Hey y’all,
Today is going to be a shorter issue.
I’m currently sitting in a hospital waiting room. My mom had some emergency surgery scheduled to clean up an infection, and I traveled overnight to get here and support her.
Everything should be ok, but if my insights are briefer in the coming days, please bear with me!
On the long road trip last night, I listened to a podcast that mentioned a quote from Benjamin Graham, a man who, among other accomplishments, taught Warren Buffett at Columbia Business School.
Buffett would go on to describe him as the second most influential person in his life after his own father.
In any case, here’s the quote:
“In the short run, the market is a voting machine but in the long run it is a weighing machine.”
There are a lot of ways to read that quote and I can’t get into all of them now but I really like it.
And I think its most important application to today’s context is that in the short term, the markets have emotional overreactions, but in the long term, they typically arrive at quantitative conclusions.
And in the case of tariffs, we’ve seen that play out in real time.
Short-term panic leads to a massive selloff.
Short-term irrational exuberance leads to an insane buying frenzy.
Another short-term panic, and then the waves start to stabilize.
I don’t know that you can say the impact of tariffs is “priced in” to the markets at this juncture, because I don’t think anyone really knows what the impact of tariffs is going to be — or even what the final tariff policy will be.
But as we get more information, the markets process their initial overreactions and move towards a sustained new paradigm.
When things start to stabilize, opportunities could appear quickly to reassess value on panic-sold companies.
Apple, for instance, will find a way to build iPhones that doesn’t increase the cost to consumers tenfold.
We’re not all the way out of the woods yet. VIX is still over 20 by a good bit, though it’s fallen quickly:
But the best way to get ahead of the market is to put the emotion behind you before anyone else.
I think we’re transitioning from a voting machine to a weighing machine in real-time.
Of course, who knows what comes out of Washington next.
In the meantime, good luck out there, and we’ll chat tomorrow.
To your prosperity,
Stephen Ground
Editor-in-Chief, ProsperityPub
P.S. Have you seen how Jack Carter is playing the volatility spike to his advantage? Get all the details here!
