The trademark of February – like January –has been global markets caught in an omnipresent spiral of negativity. However, in just the last few days, that crisscrossing blizzard of gloom has shown early signs of melting. In February – like January - many myths and misconceptions have been swirling – so much so it’s difficult to swat them all down in one fell swoop.
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For the last six years, I’ve held this is the “most loathed rally in history” - one in which its participants (most of whom have been on the sidelines since 2009) squander strong fundamentals by demolishing places where they are visible. In return, investors receive a daunting world in which fundamentals vanish and belief systems are soon blotted out. They wind up not believing in beliefs. They make value judgements after denying values exist.
The easy destruction of fundamentals weakens our ability to act wisely in the present or to place any trust in the future. Our present claims its birthright in earlier events and its destiny in later ones. Without the constancy of both fundamentals and sentiment, we short-change our present along with our future. And as these things go, even when fundamentals are healthy, dire sentiment can severely rust the market outlook to the spot where gloom and doom itself becomes a chief fundamental.
Navigating Through a Minefield of Information
Today we are bathed in flashing images of events around the globe. Where there is commodity demand destruction, deflation, or corporate credit spreads widening, the cameras and journalists will surely go. We investors are briefed on the global oil situation as often as a head of state – or we can be if we so desire. We are stately in our need to know and our power to be informed. Yet what is the hush-hush message of this deluge of information? Perhaps the most significant is that everything is changing constantly; nothing remains the same.
Market news is reported as though we are day-to-day viewing yet another docking of the Hindenburg. With its bumper sticker lingo– it’s altogether fitting not to think too hard, the news tells us, for no multifaceted thought could possibly catch up with the wind of change – it would be antiquated the moment it was expressed.
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The fountain of events, the collection of information, gives one the illusion of prudence. Stuffed full of facts, the news reporter charms its birds from the tree, feeding that incessant need for information rather than formation. We have a garage packed with words, creating a climate that entices us to think in a manner that is nomadic and pragmatic; incentivizing us simply to “deal with the circumstance” while sprinting onto the next burning matter.
A Fish out of Water is Not Free
I love the constant stream of information as I realize that, on the whole, few things in life can or should be compartmentalized. To a certain degree everything is connected and the understanding of one topic, one pattern of behavior, or one societal shift – even one that appears obscure – may lead to discovery in another.
The financial news flow helps me to use my critical faculties in respect to any claim to certainty, and to be open to new data which might call in question my previous idea of certainty. I read the news as though it were possibly the case that all of my beliefs are false as criticism does not come from a vacant mind. Other words, I don’t embrace the news flow to help me with my investing. I follow it precisely to avoid these decisions altogether. I don’t judge a system, or its inferences, by its abuse.
Three decades of experience have taught me that no one really understands how it all works, at least not with the precision required to profitably separate the wheat from the chaff. I don’t, you don’t, our policy makers don’t, economists don’t, analysts don’t, and fund managers don’t. Their confidence, capability and charisma could help for a time but at the end, the markets are all left for guess.
Getting to Mars is a problem; figuring out the markets is a mystery.