I DON’T KNOW WHERE I'M A-GONNA GO WHEN THE VOLCANO BLOWS
Ground she's moving under me. Tidal waves out on the sea. Sulphur smoke up in the sky - Jimmy Buffett
Volcano Watch: Capital Markets in a Regime of Randomness
As Jimmy Buffett once sang, “I don’t know where I’m a-gonna go when the volcano blows.” Same here, Jimmy. But let’s be clear: the volcano is going to blow. The only mystery left is when it happens—and whether we’re standing uphill holding a mojito when it does.
For now, the lava flow has paused—Trump’s tariff poker game seems to have folded (or at least taken a bathroom break), and markets have done what they always do in the face of ambiguity: ripped higher, priced in a perfect world, and poured themselves a daiquiri.
I’m not joining them at the bar.
Let’s call this what it is: we’re living in a regime of randomness. I don’t mean "regime" in the formal government sense—though if you want to use that word, I won’t argue—but in the sense of chaotic, policy-by-instinct governance. That sort of unpredictability screws with capital allocation. It muddles corporate strategy. It shortens decision horizons for CEOs and wrecks the discount rate calculus for investors. And yes, it bakes volatility into capital markets whether you see it on the VIX or not.
It’s remarkable how quickly investors can go from “the world is ending” to “this is easy money.” Markets have a way of making the hard look easy-until they don’t. As Cliff Asness likes to remind us, the two extremes to avoid are abandoning your strategy at the first sign of trouble, or stubbornly refusing to adapt when the world changes around you. The trick, as always, is to question your approach rigorously and keep improving, even when it feels like you’re just rearranging deck chairs on the Titanic.
Buffett and Munger have always preached the gospel of “one-foot hurdles”-find the easy, obvious opportunities and step over them. You don’t get extra points for degree of difficulty in investing. In fact, you usually just get bruised. As for me, I’m always a little bearish unless the market’s been demolished. Right now, I’m more nervous than a turkey in November. This is a time to be picky, not greedy.
Longtime readers know I rarely dish out stock tips. But for those of you who remember the April 6th edition—“Dips Gonna Dip! Be Ready!” I mentioned Entain PLC when it was trading in the low 500s (pence, not dollars-let’s not get carried away). It’s now around 785 pence, After another round of research and a long walk with a calculator, I think it’s close to fully valued. Similarly, I mentioned Caesars and MGM. My current assessment is that they reside in the realm of fair valuation – not screamingly cheap, but not outrageously expensive either. As for Penn Entertainment? Well, their management and board continue to exhibit a remarkable disregard for shareholder interests. Until Mr. Snowden finds himself permanently locked out of the building, I’d continue to steer clear.
So where does that leave us?
Honestly: nowhere particularly exciting. No home runs today. No magic beans. Just a reminder that surviving in this kind of market requires humility, skepticism, and maybe a little bit of Munger’s old motto: “It’s not supposed to be easy. Anyone who finds it easy is stupid.”
Stay selective. Stay sane. And remember, the volcano may have quieted for now, but the magma is still simmering beneath the surface. Don't mistake a lull for the all-clear.
DISCLAIMER: Pigs At The Trough (the “Newsletter”) has been prepared by Emanuel “Manny” Pearlman (the “Author”) for informational and discussion purposes only. The opinions expressed in the Newsletter are those of the Author and are subject to change without notice. The Newsletter is not and may not be relied on in any manner as, legal, tax, or investment advice and is not designed to meet your personal financial situation. The Author is not registered with the SEC as an investment adviser or as a securities broker or dealer. The Newsletter does not make, and under no circumstances should be construed as providing, security recommendations or investment advice, or an offer or solicitation of an offer to buy or sell any investment, security, commodity or any investment vehicle discussed herein. The investments discussed in the Newsletter may not be suitable for you. Persons who are considering making an investment or buying or selling securities must conduct independent due diligence and make their own evaluations. The information in the Newsletter may become outdated and there is no obligation to update any such information. Past performance is not a guide to future performance. No representation or warranty, express or implied, is made by, nor any liability accepted by, the Author, the Newsletter, affiliates of the Author or any other person as to the fairness, accuracy, reasonableness or completeness of the information contained herein. The Author may hold or acquire securities discussed in the Newsletter and may purchase or sell such securities at any time, including security positions that are inconsistent or contrary to positions mentioned in the Newsletter, all without prior notice to any of the subscribers to the Newsletter
Why not just stay diversified and think about other things?