Notes From a Panel

This week I was privileged to participate in a panel discussion at the Greenwich Economic Forum.  Conferences like these give me an opportunity not only for a change of scenery — in this case, not much, since it was held just down the street from our office — but also to interact with a wide variety of intelligent people with diverse opinions about markets, the economy, and politics.  I was by no means the most prominent speaker – Ray Dalio and Nassim Taleb come to mind – but I’d like to think that our panel about trends in markets and the economy more than held its own. 

The first question that came my way was in reference to the market paradigms that we’ve shared in recent days.  I offered three of the four that featured in our recent “Choose Your Allusion” piece”: the “Spiderman Market”, the “Ratchet Market”, and the “Tokyo Subway Market.”  (Quite frankly, I couldn’t recall the “Nihilist Market.”  It’s easy to forget things when speaking extemporaneously before an audience.) 

I know that the panel’s host favored the image of Spiderman scampering up a sheer wall of worry, and the analogy of shoving a few more riders onto a packed Tokyo subway got a few chuckles from the audience of institutional investors, but I think the one that resonated most with my fellow panelists was the ratchet reference.  They were all too familiar with the stock market’s current pattern of sharp advances occasionally punctuated by shallow, fleeting resets.  I enhanced that part of the discussion by referencing my belief that the “half-life” of dips is getting ever-shorter, something which appeared to get plenty of knowing nods.

The discussion pivoted to the risks about the concentration of AI-related stocks in both key indices and the market’s mentality.  The veteran institutional investors in the room were generally wary of these concerns but understood the career risk that comes from underweighting the stocks and sectors that are driving the performance of the broad market and that of their peers and competitors.  At this point I took a risk, using a joke that my son told me.  I’ll offer a similar G-rated version to the one I used at the conference:

Two accountants are having lunch together.  One of them is given something that is clearly spoiled and rancid.  Before he has a chance to return it, the second one says, “I’ll give you $100 if you take a bite.”  The first one mulls it over, then takes a nibble, at which point the second one hands over a $100 bill.  The first one then says, “I’ll tell you what.  I’ll give you a chance to get the money back if you take a bite.” Out $100, the second one reluctantly agrees, and gets his money back.

This turn of events at lunch makes them late for a meeting.  Their boss asks for an explanation, and they tell him the story of the $100 dare.  He then says, “wait a minute.  You each took a bite of rancid food and ended up with no financial gain?”  One of the accountants thinks for a second and replies, “But we raised revenues by $200!”

Neither my son nor I wrote this joke.  There are versions out there using economists and GDP, and most versions involve a substance and verbiage that I prefer not to use publicly. 

But you should get the point here.  It is quite possible for the sort of deals that were recently struck between OpenAI and Nvidia (NVDA) and AMD might not offer the sort of bottom-line benefits that the headlines imply.  This seemed to be a concern not only for our panelists, but for others as well.  There is a sense of unease among many institutional investors about the market’s relentless rise and the types of deals that have propelled it – not to mention the signals sent by a $4000+ gold price.  Yet Spiderman continues to move effortlessly up that wall of worry.