Tuesday, June 27, 2023

Morning Note: The Good Old Days

Again, I'm feeling uninspired to attempt to dazzle (or, perhaps, frazzle) you with yet another stab at articulating why we remain relatively cautious right here, and/or, why risk-concerned investors should resist the allure of bull narratives that utterly lack the robustness that present circumstances demand.  I’m therefore offering up yet another popular -- and I think timeless -- post from the past.

This one was also featured in our 2013 daily devotional, Leaving Liberty? Essays on Politics and Free Market Thinking:

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 stocks leaned green overnight, with 9 of the 16 markets we track closing higher.

Europe, on other hand, is tilting to the red so far this morning, with 12 of the 19 bourses we follow trading down as I type.

US equity averages are higher to start the session: Dow by 52 points (0.15%), SP500 up 0.29%, SP500 Equal Weight up 0.11%, Nasdaq 100 up 0.69%, Nasdaq Comp up 0.58, Russell 2000 up 0.17%.

As for yesterday’s session, US equity averages (save for SP500 Equal Weight) closed lower: Dow by 0.1%, SP500 down 0.4%, SP500 Equal Weight up 0.59%, Nasdaq 100 down 1.4%, Nasdaq Comp down 1.2%, Russell 2000 down 0.1%.

This morning the VIX sits at 14.01, down 1.68%.

Oil futures are down 1.30%, gold's down 0.22%, silver's up 0.21%, copper futures are down 0.18% and the ag complex (DBA) is down 1.21%.

The 10-year treasury is down (yield up) and the dollar is down 0.15%.

Among our 34 core positions (excluding options hedges, cash and money market funds), 24 -- led by EZA (South African equities), DBB (base metals futures), Dutch Bros, HACK (cyber security stocks) and XLK (tech stocks) -- are in the green so far this morning... The losers are being led lower by DBA (ag futures), Albemarle, EWZ (Brazil equities), URNM (uranium miners) and MP Materials.

"Our ideas are sticky. And we tend to stick to our theories Good idea then to delay ones theories, for once they're made they're very difficult to let go of.

Belief perseverance, the tendency not to reverse opinions that you already have.

We treat ideas like possessions and it is hard for us to part with them...

Once your mind is inhabited with a certain view of the world, you'll tend to only consider instances proving you to be right. Paradoxically, the more information you have, the more justified you'll feel in your views."  
-- Nassim Nicholas Taleb

Have a great day!

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