Yes, my friends, the eternal debate (is it “Pathos” or is it “Bathos”?) rages on. Moreover, the question applies not only with respect to individual events, but to human existence writ large. In this installment, we will focus on the former, because, in terms of the latter, how can we possibly arrive at a conclusion other than through impact-weighted aggregation of individual experience?
Noah Webster’s Arc (OK; dictionary) defines Pathos as “an element in experience or in artistic representation evoking pity or compassion”. Its usage, however, dates back to Aristotle’s Rhetoric (soon to be made into a major motion picture), and rightly so, because those Ancient Greeks – what with their wars, sacrifices political intrigue and endless, droning debate, seem to have been bathed in the stuff.
Bathos, by contrast has more recent origins, and is perhaps as a result, more ubiquitous in our usages and in our imaginings. After all, are we not all intimately familiar with its original source, the 1727 Alexander Pope essay Peri Bathous, or The Art of Sinking Poetry, which many of my readers can recite, word for word, from memory? However, for the less erudite among us, let’s simply define it as a humorous shift in the contours of an enterprise – to the common/vulgar, from the sublime.
Both pathos and bathos are indelible components of the human equation, carried with us as we first crawled out of the primordial ooze, and are almost certain to be present when our species’ grand purpose has fully run its course, when, presumably, back into the ooze we will sink. Moreover, each concept bleeds into the other – in both visible and opaque fashion – often in the process obscuring the lines of demarcation between the two. This has always been the case, but at various points in our history, said lines become even more blurred.
It appears, my friends, that this is one of those times, and I’d like to take this opportunity to offer some opinions as to which side of the line certain pertinent events predominately fall.
I start on a personal note, wishing a heavenly rest for my friend Tony Glickman, who died suddenly this past Monday. I called Tony “Rabbi” because: a) everybody called him Rabbi; and b) that’s what he was: an ordained minister to the Children of Israel. He went on to attain the lofty position of Rosh Yeshiva (aka, the rabbinical equivalent of capi di tutti capo) at Yeshiva University. For my money, Rosh Yeshiva at Yeshiva is about high on the foothills of Mount Sinai as any mere mortal can hope to climb.
But for all of that, the Rabbi spent most of his career in Finance. Across his storied professional experience, he served as Treasurer of Canadian Imperial Bank for Commerce, Head of Risk Services at both Globe-Op and Northern Trust, and, most recently as a Senior Advisor to the global consulting firm Oliver Wyman. He was a prolific writer and thinker, and though I only jammed with him a couple of times, I can attest that he had some legit chops on the keyboard. He could sometimes overwhelm you with his presence, not everyone “got” him, and I don’t think he’d quibble with me for stating that if you wanted Rabbi Glickman, you got all of him; no partial or smaller serving of Glickman was available on the menu. He and I grew quite fond of one another, and I will miss him. But what saddens me most is that he wasn’t done. Not by a long shot. He remained fully engaged across his wide spectrum of interests and activities until the very minute that the Good Lord took him. So, to the Rabbi I offer a heartfelt “aleha ha-shalom” (may peace be upon you) and render, for the purposes of this installment, the following verdict: 100% Pathos.
Moving on to (though not entirely) less personal (and entirely more uplifting) realms, I wish to share my satisfaction with U.S. News and World Report Magazine, which, for the first time since it got into the academic rankings game, has listed my alma mater: The Booth School of Finance at the University of Chicago, as the nation’s top MBA program. Yes, I’m pleased about this, but must offer a couple of caveats. First, the paleoanthropic era during which I studied at Chi-U began and ended many years before David Booth stroked in a maharajah’s ransom for naming rights to the program, so, technically, I attended not Booth, but U of C GSB. Second, us Maroon finance types had to swallow the indignities associated with the reality that listings actually showed a first-place tie with our intellectual enemies at Harvard. But I’m going to do my best to forget that part of the story, and offer the judgment that this development is bereft of both Pathos and Bathos.
In the wider world, I note that on Friday, the United States Congress passed its 2018 Budget Bill, and that the President (with a show of trademark bluster) promptly signed it into law. Its record $1.3T of projected outlays implies an incremental annual budget deficit contribution on the order of $300B to $400B, but hey, we’ve got children and (in my case) grandchildren to deal with that, right? The consensus among the talking heads is that the Democrats took their opposite numbers to the cleaners here, shoving in a cornucopia of discretionary bling in exchange for a much-needed increase in military spending. It seems, though, and as stated by others, that the outcome is a win for everybody – except of course American taxpayers. Still, I suppose we needed a budget, and, while I suspect that some of what has transpired will come back to haunt America and its well-wishers, I will shade this towards Bathos, while reserving the right to revisit the call at a later date.
Earlier in the week, and just for additional yucks, the Administration laid about $60B of tariffs on China and the latter has responded in kind. The markets didn’t particularly like this stunt, and for what it’s worth, neither did I. I have read widely the encouraging reassurances that this is all part of a grand negotiation strategy that will ultimately redound to our unilateral benefit. Well, maybe, but I say it’s a risky approach. This thing could spin out of control, in what I fear could be a financial redux of the events that started WWI. There, a rather obscure Archduke from a back-benching, dying empire gets assassinated in Sarajevo, treaties are triggered in domino-like fashion, and the next thing you know, the Western World’s military spends years blowing each other to bits in trenches dug not 100 meters away from each other. That conflict led to a stalemate; the Russians bolted and became the Soviet Union, the free world suffered a crippling depression, and the whole thing had to be settled yet again on the same battlefields, a generation later. I’m not saying that we’re in store for anything so dramatic with respect to this here episode, but then again I’m not saying we’re not, and I am in any event going to give the nod here to Pathos.
Last week’s other earth-shattering event involved the revelation that the Heavenly Walls of Almighty Facebook had been breached by nefarious forces, in the process violating the personal electronic space of 50 million users (including, presumably, yours truly). I was under the mistaken impression that everyone knew, or should’ve known, that this was coming. The core premise of Facebook is that it lets you communicate, creatively and effectively, at no charge, in exchange for allowing them to hoover up your private information and sell it to the highest bidder. This type of thing runs much deeper than what has been reported, and extends well beyond Facebook. I, for one, shudder to think of what type of data mining is taking place in the 3rd sub-basement of Google’s sprawling corporate campus in Mountain View, CA. To whom the content is being distributed, and for what purpose, is a matter I prefer not to contemplate at all. Further, I suspect that although the tying of this episode to the endless stream of nonsense about 2016 election interference was inevitable (not to mention ridiculous), it is instead best interpreted as the first salvo in an unfolding battle that will attack the galactic and accelerating power of a handful of U.S. Tech companies over virtually every aspect of our lives. I won’t elaborate here, but if I’m right, then the action will be both fascinating and terrifying to observe. For now, though, I think the FB thing a pig in a poke, and am going to place the sequence squarely in the camp of Bathos.
Investors, however, found little amusing in the episode, and were dumping FB shares – to the tune of about 15% loss – all the way up to Friday’s close. Between this and our burgeoning Trade War, it was a tough week for the Galant 500, which, largely through a sequence of angry closes, ended the week down a round 6%. The Facebook-heavy NAZ fared worse, down 7.3%. All broad-based indices are now in negative territory for the year.
Please know that I weep at anyone’s financial reverses, most notably those accruing to the holders of the common stock of this nation’s great corporate enterprises. That these losses are manifesting at a particularly inopportune moment – the quarter’s penultimate week (and therefore a matter of mere days before CEOs and fund manager must report results to what we can confidently expect to be a wavering group of investors) – only adds to the pathos I’m feeling. However, I’m not ready – just yet – to call the election and hand the victory to the P camp.
For one thing, I view the latest selloff as being driven more by risk reduction prerogatives than by an emerging consensus about valuation levels. Investors are nervous here, and one can hardly blame them. The non-stop assault on our sensibilities emanating from the shores of the Potomac are enough to un-nerve even the steadiest among us. Here, I blame Trump. He may not have started the infantile set of quarrels in which he is perpetually engaged, but it is he who sets the tone. And now, one never knows, from one minute to the next, whether the government is going to shut down, who is running what department, and whether we will go to war first with Russia, China, Iran or North Korea (just to name a few). The preceding administration was headed up by a guy they liked to call No Drama Obama, and I thought of this as an offensive misnomer. However, 14 months into the Trump Administration, #44 is starting to look like Tom Landry on the sidelines at Texas Stadium.
And if you’re an investor, it’s kind of tough to load the boat under these conditions. But I hasten to remind my minions that economic conditions have not changed dramatically from where they were in late January, when our friend Mr. Spoo was sitting some 285 handles and precisely 10% higher than the levels that prevail as this publication went to press. I see very few signs that the earnings harvest has been cancelled or even deferred. Borrowing costs remain stubbornly low, and we’re in the earliest of innings with respect to the widely hailed bennies from regulatory reform and tax cuts.
None of this is to say that the selloff was in any way irrational, or that it won’t continue. I just think that we’re basically looking at substantially the same world that we inhabited a couple of months ago, when it seemed like the “down” button on the equity elevator was damaged beyond repair. As such, somewhere in here, buyers should re-emerge, and I recommend that, at minimum, investors prepare for such an unthinkable contingency. As for now, I’ll deem the equity election too close to call.
However, there is one development which could decide the outcome at any minute. The SPX is now perched directly on its 200-day Moving Average, and I promised you that it would hold this threshold:
If it breaks through on the downside, from a technical perspective, it has some good ways more it can fall. But that’s not really what’s at issue; I’m much more concerned about this chart making a monkey out of me.
As you know, this is something I cannot abide, even during the wild and wooly days of March Madness. Right now, my bracket reads Pathos and Bathos tied at 2, one withdrawal and one contest undecided.
Given the way the NCAA Basketball Tournament has unfolded, I suspect I could have done a lot worse. Since Round 1, I’ve been warning anyone who would listen not to sleep on my Loyola Ramblers, but almost everyone did. And now they’re on their way to the Big Dance in San Antone. And now I’m advising this same crowd not to sleep on equities, at least not yet, but I fear many of you will. To ease my frustration, I keep telling myself, March ain’t over, and Madness is likely to outlast this and many subsequent turns of the calendar.
There’s both Pathos and Bathos in this, so stay on your toes.
TIMSHEL