Thursday, December 8, 2022

Morning Note: The Good Old Days

I'm having to stretch my thinking this morning to come up with something that isn't just a repackaged repeat of my most recent messaging... And, alas, it hasn't yet been a week since our last highlights-of-recent-messaging post... 

So, given some of the conversations I've been having of late with folks who seem gloom-ridden by the current state of political and geopolitical affairs, I'm thinking it's as good a time as any to offer up an essay I penned several years ago in an effort to shine some positive light on otherwise gloomy global setups.

The following was also featured as Day 1 in Leaving Liberty?, the daily devotional I published back in 2013:

DAY 1: The Good Old Days

 "When I look to the future I get very nervous, but when I look to the past I feel pretty good." --James Buchanan 


I’m generally not one for reminiscing, but the other day I found myself in the throes of a sentimental moment. A friend forwarded me an e-mail titled "To Those of Us Born 1925– 1970," and man did it ever take me back. Back to my childhood, to a simpler time, to a time when kids could entertain themselves for hours on end— without the luxuries of video games or cable television. I literally got goose bumps as I was reminded of how my pals and I would pile into the backs of our parents’ pickups after Little League games. But now that I think about it, I’m not entirely sure whether my goose bumps were inspired by nostalgia or by my memories of how friggin’ cold it was riding in the back of a truck. 

Ah, the good old days, when the future seemed so bright! Like during the Great Depression, WWII, Korea, Vietnam, the Cuban missile crisis, Kennedy’s assassination, Nixon’s resignation, the Arab oil embargo (remember those gas lines?), the Cold War, 19 percent mortgage rates, the junk bond scandal, the savings and loan crisis, the Mexican and Asian currency crises, the 1987 stock market crash, the bursting of the tech bubble, September 11, 2001, the bursting of the real estate bubble, and the myriad events between all those I just listed? Seriously, if you were born between 1925 and 1970— or from 1970 on, for that matter— how often were you truly looking to the future with optimism? 

In the words of economist James Buchanan, “When I look to the future I get very nervous, but when I look to the past I feel pretty good.” 

Now in spite of my calamitous chronology, I believe those of us born in the heart of the twentieth century indeed have much to be thankful for. Life was blissfully less complicated back when the notion of paying even a nickel (let alone a buck-fifty) for a bottle of water, as we drank from garden hoses, would have seemed utterly absurd. Yet while we will forever romanticize our past, we nonetheless strive mightily to make life more comfortable for ourselves and for our posterity. And clearly we have succeeded beyond our wildest expectations. 

Pessimists consider themselves realists, and they call optimists idealists. But like Buchanan, when I look to the past and consider how far we’ve come, I’m thinking the optimists had it right. 

Of course we have issues. We’ve always had issues, and of course we always will. You may indeed be pessimistic— you indeed have reason to be— and you’ll indeed be proven right every now and again. Or you may be an optimist; you indeed have reason to be, and you’ll indeed be proven right every now and again as well. 

I’ve often wondered if we even have a choice, in terms of our tendency toward one or the other. Perhaps it’s a chemical thing, or maybe it’s environmental. Speaking for myself, particularly when we’re talking public policy, I concede to both. But again, when I look at the world in retrospect, when my thinking transcends the headlines of the day, I can’t help but be optimistic in the long run. 

If you consider yourself a “realist,” no offense— I did not intend here to criticize you. For as the buyer needs the seller, you are every bit as essential to the market’s function as the optimist. 

Or, for that matter, if you’re an optimist, I did not intend here to inflate your ego. For you are the pessimist’s pawn. When Gloomy Gus gets it right, there has to be some bleary-eyed buyer to sell to.

Asian equities (save for China and Hong Kong) struggled again overnight, with 13 of the 16 markets we track closing lower.

Same for Europe so far this morning, with 18 of the 19 bourses we follow trading down as I type.

US stocks are green to start the session: Dow up 163 points (0.49%), SP500 up 0.25%, SP500 Equal Weight up 0.39%, Nasdaq 100 up 0.06%, Nasdaq Comp up 0.11%, Russell 2000 up 0.15%.

The VIX sits at 23.07, up 1.72%.

Oil futures are up 1.96%, gold's down 0.07%, silver's up 1.16%, copper futures are up 0.78% and the ag complex (DBA) is up 0.21%.

The 10-year treasury is up (yield down) and the dollar is down 0.08%.

Among our 36 core positions (excluding options hedges, cash and short-term bond ETF), 26 -- led by energy stocks, MP Materials, base metals miners, uranium miners and silver -- are in the green so far this morning. The losers are being led lower by AMD, treasury bonds, Eurozone equities, Amazon and Sweden equities.

"...politics, as we’ll explore, can impact consumer sentiment like nothing you’ve ever seen— and today’s (and yesterday’s, for that matter) incumbent knows this all too well. He’s fully aware that the economy will ultimately determine the result of his reelection bid. Thus, when we’re in the contraction phase of the cycle, he’ll desperately assign blame to the other side of the aisle, with his finger pointing firmly at his predecessor. Conversely, when we’re expanding, he’ll take all the credit."

--Mazorra, Martin. Leaving Liberty?; Essays on Politics and Free-Market Thinking

Have a great day!

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