Category Archives: Uncategorized

2019’s Potentially Market-Moving Motifs

Renown wild man and physicist Richard Feynman said, “Nature uses only the longest threads to weave her patterns, so that each small piece of her fabric reveals the organization of the entire tapestry.”

Traditionally woven by hand on a loom, a tapestry comprises innumerable threads that, though individually hidden in the completed work, aggregate to establish whatever pattern or theme the artisan had in mind.

On its own, each thread remains indiscernible. Insignificant. Together, however, these threads convey a bigger picture. Capturing the imagination through its color, complexity, character and creativity. Adding up to a visual narrative that cannot be ignored.
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Sun Tzu and the Art of Trade War

In ancient China, a respected military strategist wrote a book in which he infused his lifetime of expertise. General Sun Tzu’s Art of War became a manual on aligning aspirations with capabilities. The strategist set forth principles, selected for their validity across space and time, and then connected them to practices, bound by time and space. The Art of War, therefore, became a compilation of precepts, procedures — and categorical claims.

General Sun’s treatise was written sometime between 771 and 476 BC. Giving the Chinese roughly 2600 years to perfect his art of strategic dominance. Of course, the Chinese always played the long game. Believing that, given their history, size and geographic positioning, they would always have a chance to be at or near the center of the earthly universe, if only they played their cards correctly.

“The nature of water is that it avoids heights and hastens to the lowlands…
If you attack your enemy where he least expects it — if you avoid his strength
and strike his emptiness — then, like water, none can oppose you.” Continue reading

Tulipmania and the crypto-currency apocalypse

“There must certainly be a vast fund of stupidity in human nature, else men would not be caught as they are, a thousand times over, by the same snare; and while they yet remember their past misfortunes, go on to court and encourage the causes to which they were owing, and which will again produce them.”

-Cato’s Letters, January 1721
. . . . .

Since the dawn of civilization, mankind has on occasion caught a fever so rife with speculative euphoria so as to have become the period’s defining event. Nor has mankind ever become inoculated against such conditions.

Yet mankind remains a slow learner, at best.

In the Dutch Republic of the 1630s, such conditions were omnipotent. Simply screaming for an outburst of speculative mania. Amid a period of rising commercial optimism. The fading specter of war following the defeat of the Spanish Armada. And a booming Dutch textile trade. Seemingly a rising tide that would lift all boats. Continue reading

Post Election Outlook & Analysis

Remember: the last midterm election after which the market was lower 12 months later occurred on November 5, 1946.

Indeed.

Ultimately, Tuesday’s election followed the most probably route (for a change). With the GOP losing the House, making gains in the Senate, and maintaining a slim edge in Gubernatorial offices as Democrats managed a small net gain.

The most interesting aspect of the night? The Democratic conquest of the House. And it’s worth a closer look. As we believe the GOP House defeat had three primary causes.

First, the unique aspects of the 2018 electoral landscape that saw Republicans had to defend 41 open House seats. Of which eight were in districts carried by Secretary Clinton in 2016. Seven went to Democrats. Another 10 were suburban districts where Trump won only by single digits in 2016. Eight of those went Democratic. In at least three districts, GOP incumbents who had declined to identify with Trump — and Mike Coffman of Colorado, Barbara Comstock of Virginia, and Carlos Curbelo of Florida — were sent to defeat.
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Midterm Election Analysis

WARNING: tomorrow’s election outcome will determine the very future of our Democracy.

Or not. In fact, you can add the above to all of the other ridiculous and exasperating nostrums being cast about of late.

Wednesday morning? I’ll miss the political attack ads. The venomous vitriol. The half-true allusions. The far-flung aspersions. And the embarrassing quantities of negativity we are forced to endure in support of what should be one of our most joyous annual occasions. The day on which we exercise our rights as free, liberty-loving members of this greatest constitutional republic on earth.

Most people tolerate these caustic incursions into their lives in the same way they contend with hemorrhoids. Largely ignoring them. Biting one’s lip when the discomfort gets too high. And waiting for that blessed moment when these painful annoyances dissipate into memory.
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The Evolution of Fear.

For investors the world over, the last week has been anxiety inducing. Gripped, as we’ve been, by a cocktail of fear-inducing biological responses comprehended by few.

First, a contextual digression.

Consider February’s 10.02 percent correction. The week before that occurred, we saw $25 billion in new cash flow into stock funds. The sixth-largest amount on record. Largely a consequence of Main Street investors finally pouring back into equities after sitting on the sidelines for most of this historic nine-year bull.

The number of individual investors claiming to be “bullish” jumped to 60 percent. The highest reading in over seven years, according to the American Association of Individual Investors. Continue reading

The Politicization of Everything

In last year’s letter to shareholders, Warren Buffett sagely counseled, “If you mix your politics with your investment decisions, you’re making a big mistake.”

We’ve long recognized such wisdom. As markets care little for party politics. Preferring to focus on earnings, productivity, efficiency, and other achievement-oriented metrics that rarely resonate within the political spectrum.

Unfortunately, many have ignored Mr. Buffett. Allowing politics to invade their daily lives.

The Kabuki Theater of American politics, and its interminably caustic media coverage, has become like Norway’s summer sun. Omnipresent.

We get it. President Trump is a blowhard. Lacking couth. Diplomacy. The placid demeanor expected from the Oval Office. The media abhors him. The right is terrified of him. The left detests him. And since the 2016 election, there is not a move this administration has made that has been left unscathed by critics. Continue reading

Triumph of the Optimists

The universe we inhabit is infinite. The unknown expanse of which renders our cozy little nook as a grain of sand floating in an ocean of inestimable scope.

Scientists estimate that 68 percent of the universe is dark energy. 27 percent is dark matter. The rest — everything on earth or at least capable of observation via our instruments — comprises less than five percent of the universe. Which hardly makes it normal.

To some, this great, mysterious space is frightening. To others, an exhilarating invitation. Physicists, tending to camp with the latter, embrace their ignorance by diving into the folds of the universe’s most vexing perplexities. And as most of them will admit, we know nothing. Continue reading