God grant me the serenity to accept the things I cannot change.. …yada, yada, yada
— Reinhold Niebuhr
Yes, it’s come to this. I wish I could tell you we’ve hit rock bottom, but the way things are trending, but … Over the last several weeks, I’ve grasped at random literary device — emanating from sources ranging from William Butler Yeats to Voltaire to Kierkegaard to anonymous Irish folklore.
And now, we’re down to Reinhold Niebuhr.
Now, feel me here – I’ve got nothing against Niebuhr: a nice enough fellow it would seem, even if not a household name. And what kind of name is Reinhold Niebuhr, anyway? Kinda suspiciously foreign if you ask me. His bio says he’s from Missouri, but someone surely ought to check it out.
Further, I am a bit ashamed to have copped his most famous bit, enshrined, though it is, in Grannie’s needlepoint — framed above the kitchen table, on lockets sold in novelty stores, and yes, on enough Hallmark Greeting Cards to fill the Superdome.
Hear me out, though. Because, as a risk manager, Reinhold’s Riff, depressingly, but impressively, describes how I roll.
Well, sort of, anyway. I do spend a great deal of time seeking to separate what cannot be changed from what can — and hoping like hell I got it right.
But where Niebuhr and I part ways is in terms of the human attributes required to meet these challenges. Serenity, Courage and Wisdom seldom, if ever, enter the equation for me. Mostly it’s just brute force, sprinkled with a heaping dose of wishful thinking.
I’ve always found it interesting that Niebuhr begins his little prayer with the negative – not introduced with call for the courage to arise to meet the trials of the day, but, instead and first, a wish to accept the inevitable with a dabble of divine equanimity.
It’s certainly one way to attack the problems we face – across many fields of endeavor, including (most pertinently for our purpose) those associated with the capital economy.
But there are other methods available to those that operate in these realms. Consider, if you will, the tactics applied in Turkey, a well-visited jurisdiction in these pages, and now a land of runaway inflation. The full-year 2021 numbers just dropped – at an eye-popping 36%. And what did that polecat Erdogan do?
He fired his Head of Statistics – a role that by recent longevity trends recalls the truncated tenures (if not the final fates) of Spinal Tap drummers or English Queens during the reign of King Henry VIII.
It can be said that on these shores our methods are more civilized. Presumably, y’all saw that boffo January jobs number – released on Friday morning. Not only was the Non-Farm Payrolls figure an absolute blowout, but the Bureau of Labor Statistics threw in, for good measure, upward revisions (to the tune of ~700K) of the November/December tallies.
Published reports suggest the possibility of a little book cooking — within the murky seasonal adjustment component of the calculation. Now, I don’t have any clue as to the validity of these claims, but then again, did that little cockroach really tag Kennedy, in both the head and the neck, within six seconds, while the latter was in a moving car — from, like, 90 meters away?
Pending CPI and PPI reports in this country might offer hints, but I doubt that even buzz kill prints will lead to the termination of William W. Beach – the ubiquitous Commissioner of our Bureau of Labor Statistics. More likely, he’ll just tweak the numbers a bit, and carry on.
Let’s hope he’s up to the task because the underlying data are far from encouraging:
Soy Beans:
Crude Oil:
Affairs in world of corporate finance assume a similar look and feel. As everyone knows, it’s been a tough week in Zuck-land. The CNN Czar Zuck took the Woke Perp Walk – not for presiding over the absolute collapse of the pioneering cable news network’s viewership, but rather for some frowned upon after hours activities with a subordinate. And the other Zuck — once (but no longer) the richest man in the land — was compelled to disclose to investment world of some newly discovered Face wrinkles, and a bunch of extra dog ears in the Book.
Not much he could have done to stave off these inevitabilities. The public can only consume a finite number of cat lunch pics, and advertisers can only pay an appropriately limited amount to underwrite them.
And, in result, his company suffered a record setting, one-day valuation drop that exceeded its entire enterprise value — registered as recently as the beginning of the lockdown, or (if one wishes to mulligan that one out) those difficult days at the end of 2018.
These are things that Zuck cannot alter. But, with Serenity, Courage and Wisdom, he instead changed the name of his outfit, and launched his company, headlong, into an alternative environment called the metaverse.
Niebuhr, presumably, would be proud. And Kierkegaard (who would have advised him that he would regret it either way) would have understood.
*****
And, in terms of risk management, there are a couple of Niebuhr-esque clues to guide our way.
First, as the economist wife of an economist friend of mine is fond of stating, market prices will tend to fluctuate. As an economist/risk manager myself, I can accept this with Serenity, because if they didn’t, I’d be out of a job.
Next, when we filter out the noise, we’re looking at the near certainty of a higher rate environment, against a likely backdrop of a slowing economy, and there isn’t much we can do about it.
But such is not the stuff upon which raging, extended rallies are made. On the other hand, there’s so much cash floating around out there that a sustained, respectable correction seems virtually out of the question.
I thus believe that this is indeed one of those times when prices (which tend to fluctuate), will, indeed, fluctuate.
But within finite bands. Probably those established by our indices over much of the past rolling year: Gallant 500 between 43 and 48 handles; Captain Naz 14 – 16.5.
10 Year Yields are testing highs not seen since before any normal person would ever marry the letter M with the number 95, but, at 1.90%, I suspect that (for reasons repeatedly stated in these pages) they hit a wall at ~2.0%. On the other hand, rates in jurisdictions such as Germany (where I suspect that this shifty Niebuhr is actually from) – sub-zero for the last three years, have rocket launched to a usurious 0.2% — putting upward yield pressure on the entire global bond complex.
So, the truth is, though, I don’t really know. And this is something I cannot change.
But unfortunately, I lack the Serenity to accept this limitation. There are some matters I can influence, but hardly feel the Courage to do so. And as for possessing the Wisdom to know the difference, well, I have my views on the subject, but on balance, am inclined to let you decide.
Still and all, I’m glad I’ve got Grannie’s needlepoint version of Reinhold’s Riff on my kitchen wall, and only fear that it may offer enough inspiration to carry me through.
So, I’ll take my leave. I’m off to the Hallmark store and ask you to join me in hoping for the best – in terms of my own journey, and yours as well.
TIMSHEL