Market Thinking

making sense of the narrative

Signs and Portents

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” Beware the Ides of March”. There is no reason to feel a bit nervous about the date as President Zelensky addresses a Senate, just as Caesar did on this day in 44 BC, other than the fact that those who might wish him harm (and a quick question in Caesar’s Latin of “Cui Bono?” reveals that the list of ill wishers extends beyond Putin) might be inspired by the reference. As we know from behavioural finance, two strong traits in humans are pattern recognition and narrative. More prosaically, from a market viewpoint, the Ides fall in the same week as the important March options and futures expiry and are thus often ‘eventful’.

The Ides also fall in Cheltenham week and while the professionals pour over the form and the vast amount of stats, other punters buy their lucky heather on the way to the course or bet on horses with ‘lucky’ names. In this they are no different from the 2bn people who see their behaviour influenced by the Chinese Horoscope and it reminds us of the importance of trying to understand the motivation of others when anticipating what they will do. Did Putin pick 22/02/2022 because it was as a palindrome and was thus somehow an auspicious day? Perhaps he saw it as fate linked to the Georgian war triggered on 08/08/08, another palindrome day? Or was it maybe because it was the 8th anniversary of the coup in 2014 that triggered the civil war in the Donbass? (something most of the world was unaware of until very recently). Certainly it is likely that his talks with Xi in February will have involved not acting during the Beijing winter Olympics (the Georgian war was on the opening day of the Beijing summer Olympics of course, while the Maidan Coup was during the Russian Sochi Olympics suggesting that perhaps somebody did see a pattern). The truth is that, as investors, for all our study of the form and the data, human emotion and superstition are still a key driver of events and, to continue the racing analogy, while they don’t necessarily influence the horse race, they can certainly affect the starting prices.

However, it goes beyond this, for in fact human emotions and behaviours can affect the real world – if enough people believe in change, it can actually happen. In his classic book Extra-ordinary Popular Delusions and the Madness of Crowds, author Charles Mackay observed that “Men go mad in crowds but only regain their senses one by one”, something we have quoted on many occasions, none more so than over the last two years. The book is most widely known in financial circles for its chapters on the South Sea Bubble and Tulip Mania, both of which have echoes in stock market bubbles or, more recently in things like Crypto (which has even greater parallels to the opening chapter on the Mississippi land grab and John Law.) It seems that, for all the advances in technology, the system of human emotions underneath it all remains the same.

Thus we see modern parallels with many of the other chapters in the book (here in PDF) the persecution of witches for example has resonance in the current cancel culture, albeit with less fatal results, while the chapters on Alchemy and other ‘science’ have obvious similarities to a lot of aspects of Covid alarmism and ‘following the science’. Warming to the theme, some of the discussions of the doomsday cults predicting the end of the world sound decidedly familiar – in this case when it failed to happen the prophets of doom claimed that, due to a small miscalculation, they were out by exactly a century ! (or not obviously). Meanwhile, one might argue that Ukraine is but the latest iteration of the War on Terror and its underlying driving forces that has powerful echoes of the Crusades (another Chapter).

The Planets are aligned….Nicholas Cage and Dan Brown do Investment Strategy

As we often say, this blog is not giving investment advice, it is for information and hopefully entertainment purposes only. So, more in in the spirit of the latter than the former, we note that, while we used the quote about crowds on several occasions over the last two years, in the manner of the assorted religious manias spotting ‘signs and portents’ we would just note that while we might time the arrival of Covid in the west to coincide with the quarantine of the Diamond Princess Cruise ship on 02/02/2020 (the first date for over 900 years to be a Palindrome under both the US and the UK date systems), we could also date the start of the Ukraine War – and the near instant disappearance of the narrative on Covid – as being another Palindrome date, 22/02/2022.

Astrologers meanwhile would note in addition that the date also coincided with the return of Pluto to America for the first time since (wait for it) 1776.

Quite literally the Planets are Aligned for the first time in the same way as they were when the US was ‘born’

Apparently this completion of a full revolution means a time of rebirth and a return to first principles. In 1776 the US was fighting to be free of an Empire. Now it is fighting to hold on to one. If you want to go full ‘woo woo’ as they say, and feel like you are in a Nicholas Cage movie, or a Dan Brown novel you could note that 2/22 was George Washington’s Birthday and that the time on the clocktower on the $100 Bill is, yes, 2.22

Getting more carried away, Nicholas Cage or Dan Brown might be able to tell you (as characters Ben Gates or Robert Langdon obviously) that 2*2*2*222 = 1776.

Clearly we Librans don’t believe in all this Astrology stuff (!) but the semi-important point beneath all this is that when people start to believe that change is ‘due’, they start to behave differently and in a curious way things do start to happen. We often see this within companies; a previously unassailable CEO makes a small slip and as first one, then the next, of the loyal lieutenants reduces their support, even if only marginally, it is enough to change the ‘mood’. Then the crowd (to return to Mackay) start to sense change and it then suddenly change happens. Similar things happen in politics of course. We might say that the fall of the Berlin Wall led to the end of the Soviet Union, but what really triggered the beginning of the end of the GDR? PR and its political derivative (actually parent) Propaganda understand this extremely well, that their role is to try and control the mood, to shape the narrative and, bluntly, to manufacture consent for the actions that they wish to take.

A push back against Plutocracy?

There is also a sense of Pendulums swinging and, as we observed with Covid, we suspect that the Ukraine War will accelerate a number of changes and trends already underway, something we already touched upon in our March Market Thinking. One of these trends, to tie in with our above discussions on Pluto may be a push back against the excesses of Plutocracy. The new Sky-Atlantic TV series ‘The Gilded Age’ is set against a period of time in the US between roughly 1870 and 1900 when a small number of incredibly rich people (Plutocrats) became incredibly wealthy on the back of a massive amount of poor people. We have observed in the past that there are strong elements of this in Hong Kong, with staggeringly wealthy Tycoons in their Maybachs alongside old people literally collecting cardboard boxes to make a few dollars. Similarly in London, Private Equity Plutocrats eat in Mayfair private dining establishments while Bentley’s idle outside next to Big Issue sellers. Michael Shellenberger, following on the success of his book Apocalypse Never, has written on San Fransicko, highlighting the homelessness and poverty alongside the extra-ordinary wealth of the Silicon Valley billionaires who are literally burning their money in Moonshots. Interesting to note that Shellenberger is standing for Governor as an independent on a platform of good ideas and getting things done. This is the new wave of populism we suspect and is behind our thinking that the Fed may switch policy from the wealth effect for the 1% to the real income effect of the 40% (who own nothing and, to misquote the WEF, “are not happy”). Particularly in Europe we suspect, while not fully embracing Chinese Common Prosperity, a rejection of US style Crony Capitalism may well emerge in a return of post war Socialism mixed with increased nationalism – hopefully not National Socialism!

The Death of the Three Zeros – welcome casualties of war.

As we noted yesterday, one of the first consequences of the Ukraine War will be a shift in energy policy and thus a Reset of one of the deadly trinity of Zeros – Zero Carbon. This joins the death of the Zero Interest Rate Policy (ZIRP) as the Fed fights inflation and, of course, the death (everywhere but China/Hong Kong) of Zero Covid. For that at least we can be grateful.

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