Stormy

Happy Thursday, investment readers! The winter olympics have drawn to a close and now I do know one thing about curling which is that team GB are pretty awesome at it! Norway finished top of the medals. Why are they so good? Morning Brew have done a piece . Summary: they're rich, have lots of snow and a different philosophy for youth sports focused on participation at younger ages.

In this edition: Ray Dalio on inflation, James Anderson with Barry Ritholtz, why now is the best and worst of times for investors, a vibecheck and a vibeshift.

We had FT journalist and author of Trillions, Robin Wigglesworth on the podcast this week talking Jack Bogle, Blackrock, 1970s asset management renegades, and trillions and trillions (in passive funds) it was great (Apple ).

But first, markets

Edit: all numbers are to Wednesday’s close, you need to take another 2-4% off for this morning’s news according to futures .

Markets are at new lows for the year. Down about 9-11% for global stock indices. High quality bonds like gilts or corporate bonds have quietly lost 5-7% too giving back about 2 years of performance. The Nasdaq has been hit hardest - about 19% off highs, under the surface it's worse than it looks, the Tarantino market is still with us: 1 in 3 Nasdaq stocks have been cut in half. UK stocks are looking like a safehaven at the moment.

You all know what the big story is and there's nothing remotely lighthearted to say about what is an incredibly bleak situation, getting worse as I type this morning so I'll just make three observations: I can add no value on Russia/Ukraine commentary, markets don't tend to price geopolitical risk well and from a strict markets viewpoint, in the fullness of time it is quite unlikely that current events will be significant (for markets). Then again you could say that about a great many things.

Stockmarkets are down off all-time highs, but EPS and revenues have all been hitting new highs (Ed Yardeni ).

Latest quarterly earnings have beaten expectations , but maybe that was actually expected? Future expectations have been revised up, but by less than what was expected, that's negative. Cystal? Cool. That splashing sound you can hear? It’s central bank speakers rowing back some of those rate rise expectations.

Vibecheck

my personal favourite sentiment indicator is a look back at the last 4 Economist covers. It reveals current sentiment is: 2 parts Russia/Ukraine, one part fears of higher interest rates and one part generalised/lazy worries about market correction ("crypto, NFTs ... yada yada ... The Fed, PE ratios, blah blah, ETFs!! QT, QED). Sounds about right.

If a story about a ship full of luxury cars abandoned and on fire in the middle of the sea isn't a metaphor for today's times I'm not sure what is ....

Lets get to the longer term stuff

Three things I'm reading

1. Ray Dalio is out with a piece . He has things to say about inflation. Essentially: inflation was inevitable as a consequence of central bank monetization & the debt cycle (no, it isn’t different this time). Overlaid with a changing world order. He sees historical analogues in the 1930s and 1970s. He makes the point that we are very inclined to predict a continuation of current conditions, right up until really big shifts take place, and we could be at one. Good stuff here, but I guess my beef with this is that it tries to fit it all into one over-arching narrative, which I don't think is always a helpful or useful thing to do. But then again Ray is a lot smarter than me.
2. There has never been a better, or a worse time to be an investor, says Joe Wiggins . Low cost, transparency, choice and control are all good things - in many ways- but can be horrible from a behavioral perspective and leave us worse off.
3. Bankers getting bonuses is one thing we all love to see, right? I'll just leave this one here

Two things I'm listening to.

1. Barry Ritholtz's superb interview with Baillie Gifford's James Anderson. But wait, this isn't just another cliched shortermism critique of the industry (although he does make that point)

It's a goldmine of good insight and is well worth the time to listen to in full, highlights include: So much of what's talked about is unimportant: not enough focus on qualitative long-term theories of change (and too much on next year's GDP).

Why don't investors ask questions on earnings calls, rather than brokers? The importance of organisations like the Santa Fe institute. It's a rare insight into the mind of one of the defining investors of the last two decades, some of the comments he made in the interview even turned into news stories as it was the first time they were emerging into the public domain. (Web | Apple )

2. I hope James would approve of my second recommendation here which is Azeem Azhar 's latest podcast on how micromobility (think, scooters and ebikes) will change cities with Horace Dediu. If 80% of journeys involve one person going less than 2 miles why are we using high-performance vehicles that can transport families hundreds of miles? The use cases for transport are very varied, but we have a sunk cost infrastructure focused on the car and the combustion engine. It needs re-imagining at a system level. And I love the comment that cycle lanes are a better innovation than flying autonomous taxis (Web | Apple )

?? Popcorn time, basic b!tches. Current obsession: Inventing Anna on Netflix (It's the fake German heiress story, Ozark season 4 is on hold). There's something about scams and this era of superficiality and peak influencer that just gets me everytime. It's a study in psychology. Does it illustrate a glitch in human nature or highlight the fact that we are actually social creatures who can't help defaulting to trust , are easily blinded and avoid challenging? Maybe it just goes to the nature of identity in an age of capitalism …

Bonus froth

Are you getting the sense that some of the core pillars we use to navigate pop culture are feeling a little, well ... 2016? You're in good company. A vibeshift could be upon us . We're all emerging into a post-pandemic world and to everyone's surprise we aren't wearing, reading, thinking or saying the same things as we went in. Think, less sneaker flipping, virtue-signalling, and mass social media influencing. We want to make things personal again, push back against the mega tech platforms . A return to early-aughts indie sleaze messiness is being predicted (as someone who looks back on this era with a great deal of nostalgia I find this intriguing) . There's a pent-up opulence stemming from the last 2 years to throw in for good measure. And the Fed, maybe. If in doubt always blame it on the Fed.

One thing to brighten your day

Sit back and admire as Kyla Scanlon recaps the entire history of economics in 54 seconds.

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Extended market data as of COB 23rd Feb