It’s Thursday and we’re starting to sense that former trader Richard Breslow is losing his patience with you again.
There for a while, Breslow was exhibiting an uncharacteristic penchant for serenity in his daily missives. But if he was temporarily overcome by a state of mindfulness that allowed him to tolerate your inherent stupidity, it has worn off.
Because as you’ll read below, Richard is at wit’s end with the fact that you and everyone who looks like you is “trapped” in a “mindset” where there’s “no room for prudence or common sense.”
See, what you don’t get is that it doesn’t have to be feast or famine. Or, as Richard puts it, “there’s just two camps: bubbles will go on forever or blood will be shed.”
Well, we don’t know about all of that, but we know one thing for sure: if you don’t stop ceaselessly regaling Breslow with shit that doesn’t make any sense, some “blood will be shed” at the foot of his desk.
Restore the Word ’Because’ to Its Former Glory
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
Here’s Richard with his coworkers…