Well, your inbox is going to get a little skinnier over the next few days, as this will be my last post until early next week. Our youngest and I will be deep in the northern California woods, enjoying a little disconnection from the outside world.
Therefore, my shortened workweek has me making this week’s main message an easy one. Call it main messages, or highlights, from the past week’s commentary herein.
“…our analog for the current monetary and fiscal policy setup is the 1940s. I.e., the top-down dynamics that impact markets will be notably different going forward — they virtually have to be — than anything today’s investor has had to navigate.
Thus, while all the analytics, the back-testing, the risk-scoring, etc., tools are nice to have, and to work with, they’re in no way to be taken for granted.
Humility, open-mindedness and unrelenting diligence are, I’d say, always requisites to responsible asset management, but, frankly, now more than ever…”
“My take today is the same as it was (still is) when the Fed made their announcement. That is, we’re not remotely talking arrogance here on the part of central bankers, we’re talking utter fear. For, as inflation rises, and, therefore, as the world looks to them to tighten monetary conditions, they fully realize that they’ve taken policy (read inflating historic asset bubbles) to the proverbial point of no return. If they, for example, raise interest rates anytime soon, they know the markets will come down all around them, with them catching all the blame.”
“So, bottom line, should we trust that all is well now that there are literally no holds barred when it comes to market intervention? Well, depends on how you define “well”. Short-term, sure, there’s no reason at this juncture to believe that there’s not another buying opportunity potentially in the offing (although I’m talking a 20%, not a 2%, dip). Longer-term, well, the misallocation of resources that result from such top-down “control” of economies and financial markets is a whole different conversation altogether.”
“There’s thinking, then there’s thinking (over-thinking) when we’re talking investing. The latter can be the result of living emotionally with the short-term fluctuations of markets. And, as you might imagine — per Jesse Livermore’s admonition to sit tight when you’ve done the macro work — that (reacting to over-thinking) can result in consequentially negative (longer-term) outcomes.”
“…the upward pressure on select commodities — over the long-term from here — in all likelihood isn’t going anywhere. But, absolutely, there will be volatility along the way.”
“In our latest video commentary I made the comment that, after 40 years, labor has become paramount over capital. And while opposing groups will assign the blame or the credit to politics, know that this has been cyclical phenomena throughout our history:
“Periodically the land gets itself redistributed, legally or not, whether by the Gracchi in Rome, the Jacobins in France, or the Communists in Russia; periodically wealth is redistributed, whether by the violent confiscation of property, or by confiscatory taxation of incomes and bequests. Then the race for wealth goods and power begins again, and the pyramid of ability takes form once more…” –Will Durant; The Story of Civilization“
“As clients and regular readers have noticed, we remain bullish (long-term) on energy — and I’m not talking just renewables right here.
In a nutshell, fossil fuel markets have seen massive capital expenditure reduction of late — with the expectation of more cuts to come. I.e., we’re talking less capacity to produce to an extent that we think massively overcompensates for the go-forward reduction in demand due to the adoption in renewables.
So, again, intermediate to long-term, we want to be in that space. In the short-run, however, we see heightened risk potentially coming from a sharp increase in global covid cases and/or potentially serious riffs within OPEC.”
“Reading my notes on Popper this morning, I came across the following quote.
“A rationalist is simply someone for whom it is more important to learn than to be proved right; someone who is willing to learn from others – not by simply taking over another’s opinions, but by gladly allowing others to criticize his ideas and by gladly criticizing the ideas of others.
The emphasis here is on the idea of criticism or, to be more precise, critical discussion. The genuine rationalist does not think that he or anyone else is in possession of the truth; nor does he think that mere criticism as such helps us to achieve new ideas. But he does think that, in the sphere of ideas, only critical discussion can help us sort the wheat from the chaff.
He is well aware that acceptance or rejection of an idea is never a purely rational matter; but he thinks that only critical discussion can give us the necessary maturity to see an idea from more and more sides and to make a correct judgement of it.”
I’ll be passing this on to the next youngster who asks me for investing/trading advice. As well as reminding my ego of it everyday as I do my thing.”
Thanks for reading!