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GlossaryWeird Markets = Warning Sign
March 23, 2023I only make money in markets when I take a breath, slow down and step back. It’s easy to get too caught up in events as if investing were a soccer match…did they cut? …what did Yellen say exactly?
To get perspective, I find it is useful to a) read something written a long time ago and b) revisit the sequence of events that led us to where we are today and only then imagine the next act in the drama.
Regarding reading something written long ago, I previously neglected, Marcus Aurelius’s Meditations, the Tom Sawyer of Stoic philosophy. A number of my podcast guests, like Dan Zwirn, read a lot of such books. On my college green, there was a statue of Mr. Aurelius, cut like a Calvin Klein model and riding a massive horse. He is the “philosopher statesman” archetype.
“Today I escaped from anxiety. Or no, I discarded it, because it was within me, in my own perceptions—not outside,” he wrote … about 2000 years ago.
That made me feel better. Marcus suffered angst, too! Just like us or at least me, especially these days.
Markets are acting funny, which makes me nervous.
The central bank is raising interest rates and inflation is high but bonds are rallying, meaning yields are falling. Bank stocks are sinking (below is a sampling of their one-day and three-month price change) and we are being told that the Silicon Valley Bank blowup was, essentially, a lark.
The banking system is “sound and resilient,” according to Fed chief Powell. Finally, tech stocks are vaulting ever higher even as bank stocks sink, as if the two are disconnected, which they aren’t.
Investors are trying to find the right price for all assets given:
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inflation,
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a banking crisis of unknown magnitude,
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a likely growth slowdown (of unknown magnitude) following massive tightening,
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against the backdrop of China reopening, global conflict, including a possible war with China, and AI innovation.
How do all these pieces fit together? Not neatly is the answer.
Regarding, what led us to today, we had