On the heels of continued turbulence in key global markets, today 40-year veteran, Robert Fitzwilson, put together another tremendous piece. Fitzwilson, who is founder of The Portola Group, discussed a financial hurricane, cracks in the global monetary system, and what this all means for investors. Below is Fitzwilson’s outstanding and exclusive piece for KWN.
Fitzwilson: “This is from ‘Rhyme Of the Ancient Mariner’ by Samuel Taylor Coleridge:
All in a hot and copper sky,
The bloody Sun, at noon,
‘Right up above the mast did stand,
No bigger than the Moon.
Day after day, day after day,
We stuck, no breath no motion;
As idle as a painted ship
Upon a painted ocean.
This literary piece is describing the ordeal of a ship and it’s crew trapped in a part of the ocean called the Doldrums. The area is a low-pressure zone in the vicinity of the Equator where sailors experienced squalls, thunderstorms and even hurricanes….
“As Coleridge’s words describe, however, it is more commonly known for trapping sail-powered boats in windless seas for days and weeks at a time. As defined by Merriam-Webster, the term doldrums can indicate despondency, listlessness, as well as stagnation, inactivity or slump.
We must say that the word doldrums has come to mind in recent months. While there have been dramatic and historic movements in just about every asset class, there have been no resolutions to the innumerable economic, financial and political problems we face. Europe, China, Japan and the United States have all made attempts to break out of their doldrums, only to encounter a lack of effect (no velocity of money, no inflation) or hurricanes (worst bond market in 50 years, historic decline in the Dollar, and tumbling equity markets). It is easy in this type of environment for investors to become confused and even despondent.
We wrote some time ago about a type of volcanic eruption described as “Plinian”. A Plinian eruption shoots gas and particulates high into the atmosphere in the form of a column. At some altitude, the weight of the column is too much, and it collapses. As the material reaches ground level, it spreads at tremendous speed. This was the eruption of Mt. Vesuvius in 79 A.D. While the column was rising, the initial terror wore off for the observers as they watched it climb higher and higher. Most did not flee and paid for their complacency with their lives.
As we watch the spasms in the various markets, we know it represents that something is terribly amiss. The geopolitical, economic and financial complexities comprise a chaotic system. By definition, it is impossible to predict the events that will lead to resolution. History is our best guide, but even that cannot help us with the timing of those events. The Romans could not time the collapse of the volcanic column, and nobody can predict the timing of the collapse of our current financial eruptions.