February/March 2019 - Summary -

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.