Three articles from the past three weeks:
People are bracing for the pending recession. The trade war’s unpredictable. The election year is volatile. The 12-year bull run has to eventually end. Several people I know in hedge funds are betting the market declines next year.
But where is the irrational exuberance? WeWork gets rejected from public markets completely. Tesla, the most exciting technology stock in at least a decade, is the most-shorted stock on any exchange. BTC is trading 75% down from its peak two years ago. The market is flooded with money, yet returns are getting harder to find. The most popular investments among young people - unlike in 2001 - are ETF’s.
My “efficient market hypothesis” mental model is telling me that because of the negativity - the bracing-for-impact everyone seems to be doing - the downside risk of equities are already priced in.
The market is most inefficient when everyone thinks it’s efficient.
The big tub on the left is two loaves worth of sourdough. It’s been fermenting overnight. The little tub above it is a branch of my brother’s