The past
two newsletters have been incredibly difficult to write. Not because the
markets went up and i`m secretly a big bear, but because they went up for no
apparent reason. Yes, stocks were oversold on 24 December, but from a technical
perspective, the rally should have stalled around late January, when stocks
were up 10%. Stocks kept on going up however, and I just couldn`t find a good
reason why. This is the main problem with the stock market though: Markets can
stay irrational longer than you can stay solvent. Or in my case, Markets can
stay irrational longer than you can stay sane.
The
market`s performance is just a numerical depiction of an incredibly complex
machine. A machine so complex that you and I will never understand it. And
that`s exactly what intrigues me about it. It will make you feel stupid for the
rest of your life. But in hindsight, it always makes sense! It reflects
population growth and demographics, productivity growth and innovation, its
valuation is created by the colour of a political party, a natural disaster,
the combined effort of every single person on this planet and how much money
this person saves, what this person eats for breakfast, what car he or she
drives. Every single action of every single human and every geographic location
has in some way or form shaped, or will shape, the valuation of this machine.
And what
can make this machine act really irrational? A Single. Fucking. Tweet.
If you
think that the Federal Reserve is the biggest manipulator of the market, guess
again. The Federal Reserve at least puts their money where their mouth is (so
far at least), while someone like Donald Trump is blasting out false
information through his twitter account, making statements about information
that is either incorrect or about events that will likely never take place.
How can
normal price discovery take place, if one single person has the power to change
this price with a few strokes on a keyboard?
Despite the
market`s highly irrational behaviour however, I still have faith in the fact
that in the long run, every single dollar that has been “pumped up” by Donald
Trump will eventually fall in the right hands at the right valuation. We
already see less and less reaction from the market every time Trump tries to
boost it with a tweet, and I think that eventually it will become numb to any
kind of information coming out of his twitter account.
Even if
Trump manages to keep the market up, there is still a 55% chance of a
recession, which is not something to look forward to, but it is something to
keep in mind. Ask yourself this: would you prefer to keep your job but lose
money on your stocks, or vice versa?
Thank you
for reading, and don`t forget to stay positive!
Robbert-John Sjollema
The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in this publication is that of the publisher and is subject to change without notice. The information in this publication may become outdated and there is no obligation to update any such information.