Have you guys joined my Signal chat? It’s all the rage. Should’ve invited Scott Bessent to it, we could have been first to hear his comments about the need to de-escalate trade tensions, words that boosted stocks yesterday, sending the S&P up 2.5% to 5,287.
Too bad as Treasury Secretary he couldn’t talk the markets into a better 2 year Treasury auction. Foreign demand looked weak as the auction tailed. The 2Y yield rose 5bps to 3.83% and the 10Y moved slightly lower to 4.40%.
And despite the continued yield differential offered in the U.S. over the rest of the world the Dollar is not benefiting at present.
While the Fedspeak slate was heavy, it’s fair to say that none of that can take the emphasis off of Trump’s broader calls for Powell’s removal.
Corporate earnings will continue to be a barometer for the tariff impact and we’ll see how flash PMI data looks today.
Why This Blog Swims In A Different Ocean
When writing this blog, I sometimes feel like a fish swimming in a blue ocean that seems to exist between traditional financial media titans like CNBC and Bloomberg and the myriad of pundits that live all over social media and the blogosphere. This is by no means to say that there isn’t value in those aforementioned mediums, in fact I find solid value in several economic blogs, X posts, podcasts and traditional news flow on financial media platforms.
Nevertheless to me, this blog needs to stand out from real-time, often prediction heavy, and sometimes overly serious nature of traditional media and financial punditry. It’s staying in my swim lane that embraces uncertainty with humility, that attempts to filter out the noise to get to a deeper engagement with financial concepts and make them more accessible through humor and satire.
The Daily Madness Of Mr. Market
One of the challenges of following financial markets daily is that it is easy to abstract securities into simple pieces of paper whose values flash on screens, rather than remembering that equities represent ownership of underlying businesses and bonds are promises from underlying businesses. A daily focus can easily tilt one towards speculation, losing sight of the underlying asset – the business in the case of equities, or the promise in the case of bonds.
To protect against this I often share the Parable of Mr. Market as paraphrased here:
“Ben Graham and Warren Buffett have talked about a charming, seductive manic-depressive gentleman named Mr. Market. Every day he shows up on your doorstep offering to do business with you. When he's manic, he'll offer to buy your stocks or sell you his for absurdly inflated prices. When he's depressed, his prices go ridiculously low. The mistake most people make is answering the door just because Mr. Market knocks. You don't have to let him in. Why should you buy just because he's excited? Why should you sell just because he's down in the dumps? A long-term investor shouldn't care about market prices.” Charles D. Ellis
While I’m not in favor of the detachment that often occurs between quotes on the screen and the fundamental nature of securities and their relationship to underlying businesses, I do think we can all learn deeper lessons from the concept of detachment.
Attachments: The Hidden Threat To Investors
Sticking with wisdom from Jesuits (like Pope Francis), Jesuit priest, psychotherapist and author Anthony de Mello, offers excellent insight on the problems that stem from “attachments”.
There are various attachments we can find ourselves enslaved to, things that we falsely believe we need to be happy or secure, but because of our emotional investment we continue to cling to these things even when they no longer serve us.
In behavioral economics we see a similar behavior known as the sunk costs fallacy. We continue to invest time and money into certain investments simply because we’ve already invested a lot, even when it’s clear continuing this investment is irrational and likely to lead to further loss.
For many of these attachments, the world is a constant threat to what we’re holding onto or attached to, so we think the answer is that we can rearrange the world and we otherwise view things in terms of how they threaten what we’re attached to. We operate out of fear, fear of loss.
The trouble is this framing doesn’t leave us clear-sighted, it leaves us with clouded vision that impairs our otherwise sound judgment.
We would be better suited to drop things, to drop illusions, drop errors and overall reduce negative leverage in our lives and investments.
Reality is what it is. What is the wisest action now?
When you’re not attached to your past decisions, your hope, fear, pride, and ego, you can invest in businesses and your career with greater clarity, flexibility and peace.
When Emotional Baggage Costs Real Money
It’s a reminder to review your behavior.
Am I emotionally attached to this investment?
If I had no prior investment in this today, would I still buy it?
What is the real value of this asset based on the present facts, not my hopes?
Is my decision based on rational analysis or emotion?
Losses are part of investing, remember you’re free to change your mind when new information arises.
Detachment: The Investor’s Superpower
In fact if you study investing legends like Munger, Buffett, Marks, Sleep, you will actually find they use “detachment” as an investing philosophy. These are investors who are able to detach themselves from the often bipolar nature of markets, being willing to change their minds and overall being heroically inactive.
Clarity over comfort. Reality over fantasy. Freedom over attachment.
XTODs:
XTOD: The system is designed to keep you comfortable, not wealthy. This financial autopsy of a 36-year-old couple earning $350k proves it….You feel rich. But you're just a well-paid tenant of your own life. Big salary today, nice dining chairs tomorrow, and before you know it...
You need every penny of your paycheck just to maintain your lifestyle…That’s why you need ownership….
XTOD: Nothing says its "Main Street's Turn" like dishing out market moving information early to rich clients and employees at JPM private meetings
XTOD (super long thread by someone on Dollar Milkshake Theory): Let’s briefly review the Dollar Milkshake Theory by Brent Johnson. Since the almighty greenback is the Global Reserve Currency (GRC), it is widely for a variety of purposes, including: https://pbs.twimg.com/media/GpGNXYTa4AE1Bo6?format=jpg&name=900x900 To summarize the DMT, according to @SantiagoAuFund , the global financial system can be imagined as one giant milkshake made up of liquidity, debt, and capital. The United States holds the largest straw, allowing it to "drink" capital from the rest of the world….Anyways, what’s going on with the DXY? Well, in the last 3 months, we’ve seen a continuation of dollar weakening that is due to the market’s reaction to the trade war that Trump kicked off on Liberation Day back in early April (Less trade means less short-term demand for dollars). This relatively cheaper dollar will actually enforce the Milkshake- I know that sounds paradoxical, but it’s true. Here goes:....when the DXY is lower - meaning the U.S. dollar is relatively weaker compared to other major currencies - it becomes easier for foreign companies to service their dollar-denominated debts…Not only can they more easily pay off existing dollar liabilities, but they may also feel confident enough to take on even more dollar debt to fund growth, expansion, or speculation…This is where the feedback loop begins. As more companies around the world borrow in dollars during periods of dollar weakness, the overall size of the dollar debt system expands. While dollar bears point to rising U.S. debt or de-dollarization efforts as signs of the dollar’s decline, the reality is that the global hunger for dollar liquidity is still very much alive, and in many ways, it’s growing, not shrinking.
XTOD: For a company that sells a product with zero volatility, Blackstone sure is volatile
XTOD: Pretty tough to have a good swing outcome from a poor swing decision.
https://x.com/Codie_Sanchez/status/1914674185512575407
https://x.com/FriendlyBearSA/status/1914720657331638623
https://x.com/peruvian_bull/status/1914461509360738702
https://x.com/dailydirtnap/status/1914774811429245425
https://x.com/sentdefender/status/1914673747681804457
No comments:
Post a Comment