There’s little doubt that the world is a chaotic place. To make sense of all that’s happening, Walker & Dunlop Chairman and CEO Willy Walker welcomed Kiril Sokoloff, Chairman and Founder of 13D Research & Strategy, during the July 19, 2023 Walker Webcast. The “webcast” was recorded live from Walker & Dunlop’s 2023 Summer Conference in Sun Valley, ID.

During the hour-long event, Walker and Sokoloff discussed everything from energy dependence/clean energy to AI, machine learning, defense spending, and contracts.

Then there was economics. Walker questioned Sokoloff about the meaning of the apparent bullish stock market. Sokoloff indicated two things in response. First, the financial economy peaked during the early part of 2022. And second, we’re seeing signs of economic stress.

“Gross domestic product has been down for three quarters,” he said. “Global trade is declining. Bank loan growth, which almost always precedes a recession, is heading south. Money supply is going down.” Additionally, the Federal Reserve raised interest rates faster than any time since the early 1980s. “No one knows how fragile the economy is until something breaks,” Sokoloff commented. “I’m of the view that it’s wise to be cautious in 2023.”

Sokoloff also discussed his reason for investing in India and Greece as investments. India, he said, has a vibrant population. Greece, meanwhile, has a tough one.

For India, “You have a fantastic leader (Prime Minister Narendra Modi) who is taking a very educated, incredibly ambitious population and saying ‘go for it,’” Sokoloff said. “He’s doing all of the right things. It’s already the third largest economy and in a very important geopolitical position which Modi is playing beautifully in a very non-aligned way.”

But why Greece? Because it’s an outlier, Sokoloff said. Greece has struggled. On the other hand, “You have a fantastic president (Katerina Sakellaropoulou) who’s doing all the right things,” Sokoloff said. “They’re getting investment upgrades. They’re paying down their debt. They have the best fiscal situation in the world.” Adding to the positivity of Greece is that Sakellaropoulou is cutting regulations and encouraging foreign investment. “The companies that survived (Greece’s downturn) are tough and really good,” he said. “The people that got through the wipeout are tough and really good,” he added.

Adding to the discussion was the issue of de-dollarization (in which more countries are reducing their reliance on the U.S. dollar as fiat currency) and a weaker dollar. Sokoloff suggested that more is likely to stay the same. “The curse of reserve currency,” he said. “Is that the U.S. doesn’t have to discipline itself. IT can just keep on borrowing and borrowing and borrowing.” Because of this, the U.S. has become the largest debtor in history, with approximately $19 trillion owed to foreign concerns.

Sokoloff said that a weaker dollar and higher inflation would mean a push into hard assets. “This means commodities, gold, silver, copper, all of those things,” he said. “We like the Middle East because they’re just starting their investing . . . that whole sector should do extremely well.”

He also suggested the need for optionality, especially in this day of climate change hazards and increasing geopolitical uncertainty.  “I’m always thinking about the big risks,” Sokoloff noted. “This is 101 pragmatism and being prepared for the future.” For example, if climate change is making the earth hotter, “you want to be in the mountains, where you know it’s going to be cooler,” Sokoloff commented. “There is no perfect place, but you have to keep evaluating new information and be prepared to shift.”