The lesson? Markets can always surprise you. Especially when “everyone” agrees what will happen next. It’s why we diversify.
Quotes of the month.
“As I look back now, it’s obvious that studying history and philosophy was much better preparation for stock market than studying statistics…those who are trained to rigidly quantify everything are at a huge disadvantage.”
“Every investor wants to know whether central banks are prepared to cause a recession in order to force inflation down. Surely, officials are bluffing, right? But think about it from the central banker’s perspective. Yes, a recession would be bad: people would lose their jobs, and it could take a while to recover. But recessions happen all the time and they rarely ruin any central banker’s reputation. Some, such as Paul Volcker, are even celebrated for their “toughness” in the face of economic pain. And if a recession happens now, the authorities can blame Putin or say it was the only way to tame the inflation monster. Runaway inflation, on the other hand, would leave a darker legacy. Jerome Powell, Christine Lagarde and others would be joining Arthur Burns on university syllabuses for the semester on “historical monetary failures”. In 40 years’ time, economists would still be discussing how they “let the 1970s happen again”. No central banker wants to become a case-study in how to fail.”
Dario Perkins from TS Lombard, on why Central Banks might continue to drive interest rates higher.
This month in (financial) history.
In August 1998, the Russian government devalued the ruble and declared a moratorium on paying its foreign debt. What’s that saying about history repeating? Back in 1998 the Russian stance caused a slide in the bond market and eventually, the collapse of the giant hedge fund Long-Term Capital Management.
In August 1896, three intrepid explorers named Skookum Jim, Tagish Charlie and Jim Carmack were scrabbling for gold. Their location was Rabbit Creek, a tributary of the Klondike River near Skagway, Alaska. They suddenly came up with a pan chock full of gold nuggets and the Alaska Gold Rush was on!
Vaguely interesting facts.
- The Karni Mata Temple in Deshnoke, India, is home to 20,000 rats. The rodents are believed to be descended from an incarnation of the Hindu goddess Durga.
- The distinctive smell of old books comes from chemicals like benzaldehyde, furfural, and acetic acid. All are byproducts of decomposition.
- The Truman Show Delusion is a mental condition marked by a patient’s belief that they are the star of an imaginary reality show.
- Newborn babies have nearly 100 more bones than full-grown adults.
- It is illegal to own only one guinea pig in Switzerland. *
* They get lonely, apparently.
Just in case you were wondering.