Cover photo courtesy of Leen's Lodge
Each year, I attend an event in the Maine woods called, alternatively, “Camp Kotok” or the “Shadow Fed.” The former sounds frivolous. The latter sounds nefarious. Neither is particularly accurate.
The attendees at Camp Kotok are smart. Like, really, scary smart. While there are strict rules about how and what gets reported—which includes who attends—the combined résumé includes economists from governments and S&P 500 companies, CIOs, portfolio managers, politicians, best-selling authors and a handful of overwhelmed journalists.
It’s also surprisingly diverse for a finance-focused gathering—diverse politically, ethnographically, geographically. Walking into the dining hall on a Friday afternoon creates a near lethal sense of impostor syndrome. The only survival strategy is to ask questions and listen really hard to the answers.
The Japanese have a concept called “shinrin-yoku,” which means “forest bathing” or “nature bathing.” Where Western societies often go into the woods to do something (hunt, fish, mountain bike, camp), shinrin-yoku is about simply being, absorbing and allowing nature to surround and wash over you.
My experiences at Camp Kotok involve a little bit of shinrin-yoku in the literal sense: There are indeed a few hours a day floating through nature in a boat. But they also involve an intense, highly concentrated kind of economic shinrin-yoku. I surround myself with the zeitgeist and just try and absorb it through osmosis.
Under the rules, attendees can report specific comments with approval of the speaker (and indeed, we’ve included several in this week’s ETF Prime podcast), or, they can report the “sense of the group.”
So here are my big takeaways, with the caveat that the group’s very diversity turns any “Camp Kotok says … ” into a broad-brush synecdoche that probably says more about my listening skills than anything else.
Our Eyes Are Off The Ball
One of my parlor-tricks for large gatherings of smart people is to ask everyone the same question and then contemplate the spread of answers I get.
In the past, I’ve asked dumb things like “best first album” and smart things like “where’s oil going and why?” This year, my question was: "What’s one thing—a risk, a concern, a data point, a situation—that’s really important, that the rest of the econo-finance-sphere isn’t paying attention to?”
The answers here were dizzying. While there were a few somewhat predictable answers like “we’re in a corporate earnings recession and nobody’s talking about it,” there were also some big surprises for me, such as:
- The entire global maritime fleet has to change fuel types in five months, and it’s going to cost a ton.
- The New York PMI (producers manufacturing index) is flashing red-lights about the service-based economy.
- Geopolitics is being swept under the rug, leaving us open to a “hot war” while we focus on all the economic wars.
- The risk from Chinese corporates like Huawei is enormous.
- The degradation of the National Weather Service is going to destroy U.S. agriculture.
The list of terrifying one-liners goes on and on.
My Takeaway: I will ask more questions from a position of complete ignorance. Everyone has something that they know a lot about, whether that’s Dostoyevsky’s epilepsy or Canadian farmland.
Monetary Policy Is In The Blender
One of the highlights of this year’s event was a dinner debate on modern monetary theory. The discussants were, for the most part, not remotely proponents of any version of it, whether it’s minting trillion-dollar coins or simply entering into infinite QE (quantitative easing). And yet, there was a sense of resignation that MMT was coming, whether or not anyone wants it.
By the end of the weekend, I started hearing folks talk about “accidental MMT”—one in which the U.S. stumbles into the endless issuance and self-purchase of debt because politicians have neither the will to significantly raise revenues nor to significantly curtail spending. This contrasts with an “intentional MMT” in which laws are passed, the Fed charter is rewritten and we actually call it what it is.
My Takeaway: This is probably an important chart:
It’s pretty simple: It’s public debt to GDP (gross domestic product). Even with low interest rates, it’s unlikely that, in my lifetime, we’ll reverse this chart meaningfully. Yet I bet we don’t see it on any presidential debate stage.