Goldilocks and the Three Bears

At the table in the kitchen, there were three bowls of porridge. Goldilocks was hungry. She tasted the porridge from the first bowl.

"This porridge is too hot!" she exclaimed.

So, she tasted the porridge from the second bowl.

"This porridge is too cold," she said.

So, she tasted the last bowl of porridge.

"Ahhh, this porridge is just right," she said happily and she ate it all up.

[From Goldilocks and the Three Bears, by Robert Southey]

Syzygy (noun): The nearly straight-line configuration of three celestial bodies (such as the sun, moon, and earth during a solar or lunar eclipse) in a gravitational system (Meriam-Webster). [Sometimes used to refer to a perfectly aligned state of affairs, or when “everything is clicking.”]

“If something cannot go on forever, it will stop.” (Herbert Stein)

“The second theorem of the financial instability hypothesis is that over periods of prolonged prosperity, the economy transits from financial relations that make for a stable system to financial relations that make for an unstable system.” (Hyman Minsky in the “The Financial Instability Hypothesis”)

"Trees don't grow to the sky" is a German proverb that is translated from "Bäume wachsen nicht in den Himmel." It suggests that there are natural limits to growth and improvement.” (Source:

“Sometimes you just gotta say, ‘What the [heck]!’” (Tom Cruise as Joel Goodson in “Risky Business”)

As we transition from Q3 to Q4, the global economy and markets seem much like that third bowl of porridge in the Goldilocks story – everything is just right. The global economy is humming along, corporate revenues and earnings are solid, wages are (finally) beginning to increase, which should help consumption, oil and commodity prices are generally stable, and inflation, while still disconcertingly low, does not seem to pose a problem.

Nothing is ever completely stable in a world where Donald Trump is president, but the markets seem to be increasingly shrugging off his random tweets, as they also seem to be increasingly sanguine about Central Bank policy. The Fed announced the unwinding over time of its balance sheet and there is now a high probability of another rate increase in December, and yet the market chugs merrily along.

Despite the recent horrific shooting in Las Vegas, three massive hurricanes that inflicted terrible damage, and ongoing saber rattling between the US and North Korea, market volatility remains complacently low – Goldilocks remains safely tucked into the bed that is just right.