Is There Really Such A Thing As The "Good Old days"?

Good Morning,

U.S. stocks closed lower on Friday, with utilities dropping more than 1 percent, as investors digested hawkish rhetoric from Federal Reserve officials and kept an eye on oil prices.
Investors continue to watch for hints regarding when the Fed will raise interest rates but more fundamentally there is a lot of cash on the sidelines and no strong conviction that stocks are cheap. Does this really signal a top or rather a directionless market?
Market expectations for a rate hike in September were just 18 percent Friday and 43 percent for December, according to the CME Group's FedWatch tool. Bear in mind that the markets and the Fed have consistently overestimated the timetable for rate hikes…
More interestingly, this week I read a fascinating article by Alan Jay Levinovitz and I’ve been reflecting on whether there really is such a thing as “the good old days”. Is there really some period of time or cultural state that we can each point to and look back upon with joy, comfort and longing? Or does nostalgia have a dark side?  
“Make America great again!” yells Donald Trump to a raucous crowd that hangs on his every word. Is there anything new here? Playing on people’s fantasies and their need to believe is as old as the rising sun. Prophets both secular and religious alike have been doing it for centuries. But it's important to make a crucial distinction between harmless nostalgia aka. remembering that sunny day on the beach in Jamaica vs. the belief in a past societal perfection.
The former represents harmless sentimentality, the latter form of nostalgia represents the ideological foundation for political movements such as Greece’s Golden Dawn, which calls for a return to Hellenic glory via radical right wing nationalism, and ISIS, which waxes rhapsodic about a distorted Islamic golden age. “The good old days” isn’t a joke. The fairy tale isn’t something to be taken lightly.
As Levinovitz explains it “is a virulent falsehood that infects those whose intellectual defences have been weakened by fear and insecurity. It is easily weaponised by power-hungry propagandists who seek to replace nuanced discourse with patriotic platitudes, and diverse ideologies with homogenous tribal nationalism: Mao, Pol Pot, Hitler, the Ku Klux Klan. In its endless incarnations this myth has shackled people’s thoughts and actions to the promise of a fiction, facilitating evil on all scales, from everyday racism to the greatest human rights catastrophes of the 20th century.”
There is no doubt that there are lessons to be gleaned from the past. Perhaps certain lessons in simplicity or commitment, yet looking back must be done responsibly.  People have an overwhelming need to believe in something. Life is distressing and thus those who can manufacture romance or conjure up pleasant fantasy are like oases in the desert: people flock to them. This isn’t to say that the present is perfect but it is to say that letting go of a romanticized and often fabricated version of the past is necessary if we want a chance at building a better future.


Thought of the Week

"Things ain’t what they used to be and probably never was.” – Will Rogers


Stories and Ideas of Interest

  • Howard Marks of Oaktree Capital has released a new memo on political reality. He does not disappoint diving deeply into the oxymoron of “political reality”. The world of politics has its own altered reality, in which economic reality often seems not to impinge. No choices need to be made: candidates can promise it all. And there are no consequences. If something might have negative consequences in the real word, politicians seem to feel free to ignore them. If a pesky journalist asks about consequences of a policy statement the politician can simply ignore them.


  • Could the best stock market indicator be the Financial Media’s competition for clicks? Price action blog suggests that the frequency of articles in the financial media and blogosphere with calls for a stock market collapse is often a good indicator of a bullish market. No wonder Marc Faber who again recently announced that the stock market would soon crash 50% has basically never been right. Sex sells!


  • Morgan Housel offers some a few big ideas. 2 of my favorite:
    Recessions and bear markets are very easy to predict, except for the timing, cause, magnitude, duration, location, and policy response. 
    Bubbles occur because confidence rises as fast as asset prices. People don't just get excited about making money; they feel brilliant, and intellectually justified to play harder in the next round. (Sound like the average Toronto real estate enthusiast?)


  • Leonid Bershidsky for Bloomberg explores how the most successful technology companies are platforms. What makes a platform successful? Could the technology industry be more socially focused than technology focused?


  • Some of the smartest minds in finance tell Business Insider how Wall Street is going to change – This is what they said. Spoiler: Blockchain and Automation.



  • A new report from credit agency Equifax shows debt delinquencies continue to soar in Canada's oil-producing regions, but it also shows a troubling new trend: Canada's youngest debtors are increasingly having a hard time managing their debt.


All the best for a productive week,

Logos LP