Dear Reader,
This is Dylan Jovine with Behind the Markets.
Happy Wednesday. Today is Wednesday, March 18th.
What can an earthquake and a fire that happened in 1906 teach us about the stock market today?
I'm going to answer that.
In 1906, a massive earthquake hit San Francisco and the fires that followed basically leveled the city. Back then, San Francisco was a serious chunk of the entire American economy — gold rush money, real wealth — and news traveled slowly from the west coast to the east.
I learned about this when I was in my early twenties, just starting out on Wall Street, reading a book called Reminiscences of a Stock Operator. It's a classic — written in 1923 by Edwin Lefèvre about the life of the great stock speculator Jesse Livermore.
When Livermore got word of the earthquake and fires, he did something most people wouldn't. He went short the market, because what he perceived — early, before most people on the East Coast even understood the scale of the destruction — was that this was going to be far worse than anyone realized.
He was right. It became one of the key events that led to the Panic of 1907, when the market just broke.
So what does that have to do with today?
Right now, we have our own version of slow-traveling news. Not because of geography, but because of something else entirely: a split screen of realities. If you're getting left-leaning news, you're being told the war is a disaster, Trump blundered into it, the world is ending.
If you're getting right-leaning news, you're being told we've got Iran exactly where we want them, it's only two weeks in, this is going great. Two completely different pictures of the same situation.
Here's what that means for the market. In 1906, the delay was physical — it took time for news to travel across the country. Today, the delay is perceptual. Both sides need to reach some kind of consensus view before the market really moves decisively in one direction. And until that happens, we stay frozen.
But behind the scenes, professional investors are already telling us something. Market liquidity in S&P 500 futures has dropped to just $5.1 million, which is near the Liberation Day lows from April 2025 and 61% below the historical average of $13 million. Levels below $7 million typically signal market stress.
Let me put that in plain English. It now takes just a few million dollars in orders to move the S&P up or down, and when any institution tries to buy or sell in size, the impact on the market is much larger than under normal conditions. Brace for more volatility.
I ran a market-making firm called Lexington Capital Partners, and in times like this, we'd still be making markets — bidding on stocks — but only in tiny size. The moment a big seller showed up wanting to move a large position, we'd take our thousand shares and step back. In a strong market, you're happy to gobble up whatever a large seller throws at you. Right now, nobody wants to commit to up or down. Everybody's a deer in the woods — one snap of a twig and the whole herd runs.
JP Morgan put out a note recently saying go long energy and short the market until the Strait of Hormuz reopens. That's reasonable, and it tracks what we've been saying.
We've been long energy, we've been long defense. I'm not a short seller by nature — it doesn't match how I'm wired. I buy good companies when nobody wants them and hold them until everybody does. But I have been saying for weeks: tighten up, sell your weakest positions, raise some cash.
That said, don't mistake this for the end of everything. Nvidia just announced a trillion dollars in projected chip revenue through 2027, and the AI boom isn't slowing down — it's actually accelerating. That's a big part of why this market isn't down 20% right now. We have a split screen in the fundamentals too, not just in the news.
Use this moment to lighten your most speculative positions. Be careful out there. And make sure you are placing good bets like investing in our #1 energy stock on the market today.
Anyway, that's all I have for today. Have a wonderful day. I'll see you tomorrow.
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