Markets have been bad this year. The S&P 500 has had one of the worst years in a decade and the NIFTY is barely getting by thanks to the BAAP & HODL crowd.
US bonds have had one of the worst drawdowns in history.
The TLT (iShares 20+ Year Treasury Bond ETF), is now down more than 40% from its peak in August-2020.
The US 60/40 investor is down more than 20% while meme-investors have felt a special kind of loss.
So, yes - a lot of pain in both retirement and speculative portfolios. And when there is pain, investors seek out “reasons.” And only the most controversial/scary headlines scale the social-media leaderboard.
THIS IS A LEHMAN MOMENT
- every nutjob since 2010.
Only this time, it is some shitty European bank.
Credit Suisse and Deutsche Bank have been in the dumps for longer that I care to remember. They are both the chronically sick children of the European “extend and pretend” head-in-the-sand approach to cleaning up bank balance-sheets after 2008. And in a weird “If you're not first, you're last” vibe, Credit Suisse has been willing to blow itself up in the pursuit of fees. Archegos, Greensill, and the Citrix LBO, to name a few recent ones.
So, it’s no surprise that CS is down 80% from its Jan-2018 peak.
The Lehman bankruptcy was a “black swan” - the stuff that made Taleb intolerable for the next decade. Thankfully, we don’t live in 2008 anymore. The rules of the game have changed. The system is inoculated - what didn’t kill it has made it stronger. Also, the post-2020 pump was not because of a credit-binge. It was largely a fiscal over-stimulation.
The markets are experiencing a hangover, not an implosion.
Remember, at one time Nike was supposed to be software-platform/social-networking company. And NFTs!!!
Now down more than 50% from its late 2021 peak.
It’s not like they suddenly stopped making shoes or people stopped running. The market just got a bit ahead of itself.
So, relax. This too shall pass.
Markets this Week
Links
Black-Scholes (and related) models, for which Nobel prizes were won: we do NOT use them as models, we use them as normalizations only, as a convenient change of variables. (thread)
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There are three distinct policies that go under the name of QE. (thread)
The shortest economic suicide note in history? (lse)
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Something to keep in mind while back testing - most of the “inefficiencies” would not have been accessible during that time. Regulations, technology, liquidity and cost of capital play a large but ambient role.
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I hear about the number of employees in some of these “new-economy” companies and can’t help but wonder what they do all day.
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VC firms pivoting from hiring from the business school to the law school.
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We need a G10 wealth-tax.
Schools in England warn of crisis of ‘heartbreaking’ rise in hungry children. (theguardian)
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Memes of the Week
