Yesterday we hosted a seminar at our office. The first part was a market recap; the second reminded us that humans are wired to be terrible investors; and the third explained how politics (and the upcoming midterms) can affect our decision-making.
You can find a full copy of the slides here.
For today’s note, I’ll jump to two stories from the last section:
The first is about betting on elections.
In 2016, Sam Bankman-Fried - who later became famous for founding the FTX crypto exchange and committing fraud - worked at Jane Street. He designed a system that predicted Trump’s victory before major news outlets did.
Jane Street’s thesis was that if Trump won, the markets would tank. So, they used that insight and placed billions of dollars in short bets that would benefit when the market fell.
They were right about Trump winning, but wrong about the market reaction, and they lost $300 million.
The second is about consumer confidence.
Back in April, I wrote a note titled “Investing While Sad” and made the comment that the Michigan Consumer Sentiment Index was at record lows.
Mason, our rockstar intern, broke the numbers down further so I could talk about them in the presentation. What he found was that:
Young people are a little less confident than older people. (52 v 58)
Lower-income people are a little less confident than higher-income people. (45 v 61)
And lower-wealth people are also a little less confident than higher-wealth people. (46 v 67)
But the real divide is Republicans versus Democrats. Republicans are currently at 90, and Democrats are currently at 32.
This is the widest gap in history, and whether someone feels confident in our economy right now doesn’t really depend on how old they are, how much money they make, or how much wealth they have; it depends almost entirely on who they vote for.
Keep these points in mind before you start rebalancing your portfolio. Neither your predictions nor your feelings tell you anything about what the markets will do next.
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Personal Note:
Big thank you to everyone who came out to yesterday’s seminar, and special thanks to Mason for help with the charts.
Interesting, thanks
Very interesting statistics & charts on Consumer Confidence.