Tundra is spongy. So are stocks.
Somebody facile with words is Peter Heller. Karen and I met him at a book-signing in Steamboat Springs. Things to do abound everywhere but I think one is more aware of them in small towns. We love our little bookstore, Off the Beaten Path, in Steamboat Springs, and they’ve begun hosting authors. Peter Heller came. We went.
Wow. He’s a man comfortable in his skin, fond of how words sound read aloud. I get it. I’m similarly moved. Music too is words said aloud, and we saw the Avett Brothers Saturday evening at Whitewater Amphitheater in New Braunfels, TX.
Don’t worry, I’ve not lost my train of thought. Follow me to the end, and I hope to reward you.
I think We Are Loved by the Avett Brothers is a marvelous poem. Read the lyrics. Sit back in a forest with the sound of running water or the rain or the ocean on a shore with the waves rolling in and think about it. You don’t have to be spiritual to appreciate it but I suppose it doesn’t hurt.
You’ll find it on their latest album but it’s an old song written probably 25 years ago when Scott, Seth and sister Bonnie on keyboards were young (I remember what that’s like!). They all still look young, and man do they bring energy when they play. Go see them. You’ll be glad you did.
Peter Heller too can pirouette on words. I invite you to read The Dog Stars. It’s not lighthearted. Written in 2012, it’s about a global pandemic that wipes out humanity and leaves a smattering. But it’s in a dystopian way, beautiful.
I don’t know that the stock market and the US economy are in dystopian ways beautiful. I find both as magnetic as young love, riveting as drama. After all, it’s what I’ve known. This market. For thirty years. And just as I look at today’s commentators and think, “They are so behind what’s happening,” I have no doubt that the same will someday be true for me. I won’t be able to keep up.
Not anytime soon though! I spoke to the Board of a public company in Philadelphia Monday about what’s behind trading and how the market works. Those executives and board directors had a genuine desire to know more – and what they might do as fiduciaries for shareholders to make the most of the current construct.
The economy is another matter. What happens when you devalue the currency, as I’ve written often, is known. People will see that money doesn’t go as far as it used to. They will blame merchants for gouging them. But the problem is the money controlled by the government. Copernicus explained it to the king of Poland in 1526.
Devalue a currency and people will spend what’s devalued and hoard what preserves value. Gold. Stocks. Real estate. Art. Cars. You follow me. Then everyone runs out of money, including the government. People need to sell things to raise money, but they want to sell at high prices – which now no one can afford. So prices have to fall.
And governments run out of money too and desperately need it, so they tax everything. Such as unrealized gains. And they can’t let prices fall because prices are revenue. So they devalue the currency more (today by cutting interest rates to promote spending on credit).
Copernicus explained all these things in 1526. Well, not the credit part but you follow. So why don’t we understand them? Why are we repeating the mistakes of the past?
Which brings me to stocks. Demand marketwide was falling heading into options-expirations last week. Normally that means stocks fall. But they didn’t because investors were betting on a rate-cut from the Federal Reserve – which devalues the currency. Cheap credit floods markets will fake dollars – which means you pay more for things. And it juices things that preserve value, like stocks.
The gap between mathematical Demand – investor behavior – and price is a spongy tundra. It’s unreliable footing. We’re on it now. Maybe it means nothing. Maybe a sort of monetary global warming will mean the tundra firms up and the footing gets better. We’ll see.
Demand (an algorithm measuring all motivations behind buying and selling) the past week reversed course and has now topped. One consequence may be that whatever we give back at some point ahead, maybe with month-end options expirations next week, will be what’s expected, plus the spongy tundra. So in a word, worse.
We’ll see.
Meantime, read Peter Heller (I’m reading Burn now, another dystopian tome, on a rebellion in the USA – hope it’s not predictive like The Dog Stars). Listen to the Avett Brothers.
And carry on.
And if your BOD would like to know what it should be doing as fiduciaries in the Great Passive Era, ask us. We can help.
