I am perplexed by this. There have been enormous drops in several markets (see charts below). This reminds me of the sell-off in November on worries about Chinese tightening, which subsequently turned out to be nonsense — as I expected at the time.

But what I am trying to do is make money, not be right, and I have damn well failed. Perhaps I still have too sophisticated an idea of what moves the markets. I said to someone a few weeks ago, only half in jest, that the best model of the markets would be the reactions of a nervous American child. And why shouldn’t it be?

Update: I wonder if it is really so hard to understand this. People had been fretting about inflation; but it is one of my principles that markets don’t care until they do. Tension in Libya led to an increase in the oil price that, added to existing inflation fears, caused markets to care and sparked a sell-off. In several markets, there was really only one logical way to have bet (up until now), so the sell-off was sharp.