Monday, December 20, 2021

Morning Note: Imagine If

Two headlines catch the blame for this morning's selloff across asset markets:
Omicron casts a shadow over holidays as countries consider serious restrictions
And the bigger culprit, I suspect:
So let's play a little "imagine if."

Imagine if the latest covid variant indeed morphs to the point where the world measurably shuts down, say, live entertainment events of all variety, vacation travel, etc. To what extent would the-powers-that-be rush in with a fresh round of aid that overshoots the consumer's loss of income? Last year's experience resulted in a 5 to 1 ratio. Ultimately distorting, to the upside, everything from the price of everyday goods, to stocks, to cryptocurrencies.

And imagine if you were a politician who literally had the wherewithal, and the will, to hold up your own party's signature legislation 11 months from mid-term election day. Well, suffice to say that you'd be able to write your state's own ticket. Holding out for the absolute best deal for your constituents is a no brainer! I.e., while anything's possible, killing the legislation altogether is probably not Mr. Manchin's ultimate intent.

Asian stocks got hammered overnight, with all but 2 of the 16 markets we track closing notably lower.

Europe's taking a beating this morning as well, with all 19 of the bourses we follow selling off, as I type.

US major averages are a mess to start the week: Dow down 553 points (1.58%), SP500 down 1.37%, SP500 Equal Weight down 1.47%, Nasdaq 100 down 1.26%, Nasdaq Comp down 1.43%, Russell 2000 down 2.01%.

The VIX sits at 25.39, up 17.71%

Oil futures re down 4.94%, gold's down 0.04%, silver's down 0.56%, copper futures are down 0.21% and the ag complex is down 1.10%.

The 10-year treasury is up (yield down) and the dollar is down 0.18%.

Led by KRBN (carbon credits) and AT&T (our only positions, other than the put hedges, in the green this morning) -- but dragged by everything else, particularly solar stocks, ALB (lithium miner), energy stocks, uranium miners and base metals miners -- our core allocation is off 1.31% to start the session.

Epictetus (this quote featured in Hanselman and Holiday's book The Daily Stoic) spoke about life in the following, but my how it applies to the investment process as well:
“For if a person shifts their caution to their own reasoned choices and the acts of those choices, they will at the same time gain the will to avoid, but if they shift their caution away from their own reasoned choices to things not under their control, seeking to avoid what is controlled by others, they will then be agitated, fearful, and unstable.”

 The authors' interpretation/version:   emphasis mine...

"Epictetus is reminding you that serenity and stability are results of your choices and judgment, not your environment.
If you seek to avoid all disruptions to tranquility— other people, external events, stress— you will never be successful. Your problems will follow you wherever you run and hide. But if you seek to avoid the harmful and disruptive judgments that cause those problems, then you will be stable and steady wherever you happen to be."

Have a great day!

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