The Falling Sky

Tomorrow. Not today.

Aug 28, 2022

Cheif Vitalstatistix from the Asterix comics has only one mortal fear — That the sky will fall on his head tomorrow. It is this fear that he has been living with, and since tomorrow never comes, he and the rest of the famous gauls are all safe. 1

There is no shortage of people who see doom at every corner. If you are a mediocre talent, being openly pessimistic and cynical is a high expected-value play. Since market corrections occur about once every 3-5 years, you’ll eventually hit the right note and get hyped by the media as the person who saw it coming. This allows you to monetize the doom mongering for decades.

The most famous example of this is Nouriel Roubini but there are plenty more like him. They all sound very logical, erudite and convincing.

There is only one problem, the world belongs to the optimists.

We have gone through the European PIIGS and GIPSIs, the Fragile Five, Battle of Seattle, “New Normal”… Nothing really brought the sky down. Markets survived and so did investors.

Now we are worried about the US Fed raising rates, crisis in Frontier/Emerging markets and Germans freezing to death.

You may have come across some of the scary charts doing the rounds.

In Germany, the 1y ahead power price has skyrocketed to almost €1,000 per megawatt hour. The electricity price has risen by 720% ytd:

This winter’s EU mandated uniform:

However, you know what doesn’t do numbers? The most-likely moderate scenario.

Savaş Yakut @yakutsavas

Overall I don't expect an apocalyptic scenario in Europe this winter but still some consumers will suffer (high prices on their energy bills). Though I don't expect blackouts or total collapse of energy markets. 5/x

Marko Papic @Geo_papic

It's time for a thread on the European natural gas freakout. No doubt, Europe should be concerned given that the TTF contract is up over 200% YTD. But with the EURUSD at parity (a level it never reached during the height of the Euro Area crisis), how much of this is priced in?

Kantro @MichaelKantro

@andycwest #HOPE. Playing out in classic fashion in 2022. #macro

Markets will fluctuate, as they always do when the degree of uncertainty rises. It will price the risk and move on.

Macro is hard. Market timing is harder. Very few people in the world get it right and luck plays a large part in it. As someone smarter than me put it: If you want to beat Federer, don’t play tennis.