2022

We don’t think so, and no, it isn’t safe to invest in markets now. Growth has been slowing in recent months and we anticipate the slowdown will accelerate. This was likely even before inflation hit 8.5% and key borrowing rates spiked across the board. Both of these things have and will probably continue to reduce consumption and overall economic activity. The slowdowns we’ve experienced over the last 12 years since the financial crisis didn’t face these same challenges. In addition, stocks remain historically stretched in terms of their price relative to more grounded metrics like sales, cash flows, and overall...

As we addressed in the Monkey and the Volcano parable, there eventually comes a time when extreme volcanic pressure releases itself all at once. Markets are no different. Extreme buying pressure over time inevitably leads to sudden eruptions that send prices falling; in many cases faster than they went up. In markets as with volcanos, energy and volatility doesn’t disappear, it simply transmutes into another form. If you’ve been paying attention to financial markets the last few weeks, you’ve probably picked up on the fact that this process seems to be playing out currently. Netflix has been a good example...