Mea Culpas, 2018 edition

Trump, Markets, Infrastructure and Other 2018 Mistakes
There’s merit in going back and seeing what we got wrong.
Bloomberg, January 4, 2019



I was wrong.

I find it helpful to say that occasionally. In fact, each year, I make a list of what I got wrong; I share publicly all the things I have written about where I was off, either a little or a whole lot. Publishing this list in the full light of day allows me to own my mistakes, recognizes our fallibility, and learn from the experience.

I have been doing this for about a decade. It is incredibly helpful to my “process;” hopefully, you may find some usefulness in it as well.

1. Trump and the Stock Market: I have written fairly extensively about why mixing politics and investing is such a bad idea. Its emotional, not objective and has shown poor results over time. I tried to discuss this repeatedly: the tariffs are what he campaigned on, and should have been reflected in prices; how partisan bias affected financial analysts; the advantages of a trillion dollar tax cut stimulus.[i]

*Sigh*  It took me until December to recognize this error (see Donald Trump Owns This Stock Market) when POTUS replaced a dovish Fed chief with a hawkish one, ran up the deficit, and started a trade war.

2. Emerging Markets: Much cheaper than US markets or developed ex-US, EM has been my default answer to “Where should I put cash to work today?” I have suggested that EM is a great long-term play, that valuations always mean revert – eventually. “Maybe you might look foolish for a few years, but in a decade or two you will look like genius.”

Well, it has been a few years, and the foolish part for sure has come true; I sure as hell don’t feel like a genius.

3. Infrastructure Fix: Yeah, I blew this one also. Blame my wishful thinking on hoping to see a modern rail, road, airport and electrical grid that was befitting of a great nation. Nope.

In “The Odds of Fixing U.S. Infrastructure Just Got Better,” I wrote: “Tom Donohue, president of the U.S. Chamber of Commerce . . . proposed a big infrastructure plan, including a 25-cent-a-gallon increase — phased in over five years — in the federal tax that supports the Highway Trust Fund. The chamber has made a substantial push for this…” Only they didn’t. It died almost immediately. At least I admitted my error quickly, just 2 weeks later.

4. Facebook did not flip the 2016 Election: Shortly after the Presidential election of 2016, I discussed the social network’s news feed. Sure, it spreads fake news, but it changed few, if any, minds. “I am skeptical that social-media posts changed many votes; people aggressively avoid ideas that challenge their basic philosophy and opinions.” Hillary Clinton was a terrible candidate who got 3 million more votes than the other terrible candidate, Donald Trump. But she failed to visit the Midwest enough, did not connect with people in a visceral level the way Trump did. Sure, 3rd party candidates hurt her, as did then FBI Director Comey’s ill-timed intervention was problematic also. Problem is, there are always so many of random elements involved we cannot know for sure which was the most important one. Elections are complicated affairs, filled with opportunities for success or failure.

Or so I argued.  As it turned out, the election was much closer than originally realized. Swaying 77,774 [ii] people across 3 states might have been all that the Russians needed to nudge the outcome in the direction they wanted. The Senate report noted Instagram [iii] was a “bigger Russian tool than Facebook itself.”

So I have to admit: maybe I was wrong when I said Facebook was inconsequential to the final results of the 2016 Presidential elections.

Not Wrong (but Looks it)

I am always surprised when I get pushback to columns that are effectively correct. Consider these three as not mea culpas:

1.Don’t be Afraid of October: I wrote “Investors should worry more about September” than October. Markets promptly went straight down starting in October, continuing to fall for three months, just about losing 20 percent of their value.  The angry emails I got on this column came from “outcome focused” traders. Those readers who were focused on process knew this was a probability discussion.  Just because the dice come up snake eyes does not mean the math was wrong.

2. There’s Nothing Old About This Bull Market: The discussions about how old bull markets are is so silly. Age is not the factor that ends bull markets, not is there anything magical about 20 percent measure of a bear market, a made-up number. [iv]

Now we get to argue wither the recent 19.78 percent pullback on a closing basis was truly the end of the bull market. Never mind that Russell 2000 (-27.28%) the Nasdaq 100 (-23.45%) and the S&P500 (20.06%) all suffered drawdowns of more than 20 percent peak to trough. Please leave me out of this one…

3. Apple Mag Cover Indicator. I an fond of pointing out that certain indicators that work with entire indices or markets do not work with single companies. To wit, the Apple magazine cover indicator. As I noted in “That Magazine Cover Doesn’t Make Apple Shares a ‘Sell’ “ Apple and Steve Jobs or Tim Cook have been on countless covers over the years. Cherry picking those that precede a selloff while ignoring the rest is a pointless exercise.

That’s my list for 2018. Check back next year – the odds are pretty good there will be lots more errors to own up to.




[i] Why Markets Love Trump’s Tax Cuts Bloomberg, January 29, 2018.

[ii] “Trump won Pennsylvania by 0.7 percentage points (44,292 votes), Wisconsin by 0.7 points (22,748 votes), Michigan by 0.2 points (10,704 votes).” –Weekly Standard

[iii] A Facebook property since 2012

[iv] So too is 10 percent for a “correction” a wholly fabricated measure.



I originally published this at Bloomberg, January 4, 2019. All of my Bloomberg columns can be found here and here


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