Mirror Image | To Mania

Mirror Image | To Mania

By Julien B. Booth

October 17, 2022

‘Our desires and aversions are mercurial rulers.  They demand to be pleased. Desire commands us to run off and get what we want. Aversion insists that we must avoid the things that repel us.’ Epictetus

I am in the process of re-reading a truly life changing book, Wanting by Luke Burgis.

Wanting: A Book about René Girard’s Mimetic Theory of Desire

A groundbreaking exploration of why we want what we want, and a toolkit for freeingourselves from chasing unfulfilling desires by Luke Burgis


Wanting (the book) is a condensed version and application of the work of Rene Girard concerning Mimetic Desire.

Mimetic desires are the desires we imitate from the people and culture all around us.  Mimetics largely explains how people (and markets) ultimately behave.

2022 is a mirror of 2021’s mania, the perfect inverse of investment mania – pure fear.

At this time last year (roughly speaking) the ALL TIME HIGHS ever in stock/bond markets were being recorded.  We outlined in our recent note the correlation to the actions of the Federal Reserve to inject liquidity into the markets in 20/21.

2022 is the inverse, the Federal Reserve is removing liquidity at an accelerating rate.

Looking at risk – from the most, to the least here are some brief highlights:

10-2021 10-2022 % G/L
Bitcoin $61,550 $19,013 -69.11%
Nasdaq $15,900 $10,427 -34.42%
S&P500 $4,690 $3,583 -23.60%
Agg. Bong Index $114.50 $95.40 -16.68%
Gold $1,860 $1,670 -10.22%
US Dollar Index $25.20 $30.44 20.79%


Note the US Dollar Index.  When the Federal Reserve is raising interest rates and financial conditions are tightening, the US Dollar appreciates vs. other currencies. While correlation is not causation, a large part of the negative performance of asset prices is the strength of the US Dollar vs. other currencies.

As consumers of foreign goods, we benefit, but our financial asset prices do not.

The shorter term behaviors of asset prices are 99% mimetic, and reflexive, perpetuating the manias (2021) and fear cycles (present).  I believe it is safe to say the risk taking in 2021 was legendary – and stupid.

The models of the 2021 Bubble (CNBC) were financial weapons of mass destruction.  There are too many poster children (Bitcoin, ARKK, RobinHood, Coinbase, Facebook, Snapchat) for the excesses seen during 2020-2021 – in aggregate most of them have losses exceeding 60%+ and are measured in $trillions of losses.

It is unlikely they will recover this decade, if ever, to their peaks.  The tech bubble of 2000 was a Junior Varsity warmup for what we are working through.

We speak frequently about investment risk.  During periods of mania few want to hear about risk.  We get fired during periods of mania.

I am old fashioned – one of my strongest Mimetic models was my grandmother Nora.  She instilled frugality, hard work, value, and toughness – in a wonderfully ladylike and kind package. As I age, I cherish her model.  She had durability.

At present we are buying the bonds of high quality (energy companies, Schwab, Bank of America) yielding over 9.1% (price: $85 range).  These same bonds were trading under 5% in 2020-2021 (price: $113 range).

The mimetic nature of chasing yield, now despising yield, is quite wonderful from a value-buyer’s point of view.

Nature is healing the excesses of the past several years – it will take time, but quality underlying business are durable and the cash flows safe.

Thank you for your interest.  We are grateful to work for value people.

Julien B. Booth

Chief Investment Officer – Fixed Income & Real Assets

BRC Wealth Management