Amid today's turmoil, we are sure there will be another round of "this is it" calls (along with the ubiquitous "this is the dip to buy" narrative peddlers) and former fund manager Richard Breslow has had enough of this increasingly binary view of the world…
The investing world, like the real world, has sunk to the point where they see everything as digital.
We’re going to make new all-time highs on a regular basis or collapse.
I hate you because the only alternative is to be wildly in love.
It doesn’t work well in markets any more than it does in life. There’s no room for prudence, making allowances for cyclicality nor common sense.
Investors trapped in this mindset can’t possibly admit to ever being unsure, let alone wrong on something, because it’s all or nothing. You’re either a genius or a schlub.
It’s easy to spot these folk. They’ll tell you exactly where things are going without reference to stops or objectives. Hint: they haven’t a clue because every decision is subjective. All in on every hand and pray not to have gone broke before the broken clock has a chance to finally be right. Nuance and gray areas don’t sell tickets, I guess.
How we got here as a society is one discussion.
The answer for markets is obvious. We need to get back to understanding asset prices as an amalgamation of short and longer-term trades rather than a lifestyle. Mathematician Benoit Mandelbrot said, “The word ‘because’ is one of the most dangerous in the world of finance.” Little would he ever have thought we should mourn its relegation to meaninglessness as we’re left with markets where there’s just two camps–bubbles will go on forever or blood will be shed. And nothing in-between.
Disaster has struck, the Standard & Poor’s Global Fixed Income Research IG Index exploded to +156 from +153.
So what if stocks or credit back off from all-time extremes? Other than it would make life far more interesting.
If you think the alternative to new highs is crash, then disregard all talk of balance sheet and rate “normalization.” Or at least accept the fact that it’s going to be halting, subject to continuous debate and certainly not according to whatever plan is currently being floated. That’s a much more useful concern to contemplate than trying to be the one to call the market’s demise on your 10th try.
Given that Mark Cudmore, Breslow's colleague at Bloomberg, asked whether the S&P topped out this week, we suggest the two macro strategists start talking more.
The bottom line is – it seems being "cautiously optimistic" is the preferred middle ground… until Mike Tyson punches you in the face.
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