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Autumn ‘Flash Recession’ And A Litany Of Concerns
It's all too easy to cite a litany of concerns in the course of suggesting a market trading on a nosebleed forward multiple is "sure" to correct sooner rather than later.
One thing I learned from years spent immersed in the social sciences is that there's always something seriously wrong somewhere. Market participants predisposed to a "constructive" take no matter the circumstances are fond of saying there's "always uncertainty." The point being that if the presence of uncertainty is enough to
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Looking at your list of global uncertainties, civil unrest, etc., it occurred to me that civil unrest is something of a luxury that mankind tends to afford because certain factions, at least, have enough resources to afford such destructive activities, or they really don’t care what they have, they will simply keep fighting for principles “to the last man,” as it were. We spent 2 trillion dollars and sacrificed the lives of tens of thousands and ruined the lives of many times more, for what? The fear of terrorism? Since 9/11 the worst terrorism we suffered was the storming of the Capital in DC on Jan 6. No one seems particularly worried that we nearly lost our soul in a scant few hours. Nor do nearly a majority of people not vaccinated, unmasked, and relaxed to risk the lives around them so people will pay attention to them. People who tout 9/11 as a motive seem to forget, that was the second attempt at destroying the WTC. The first was a nasty bombing in the garage to try to bring the building down. Where was the hew and cry then? Two trillion wasted in Afghanistan, another trillion in Iraq. We lost, there was no nation building, but we could have rebuilt the US infrastructure with that money. Are we really as stupid as all that? Maybe just indifferent. War, unrest, and the institutions that drive them are mostly silly and wasteful luxuries.
I mean realistically we spent that money largely making a bunch of big contractors wealthy, which was definitely one of the primary goals. It was just an opportunity to sell the population on a huge wealth transfer under the guise of national defense.
Well put, Mr Lucky. And, yes, we are that stupid.
Geopolitical considerations are seldom particularly impactful to the US stock market.
For a given geopolitical risk X, ask “how much will X affect next quarter’s earnings report for” AAPL? MSFT? AMZN? BAC? WMT? JNJ? NVDA? XOM? etc.
It’s often hard to come up with anything much.
Granted, though China and AAPL does come to mind…
The elements of risk Hartnett brought to the table reminded me of (Sec. of Defense) Donald Rumsfeld’s response to a reporter:
“Reports that say that something hasn’t happened are always interesting to me, because as we know, there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns—the ones we don’t know we don’t know. And if one looks throughout the history of our country and other free countries, it is the latter category that tends to be the difficult ones.”
Hartnett was highlighting the first category, the ‘known knowns’ (or risks). And we can acknowledge the second category of ‘known unknowns’ in this context (ie., China could do something, but what?). The third category deserves our ardent attention though it suffers from an epistemological disability (how can one know something they don’t know they don’t know?).
The study of Rumsfeld’s ‘unknown unknowns’ aka “black swans” in macro theory is not without merit. But the satisfaction of having conjured up something hypothetical and “saw it coming” when it happens to occur is not unlike a stopped clock bragging about being right twice a day.
One of the known unknowns is climate change. Who knew 17 inches of rain would fall in hours in a part of Tennessee. Reading the news this morning, it appears that known and unknown unknowns are increasing. Investing feels like sitting in a casino on a lucky streak knowing the place has a high probability of bursting into flame and hoping you’ll smell smoke 5 minutes before it does.