Fiddling While Rome Burns

I was in Nashville last week for a DJ gig, and I also spent a second night out clubbing. I am sitting in the airport pretty haggard after a few nights of not enough sleep. Tired but happy. Things are popping in Jared Dillian-land—business is good, returns are great, got a book coming out, teaching, and DJing across the country.

This is a weird juxtaposition to the fact that… things maybe aren’t going so well in the financial world these days? We are getting some private credit blowups here and there, and I think many people underestimate the systemic effects of this. Oil just ripped to $90/barrel, and I think Trump miscalculated—he thought if he took out the top 100 guys in Iran that the IRGC would just roll over, but that turned out not to be the case. They have dug in. 

So, we will have a few months of war at least, and potentially higher oil prices, and potentially lower stock prices, and Bessent is making noise about selling oil futures, which will only create distortions and do nothing to the physical market. Emerging markets, which had been on a historic run, just got whacked. European front-end rates ripped, and European stocks dipped. There are the usual rumblings about wealth taxes and such, but that’s not an immediate concern. Politics are more toxic than ever, and of course, we have the AI bubble, and nobody is smart enough to predict how that is going to play out.

I am bearish, have been for a while, and the chart of the S&P 500 is pretty ugly. When I am not writing, I am usually sitting in my chair just watching the price action, and I can tell you that we are nowhere near any kind of capitulation. In fact, the stock market is holding up remarkably well under the circumstances. Given everything that is going on, it should be a lot lower.

My M.O. as a Trader

I am a terrible student of history, which is a deficiency because traders should have some understanding of financial history, if not all history. I wonder what the mood was like from 1929–1933. I can tell you what the mood was like in 2009. I was still in New York City, and I remember going out to a fancy dinner with my wife right around the low in stocks… and we were the only ones there. The city was a ghost town. I’d argue that there was even less economic activity than there was during the pandemic. People will still partying, though—those were some of my best times going to clubs in the city. If anything, people were partying even harder.

My whole M.O. as a trader and an analyst is trying to ascertain social mood. 62% of Americans own stocks. Bessent is trying to get it to 100%. I think this is a mistake, and I think this is another huge sentiment indicator. Pile everyone into stocks at the moment we think stocks are safe and go up forever. Of course, the biggest sentiment indicator in history was the Pam Bondi Dow 50,000 call, in the Epstein hearings. We haven’t seen that price again. I’m looking around the airport, and people seem pretty content. We are a fabulously rich country, and if 62% of the people sitting at gate D3 own stocks, they sure don’t look like they are worried about it. The tomb is sealed, and we don’t even realize it yet.

Things You Want to Own

Yes, I am bearish, but I don’t think the solution is to not hold any assets. It’s a good time to raise some cash, but don’t get carried away. There are still things in the world that you want to own. Commodities, in particular—and emerging markets and international stocks generally. The US stock market, at its outlandish valuation, is the least attractive of all stock markets.

You generally can’t go wrong by buying things that are undervalued. Of course, this worked in 2025, and it has become a bit consensus, but I think it has a long way to go. The thing with EM investing is that you are occasionally subject to shocks. The dollar ripped after the Iran invasion, and emerging market currencies had a minor crash. The perils of investing overseas.

I’ll give you one concrete piece of investing advice: If you have any exposure to corporate bonds, you will probably want to get rid of it. If private credit gets nuked, which I think will happen, you will see credit reprice very quickly. We are already seeing some weakness in the credit markets, but it will get worse.

I am an opportunistic credit investor—I like buying stuff when it is distressed. I like buying stuff with 14% yields. I won’t even look at high yield until it is trading at 500 basis points over Treasuries. Having some cash and deploying it into high yield at the bottom of the cycle is one of the smartest things you can do. But don’t shoot until the squad is ready.

Jared Dillian, MFA

P.S. I mentioned the Dirtnap conference last week. I’d like to offer it to readers of this letter, but the reality is that it will sell out long before you get a crack at it. Really, your only chance of coming to the conference is to subscribe to The Daily Dirtnap. I will be opening registration on March 24 at 11 am. Last year, it sold out in 39 seconds. The best speakers and the most fun of any financial conference in the world. We like to get loose.