Shorts & Qubits


This morning we find on the internet generally positive headlines about the market and the economy.  But, perhaps disconcertingly, we also find a headline about a famous hedge fund manager who has placed, and recently increased, a large “short” position on the S&P 500, thereby betting what you and I would consider to be a fortune… over $1 billion… that the market is going to fall dramatically by the end of the year.

How can smart, deeply experienced, highly motivated Wall Street professionals have such radically different interpretations of the market?   What is the average person reading the news to make of this?

Over the weekend I was waiting in the checkout line at the grocery store and noticed the current issue of Time in the magazine rack.  The cover story about the “Infinity Machine” was so fascinating that I succumbed and went ahead and made an impulse purchase just to read the article.

It turns out that the Infinity Machine is a reference to a new, extremely exclusive breed of supercomputers which are based on quantum physics.  I won’t go into all the particulars, but the basic gist of it is that rather than using the classical “bits” used in all other computers, these quantum computers use something altogether different, called “qubits”.  The fundamental difference being that, in theory, the data in the qubits exist briefly in two parallel universes… at the same time.  Therefore, in theory, the computers can ask data to perform calculations not just really fast, but multiple sets of calculations using the same data simultaneously.  It’s a little bit like using a single screwdriver to loosen and tighten two different screws in two different locations at the same time.  If this turns out to be real, then quantum computing could radically change not just the computer business, but potentially how we manage information in general and find solutions to very big problems like the stock market.  As you can imagine, there are some very powerful people and organizations who are seriously interested in this.

Bringing us back to what the market is doing – How do we know what’s actually happening, and make reasonable predictions for what is going to happen?  Well, we don’t have access to a $10 million quantum computer that performs simultaneous calculations in an alternative universe to answer these questions for us.

What we do know is that most economic data appears to be encouraging.  Politically, last week Congress agreed to suspend the debt ceiling, which suggests to us some willingness in Washington to play nice.  The S&P has had a bit of bumpy ride so far this year; year to date it’s about even.  But, looking back one year, the index is up over 23%.

The bottom line is, halfway through the first quarter, we confess that we have no idea what the market is going to do or what future headlines will be.  Based on what we see, however, we remain cautiously optimistic.  From a financial planning perspective, we are well into tax season and most of us have received our 1099’s.  Now may be a good opportunity to review your portfolio and consider if changes to assets or allocation should be made, or perhaps other changes to your financial plan should be considered.  We are happy to help, with the caveat that we can only operate in one universe at a time.  We think.

Chad Campbell


A little more about Capital Financial Planners...

Established in 1984, Capital Financial Planners, LLC is an independent, fee-based investment management and financial planning firm located in Salem, Oregon. We provide wealth management and advisory services to clients in the Pacific Northwest and beyond. Our services include retirement planning, investment management, advisory services for trustees, hourly financial planning and more. We take a holistic and collaborative approach, working not only as our clients’ financial advisors, but as their financial partners.

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