Dave Canal's blog

As we pause to reflect on the sacrifices of so many for our great country this Memorial Day weekend, we wanted to take a moment to provide our thoughts and perspectives on the recent volatility across the capital markets landscape.

If you follow financial news you are undoubtedly aware of the story about millennial stock traders using a computer network to challenge a 12 billion hedge fund. They impacted a stock appropriately named GameStop. Millions of them “colluded” in buying this heavily shorted stock, creating a short squeeze. Their effort drove the stock up 1,600% in a couple of weeks! “Pools” of organized speculators did this 100 years ago. It was then made illegal. But with computerization, it is so easy to do.

By no means are we out of the woods yet with the Coronavirus pandemic, but things are certainly trending in the right direction.  The incredible social distancing efforts that Americans have endured has “flattened the curve” and our politicians are working to restore our society to some form of normalcy. 

Years ago, I was randomly changing television channels when suddenly, I saw something extraordinary. A young boy was standing with his back to a cathedral in Paris. There was an artist’s palette behind him. Then a voice said, “Now turn around.” The boy turned, stared at the medieval cathedral for a moment, then turned again with his back to the cathedral and drew the church with all its myriad iconic detail.  His precision was astonishing. The voice then softly said, “The boy is autistic and gifted.” Later, I realized we all have a gift.

During this time of unprecedented uncertainty, all of us here at Contravisory are concerned about the safety and well-being of our families, colleagues, customers, partners, and the many friends who make up Contravisory’s broader family.  Please know that we are thinking of you.

With half the stock market’s total capitalization represented in index and ETF funds, it could almost be called a “passive” stock market. But that will never happen. The impact of an individual stock on a portfolio’s performance is too great. Peter Lynch expressed this reality best when he said, “It is not the number of times you are right, but the magnitude of when you are right.” I had learned that lesson years ago working for Merrill Lynch as a young order clerk.

If you’ve ever watched a TV quiz show called “Jeopardy,” your reaction might have been similar to mine.  “Wow, how do they know that?  They’re really bright!” Endless facts.  Endless “knowledge” about things that I, for one, know nothing about.  But it is not knowledge; it’s about an ability to retain information.  That’s very different from having knowledge of a subject.  With knowledge, one has the ability to use information.  It is the essence of the quote, “May the force be with you” from the Star Wars epic film saga.

It was a dreary fall day as I climbed the stone steps to Marblehead’s cemetery, known as “The Old Burial Ground.”  The weather was appropriate.   The cemetery, dated 1638, is situated on a hill overlooking the ocean.  I was curious what historic names might appear on the tombstones.  After all, I live a block from General John Glover’s house.  He is the man in the famous painting ferrying George Washington across the Delaware.  And then of course there is Salem, famed for the witch trials, in an adjacent town.  Two “witches” are buried in the cemetery.

In theory, a magician and an illusionist are the same.  But an illusionist performs on a much larger scale.  He’s the one who uses sleight of hand to distort the senses.  Especially the brain.  In effect, he makes perception overtake reality.   Such a technique is used today in bringing a “new” company public.

The word, unimaginable, has a fearful connotation.   It describes something we cannot comprehend because we have not experienced it before.  This is the reality of a subzero interest rate environment.  There is now 17 trillion dollars in sovereign debt paying a negative interest rate.  Why would anyone want to purchase a bond guaranteeing them a loss?  There is no reason, other than a fear of everything else that pays a positive interest rate.