What we’re reading (1/25)
“Was Larry Summers Right All Along?” (New York Magazine). “Once the consummate Democratic insider, he had suffered the fate of so many left-wing wonks of yesteryear: to see one’s dissent derided as economically illiterate and politically treacherous. Progressive commentators declared him a ‘vindictive SOB’ whose caterwauling about inflation was really a bid to ‘spook the markets and crash the economy to punish the administration for shutting him out.’ The New Republic entertained the hope that, after three decades at the center of Democratic politics, Summers was finally ‘becoming irrelevant.’ Ten months later, times have changed.”
“Correction Or Pullback, January’s Swings Call For Calm” (Fisher Investments). “Magnitude aside, the downdraft to start 2022 looks a lot like a correction—and not much like a bear market. The lockdown-induced, warp-speed 2020 version aside, bear markets usually begin gradually—with long rolling tops early…Corrections are different. They normally begin with a bang, for any or even no reason, with stocks falling steeply from a prior high and plunging fast. Typically, they have some big fear or scare story associated with them many presume is driving the negativity. After a swift fall that has most expecting worse to come, stocks turn around and snap back higher—usually about as fast as they fell—with no warning.”
“But Are You Short The Market?” (Marginal Revolution). “‘But are you short the market?’ That is my favorite rejoinder to expressions of radical pessimism. It came to mind recently when I read an opinion piece suggesting that ‘the United States as we know it could come apart at the seams.’…Besides, shorting the market does not have to be impossibly risky. Just buy some unleveraged market puts each year until that position pays off. That’s not a great investment tactic for most people, but it makes sense for diehard pessimists. Are they even asking around about how to do this, the way you might ask for recommendations for a good restaurant or a masseuse?”
“Was The Market Sell-Off Overdone?” (New York Times). “The foundations supporting the market during the pandemic are looking less stable. That starts with the Fed, which has flooded the market with money and kept interest rates low. The unwinding of this stimulus is preoccupying market watchers, who are looking to the central bank this week for clues about its intentions (more on that below). Rising interest rates, combined with uncertain corporate earnings prospects and geopolitical tensions between Russia and Ukraine, form an ‘investor triple-whammy,’ Ben Laidler of eToro wrote in a research note.”
“Cryptocurrency Doesn’t Amount To Much” (Wall Street Journal). “[T]he crypto ecosystem merely mirrors, electronically and anonymously, the most rudimentary components of the regulated financial system. The putative gains are quickly dissipated by crypto’s many weaknesses. The convertibility of stablecoins like Tether to dollars at par is doubtful. People can’t judge credit risk the way banks can. As currently constructed, the crypto ecosystem lacks accountability and legal recourse, so there is little basis for trust. And bitcoin’s basic operations, for example, require enough electricity to power an industrialized nation.”
