Checking myself in

Happy Friday!

We get asked a lot by investors why they shouldn’t just buy a 6-month Treasury bond, collect that 5%, and call it a day. So, I wrote about why that’s not an optimal long-term plan. Reach out if you’d like a copy.

Moving on…

Stability

The Fed has a dual mandate of (1) price stability and (2) maximum employment. The idea is to maintain both in harmony, but the Fed only pursues this dual mandate if they have financial stability. 

Once the system starts falling apart or showing signs of cracking, this is what happens to that dual mandate:

The Fed panicked last year and began raising rates at the fastest pace in four decades. This caused a few banks that made bad decisions to fail, and they dropped an atomic bomb on that ant hill to prevent the fissure from becoming a canyon.

That’s why there’s a good chance that the Fed is done raising rates (or close). They still want to act tough on inflation, but it’s unlikely that they are willing to risk financial stability to do so.

Perhaps that’s why the market is now pricing in a 50 bps rate cut by the end of the year and another 1.25% lower by the end of 2024. Well, that and expectations of a recession later this year forcing the Fed’s hand.

This creates a challenging situation for investors. The economic data will probably worsen as the stock market prices in more rate cuts. 

Maybe that’s why so many pundits are scratching their heads at the chart below. The Nasdaq is back in bull market territory from mid-October lows, and while there could be several reasons for this stellar move, interest rate expectations are likely high on the list.

Herein lies the real risk ahead… Focusing too much on the economic data and not enough on what could get priced into stocks. Because if the former outweighs the latter, you could miss out on the early innings.

And if you think you’re good enough to time all of this, then Vaya Con Dios Bodhi. The early innings are often measured in weeks or even days. 

Opening Pandora’s box.

Now that most of the dust has settled, I think it’s safe to say that nobody really feels all that bad about the SVB fallout, right? How can anyone honestly sympathize with VCs and dopamine fasters? It’s not mathematically possible.

The irony of the whole situation is equally palatable. Think about it. SVB enabled tech companies to grow and do things like make online banking possible from an iPhone. Then, when things got weird, their customers used that SVB-fueled innovation to pulverize them in hours by withdrawing 42 billion using iPhones. It was so fast that SVB’s website couldn’t keep up.

This isn’t the first time we’ve seen an invention kill its creator. There’s a long list on Wikipedia, and there will be more. In fact, two weeks after they scrape off all the disemboweled organs from the ceiling of the Boston Dynamics headquarters, Netflix may even release a documentary about the robot that “snapped” and the ensuing tragedy that forced them into bankruptcy.

But will any of them be as meme-worthy? That’s harder to say.

They tried to make me go to rehab.

Apparently, trading crypto is addictive. So much that there are now rehab centers in places like Mallorca that offer treatment. Here’s what one looks like:

Oh, and the best part is that a 4-week treatment can cost up to $350,000. 

Nothing about this story makes any sense at all. If you can afford a six-figure crypto detox, that means you most likely were successful trading crypto. There’s simply no other conceivable way that you could pay that much for a month on a Spanish island.

If so, why are you trying to quit? You’re clearly good at trading crypto, it’s made you wildly rich, so why stop now? Michael Jordan never checked himself into Passages Malibu at the height of his career to stop dunking. 

It’s also not boring because if it was, you wouldn’t need rehab to stop. 

Don’t misunderstand. I support any scheme to rob Millennials of their inheritance. The proprietors of these rehab clinics are geniuses, and they deserve all the accolades coming their way. 

I’m just annoyed and can’t say why. Maybe it’s because I didn’t think of it first.

In any event, enjoy the weekend. Can’t say I will.