November 1, 2024
By Steve Blumenthal
“The Great Powers Index is a very thorough report on each of the leading 24 countries, showing readings for several different categories of well-being with many measures of each category. It also uses these measures to provide a prognosis for the next ten years’ growth rates.”
— Ray Dalio, Founder, CIO Mentor, and Member of the Bridgewater Board
Few people have done more work to understand systems dynamics than Ray Dalio and his team at Bridgewater Associates. Fortunately, they are generous with their work. I clipped a recent LinkedIn post to discuss with you today.
I often imagine sitting in one of their investment committee meetings, watching them debate probable outcomes. We, too, can challenge assumptions. There is no perfect. The goal is to assess probabilities and position accordingly. I’ve read Ray’s books and most of his articles. You can also find Bridgewater’s CIO updates here.
Grab your coffee, and let’s jump in. Please feel free to share your thoughts with me. I appreciate your thinking.
On My Radar:
- Great Powers Index 2024 – The Most Important Facts and Charts
- Personal Note: Praise Junkies
See Important Disclosures at the bottom of this page. Reminder: This is not a recommendation to buy or sell any security. My views may change at any time. The information is for discussion purposes only.
If you like what you are reading, you can subscribe for free.
The Great Power Index 2024 – The Most Important Facts and Charts
By Ray Dalio, Founder, CIO Mentor, and Member of the Bridgewater Board
Notepad near and pen in hand. Let’s go… From Ray:
“Below is a summary of the most important findings from my Great Powers Index: 2024 report, which was just released today. The Great Powers Index shows how each of the 24 leading countries are doing in most dimensions and their prospects for the next ten years.
If you want to see the whole report, you can sign up to read it here.
The Great Powers Index is very thorough report on each of the leading 24 countries, showing readings for several different categories of well-being with many measures of each category. It also uses these measures to provide a prognosis for the next ten years’ growth rates.
The report and the indices were originally created to help Bridgewater’s investing by having good 10-year future growth estimates for these countries. Then a number of countries’ senior policymakers started using the indices as KPIs for helping them shape policies, so I modified the report to help them do that. I decided to use it to update the data series that were shown in my book Principles for Dealing with the Changing World Order so that people could watch the world order unfold.
As always, I welcome your feedback on this summary excerpt and on the full report.
The Most Important Facts and Charts
There is an enormous amount of information in this study that allows you to go from granular pictures within each country up to an aggregate picture of each country and the relationships between countries. My aspiration is to put the whole dynamic thing online to allow the open-source exploration and contributions to what’s here, but for various reasons I won’t digress into I can’t do that now. That leaves me with the challenge of trying to show you the highlights. To do that well, I will summarize the biggest forces and most important pictures as I see them.
To reiterate, my study of history has shown me that there are five big, interrelated influences that are driving the changing world order and that they tend to evolve in big cycles. In order of most concerning over the near- term, they are:
- how well the internal order (system) works within countries, especially the United States, to influence how well people within them work together,
- how well the world order (system) works to influence how well countries work with one another,
- how well the debt/money/economic system works,
- the force of nature, and
- how well humankind invents and decides to use new and better approaches and technologies.
How these five forces work and interact with each other shapes what happens. In this study, I look at these forces through hundreds of individual indicators to build up a picture for the world and across each major country. Before getting into the detailed assessment of each country, I will lay out how I’m seeing the big forces and how they’ve shifted in recent years.
1. I put the level of internal disorder first because it appears to be the biggest immediate risk. A few countries, most importantly the US, are experiencing classic big internal conflicts over wealth, values, and power and those conflicts are increasing. The chart below shows the U.S. Internal Order gauge which shows the highest level of internal conflict since the beginning of our data series in 1900. It appears that this will be the greatest near-term risk which will come to a head over the next year with and after the election. For that reason, in a year from now we will know a lot more about how disruptive this risk will be.
2. The international great power conflict risk appears to be the second greatest risk so I put it second. My measures show that the United States and China continue to be the two most powerful countries with high levels of conflict between them. As shown in the chart to the left, the United States is measured as a bit stronger with China rising fast, and the chart on the right shows that the conflict between them is the highest on record.
There are notable differences in the ways they are strong:
a. The United States has much bigger and more developed capital markets than any other country, the leading reserve currency, the strongest military, and the highest aggregate education rating because of excellent universities. It is also the most innovative country and has the largest economy in the world. It also has large wealth gaps, high domestic conflict risks (shown below), high external conflict risks, and an unfavorable economic/financial position (high debts and low expected growth).
b. China has relatively high projected growth (we project 4.0% over the next ten years compared to the US’s 1.4%), it has the second largest economy which is nearly as strong as the U.S. economy, a nearly comparable military in Asia though it is much weaker globally, the highest rating on infrastructure, is the largest exporter and trading partner of more countries than any other country and is excellent on innovation and education. China’s main weaknesses are its relatively high risk of external conflict and high debt levels (netting high corporate and local government debts against low household debts and a favorable international investment position).
The U.S.-China conflict is only a part of the growing world conflict that are reflected in the sides lining up in allied and axis powers. The next chart shows our global conflict gauge. It includes all countries and goes back to 1825. As shown, it is at moderately high levels vs history, comparable to the highest levels except World Wars 1 and 2. It reflects both a high death toll and flow of refugees from ongoing conflicts in Ukraine and Gaza, and increased military spending.
As for economic growth prospects, based on my leading indicators India is projected to see the strongest real growth over the next ten years (about 6%), reflecting modest workforce growth (0.7–0.9%), competitive labor, high rates of investment, and favorable culture, with Indonesia, Turkey, China, and Saudi Arabia following as the fastest growing of the major economies. The chart below shows my projected growth rates for these 24 countries. These estimates are based on the leading measures of growth shown in this report.
4. Regarding the forces of nature (droughts, floods, and pandemics), clearly conditions are worsening. The world faces a rising trend of average temperatures and more natural disasters arising from them.
5. As for the fifth force, inventiveness especially of technological advancements to raise productivity & living standards, is the greatest force of humanity. Revolutionary new technologies like AI have the potential to greatly raise understanding and productivity in virtually every activity or damage mankind if not handled well. My measure of that force of innovation is shown in the chart below. As shown and one can clearly see in developments such as AI, it is accelerating.
This concludes Ray’s post. You can find the full post, along with disclosures, here.
Not a recommendation to buy or sell any security. For discussion purposes only. Current viewpoints are subject to change.
In Trade Signals, we combine a fundamental view with our arsenal of technical indicators to help with investment entry points and risk management.
If you are not a subscriber and would like a sample, reply to this email, and we’ll send you a sample.
Trade Signals is designed for traders and investors seeking a better understanding of macro trends. Click on the link below to subscribe or login. The letter is free for CMG clients.
TRADE SIGNALS SUBSCRIPTION ACKNOWLEDGEMENT / IMPORTANT DISCLOSURES
The views expressed herein are solely those of Steve Blumenthal as of the date of this report and are subject to change without notice. Not a recommendation to buy or sell any security.
Personal Note: Praise Junkes
A quick soccer update: We talked about pistachios last week and the role a handful of them played on our kitchen table. Coach Sue used pistachios to show me her planned formation for last Saturday’s Malvern Prep Friars Homecoming soccer game against first-place Haverford School. It was a beautiful sunny day for the early morning game. We were up 1-0 at halftime. With twelve minutes to go, the score was 1-2. A foul about 30 yards out led to a wicked strike that fooled the Haverford goalie. With the game tied at 2-2, we went into overtime. It ended with that same score. Exciting is an understatement.
Sometimes, a tie feels like a loss. Other times, it is less painful. This one was particularly sweet. The quality play on the field that day was the Friars.
The season is nearing an end. Today, it’s round one of the State playoffs, and we face what Susan believes is the strongest team in our division. We’ve played them twice, lost one, and tied one. Win, advance. We have a loss and its elimination; just one regular season league game remains.
Last night, I picked up 32 Chick-fil-A sandwiches and brought them to the field. The practice was concluding, and the boys were practicing penalty kicks. Coach Sue decides who can and has the guts to take the kick should the playoff game come down to penalty kicks.
The sandwiches were gone in seconds. The boys left; it was just the two of us. I reflected on my college coach, Walter Bahr. I remembered the smell of the grass in the fall, the sun setting after practice, and the peacefulness in the air. One day, he randomly stopped the practice, pulled us in, and said, “Look at that.” The clouds in the sky were painted orange from the setting sun. “Just remember,” he said, “the world is so much bigger than you.”
The time with Susan and the team has been a true joy.
Fingers crossed for today’s game. By the time this post hits your inbox, we’ll be thinking about a cold IPA. Oh, and it will taste much better with a W! Go Friars.
Praise Junkes
I receive an email from Admired Leadership daily. This one caught my eye because it also applies to sports, player growth, coaching, and many situations in life. I thought I’d share it with you, too (hat tip to Michael Gale).
Candidly, this is something I need to work on. I am a praise junkie. Ugh.
There’s a controversy brewing in parenting circles, and it’s all about changing the way authority figures, like parents, give praise.
The debate has implications for leaders of all varieties, including corporate leaders. The argument that experts are making suggests that parents should never tell their children they are proud of them. At least not in the way everyone has traditionally been taught to.
“I’m so proud of you” places the focus on the parent or leader. It robs children of the intrinsic motivation to learn from their work and the outcomes they produce.
When parents tell their children they are proud of what they have done, they act as judges, declaring winners and losers. The new advice is to make the praise all about the person performing the behavior, and not about the so-called authority figure.
Instead, experts suggest replacing the praise “I’m proud of what you did” with “You should be very proud of what you did.” This sounds subtle, but it packs a big punch motivationally. By making it about the child, parents instill confidence in the child’s own choices and behaviors.
Relying on external validation from an authority figure, experts reason, turns kids into “praise junkies.” Children who become accustomed to a proud parent who constantly praises them will increasingly look to others to confirm their actions.
Smart parents would do better by focusing their attention solely on the child’s actions and not on their own authority or expertise. Leaders across the spectrum could benefit from the same advice.
In the workplace, leaders too often act “parentally” by doling out rewards and offering praise to those they deem deserving. This feels good but often creates a dependency where team members look to leaders to validate the quality of their work.
Using phrases like “You must be very pleased with what you accomplished,” and “That must have made you feel very proud of yourself,” focuses attention on the other person and not on the leader or parent.
Telling others they must be pleased, proud, or gratified about what they have accomplished places the focus exactly where it needs to be—on the quality of the work and the person who performed it and not on the leader.
Rethinking how you give praise is worth the time and effort. Good leaders often conclude that praise shouldn’t be about them. That need not be controversial.
Wishing you and your family the very best.
Ever forward!
Steve
You can share this letter on X by clicking here.
You can share this letter on LinkedIn by clicking here.
Subscribe to OMR for free by clicking the photo.
Stephen B. Blumenthal
Executive Chairman & CIO
CMG Capital Management Group, Inc.
Private Wealth Client Website – www.cmgprivatewealth.com
TAMP Advisor Client Webiste – www.cmgwealth.com
Forbes Book – On My Radar, Navigating Stock Market Cycles. Stephen Blumenthal gives investors a game plan and the advice they need to develop a risk-minded and opportunity-based investment approach. It is about how to grow and defend your wealth. You can learn more here.
Stephen Blumenthal founded CMG Capital Management Group in 1992 and serves today as its Executive Chairman and CIO. Steve authors a free weekly e-letter entitled, “On My Radar.” Steve shares his views on macroeconomic research, valuations, portfolio construction, asset allocation and risk management.
Follow Steve on Twitter @SBlumenthalCMG and LinkedIn.
IMPORTANT DISCLOSURE INFORMATION
This document is prepared by CMG Capital Management Group, Inc. (“CMG”) and is circulated for informational and educational purposes only. There is no consideration given to the specific investment needs, objectives, or tolerances of any of the recipients. Additionally, CMG’s actual investment positions may, and often will, vary from its conclusions discussed herein based on any number of factors, such as client investment restrictions, portfolio rebalancing, and transaction costs, among others. Recipients should consult their own advisors, including tax advisors, before making any investment decision. This material is for informational and educational purposes only and is not an offer to sell or the solicitation of an offer to buy the securities or other instruments mentioned. This material does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual investors which are necessary considerations before making any investment decision. Investors should consider whether any advice or recommendation in this research is suitable for their particular circumstances and, where appropriate, seek professional advice, including legal, tax, accounting, investment, or other advice. The views expressed herein are solely those of Steve Blumenthal as of the date of this report and are subject to change without notice.
Investing involves risk.
This letter may contain forward-looking statements relating to the objectives, opportunities, and future performance of the various investment markets, indices, and investments. Forward-looking statements may be identified by the use of such words as; “believe,” anticipate,” “planned,” “potential,” and other similar terms. Examples of forward-looking statements include, but are not limited to, estimates with respect to financial condition, results of operations, and success or lack of success of any particular market, index, investment, or investment strategy. All are subject to various factors, including, but not limited to, general and local economic conditions, changing levels of competition within certain industries and markets, changes in legislation or regulation, Federal Reserve policy, and other economic, competitive, governmental, regulatory, and technological factors affecting markets, indices, investments, investment strategy and portfolio positioning that could cause actual results to differ materially from projected results. Such statements are forward-looking in nature and involve a number of known and unknown risks, uncertainties, and other factors, and accordingly, actual results may differ materially from those reflected or contemplated in such forward-looking statements. Investors are cautioned not to place undue reliance on any forward-looking statements or examples. All statements made herein speak only as of the date that they were made. Investing is inherently risky and all investing involves the potential risk of loss.
Past performance does not guarantee or indicate future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by CMG), or any non-investment related content, made reference to directly or indirectly in this commentary will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this commentary serves as the receipt of, or as a substitute for, personalized investment advice from CMG. Please remember to contact CMG, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. Unless, and until, you notify us, in writing, to the contrary, we shall continue to provide services as we do currently. CMG is neither a law firm, nor a certified public accounting firm, and no portion of the commentary content should be construed as legal or accounting advice.
No portion of the content should be construed as an offer or solicitation for the purchase or sale of any security. References to specific securities, investment programs or funds are for illustrative purposes only and are not intended to be, and should not be interpreted as recommendations to purchase or sell such securities.
This presentation does not discuss, directly or indirectly, the amount of the profits or losses realized or unrealized, by any CMG client from any specific funds or securities. Please note: In the event that CMG references performance results for an actual CMG portfolio, the results are reported net of advisory fees and inclusive of dividends. The performance referenced is that as determined and/or provided directly by the referenced funds and/or publishers, has not been independently verified, and does not reflect the performance of any specific CMG client. CMG clients may have experienced materially different performance based upon various factors during the corresponding time periods. See in links provided citing limitations of hypothetical back-tested information. Past performance cannot predict or guarantee future performance. Not a recommendation to buy or sell. Please talk to your advisor.
Information herein has been obtained from sources believed to be reliable, but we do not warrant its accuracy. This document is general communication and is provided for informational and/or educational purposes only. None of the content should be viewed as a suggestion that you take or refrain from taking any action nor as a recommendation for any specific investment product, strategy, or other such purposes.
In a rising interest rate environment, the value of fixed-income securities generally declines, and conversely, in a falling interest rate environment, the value of fixed-income securities generally increases. High-yield securities may be subject to heightened market, interest rate, or credit risk and should not be purchased solely because of the stated yield. Ratings are measured on a scale that ranges from AAA or Aaa (highest) to D or C (lowest). Investment-grade investments are those rated from highest down to BBB- or Baa3.
NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE.
Certain information contained herein has been obtained from third-party sources believed to be reliable, but we cannot guarantee its accuracy or completeness.
In the event that there has been a change in an individual’s investment objective or financial situation, he/she is encouraged to consult with his/her investment professional.
Written Disclosure Statement. CMG is an SEC-registered investment adviser located in Malvern, Pennsylvania. Stephen B. Blumenthal is CMG’s founder and CEO. Please note: The above views are those of CMG and its CEO, Stephen Blumenthal, and do not reflect those of any sub-advisor that CMG may engage to manage any CMG strategy, or exclusively determines any internal strategy employed by CMG. A copy of CMG’s current written disclosure statement discussing advisory services and fees is available upon request or via CMG’s internet web site at www.cmgwealth.com/disclosures. CMG is committed to protecting your personal information. Click here to review CMG’s privacy policies.