Last week my quarterly investment statement arrived. I flipped to the last page and there in italicized mouse-type was the tally. Given the recent lacklustre performance of the markets, I was not surprised by the soggy number.
It’s foolish to expect investments to only go up. Pundits will even say that for accumulators a down market is a boon. Your favourite mangoes now sell for 75-cents a piece instead of a dollar. But emotionally it’s a downer. And, like a bout of melancholy, the sluggish stock market invites introspection, not only about mundane things like asset allocation, but also about the hazards of tying one’s personal worth, or at least daily mood, to the vagaries of global finance.
I have an unproved theory that people who are prone to melancholia may be better equipped to withstand the ups-and-downs of the market than those who feel compelled to be commercially, relentlessly cheery. Melancholics don’t expect the world to always be filled with unicorns and cotton candy. Thus down market days are not exactly welcomed but nevertheless accepted as old friends bringing sad news.
In her recent essay in The New York Times, Laren Stover writes about melancholy perfumes and how “rainy” scents can be matched to our wistful moods. Given our society’s current fascination with happiness, (judging by the raft of books on the subject), it’s not easy to find one of these gems. One has to reach back to some of the Guerlain classics from the early 20th century like L’Heure Bleue, Jicky, and Mitsouko (my favourite), as well as some new-ish ones from niche “noses” Serge Lutens (Iris Silver Mist) and Frédérick Malle (En Passant). Stover neglects to mention Guerlain’s Après L’Ondée, literally, “After the rain shower”, a green fragrance with top notes of aniseed and rose and heart notes of violet and hawthorn.
Some years ago I took a perfumery workshop in Grasse, the heart of France’s fragrance industry. Each member of our small group had her own station equipped with a miniature “fragrance organ” of different essential oils. Our guide, a charming older gentleman who had worked for leading French perfumeries, gave us some basic instructions and off we went.
I already knew the fragrance I wanted to create: the olfactory expression of looking out a window on a rainy day in London, a good book and a tray of strong black tea (with milk) on the nearby table. It was to be a wisp of a scent composed of bergamot, chypre, licorice, lavender, lemony rose de mai, and a dash of iris root for that powdery, flinty touch.
My little masterpiece was coming along nicely, one tender drop at a time. As we were all novices, the instructor was free with praise. Until he came to me. He took one sniff and immediately reached for the aldehydes to “brighten” the scent. It was the equivalent of a burst of fluorescent bulbs where previously there had only been soft candlelight. I’m sure he meant well but I think he couldn’t imagine that I wouldn’t want an “up” scent.
This is like a lot of investors. We imagine that the market can only go up, up, up. When it pauses or reverses, panic sets in. You could say that quantitative easing, the US government’s program of printing money to buy bonds, was the financial equivalent of dosing perfumes with aldehydes, synthetic compounds that juice a scent giving it sparkle and fizz like popped Champagne. (The 1980s blockbuster fragrance Giorgio Beverly Hills is the Frankenstein of aldehydes.) Come December, when U.S. interest rates are likely to go up, equity markets may wilt like meadow flowers under a cool, steady rain.
When this happens it will be good to remember that there’s a season for everything. Much of the recent market froth was related to abnormally low interest rates, highly-leveraged trades and speculation. When the bubble bursts—and it will—say ‘Ciao, Giorgio Beverly Hills’ and ‘Bonjour, L’Heure Bleu’.