Alchanati Campbell & Associates
The market is crazy, and you know it and I know, but how are you reacting to it?
The Market. Traders and investors are dazed, confused, quick to cast blame… but who can condemn them, the market has been choppy. Oil is near $50 per barrel. Lower oil prices mean less pressure on inflation and less pressure on central banks to raise interest rates, and it also benefits households, businesses, and countries that import oil. Corporate bonds have fallen so hard that they’re officially in a bear market. Volatility in emerging market hedge funds spiked in recent months as regional equity market losses in both emerging and developed markets accelerated. American life expectancy falls as opioid deaths rise.
Overconfidence. It causes selection bias (selecting individuals or groups in an unrandomized way), overtrading, lack of diversification, taking on more risk… But, there is a way to mitigate it: take the outside view and do not only rely on personal experiences, think in probabilities and bets, assume you are average and record and review decisions.
Reflections. Breathe and relax. Do not overwhelm and take it slow. What’s yours is yours. Calm and composed. Don’t act on impulse. Think before you do or speak. Don’t try to validate and don’t try to prove yourself. Do not have regret. Patience and restraint. Stop being a bitch. Only weak people get upset, complain and give up. Don’t express weakness to others. No more distractions. You have to be willing to let go and accept that it’s over. I know everything in my life is there to test me and make me better and stronger. Be untouchable.
Financial stability report. The four biggest vulnerabilities the US economy is facing are elevated valuation pressures, excessive borrowing by businesses and households, excessive leverage within the financial sector and funding risks. Asset prices are high relative to economic fundamentals. There’s an increased willingness of investors to take on risk. Borrowing by households has risen roughly in line with household incomes, but there are high amounts of debt. Debt owed by businesses relative to GDP is historically high. The net increase in total household debt has been among borrowers with prime credit scores (719+). Mortgages represent 2/3 of overall household debt outstanding.
Meditations by Marcus Aurelius. Don’t be afraid of work, be sparing in your wants, attend to your own needs, mind your own business and never listen to gossip. Make decisions for yourself instead of depending on the hazards of chance, and never for a moment leave reason out of sight. Approach each action as though it were your last. Remember the doctrine that all rational beings are created for one another. Anything in any way beautiful derives its beauty from itself and asks nothing beyond itself. The man who has done one good action does not cry it aloud but passes straight on to a second. Nothing can happen to any man that nature has not fitted him to endure. Love nothing but that which comes to you woven in the pattern of your destiny.
G-20. This week kicked off the G20 or Group of Twenty summit which is an annually held summit attended by 19 countries and the European Union. Political and financial leaders from the countries plus an extended list of invitees attend the summit to promote worldwide financial growth and stability. The summit represents 85% of gross world product, 80% of world trade, and two thirds of the world population. The G20 was founded in 1999 and replaced the G8 in 2009 as the main economic forum for industrialized and wealthy nations. World leaders use the summit to meet with other heads of state and discuss economic relations. This week kicked off this year's G20 and has already seen the singing of a new trade agreement, and is expected to see progress made on a US-China trade deal. Mr. Trump, Prime Minister Trudeau, and President Enrique Peña Nieto (Mexico) signed the USMCA in spite of persistent trade disputes, which updates NAFTA, the previous free trade agreement. USMCA notably resembles NAFTA except for its updated regulations on cars, crops, and labor regulations. Even though the agreement has been signed it must still receive a majority vote in the Senate and House of Representatives, which is unlikely to happen before changes are made considering both Republicans and Democrats have voiced concerns about the agreement.
“I come to bury Bitcoin, not to praise it” - UBS. “Bitcoin trading below 4k, is it dead?”These were both headlines that displayed on CNBC and other major news stations over this last week. The question among everyone's mind, is bitcoin actually dead? Will we see a recovery? Well, to put this last crash into perspective, bitcoin has crashed more than 50% over 6 times, with crashing over 80% 2 previous times, with this last crash just reaching that 80% point this last week. What does this mean? Well, we have seen this type of crash at least twice before, and both times have surpassed previous levels. The longest correction took place from November 30th 2013 - January 13th 2015, lasting 411 days and declining about 87%. This current crash is at the 331-day mark, with a decline of around 80%. Personally, I think Crypto is on the cusp of something revolutionary and the next phase will be improving the ease of use on the consumer basis.
The Alchanati Campbell and Associates Team
WHAT'S UP FRIDAY? is a weekly newsletter that will give you a summary of "What's up?" on Wall Street, in the US and around the World written by The Alchanati Campbell and Associates Team. What makes us unique is we focus on long-term knowledge; knowledge that will still be useful to you 10 years from now.