Let it Bleed (My 1 and only piece on the election)

“The point of modern propaganda isn't only to misinform or push an agenda. It is to exhaust your critical thinking, to annihilate truth.” ―?Garry Kasparov, former world chess champion and leading Putin regime critic

“There is nothing to writing.?All you do is sit down at a typewriter and bleed."?- Ernest Hemingway

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15 years ago, at the tail end of the financial crisis, was when the financial services industry truly began a serious pivot towards a fiduciary, client best interests first model of advice.? As I’ve written before I jumped in early and wholeheartedly as the entire concept didn’t just fit my overall philosophy, it just plain fit who I am.

The thing I have always loved about being a fiduciary is that it allowed me to bleed like Hemingway.? It didn’t matter who you were or what your job was.? Your age, your sex, your religion, your ethnicity, your politics, your education, your football fandom, your food allergies, your shoe size.? None of it mattered.? If you trusted me with your money I was going to bleed for you.? There were always going to be things out of our control, we wouldn’t always see eye to eye on every piece of advice, and God knows I wouldn’t always be right.? But under the structure of a fiduciary relationship there was one thing the client would always know:? The advice given would be open, honest, and always in good faith.??

Ahh much simpler times….??????

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To me it seems Wall Street is currently gearing up for one of its most intense and focused pushes I’ve seen during my 25 years in the business.? It’s going to be firm.? It’s going to be unwavering.? It’s going to be a drumbeat.? Chances are you’ve probably already heard it as the topic is already deafening in my neck of the woods:

“Elections Don’t Matter to Markets.”

They’ll have charts and graphs and statistics and flow charts and bullet points and mountains and mountains of data to back up their point.? They will beat this into investor brains relentlessly and mercilessly, and will allow no wavering from the main point whatsoever. The data is the data, period.

And they’re right.? Elections do not, in very plain historical context, matter to markets overall.?Decades worth of research has provided more information on the subject than you could choke a horse on.? It proves it well beyond the lofty reasonable doubt standard some these days might fear.???

In years gone by this hardline approach might be more than enough for most.? But in current times I find it unsatisfying.? Unsatisfying specifically because of the almost comical refusal of the industry to explain why.? But context on this refusal makes more sense against the backdrop of where we are in society these days.? In the age of disinformation, ?even in day-to-day business advisors are sometimes forced to walk an un-walkable line where even providing factual information to people can create a world of trouble for themselves.? It's in a word: exhausting. So the overall mood of the industry is to avoid the subject altogether; hoping to go back to normal after the election is over.??

But if I were a client, I’d have one main question:??

“If you can’t tell me why elections don’t matter, why should I believe it?”

And I get it.? Some days I feel like I’m advising inside an Orwellian novel myself (others, during the largest Dunning- Kruger experiment of all time).? But if you think I’ve been talking about the changing world order, the value of the US dollar, our debt servicing, and other long term macro economic issues to you for years now for my health, nothing could be further from reality. I don’t have the luxury of living anywhere else but in reality.?????

So I’m going to try to explain why in writing.? It’s not because I’m brave.? It’s not because I think I’m changing the world.? It’s simply because I can’t just stick to data.? I need to bleed.? I need to tell a story and for it to be foundational in nature to why it’s important.? Well, that and the idea of repeating it dozens upon dozens of times over the next few months separately to you all is a level of mind-numbing exhaustion that even Kasparov would shake his head at.?

The reality is that we live in a populist, post truth world where disinformation is rampant, too many people think their opinions override hard facts, and where the loudest voices can easily drown out the more competent ones.? This is the age of social media dystopia.? Where deciphering the truth can be so tiresome, many just throw up their hands and refuse to believe anything.? (Well, anything but what they wanted to believe in the first place, thus creating confirmation bias on steroids, but I digress….)??

This is havoc and is doing real damage in society.? That havoc is by design as we know it is largely coming from enemies of the United States; namely China, Iran, North Korea, and Russia.? But what’s disconcerting to me isn’t as much the outside influences we know are there, but how our own fellow citizens amplify it internally in both good faith and bad.? Further, we’re at the dawn of artificial intelligence and deep fake technology.? Long term this is technology that can, and hopefully will, meaningfully combat these societal issues.? But in the short term it will make the problems worse.? Divisions and issues like these threaten the very foundation of a stable society.? And foundations are everything to me.?

So why don’t these things that effect the election effect markets?

They do, just not like you think.

Contrary to popular belief, politicians do not shape our society overall.? Society shapes our politicians.? From the White House down to the local dog catcher, winning candidates mainly get elected by parroting what society wants back to them and not because they think their positions can change society. ? This is an oversimplification for sure, but they really are just “us.”? For better and for worse.

For years in my writing I’ve emphasized the market is a weighing machine of probabilities.? It takes all data in the world, new and old, and uses it to determine the probability of outcomes in the form of prices on assets.? When the data or results change, it changes the prices again.? Then it moves forward, bending and adjusting itself along the long arc of history; changing with society as it gradually changes. As it’s always done.

The reason I believe all the data supports the fact elections don’t matter to markets is because societies don’t change in one day.? Markets have been taking in all information in the world about what our society is telling our politicians to regurgitate back to us and factors it in already.? Every policy you fear, every cult of personality candidate you loathe, every piece of disinformation currently warping minds. The market sees it all.? And the market knows none of it will go away in one day regardless of outcome.? November can change the trajectory of this arc for sure, and societies themselves can be drastically affected one way or the other because of it. But this is about financial markets. There are always winners and losers; some companies and industries will be effected and I will be paying close attention to that aspect of it from a financial perspective.? But overall once it’s done that long arc of history will bend and adjust; and markets will move forward accordingly.? ??

This is reality.? And as a fiduciary advisor I will never have the luxury of living anywhere else but in it.? There are always going to be things out of our control, we won’t always see eye to eye on every piece of advice I give, and God knows I won’t always be right.? But it will always be open, honest, and in good faith.? In other words no matter what comes our way, I will continue to bleed.

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Hang in there and hope all is well,

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-Trevor

Written and re-written over an extended period of time. Approved for distribution 08/23/24

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