Well, I’m back. After a two-week absence – the first such breach of protocol in this column’s nearly 2- decade history. Prior to this, no matter what else was going on, I. always represented.
Where was I? What was I doin? I ain’t sayin’. Other than this: IFYKYK.
Call it my Second Act — yet another refutation of that ill-formed observation, attributed to F. Scott Fitzgerald, that there are no such scenes in American lives. Perhaps this was true in Fitzgerald’s time. But that was a century ago. And, in the interim, I’d (oxymoronically) suggest that we have evolved in such a way as to now enjoy more Second Acts than first runs.
And this is true across virtually all realms of human operation. Let’s consider some examples, shall we?
The first which comes to my mind is Martha (M. Diddy) Stewart – a dewy 20th Century fashion model who built an entire industry around the concept of (what?) tasteful living. It all came crashing down in 2005, when she was (ridiculously in my judgment) convicted if Insider Trading – on the skinniest whisp of evidence I’ve ever encountered. She went to prison, where the other inmates loved her so much that they hung the above-mentioned Diddy appellation on her. And when she got out, she, I believe with great humility, began rebuilding her empire. It worked. She sold it for a shit pile, and just a couple of years ago, made history again by becoming the first octogenarian to pose for the Sports Illustrated Swimsuit issue.
Sports? Consider the sagas of Kurt Warner, Warren Moon, Baker Mayfield, Muhammed Ali, or Michael Jordan. Tommy John had a virtual pitching arm transplant and returned to produce his greatest mound- based glories. Bill Walton – so thoroughly crippled that he could barely hobble his way to 200 Dead shows he attended the previous year, summoned enough mojo to join, and, at minimum, inspire, perhaps the greatest season in NBA history — the 1986 Boston Celtics championship run.
And speaking of The Dead (and of music generally), they went from Summer of Love Sensei in’67 into relative obscurity in the mid-70s – only to re-emerge for a 15-year run as the top grossing act on the touring circuit. Fleetwood Mac has reinvented itself so many times that it is difficult to keep track of them. Before he died, Johnny Cash dropped several successful alt-pop records with the improbable assistance of Nine Inch Nails and the Violent Femmes. Lou Reed transformed himself from the leader of the magnificent Velvet Underground into an edgy but nonetheless commercially successful solo artist.
And then there’s Def Leppard – a marginal band on their best day but distinguished by the following points: 1) their lead singer stole my uncle’s sister-in-law from the late Ronnie James Dio. Married, divorced her and now presumably pays her substantial alimony; and 2) they retained their founding drummer after the latter lost a wing in a car crash – prompting perhaps the greatest rock and roll joke of all time (Q: what has nine arms and sucks? A: Def Leppard).
Closer to my own professional domain, comebacks are legion. Jamie was the deposed heir-apparent to Sandy, having been rejected in favor of Sandy’s daughter. Brick by brick, he built a banking colossus and now reigns as the indisputable king of depository institution overseers.
My longest-standing client spawned itself out of the ashes of an earlier-rendered multi-strategy hedge fund, which blew up in a highly public fashion not long after M. Diddy was released from prison. The “new” platform (now in its 18th year) is bigger, badder and more profitable than its siring organization.
After seeing his firm indicted, convicted and banned from the Money Management biz, my old boss achieved a reversal of this judgment, re-opened his fund to outside capital, and, not only has crushed it ever since, but manages to find time to run a Major League Baseball franchise on the side — that he purchased with his investment profits.
Finally, in the dominions of politics, we can present perhaps the greatest Second Act in all recorded history: the return not only to prominence, but towards absolute power, of one Donald J. Trump.
While a matter of overwrought, over-prolific public record, for our purposes, some context here bears reiterating. That as recently as, say, 2.5 years ago, he stood, a wardrobe-less, deposed emperor, twice- impeached, four times indicted – 88 counts in all (and probably more on the way), 34 of which he had been found guilty. He’d been fined to the tune of ~$500M. Under what amounts to only slightly modified circumstances, he might right now be cooling his heels in federal prison.
Perhaps his last, best hope was to recapture the White House, and we all know how that played out.
Most of us would have deemed this a sufficient self-vindicating Second Act performance, but as is more apparent every day, we’re dealing with a different breed of cat here.
It appears, moreover, that seeing as how he’s back in town, he might as well make the most of it – issuing swift beatdowns to his political enemies, using his office to achieve unfathomable personal enrichment, and assuming Executive Powers never even imagined by the framers of the Constitution.
I wrote about this extensively during the last portions of Act 1 (Scene 5?) and am not over-inclined to relitigate much of what was covered at the time. Suffice to state that the pattern continues. And few paying attention can doubt that locking horns with 47 comes at a significant price.
Some of it is annoying, some worse than bothersome. I was, for example, irritated by his “suggestion” that the SEC reduce Corporate Earnings reporting requirements from once a quarter to twice a year. Completely apart from being a stone-cold grandstand play, the idea is entirely counterproductive. Though the New York Real Estate market may fail to recognize this, shareholders are the owners of corporations, entitled, as such, to more, rather than less, information about their holdings. This does not imply that they should have the ability to strike and publish a daily P/L, but what benefit is served by reducing the frequency of their public disclosures? And to whom? And to what purpose?
Moreover, to my way of thinking, the ability to operate in such a way as to publicly and formally share results with the investing public every three months is an excellent measure of operational competency. Those enterprises that can do this (particularly profitable ones) can only advance themselves by dhering to this time-honored practice.
And finally, even if Trump muscles something like this through, my guess is that few corporations will avail themselves of this enhanced latitude and will instead continue to report 4 times a year. Because I believe that investors will punish them if they don’t. And one can hardly blame them for so doing. A company that reports once every six months is operating with more opacity than a quarterly reporter, and, for this reason, compels a higher risk premium.
But all this is small potatoes compared to the latest stunts pulled by the Administration on the Federal Reserve. Though stopped by the Supreme Court (for now), they did all in their power to remove dissenting Governor Lisa Cook from her post – ahead of last Wednesday’s FOMC meeting. And the Committee itself cut only 25 bps.
But they were just getting started. The Big Guy filled the open seat with Steven Miran — his own Chairman of the Council Economic Advisors. For form’s sake, Miran took a “leave of absence” from the top Economic advisory post in the Executive Branch. But please. Trump just installed his top econ guy as a voting member of the Fed. Of course, he was there for Wednesday’s vote and, as indicated in the following dot plot, he made his presence felt:
I draw your exclusive attention to the left-most data set – indicating the current-day preferred levels of Committee members.
For the most part, they present themselves in a tight band between 4.0% and 4.5% (we’re currently at 4.25%).
Except for one – which clocks in at < 3% — over 100 bp below current levels.
Steven I. Miran. Once and future Chairman of Trump’s Council of Economic Advisors.
Yup, T-bear is muscling in on the Fed, and, for better or worse, will soon control the whole shebang. Meantime, there’s been a great deal of pointy-headed debate as to whether, and if so, why, Fed Independence is important. Its formation documents are vague on the issue. And, for that matter, one might question the need for a Central Bank in the first instance. Hamilton created the First Bank of the United States in 1791 – largely to consolidate the Revolutionary War debt of the former colonies, and under a 20-year charter that was not renewed in 1811. The country then managed to muddle through for more than 100 years before the modern-day Federal Reserve was established in 1913.
But to my way of thinking, if we’re to have a Central Bank at all, it must have a measure of separation from the grasp of elected officials – lest it become little more than another tool in someone or other’s political arsenal. At which point, any pretense of dainty, anachronistic objectives such as the dual mandate of maintaining price stability and full employment become little more than cruelly farcical ruses. Instead, it evolves an instrument of pure political tactics – a role it is well on its way to assuming right now.
Trump wants lower rates, and by God, he’s gonna get ‘em.
And after that, any pretext of monetary policy decoupled from our perpetual game of Thunderdome politics will have vanished. It kind of reminds me of the scene in Goodfellas, when Henry convinces Paulie to take a stake in that restaurant. After which the dining establishment became little more than a fencing operation, which, after the last dollar had been squeezed out of it, you torch the place.
But I reckon there’s a titch of good news in all this. Rates – particularly at the long end of the curve – are coming down – as impelled by our overseeing betters. And with those lower rates, a period of extended (if finite) valuation expansion.
Plus, I’m back. In Round 2 and energized by the concept. Heck, when I contemplate the possibilities, I can even anticipate a Third Act. If so, I’ll take my inspiration from The Dead, whose Second Act ended (for what I believe should’ve been all time) with the demise of Jerry. But over the last several years, the remaining founding members have re-gathered themselves, and formed an enterprise that I believe generates more income in a month than the original band could produce in a year.
Round 2 will be OUR round. Justifiably earned by us for having never properly experienced Round 1.
Fitzgerald, on the other hand, died at age 40 – drunk, broke and discredited. He has since experienced a magnificent revival. But he never lived to enjoy it.
Which is a shame, because it might’ve changed his mind about Second Acts, and, for my sake, and ours, I hope that it would’ve.
TIMSHEL