Anger
management
Now that
several-hundred-point up and down days are becoming commonplace in the Dow
Jones, I'm observing that the market's mood is shifting from "what just happened?" to "who's
the SOB that caused all this chaos?"
Even if there were just one
person to blame for market volatility....and there isn't....that is the wrong
response to what is happening, anyway.
It wasn't that long ago
that investors were laying it all on the line for a bull market advance which,
for them, was paying handsome rewards and seemingly never-ending satisfaction. That all led to a "bet it all on black" casino-type mindset that, arguably, set the
stage for the disappointment and consternation they are now feeling as
valuations literally head south.
In the world of
parabolic quantitative design in which I reside, these reversals were neither
unexpected nor out of the ordinary.
But people seem to need
a special reason why markets gyrate as they do.
Surely, it must be the Federal Reserve and their interest rate policies;
or it's the fiscal and political gridlock in Washington, DC; better still, it's
the Iranians, the French, the Chinese, the Russians.....
One needs to take a
deep breath and realize that it is our perceptions of these problems that doom
portfolio management more so than the individual (or collective) problems
themselves because "problems" and "unforeseen events" are,
by their very nature, unpredictable and always
a part of the investment calculus.
So who/what is to blame for the recent volatility and
weakness in the markets........?
Money,
money, money
I believe that an incoherent
global lending system has cultivated an "us versus them" economy, a
universe of the haves and have-nots that is exacerbated by a widening wealth
gap in which the wealthy "play" with their money while the rest of
the world struggles to acquire it.
Our data supports the
emergence of these tectonic shifts and the quantification of their influences.
The demand for goods
and services has migrated into smaller enclaves of privilege. Yet, we rely upon those enclaves to provide
the jobs, products, and security for the rest of the population. As more wealth was created during the past
decade through quantitative easing and spurious lending practices a curious
thing began to happen: the benevolence of mankind morphed into the worst of
man's nature. The roads and bridges
began to deteriorate....so what? People
afflicted by natural disasters or worse, warfare and starvation....let them
fend for themselves. A "living
wage" that fails to account for the basics of home and healthcare....get a
job and go back to school. And,
investors who lost money on risky product offerings from Wall Street....that's
your fault for being careless and belligerent.
The safety nets are
ripping wide open at the seams and greed is on steroids.
Acquiring money for money's
sake has become the name of the game.
Fairness? That's not what makes
markets...or economies! Ugghh!!!!
Thus, the ache of
enduring traditional market cycles has become harder to endure as one's
expectations for self reliance, aggressiveness and higher rewards became entrenched
in an unprincipled culture of global finance.
The moral hazard of
boom and bust cycles is that one becomes even more numb to the needs of others
when you put all the chips "on black".
On the flip side, there
are a lot of investors who simply strive for stress-free, conservative portfolios
who are also getting clipped by the slide in financial assets. To them I urge patience and a requirement
that they view all asset allocation models as fluid guideposts for long-term
results and risk mitigation, but certainly not an implement of straight-line
capital appreciation performance.
Happy Thanksgiving!
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