Volatility and Masters

Continued Volatility

The Financial Times had a headline this week, “Private equity goes risk off as it pauses dealmaking.” This period in markets is somewhat reminiscent of COVID shutdown, but to a much lesser degree of course. Businesses cannot build reliable financial models without policy clarity. I wouldn’t call this period “risk off” as much as I would call it a paralysis. Businesses can freeze their activities, but markets still trade daily, and the market’s ability to arrive at a fair valuation has been reduced significantly. As a result, it’s fair to expect more market price volatility, both up and down. The VIX (fear gauge based on how much people are paying for options contracts) has stayed above 30 for two weeks now. It will likely continue to stay elevated. I will add that Trump has a history of coming out hot and backing down later as he already has in various ways. Tariff clarity alone would be good for markets.

I mentioned this last week but I think it’s worth repeating. The ultimate goal of reshoring is critical manufacturing independence, similar to the energy independence achieved by the US in 2019. It’s very difficult to reshore manufacturing when there is both a lack of talent and higher wages. I think the only manufacturing that will make it over the hump back into the US will either be 100% robotic or so critical in nature that it will be reshored at any cost with significant subsidies, like advanced semiconductors.

Masters

It’s culturally notable to me that The Masters does not allow cell phones, significantly limits advertisements and sells food at 1990s prices. The Masters makes most of its money on merchandise and tickets. For most events it’s probably not economically reasonable to exclude influencers as they are powerful marketing allies. The Masters does allow Meta glasses, so you can still take digital photos with your sunglasses.

I’d like to see more events cultivate a no phone singular focus environment. Schools struggle with this. Even Netflix has changed the way their shows are created because they know people are looking at their phones while watching. Writers are told to, “have this character announce what they’re doing so that viewers who have this program on in the background can follow along.”

I wonder if other major sporting events will follow suit and refocus their fans back into the present moment. I’m not sure how one would invest in a no-phone event trend, but I hope it gains some momentum. Maybe the Meta glasses no phone workaround is the trend.