Let’ s begin with a favorite old joke of mine. It tells of a man who sits down on a plane next to an elegant woman wearing an enormous diamond ring. He asks her about it, and she tells him that it’s the Klopman Diamond: beautiful, one-of-a-kind, but that like the Hope Diamond (so she tells him), it comes with a curse. “What’s the curse?” he asks.
“Klopman” was her reply. And that was all.
In the early parts of my life (and for the record, I’m typing these words on my 58th birthday), I heard variations of this bon mot — mostly from my maternal grandmother – Sylvia Goldstein Manaster. She contributed 25% of my DNA, but its own chromosomal origins remain a partial mystery to me. I don’t even know for certain the name of her mother. Her father Louis, on the other hand, looms large in family legend. Through my middle and Hebrew names, I actually carry his moniker, and I can only thank my late mother for showing nomenclature restraint here. She could have gone the whole route and named me Louis, but then I’d have been forced to endure life with the handle of Lou Grant, and that, my friends, is a prospect too horrible to contemplate.
Louie was, as a matter of heredity, 100% Litvak; all his ancestors can be traced that earthly Eastern European paradise of Lithuania, nestled as it is between the Edens of Latvia, Belarus and Poland, and featuring a modest but important coastline on the Baltic Sea. From there, it’s a short, if treacherous boat-ride to Sweden and Denmark. I’m not sure why the Goldsteins ever considered departing the land of their forebears, but somehow, they set their sights on Chicago. Due, however, to the idiosyncrasies of late 19th Century European migratory fate, Louie was actually born in London. The family was detained there over a multi-year period, so he was born and spent his first 3 or so years in England’s glittering capital. The Goldsteins did eventually make their way to the Windy City, and at some point during his adult years, Louie made some modest but rather savvy real estate investments on the city’s South Side. This set him up for life, leaving, alas, little of the spoils to pass along to his progeny. I, for instance, got nothing.
But Louie Goldstein spent the better part of the late 19th and early 20th Century leading a comfortable existence, with even (if family history can be believed) a touch of elegance. It is said, for instance, that he never left the house without his top hat, spats, cane and other accoutrements befitting an English dandy such as himself.
He died before I was born (how else could I have been named after him?), and even my grandmother resides only in the vague contours of my long-term memory. I do recall that she was a killer behind-the-ear scrubber, and that she still holds the record for cooking the driest briskets ever choked down by humanity. I also know that she loved me. I reckon that’s about it.
But perhaps her greatest legacy to me was the whole Klopman thing, with which, having been raised by a Klopman of sorts, she had first-hand experience. As a Wall Street guy in general, and a hedge funder in particular, I’ve have also known many Klopmans, and, knowing them, have had innumerable occasions to recall the wisdom of our title theme. Yes, my loves, Klopman comes with the Klopman Diamond, and we can either acclimate ourselves to this reality, or find something else to do with our time. I, of course, have chosen the former path, and have few regrets. In any event, this late in the game, it would be difficult to change course.
It doesn’t take much of a strain of the imagination to notice that the world in which we live appears to becoming increasingly Klopman-like. Impossibly wealthy but eternally irritating Klopmans are everywhere in our midst, and we are forced to accept both the gifts and annoyances they bestow upon us. However, for the most part, we appear no worse for the wear.
If the equity tape can be read with any faith in the numbers, new Klopmans are being minted on an hourly basis. About 80% of the indices I track remain at all-time record highs. Rates are low and stable, and the good old greenback, after a difficult summer, is recovering some of its mojo. Commodities are all over the map – except the energy complex, which features many more Texan, North Dakotan and Arabian Klopmans than one would’ve otherwise imagined. With WTI and Brent Crude on a wicked rally, I expect more of these oily K’s will appear on the scene anon.
There is a great deal of information flow coming at us this seasonally content rich time of the year. The big dogs of tech continue to bark, and let me give you fair warning: they’re gonna eat. On Friday, Apple, in the wake of its own blowout results, breached the $900B market capitalization threshold on an intra-day basis, before settling in at a rather tepid $891B. Does anyone doubt that they will power past the once-thought-unreachable “T” threshold, and soon? On balance, I think I’ll take the other side of that trade.
The action was also fast and furious in what I’ll broadly refer to as macro-land. On Wednesday, the soon-to-be-lame-duck Yellen Fed, as expected, literally mailed in its stand-pat policy decision, along with written warnings that a December rate hike is a matter of near-certainty. The laming of Janet became official on Thursday, with the naming of Jerome “Jay” (never one to set Louie Goldstein’s Thames on fire) Powell as her successor. On Friday, the October Employment Report dropped, to the mixed delight of labor market observers. Jobs growth was strong, but not so much as had been hoped for. Hourly earnings were stagnant, and while the base rate declined, the decrease derived almost exclusively from a somewhat alarming reduction in the Labor Force Participation Rate.
All of the above was arguably, er, “trumped” by Thursday’s Godot-like arrival of the House’s tax plan. Reading even the most general summaries of this gave me a raging headache, and after having done so, I had to lie down. Upon first glance (and I know it’ll break your hearts to read this), it doesn’t look like it’s going to save me any money. In general, the document looks exactly like the muddled mess that is probably about the best we can hope for in these truculent times. I won’t add much to the ocean full of erudition on the topic that has overwhelmed the blogoverse, but will point out that: a) after anticipated Senate handiwork and what is sure to be an energetic reconciliation cycle, what’s on the table now is likely to bear little resemblance to the final product; and b) I wouldn’t bet the ranch on passage of any tax bill of any kind.
I should also add that I feel disenfranchised by the entire episode. On the one hand, the bill looks pretty sucky to me; on the other, even though it probably costs me money, I feel compelled to root for its passage, because a failure here creates potential political outcomes that I believe would be suckier still.
At any rate, investors, for the most part, yawned. So there’s that. Meanwhile, as if a new Fed Chair, an FOMC decision, a big Jobs Number, etc. wasn’t enough Washingtonian cud for us to chew, we have other issues to contemplate. These include the prospect of our big best bros Google and Facebook being grilled by various committees for allowing, across trillions of information units and hundreds of billions in revenues, about $150K of Russian sponsored political advertising (out of an estimated $1.8B of aggregate political expenditures) to slip past the goalie. I consider this more in sadness than in anger. With each passing day, the afore-named companies are tracking, and to an increasing extent, influencing our every move — all with frightening accuracy. I expect that at some point, we’ll begin to notice t that – probably after it’s too late to do anything about it.
Beyond this, and though it will be unpleasant, I’d suggest keeping one eye on the Trumpster as he boldly strides across East Asia. There’s a good deal riding on this trip, including the likelihood that it probably help advance the plotline of the current North Korean morality play. On a related and perhaps more important note, it will be the first meeting between the gentlemen who now are indisputably the world’s two most powerful. In a matter that drew little attention in these distracted realms, a couple of weeks ago, the once-in-a-generation Chinese Party Congress convened to bestow absolute, life-long powers upon General Secretary Xi Jinping, rendering him the most stone-cold baller dictator since, well, since Mao. How Comrade Xi plays his new hand is maybe about as important an issue for the global political and capital economy as any that comes to mind.
But one way or another, I think we’ve now reached the point in the calendar when the solemn process of locking down prices and performance for year-end purposes is upon us. I don’t see any asset classes selling off much between now and 12/31, and some, including equities, may rise.
All of which leaves just one question. Like I said, there’s a lot of Klopmans out there and more being created with every tick of the tape, but perhaps only on KLOPMAN. So who is he (or she)? Trump? Too much all over the map. Jay Powell? Please. Cook/Bezos/Serge/Larry/Zuck? Perhaps, but it may be too early to tell. Xi? Now that’s a good one, but in xenophobic America, this is likely for the moment an ethnic differential bridge too far.
I have my own thoughts on the matter and they are as follows: We’ve met KLOPMAN and KLOPMAN is us. If we’re going to enjoy our diamond, we must be willing to live under our own curse.
On a happier note, it is my hope; nay my belief, that we are up to the challenge.
TIMSHEL