Whatever “Is” Is Always Changing
February 28, 2020
Dear Friends and Colleagues,
I can distill my message down to a short sentence or two. I’m sure you can anticipate them and even speak them to yourselves before I do. And I hope you can live in the meaning found there. But to more extensively assimilate the antidote to the combined force of what the markets and the actual virus are presenting, requires a more extensive description of phenomena currently occupying much of our attention.
Why is the “market” doing what it is doing? Because it can. Really. And understanding this capacity provides the opportunity to understand a critical lesson, critical to your financial success. I will review this lesson later on. Right now it is important to separate the more and the less likely outcomes of what has become the meta-virus of the financial press itself, the complicity of major financial institutions and governments.
I don’t think the actual effect of all this will become nearly as extensive as the deliberately generated fear that has become the currency and measure of the artificially earnest relevance portrayed by the news outlets, specifically the financial press. This fear is crafted to build on itself to create the appearance of authenticity. Of course this is with a great deal of help from the merchants of fear and desire, the media, and the Wall Street firms that supply the authority figures, before whom we are expected to surrender our sovereignty and common sense, embracing the “end of the world as we know it” virtually day after day.
This virus, the actual virus, is serious and is having a real effect on normal life activities in many areas of the world. And it has the potential to spread. However, there is also a meaningful and growing counter effort to contain the virus, understand its mechanism and methodology and find a medical response that will bring it under control. So far it is fear, not actual realities that are driving everything. And when/if the fear dissipates, as I believe it will, then what? Then markets begin to actually reflect the underlying economic conditions which are far more positive than the market activity is currently reflecting. It means that, as the economies normalize, the markets will follow, which means they reflect the increased value that is being ignored now.
Many phrases are used in presenting financial news/information which, if even given a cursory examination, crumble into meaningless jargon. The gestalt of financial news has become severely warped, shaped by questionable assumptions and jargon. From my perspective it has become painful to experience. After living through 43 years in this profession, I have acquired X-ray vision and can clearly identify the manipulation of it all.
There are three dominant metaphors used to structure financial news: gambling, entertainment and sports. The gambling metaphor rests on the uncertainty or risk associated with investing. What is left out is that with gambling the essential structure of the “game” from the outset is designed to favor the house and for the gambler to inevitably lose. If one gambles long enough in the casinos, one is likely to lose any gains made along the way and your own money as well. In the end, the house always wins. That’s why they exist.
The entertainment metaphor speaks of “the markets” putting on a show. These are not programs, they are “shows.” We are to be mesmerized and fascinated by the drama of it all. But the sports metaphor has risen to the lead. Each day the titans of business battle it out to determine the winners and losers. The “talent,” which is what the inside language of media calls the program hosts, take one of two roles. One role is the play by play commentator and the other is given to the “color” commentator who analyzes, fills in the explanations of the strategies and nuances of the confrontations. This role is often filled with a Wall Street titan who by definition is expected to generate controversy and argument.
If you can remember the days of “Wall Street Week with Louis Rukeyser” on PBS years ago, what was once a slow paced discussion of Wall Street activity, the examination of companies and investment strategies, which included significant content and educational value, has now become a mashup of personality, soundbite structured hyperbole, disagreement and promotion. In short, the” X $Games!” Still short of the Hunger Games, but moving in that direction. It reminds me of the fear of terrorist attacks following 9/11. An often used phrase then to justify the massive response domestically and internationally was, “We have to succeed 100% of the time to prevent more attacks. The terrorists only have to succeed once.” In retrospect, while having significant meaning, this extreme evaluation was very much a way to, and a product of, the needed preparation to confront the unknown, the fear of the unknown. I wonder who benefits from the current unknown! Follow the power and money.
Now, what has been going on since last week? I have a different read on this from what you are hearing almost without variation in the financial news. I don’t think the significance of this is mainly due to the virus or to the effect on the global economy. That answer it is too obvious, immediate and extensive. The virus issue is a trigger for two other, perhaps unconscious issues.
First, the spread of the virus. Yes, there will tragically be increasing deaths for a period. Yes, there will be (some) economic dislocation. But even if the negative economic effect of the virus is greater than it now appears, it is a consequence that can and probably will be recovered fairly quickly. China, especially, has something to prove here. They failed their people and will fail them again if the economy tanks. They cannot afford to disrupt the growth of prosperity significantly without facing the risk of deep social unrest. That is their biggest fear. Not the U.S. Not becoming a world player. They fear that social unrest will undermine the power structure. In my opinion, that’s why the central government did not crush the recent riots in Hong Kong. They cannot allow the internal and external condemnation they experienced which led to and intensified after Tiananmen Square.
This is not and will not be an illness that results in 50 million deaths, including 675,000 in the U.S. as did the H1N1 virus of 1918-1919. That epidemic killed more people than WWI. Nor will it result in 300-500 MILLION deaths, as did cholera, bubonic plague, smallpox and flu in the past. And it will not result in the 60-80,000 deaths from the flu LAST YEAR in the U.S. alone. Nor will it come close to the millions of people who die each year from being political refugees exiled to horrific camps, or malnutrition, mosquitos and diarrhea.
Further, no significant actual economic or supply chain effects have happened yet. They may, but they haven’t yet. This outcome, as if already true, has been relentlessly expressed by the financial press for days. It has been declared the end of growth in the global economy, the start of a global recession. It is all a worst case projection. I heard one Wall Street CEO, from a major financial firm, say on Bloomberg TV this (2/27) morning, that this will probably be the worst event he has ever experienced! What?? He needs to first get a life. Would he yell “fire” over “vaping” in a crowded theater? Why would he make so reckless and incorrect a statement as that on a nationally available major financial news outlet? He should be thrown out of the financial markets.
Second, in my opinion, the real reason for all this hyperbolic expression is a combination of human nature and human nature. Huh? The first instance is the very significant cumulative gains that have been accrued over the past 10 years. This is a case where the first one who acts induces all the rest to head for the exits, or grab a (musical) chair, etc. It is not rational. Fear never is. But it is a deep aspect of human nature that causes many bad decisions. Yes, it occasionally saves you from the tyrannosaurus. But mostly it just causes you to repeatedly run from phantoms. However, the bad decision is not understood until after the fact.
The second aspect of human nature at work here is the other form of fear—greed. Psychologically many folks fixate on the financial numbers, especially the highest number they receive personally. It is another irrational aspect of humans and money. And it is being intensified by our frictionless, speed of light, computer driven financial system. The fear of losing what has been fixed in the mind and “owned” is a fear right up there with starvation. Whatever the number is, it is a phantom conjured up by our desires. There is no number that has duration. Financial numbers on statements are like wisps of cloud on a day in the desert with no humidity. They’re gone before you can focus on them. Values are changing constantly, even at night, weekends, just like time. In nature there is no “second” “minute” “hour” or “day.” We created them for many reasons. Time not only flows, but accelerates, slows, takes on the appearance of stillness or being so fleeting that we wake up 20 years later and wonder where it went!
There is a well-worn quote or paraphrase from the Pre-Socratic Greek philosopher, Heraclitus. He is credited with saying, “You can’t step into the same river twice.” With some trepidation, I would rephrase that to, “You can’t step into the same river once.”
In other words, there is no fixed entity. Whatever “is” is always changing. If we fix on a number applied to our investment values, we are always about to be incorrect. Either the value has gone up or it has gone down, even if it’s by virtue of the passage of time.
We need to recognize the human emotional and psychological tendency to “own” these elusive numbers. When we “own” them we take them into our universe as an aspect of ourselves. Of course, in a capitalist economy, based on the rule of law, particularly property law, we do own things. But existentially we own nothing and it is the emotional and psychological ownership that brings us the sense of well-being and the sense of anxiety associated with money and wealth. There is a lyric in a Don Henley tune (“Gimme What You Got”) that sums it up: “But you don’t see no hearses with luggage racks.” The Egyptians had a different view. They filled the pyramids with all the possessions, including some people, to be sealed in with dead Pharos, to accompany them to the next world. But, we understand that ultimately we own nothing. We have the privilege, opportunity and responsibility to use and care for the things of this world while we are here. Then others may have that same opportunity. If we fuse our identity, our “self” to things, we are asking for a heap of suffering.
Finally, I alluded in the beginning of this essay to the less conscious aspects of the current turmoil in the financial markets over current events. I would like to add another, less obvious event to the conversation. To be clear, what I am about to write is not personally political. It is only an observation of the apparent confluence of events.
Over the past few weeks the Democratic Party has held a series of debates, caucuses and primaries as part of the process leading to the choice of a candidate to represent them in the upcoming presidential election. The large field of contenders has diminished overall with one addition. Michael Bloomberg has entered the contest. The candidate that has strengthened the most has been Bernie Sanders. Bloomberg has made it clear that he does not agree with Sanders’ economic agenda. Bloomberg, who is a mega-wealthy business person, media owner and former mayor of New Your City was hoped by many who disagree with Sanders to be the “moderate” democrat who would have a better chance of taking on Donald Trump and winning the Presidency. The recent results have severely weakened that possibility. Sanders has strengthened and Bloomberg has weakened.
As this was unfolding and the possibility of a Sanders nomination became more likely, the financial markets began this large decline. I think that the virus scare was the trigger needed to create the excuse by many influential very wealthy Wall Street people to express their fear of a Sanders nomination by massive selling, realizing some of the very large profits accrued over the past 10 years. I asked up top, why this market is doing what it is. I answer because of the fear of losing power and money if Sanders succeeds and if he is actually elected president. The virus (and other of the constantly present fears affecting the markets) became the trigger, but not the cause of the instant and massive pre-programmed trading protocols built into the major Wall Street wealth and power structure. It has been said that one never goes broke taking a profit. With a Sanders presidency and a compliant congress, much of that wealth would be gone. Might as well take it while it is there.
The U.S. economy, after ten or more years of growth and expansion is still growing. Most economic indicators remain positive: lowest unemployment in 50 years and without serious inflation, super low interest rates, companies slowing but still producing more than ever and still earning profits. Increases in housing starts and mortgage applications. This list goes on.
So the sum of this is the money still being earned and the money being taken out of the equity markets has few alternatives that can rival the productivity and endurance of the U.S. economy. It will have to find its way back in, regardless of who is president. My advice is to stay invested in the most productive wealth machine the world has ever created and while this periodic Wall Street “sale” is going on, add to the ownership and stewardship of companies that bring the material future into manifestation.
As ever, here’s to (Y)our good wealth!
Jerry!
