Did Someone Call a Plumber?
You have a water leak in your basement. You call a plumber in the middle of the night. He comes immediately and fixes the issue. This early action saved you countless hours of cleanup, plus the expense of lost valuables.
A few months go by. You are coming down with something. You have the chills, and it’s the middle of the night. What do you do? Why, call the plumber, of course. When you had a problem in the middle of the night before, he fixed it. Duh!
The plumber arrives. Your radiators aren’t putting out much heat.
“It looks just a little more mathematical and regular than it is; its exactitude is obvious, but its inexactitude is hidden; its wildness lies in wait.”
— G.K. Chesterton
The Quarter in Review
What a way to end the year! Global markets experienced a robust finish to 2019, with all but the so-called safe assets experiencing an acceleration in the fourth quarter. Though confidence increased as trade tensions appeared to lessen, this may not result in a lasting euphoria. (When does euphoria ever last?) Corporate earnings are about to record their second
“Some things benefit from shocks; they thrive and grow when exposed to volatility, randomness, disorder, and stressors and love adventure, risk, and uncertainty.” -Nissim Nicholas Taleb
Well-intentioned plans can bring unintended consequences. The world’s major central banks have been adding stimulus to the global financial system, hoping to lessen economic volatility and minimize the chance of a material slowdown. However, the result of their actions might be to increase the fragility of the institutions they intend to strengthen.
We have written about the unnatural negative interest rates in many developed nations outside the U.S. (See,
“The investor of today does not profit from yesterday’s growth.”
The Quarter in Review
Compared with previous quarters, the third quarter exhibited considerably more volatility with little appreciation. Most investment markets are showing signs of exhaustion due to continued uncertainty about trade wars, the negative interest rates in most developed countries, and deteriorating economic readings. Over this past quarter, we have seen companies reduce their outlook for growth and earnings, for obvious reasons.
The U.S. continues to be the only large house in the neighborhood not on fire. Both developed international and emerging markets have deteriorated since the end of the second