The Week Ahead – Futility

Welcome to “The Week Ahead” where we take a moment to provide our thoughts on what we can expect in markets and the economy during the upcoming week.

I recently learned that 14 years prior to sinking of the Titanic, the book Futility told the story of an unsinkable ship, the Titan, which also struck an iceberg on its starboard side in the North Atlantic on an April night. The fictitious ship closely matched the Titanic's length, weight, speed, capacity, and dearth of lifeboats. If that isn’t coincidental enough, the author, Morgan Robertson, subsequently wrote another fictional book in which Japan attacks the U.S. Naval fleet in Hawaii. Mr. Robertson certainly had an uncanny knack for predicting unlikely events. If he were still alive, I’m sure we would find a position for him at First Foundation!

The Titanic tragedy was an avoidable event marked by the dangerous combination of bad luck and hubris. If you know the story, you may recall that the captain of the Titanic was attempting to break the trans-Atlantic speed record. Despite receiving six warnings of sea ice, Cpt. Smith was traveling near maximum speed when lookouts sighted the iceberg. Unable to turn quickly enough, the ship suffered a glancing blow that buckled her starboard side, opening five of her sixteen compartments to the icy-cold seawater. The Titanic had been designed to stay afloat with four of her forward compartments flooded, but unfortunately no more.

At times investing can be very much like navigating a ship. No matter how calm the seas, or how “unsinkable” the portfolio, caution is paramount. Without proper diversification, we would be guilty of the same hubris that resulted in the deaths of more than 1,500 people; one of the deadliest peacetime maritime disasters in history.

This week we await two extremely important details about the health of the economy: the Case-Shiller home price index & motor vehicle sales. Housing and autos are hugely important indicators of the wellbeing of the economy, and we’ve seen recent softness in both of these key indicators.

Data deck for October 29 – November 2: