“E”
commerce
The markets fumbled again last week
with this notion of earnings versus inflation,
as if that choice was the only one. Yet,
Thursday's economic growth numbers came in at a reasonable 6 percent for June,
not unreasonable for a post-Covid summer recovery. Seemingly, all is forgiven as long as equity
valuations continue to go up. But this
kind of mental jousting is extremely shortsighted and counter-productive. Look around...sector rotation and
generational change is happening all around us.
Those pivotal trends....ecology
(climate change), healthcare (including disease prevention and control),
internet and technology, and social dynamics (poverty, hunger, housing)....will
combine to dictate the future of capital gains and investment opportunity.
The major political, emotional, and
operational imperatives of our time are dominated by Covid, wild fires,
flooding, and infrastructure failures...obstacles that must be overcome in the
short run but which currently eclipse the repurposing of any capital expenses
going forward.
Interesting, that investors' fixation
upon data harvested exclusively from the internet has supplanted what used to
be conventional methods of appraisal. In
today's world, one man's belief is sufficient to influence markets irrespective
of the legitimacy of his opinion. What
used to be time-tested science has been discarded in favor of a more immediate
calculus: if it fits the moment, it must be true. In a
hierarchy of relevance, speculation and greed have displaced sustainability and
fact.
Look, there is no doubt that modern
internet technology is a boon to science, economics included. It is no longer necessary to wait for
tomorrow's Wall Street Journal to find out what is happening in financial
markets around the world today. Almost
every piece of literature ever written can be found on a computer device. My family, and maybe yours, scoured through
our Encyclopedia Britannica each year (am I dating myself...do any of my
readers recall using an encyclopedia?).
What once required a trip to the library can now be accessed on one's
cell phone. However, an epidemic of disruptive
behaviors and opinions permeates through covert channels which only contributes
to impulsively manic conduct and deliberation.
Classical investing is being beaten
back by self serving impulses by which the value of things are imaginary for
the purveyor's own interest. Crypto
currency and other fabricated payment options only exist because we allow the ascription
of meaning to their creation. Without federal support or guidelines, these
currencies are akin to the Wild West. Why not go back in time and bring back the
tulips, jasmine spice, and silk threads?
It has always been my calling card
that “sustainable” (socially responsible) investing (SRI) is supported by data and secular anecdote. These are areas where profitability has
proven to do well and to do “good”.
Environment, agriculture, water, biotech, and energy provide sufficient
diversification and leverage within portfolios to span generations of
innovation and problem solving, responding to problems not just in the present
but for decades hence.
No doubt, the more eager amongst us seek
short-sighted opportunity. Looking at
the current one year market cycle, we, too, believe that valuations are
extended. There is significant upside
resistance ahead which prompts the kind of sell-off that has been happening in
recent days. Even as these pullbacks
offer a well deserved pause, there is still sufficient base building in the
market overall to withstand a bear swoon. The idea that price pressures are an
impediment to market progress is erroneous in our view. Rather, they signify an upturn in economic
activity and demand which lay dormant during the pandemic, and represent a
continuation of the recovery begun in 2009.
Be forewarned, however, that short
cycle pullbacks are part of the normal course of things that occur within
broader bull markets. Capitulations are
not cause for panic or emotional defeat.
Across the spectrum, there is potential not yet realized. Too often our attention is sidetracked from
emerging opportunity to obsess, instead, upon the immediacy of local politics,
exogenous influences, or personal self-interest.
Consider, if you will, that empathy
also has value to our long term expectations.
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