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Today’s letter is not just any letter. It is my 400th letter sent to you, my loyal readers. If you enjoy what you read, please share the love. I grow my audience through readers like you forwarding it to friends and family whom you think will get some value.

I was hoping to reach 4,000 readers for the 400th letter, but that was not to be. So my new goal is 5,000 readers for the 500th letter.

I am not sure why; maybe I am not normal, but for some reason when I walk around town I look at people, and before I know it I am playing a movie vignette of their lives in my head. Who they might be? What is their family like? Who are their friends? What do they do for a living? Are they happy or sad? What drives them (not their car)?

As an economist I understand the macro- and micro-models, but that is the river. What I get from my observations on the ground is the water. That is the lifeblood that brings theory into practice. To me that is where it all starts to make sense.

Allow me a slight detour; it’s my 400th edition. There is nothing on the internet to support the thesis I am about to share; this is fertile and untilled like most horse shit. Trust me, I checked with AI; there is nothing to support me, so if this falls flat, it’s me failing on my own on the high wire of my 400th edition of exposing my thinking to the world.

So let me introduce you to Robin Dunbar.

In the 1990s, British anthropologist Robin Dunbar made a deceptively simple observation. He noticed that the size of a primate's neocortex, that is, the thinking part of the brain, correlated almost perfectly with the size of the social groups they lived in. When he plugged human brain size into that equation, he got a number: 150.

That, Dunbar argued, is the cognitive limit of meaningful human relationships. Not followers. Not contacts. Not connections. People, you actually know I am not talking about Instagram followers. These are people whose circumstances you understand, whose reliability you've tested, and whose loss you would feel.

But here's where it gets interesting. That 150 isn't flat. It's layered like rings of a tree. At the centre, you have roughly 5 people. Your inner circle. The ones who would drop everything for you. Then 15 close friends and family you trust deeply. Then 50 good friends you keep genuinely warm. Then the full 150. Your community. Your world.

And here's the thing that stopped me in my tracks when I was walking down George Street in the Sydney CBD today watching people go about their lives: it doesn't matter if you're a billionaire or a garbage collector. Everyone gets roughly the same number. The garbo and the CEO are working with the same basic social architecture. For those not in the know in Australia, the guys who do the garbage bins are known as 'garbologists' or 'garbos'. for short.

The economy. All of it. Runs on those circles.

That part is not so original. 1990 was a long time ago, and the theory still holds.

The original part I stumbled upon, quite literally. For those of you who know George Street, it has a tram line running across it. I tripped on the tram while I was thinking of the messy middle, the hollow interior of the Dunbar number.

I am ok in case you were wondering.

This is actually really serious, and it upset me while thinking about it, picturing all these happy faces around me not being so happy.

Every major technological disruption in history has done something to those circles. The printing press, the industrial revolution, the internet, and social media. Each one reshaped how we work, how we communicate, and how we organise our lives.

But here is what is remarkable when you look back. The inner circles held. Technology expanded the outer rings: more acquaintances, more weak ties, and more reach, but the core stayed human. Your family remained your family. Your trusted few remained your trusted few. The telephone didn't replace your best friend; it just meant you could call them.

And the middle layers, that 15 to 50 band, were largely filled and reinforced by work. Your colleagues. Your clients. The accountant who knew your business without being told. The sales rep who remembered your kids' names. The barista at the coffee shop knew your order of a soy latte, extra hot, with extra froth, 1 sugar raw and a dash of cocoa powder and a splash of lemon on the side, sprinkled with a touch of banter. The junior analyst you were quietly mentoring. The customer service person who actually solved your problem because they genuinely cared enough to engage with it.

These people weren't just doing tasks.

They are/were the connective tissue between institutions and human beings. They translated corporate into personal. They made commerce feel like it was between people, not entities. They were the layer that made the whole thing feel alive.

And they are precisely the layer that AI is about to remove. 🤓 and 😟

Not the inner circle; AI cannot replicate the people you love and trust most deeply, at least not yet. Oy vey, don’t get me started on this subject. Not the outer rings, AI will actually inflate those, giving everyone the illusion of broader reach and warmer connections than ever before.

The middle. Specifically and ruthlessly, the middle.

And when that layer goes, based on everything I am reading and seeing, it is going to be that we will not just have an unemployment problem.

We will have a belonging problem.

Because for most people, that middle Dunbar layer was their working life. It was where they felt useful, known, and embedded in something larger than themselves. Strip it away and you haven't just taken their income. You have made them socially homeless.

The policy conversation right now is almost entirely about Universal Basic Income; replace the paycheck, soften the landing, retrain and reskill. Fine. Necessary, perhaps.

But nobody, not the economists, not the technologists, not the policymakers, is talking about replacing the human architecture that the paycheck came attached to.

That is what the models miss.

I don’t have an answer for this. I am simply saying that there are effects coming in the not-so-distant future that will have profound effects on the economy and the financial models valuing it.

Yesterday I wrote a post in my more technical newsletter titled, Tested Ray Dalio’s All Weather Portfolio. It didn’t just Survive. It Thrived.

I think the post is so empowering. So many of us think that access to high-quality money management strategies is for the rich, and they merit high fees. The incredible thing about Ray Dalio’s All Weather approach is that a well-designed robust strategy outperforms 90%, if not more, of the professionally managed strategies over long periods of time.

A Sharpe Ratio of 1 over 36+ years is exceptional and is currently the highest S2N Score I have in my database.

I also wrote a critique on the 200-day moving average cross, which happened late last week. What caught my eye today is an old chart I updated that measures when all 3 major indices cross their respective 200-day moving averages.

What worries me and merits a much bigger piece is the fact that the US Federal Debt is growing quicker than the number of vibe coders who think they can build a bot to trade markets with a prompt before they go to sleep.

These numbers don’t include the War on Iran and the subsidies that will no doubt come to support the economy from the fuel crisis.

The steepener trade wrong-footed most traders who were positioning for Trump’s Fed nominee to drop or keep short-term interest rates low with inflation building towards the backend. The spike in oil prices has railroaded that trade a little.

There are 10 trillion dollars of government debt to be financed this year on the back of a 2-trillion-dollar deficit. This will put pressure on yields towards the upside. The only fly in the ointment of that call is if the equity markets tank, there might be a flight towards bonds. I am, therefore, saying in a hedged kind of way I am still a believer in the steepener trade.

I ran one of my screeners looking for all-time highs or lows. I will present 2 new ATH’s which are, in fact, lows (inverse of strong). The Indian rupee and the Turkish lira. I may just be able to afford my Turkish hair transplant.

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