Men ought either to be well treated or crushed, because they will readily avenge themselves of slight grievances, but not more serious ones.
Niccolò Machiavelli
Been thinking a great deal about my old crime partner Nicky Mac lately. While I won’t get into specifics here (what happens, after all, in the Florentine Renaissance, stays in the Florentine Renaissance), suffice to say that he, I, Leo DV, Mickey the Angel and Larry the Great Medici (the last of these plausibly the founder of the misanthropic 27 Club) kicked up quite a bit of dust in the late 15th and early 16th Centuries — engaging in unmentionable Hijinx and dodging that buzz-killing Dominican Friar Girolamo Savonarola (original architect of the Bonfire of the Vanities) throughout. And, while a few of them cats had personal tastes, which, shall we say, I did not share, we had one whale of a time.
It was, though, ages ago, and the old crew ain’t what it once was. Luckily, though, they left stuff to remember them by – the Sistine Chapel Ceiling and the Mona Lisa, for example.
And in the case of Nicky Mac – that posthumously published, world-changing Political Treatise “The Prince”. Containing such eternal and universal truisms as “if you strike at a prince, you must kill him”.
As well as our thematic quote, which seems to me to be highly a’ propos to modern times. Because we live in an era where grievance is currency – perhaps the most valuable unit of account under heaven. And, as Nick instructs us, small grievances often carry more weight than large ones. Look at a colleague funny and they’ll drag your ass in front of H.R. Disagree with the settled academic consensus – particularly as to the high crimes of our forebears and, wham, you lose tenure and find yourself banished from the physical plant of the campus itself. Offer compensation for silence to a former side piece? Well, I reckon it depends on who you are.
As I recall, it wasn’t always that way. Saturday marked the 40th Anniversary of the iconic but arguably tacky New York Post headline “Headless Body in Topless Bar”, for which that world-class publication has been lampooned for a full four decades. Further, the cops did bust the perpetrator – one Charles Dingle, who was found guilty of the dual serious grievances of murder and decapitation. He was last denied parole over ten years ago, and I cannot find any more recent information on him. Presumably he’s still in jail.
But in today’s markets, it is certainly the case that if one transgresses in small ways, one can expect to pay dearly for such sins. Larger crimes, though, will indeed tend to go unpunished. Nobody, for instance, went to jail for nearly tanking the entire global capital economy a decade and a half ago. Ditto for the contemporaneous LIBOR scandal – arguably the largest scam in financial history. And, in terms of the latter, the only vengeance extracted only came to fruition on Friday, when the once dominant CME Eurodollar futures contract (settled to LIBOR) gathered to the dust of its forebears.
Jho Low – absconder of ~$5B from the complicit Malaysian Sovereign Wealth Fund 1MDB — remains at large. Bernie lived out his final days playing cards and doling out financial advice to other cons at a North Carolina Club Fed.
And so it has always been. I reckon that what Nicky was really trying to tell us though, is that if you’re gonna f@ck with someone, you probably ought to go big. This was plainly true six centuries ago, and remains so, I think, till this day.
I myself have some grievances against the market, which, unfortunately, are of a finite nature, and thus subject to the maximum penalty under our titular maxim. Risk assets, building on a surprisingly robust Q1 performance, remain on a tear. Newly promoted (yes, it was approved by Congress) Coronel Naz is up > 15% for the year. Bonds of every configuration are enjoying a strong rally. Live Cattle – perhaps unfortunate beneficiaries of that Texas dairy farm explosion which claimed 18,000 head (and appears to be a crime that remains unsolved) is up double digits.
Crypto is through the roof – nearly a double in 3.5 months of ‘23 action. And this despite myriad frauds, bankruptcies, and concerted, coordinated attempts to destroy every exchange and trading platform where it is transacted.
The White Sox are off to a dismal start, but then again, I take comfort that some things, at any rate, are eternal.
Attempting to trade or invest through this madness has routinely evoked the full wrath of the Gods, who seem determined, at least at present, to express their full outrage at such audacity. Unless, of course, you’re a bulge bracket bank. In which case your hubris is richly rewarded.
Meantime, the extended damage wrought on the developed world’s capital economy ensues unavenged. I remarked to one of my clients, in the wake of encouraging Employment, Inflation, Industrial Production, Consumer Confidence and (through inverted logic) Retail Sales figures, that risk assets are configured more comfortably than they ought to be – considering my overall view of the current economic problems that plague us.
And what are these, you may (but probably won’t) ask? Well, allow me to inventory them.
Economic agents of every stripe – Consumer, Government, Corporate and Institutional, are overextended, awash in debt. Policy makers are universally hostile to value creation. Corporations and even small businesses – those vital engines of output, are focused with laser attention on image and branding rather than innovation and efficiency, and if you doubt this, consider the recent Bud Light fiasco, about which I cannot bring myself to offer more than passing reference.
Recent surveys suggest that 70% of American households feel financial stress, nearly 60% are subsisting from paycheck-to-paycheck. Yet consumers continue to binge. Our workforce is listless and unmotivated, a vast majority of them adopting a rent-seeking approach under which they strive to extract more value than they generate.
Politicians and political leaders wallow in small ball – seeking, first and foremost, tactical advantage over their rivals – rather than earnestly attempting to confront, much less solve, the myriad problems that plague us. This theme is recurrent through history – Europe of the 1930s comes to mind. And how well did that turn out?
And, in result, a serious grievance emerges. As I am convinced that the lion’s share of investible assets is priced irrationally, decoupled from underlying realities. To the extent that I am correct, here, it is unavenged. For now, at any rate.
But we will continue to trade. And invest. As we must. To do so, however, we must embrace our myopia. We’re into the heavy part of the information flow season, with the short-term focus fixed on the Q1 earnings cycle. The big banks kicked us off and delighted us with vanities for which no bonfire is poised to combust. Q1 was a laugh riot for them, despite (or perhaps because of) the mortal threats and carnage imposed upon a few (Credit Suisse, SVB, etc.) of their number.
A month ago, it appeared that the banking system was under enormous threat. Now, it’s the place to be. But these wheels keep spinning so it pays to stay alert. This might require an extra dose of caffeine, but it may bear mention that Coffee has had an even better run in ’23 than has our population-depleted Cattle Complex, and that for those who like a bit of authentic sweetener, Sugar tops them all:
No Sugar (Right Graph) Tonight in My Coffee (Left Graph):
God oh mighty, I sound like an old man. But give me a break – it’s 600 years since me and my krew were pounding the streets of Florence, looking for action.
As time goes by, I believe I understand those days better than the present era – rife as it is with risk of undefined nature and magnitude. But like my boy NM pointed out:
“And what physicians say about consumptive illnesses is applicable here: that at the beginning, such an illness is easy to cure but difficult to diagnose; but as time passes, not having been recognized or treated at the outset, it becomes easy to diagnose but difficult to cure.”
I’m not a physician, so I have no idea where we are in this cycle. I only can thus admonish that we heed the symptoms and react in a timely fashion to whatever comes our way.
TIMSHEL