A Market Lesson from The Last Jedi: Spoiler Edition

Equities start the day higher because Tax Reform is going to pass and we’re all gonna be rich and the S&P is going to the moon.  Now that we have that out of the way we need to talk about The Last Jedi and the lessons we can learn from it with respect to the market.   If you’ve been with me over the years you know there’s a few things I hold dear to my heart:  the Cubs, the Bears, travelling to London, Patagonia, making fun of stocks, but most of all I love the Star Wars franchise.   It has its up and downs, Vader is the best villain of all time and Jar Jar is the worst character of all time, but if we take a step back and look at it as a whole it is undoubtedly the defining mythos of the late 20th Century.  I’d argue Star Wars has had a greater impact on our culture than the iPhone (come at me bro).   I went into the Last Jedi with SKY HIGH expectations, Rotten Tomato reviews were off the charts and word of mouth was strong (I had heard it was better than the ESB).   **spoiler section**    But the moment Luke Skywalker chucked that lightsaber over his shoulder the weight of disappointment overwhelmed me.  I mean WHAT?   A scene that should’ve had immense gravitas, a scene that literally ENDED the previous installment with dramatic tension was summarily destroyed by a lame gag.  And as the movie dragged into Space Leia, horse racing, and income inequality in the Outer Rim I could only taste bitterness in my mouth.  Why?  Why were there so many things that felt out of place?  (Finn’s ENTIRE story)   So Mike….what does this have to do with markets?  Well I’ll tell you, because people often don’t understand this nuanced point:  There are times when a stock or an index falls after what appears to be “good news”.   AAPL beats earnings yet falls.   Jobs data is better than expected yet the stock market falls.   It’s because of the very same thing I experienced in the movie.  A level of excitement that cannot be met, a bar set so high that nothing could jump over it.  If you take one thing away from my recap it’s that emotions are LITERALLY the day to day driver of what we do.  It’s not news, or earnings, or macro data it’s emotions, and those emotions are hard to measure because inside everyone’s head is a movie where Master Luke is as wise as Master Yoda and Poe Dameron doesn’t make a stupid joke about being on hold.   SO BAD. 

After the open we got a surge in the major indices as we priced in Tax Reform for the 8th time this year.  Look, all the catalysts are in the books, we aren’t “pricing in” tax reform anymore, it’s December 18th this thing is locked in.  People are chasing stocks because its year end and they always chase at year end.  Actually, the most fun today was in watching LFIN.   I had never heard of this stock but WOW what a magic carpet ride this thing took.   Logfin Corp debuted for trading on the Nasdaq last Wednesday.  It languished around $5 a share for the first few sessions before catapulting itself to $140 today.  140....as in a 2300% gain?  That’s right my friends.   So what happened, did these guys cure cancer?  Did they make a good Star Wars movie?  Nope, they bought another company, take a look at this Bloomberg news blurb then come back.  “Microfinance crypto warehouse receipts with Ziddu coins”?   I couldn’t make that up if I tried.  I will say…it sounds more interesting than Rey’s two day camping trip with A-hole Luke but is that really a business?   You know what?  I bet that news release is studied in business schools in a decade as a clear sign of “what were these people thinking in 2017”.    Anyway, we spent most of the day grinding higher and by lunch the Nasdaq had hit 7k, the S&P 2,692, the Dow 24,800, and the Rus2k 1,546.   All were fresh highs….way fresher than that dumb milk scene.   I’m angry.

Unfortunately the rest of the day was a whole bunch of sideways as the clock ticks down on 2017.  That being said, by the close the S&P500 had gained 20.19% YTD and the low is STILL the first trading day of January.  Think of how many people have called the market a bubble over the past 1, 2, 5 years.   Is it 50?  Sure.   250?  Absolutely.   1,000?   Guaranteed.  Look, NO ONE knows when this thing will top.  Not me, not your favorite blogger, not the guy on CNBC, and not old Yoda who was actually good in the movie.  No one can predict the future.   All you can do is control your behavior, construct a durable portfolio to weather market storms, and then sit back and filter out the day to day noise.  What if the market is up 25% next year too, will it be a super mega ultra bubble then?   One final note on Star Wars:  I’m not naïve enough to think my opinion is the “be all end all” of movie reviews.  There’s probably a ton of people who like TLJ and I’m ok with that.  Personally I’m being super critical because I hold the franchise and its story in such high regard.  I want my children to have the same sense of wonder and awe I had during my time with Luke, Leia, and Han that I get bummed over tiny details that seem lame.  I don’t know, I’m rambling now, maybe it will be better with another viewing.  Final Score:  Dow +58bps, S&P500 +55bps, Nasdaq +84bps, Rus2k +121bps.  

We’ll end tonight with an absolutely amazing ping pong link.   A guitar pick?   He hit a ball with a guitar pick?