According to what is told in the book of John in the New Testament, Saint Peter, one of the 12 apostles of Jesus, who at the time was trying to escape from Rome where the cross was waiting for him, met Jesus (who had already been crucified earlier in Jerusalem) walking in the direction of Rome. “Where are you heading (quo vadis)”, Peter asks Jesus and he answers: “I am going to be crucified a second time in Rome”. Peter, according to Yohanan in his book, was reprimanded for trying to escape the fate destined for him, returned to Rome and was crucified there. This phrase, “Quo Vadis”, is still used today to ask a person where he is headed at a crucial crossroads. According to the media, this is also the right question about Wall Street. why? Because the world’s investors, according to the media, are standing at a crossroads and are unable to choose the right direction to take. Why? Because the leading investment avenues, shares and bonds convey complete uncertainty about the future expected of them and so do the non-leading ones such as gold, raw materials and cryptocurrencies. The economic situation, macro and micro, is not clear at all and black swans are flying en masse from above.” And all of these,” said one of the Wall Street Journal writers, “the media and the threats it poses to the market.”
The Wall Street Journal did a poll of experts about the future on Wall Street. They chose some real experts, not analysts, not professors from the academy, not “stakeholders” and not gurus or experts on their own behalf, but people who grew up in the most difficult and complicated battlefield in the world, who have experience in the field, real “maybeans”, who live Wall Street from the inside and so on. A. Of whom Maybin is considered a leader in a certain field on Wall Street. People like Jeremy Grantham, Rob ArnottRobert Schiller, Paul BrittonNancy Davis Founder and CEO QuadraticLloyd Blackfein andRick Rieder Director of the Global Bonds Division at Blackrock.
“The situation is not as dire as it is reflected in the media,” he said Lloyd Blankfein, who between 2006 and 2019 served as chairman and CEO of the investment giant Goldman Sachs, “We have already passed such crossroads. The investor must come to terms with the fact that it is never as bad as his worst fears or as good as his best hopes.” What stands out in these interviews is that there is really no agreement between these experts and they admit that it is very difficult to demonstrate confidence regarding future developments in the face of the multitude of economic and non-economic events that threaten the investor. The interesting thing is that Lloyd Blankfein is the most optimistic among the experts. Why is it interesting? Because it is very difficult to find a Maybin at his level, a man who plowed through Wall in every way and with impressive success. Among other things, he was appointed CEO and Chairman of Goldman on the eve of the 2008 crisis and found himself in a situation where Goldman almost crashed. He managed, with Buffett’s help, to carry out an amazing reorganization and restored the crown to its former glory. He is optimistic because he has already seen everything. But alongside Blankfein we interviewed serious Maybins like Jeremy GranthamShiller and Rob Arnottwho express pessimism. By the way, Arnott is convinced that US stocks have not reached their lowest point. Why? Because Shiller’s price-to-earnings ratio (multiplier) shows that stocks are still relatively expensive. The 500 index P&S Although trading well below its peaks during the dot-com or post-corona booms, it is well above the range reached at the bottom of the 2007-09 financial crisis. According to him, the bottom in a situation like the current one comes “only when all investors break” and that is definitely not the case at the moment. Blankfein is not bothered by the multipliers or the question “has the bottom already been reached or not?” He is optimistic because the flow of bad news is so large and varied that investors do not properly appreciate or ignore the fact that there is some reasonable news that can affect the market in a positive and fast way, scenarios such as a change in Russia’s behavior, inflation that will start to fall and cause a change in Fed policy or clear signs that the recession is not at all certain . “To remind you again,” he tells the Journal, “investors don’t just rely on the current picture, they look ahead.” It is recommended to read the article here.
But the real reason for this article is an article by Michael Wilson, the chief strategist of Morgan Stanley that we mentioned before, a bear known for his opinions and one of the leaders in pessimism that about two weeks ago, many investors were surprised to find bullish signs about the stocks and in a letter on October 30, he tries to explain what happened. “Many investors felt uncomfortable with this surprising reversal,” he writes, “To be clear, this call (the reason for the reversal) is based almost entirely on techniques and not on fundamentals that remain unsupportive of many stock prices and the 500 P&S“.
And yet he presents some facts that nevertheless support the stock increases from the economic and not the tactical side. “From a basic point of view, there are also several (fundamental) supporting factors. First, the consumer price index signals a decline. True, this is one of the latest data series which says very little about the future and can be misleading regarding current conditions, but, in our opinion, it is important to take the trend into account “. But the second reason for the change in his views is the important one, “while until recently we loudly led the bearish herd and mainly because of the declining growth, This is no longer a problem. A large part of our bearishness was related to the expectations of the results (macro and micro) of the third quarter and the results prove that the fear of a recession was exaggerated. Bottom line, inflation has peaked and is expected to decline faster than most expect, which could provide some relief for stocks and the threat of a slowdown has significantly decreased. We think the current rally at 500 P&S There are legs to reach 4000-4150 (currently 3900)” and his closing sentence, which tries to explain the change in his view, “We are obliged to understand that going against one’s core view in the short term can be dangerous (and perhaps wrong), but that is part of our job.” At least He, unlike the media bears, admits that even Morgan can be wrong.
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Why is what Wilson writes so important? Because it proves that the masses (masses of investors) look at the picture through different glasses than the media, which is interested in terrifying headlines for the purposes of ratings and advertising revenue, investors do not need it!! Wilson’s letter is one of the reasons for the sharp increases of Yom and As a friend in New York told us? “If he even half-heartedly admits that he was wrong, then the wisdom of the masses is probably still right.”
We tend to accept Blankfein’s estimates and have been trying to explain this for several months. Faced with all the economic horror scenarios such as inflation, high interest rates, recession, a sharp drop in consumption (the anchor of the American economy), Russian nuclear use or a Chinese invasion of Taiwan, there are some important facts that many investors, especially the media, ignore, and it is not just about the power of the technology revolution that we are returning On her again and again. Consumption does not decrease, employment continues to increase, liquidity does not decrease, companies continue to make big profits and are in a better position than ever before, and most investors are of the opinion that the rise in inflation and interest rates is not the result of a distortion between the supply and demand systems, but rather the result of a decaying political distortion. Our opinion is that the main concerns at the moment are not the result of the economic situation but the result of the political problems (Russia-Ukraine and especially China-Taiwan) but with all due respect to the commentators and experts who threaten Soviet nuclear weapons or a Chinese invasion of Taiwan, we believe that there are no fools in Moscow and Beijing . The Honorable Xi and Putin are aware of the still huge difference between them and the USA and the possibility that the Republicans will regain control of the Congress and the Senate (at the moment it seems that way). Chi and Putin understand the military and especially the economic strength of the US, which will not hesitate for a moment if the Russians use nuclear weapons and, to secure the Chinese, invade Taiwan (which, by the way, will completely eliminate all of China’s economic progress), Biden or no Biden.
This is actually the picture presented by Wall Street since the end of September, certainly concerns, future shocks for sure, but the hope that things will work out is getting stronger and at the current valuations of the shares it is worth starting to identify opportunities. If not for this picture, Wall Street would behave in a completely different way.