SO | Child of Market Irrationality and Efficiency

NYSE:SO   Southern Company (The)
This chart is a perfect example of how the market is overtly irrational but also simultaneously efficient. The recent Russian debacle and resulting growing concerns of global economic slowdowns (see: return to pre-COVID economics) has all the utilities performing very well for the past couple days while banks have languished (folks are looking for safety and yield). Make no mistake: These weakness are only perceived. If you go to a company like Berkshire (which has exposure to all kinds of industries where consumer demand is directly observed in its statistics) economic indicators remain strong.

My prediction: If Russian issues persist I'd expect more of what we're seeing. If this persistence is itself "persistent" I'd expect to see an eventual return to trend as people and markets get "bored". If the Russian issues are speedily halted or resolved, I'd expect a strong sell-off in the utilities and would expect the S&P , financials, and tech to roar back into value with a vengeance. Either way, investing in utilities right now is buying $1.00 with $1.05. It doesn't make sense and I'm not adding to my utility positions anymore, regardless of how well I like the sector over-all.

Long term, I think we will eventually revert to pre-COVID economics but the present scare is just that: a scare.


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