Ted Pick says “We should welcome the possibility [of a] 10% to 15% drawdown” in equities as long it’s not “driven by some sort of macro-cliff effect.”

In the immortal words of Tonto: “What’s this ‘we’ shit, white man?”

The Morgan Stanley chief was speaking Tuesday for an event in Hong Kong organized by the city’s equivalent of a central bank. A correction, Pick went on, would be “a healthy development” as long it’s not triggered by a deep recession.

I don’t disagree with Pick’s assessment, although I’d (vociferously) dispute the idea that it counts as news. A couple of Wall Street CEOs (David Solomon spoke on the same panel) musing about a hypothetical selloff at an indeterminate future date is only worth mentioning if you’re Bloomberg. Or if you’re me and you were looking around Tuesday for something to sneer at.

Who’d benefit from a 15% pullback in stocks (which would invariably be accompanied by a meaningful vol expansion) that specifically isn’t “driven by some sort of macro-cliff effect,” as Pick put it? Well, Pick, to name one person. Solomon too. All of Wall Street, where trading desks mint money during bouts of market turmoil.

Recall that equities trading revenue at Morgan was $4.12 billion last quarter, up 35% YoY. That’s not enough for Ted, apparently. If only we could get a little downside action and a “healthy” dose of fear (sans the sort of economic downturn that might snuff out the nascent IB recovery), Wall Street could squeeze some more blood from the stone.

Pick’s remarks came as market participants and the financial media continue to fret about the AI bubble and when it might burst. Regular readers know how I feel about this: Of course it’s a bubble, there’s no telling when it’ll burst, trying to time it is a fool’s errand and painful as burst bubbles are, you’re better off just staying invested than trying to be “nibble.”

The market timers among you probably read about a bad omen in the Journal today. “This Famous Method of Valuing Stocks Is Pointing Toward Some Rough Years Ahead,” Spencer Jakab declared. He was referring to the Shiller P/E which, like me, is over 40 now.

A >40 Shiller P/E is 99%ile looking back a century, and as Jakab went on to note, those sorts of valuation extremes don’t bode well. “Something’s got to give,” he said. “Expect paltry stock returns in coming years.”

Again, I don’t think “this time’s different.” And how often do I remind readers that the only thing which matters for long investment horizons is starting valuation? All the time. I say that all the time.

But. BUT. For the vast, vast majority of investors it’s not worth trying to trade in and out of markets. About the only thing these sorts of warnings are good for is making you think twice about adding meaningful equity exposure above and beyond what you might be adding as part of a regular monthly investment program.

If you buy now, at these valuations, returns on those shares (note the emphasis) are very likely to be subpar. What gets lost in that discussion is that your overall cost basis is far lower. That’s what matters, not how much you paid for the last share of SPY you bought.

Anyway, this sort of article’s laughably easy to pen. Here’s how you do it: You find a quote (Pick’s), pair it with some sarcasm (Morgan Stanley has the best equities trading business on the Street and is thus in a position to benefit handsomely from a “healthy” correction and the attendant vol expansion) then go looking for an article which appears to validate the correction call (the Journal‘s Shiller P/E piece).

All that’s missing is Michael Burry buying puts on Nvidia and Palantir. Oh! Wait…