Yesterday, a friend asked me whether Buffet selling Apple shares indicated anything in the market. I said I don't know, the only thing I know is people know some stocks are overvalued and showed signs of panic selling...

Today, NASDAQ closed down -3.43%, and the NASDAQ futures broke -5% in pre-market.

As kids, we love listening to fairy tales. They lift us into a world where there's no pain nor suffer, and all justice will be served.

As we grow up, we learned that, life is a great venture with even loftier pursuits than fairy tales, but littered with annoying details here and there. We need to face the reality to actually achieve. That one extra push-up you do after exhaustion, that final math problem you solved on the exam, that one bitter green pepper you ate because it's healthy. Change doesn't happen with mere thinking as in fairy tales.

Now, soft landing is a fairy tale that some news outlets, researchers and policy makers are selling. The US Gov't bond curve has been inverted since 2022, and stayed there. It's a typical sign that there will be a recession. Then in 2023, people started saying in mainstream media that even though inverted yield curve signals recession, this time will be different.

I was reading Howard Marks' book "The Most Important Thing Illuminated" at that time, and was struck with this sentence:

Every once in a while, an up- or down-leg goes on for a long time and/or to a great extreme and people start to say "this time it's different."

In a memo to Oaktree Clients, Marks expounds on the practical meanings behind a a New York Times article "Why This Market Cycle Isn't Different" by Anise C. Wallace in 1987. Among a few propositions Marks were usually asked in meetings are:

• There doesn't have to be a recession.
• Continuous quantitative easing can lead to permanent prosperity.
• National debt isn't worriesome.
• The inverted yield curve needn't have negative implications.

If you imagine the general direction of history as the change of mean, then market booms and busts are reversions to and overshoots of the mean. Joel Greenblatt also went over a similar theme in his Special Situation Investing Classes at Columbia. The most important thing he emphasized is knowing the true value of an asset (which is difficult to value post 2000), and wait for the reversion to the mean to happen.

We don't need to accept reality, but we do need to understand it and leverage the rules of it to catapult us to where we want to be. I believe the market will get a new high in 10 years, but it will be a long-winded path, not a gravity-defying path of new highs every day. Then it's more productive to admit the failure of quantitative easing and a delayed recession, so we can get to a more optimistic future quicker.

Screenshot of Seeking Alpha homepage today: