He did not want to return to Memphis. Of this I am certain. He had other fish (and perhaps some loaves) to fry. He was fully engaged in the planning of the Poor People’s Campaign/March on Washington, intended to be the largest-ever nonviolent demonstration against wealth/income inequality and general economic injustice. Maybe it’s just me, but this theme has a vague ring of modernity about it, no?
But on balance he felt he had no choice. There was an all-out crisis ‘a-brewing on Beale Street. The City’s entirely-black sanitation force was on strike. On February 1st, two of their own had been crushed by a truck, just the ghastliest episode a seemingly never-ending string of serious mishaps on the sanitation line. Their average salary was approximately $1.50/hour, and workers finally reached the limit of their patience. They walked out in demand for higher wages and safer conditions. Henry Loeb, the newly elected, somewhat reactionary mayor, declared the strike illegal, and ordered the men to return to their jobs. As always, Hoover’s FBI had its meddlesome eye on the episode.
History confirms the inevitable and let’s just say Mayor Loeb’s stance did not produce his desired outcomes. The workers stiffened, and the image of hundreds of them, each carrying a sign with the words “I AM A MAN” is, to my thinking, one of the most poignant in the history of American Social Justice.
On March 18, 1968, the Reverend Dr. Martin Luther King travelled to Memphis, and addressed a crowd of 25,000. At the time, he was struggling mightily to prove to his followers, skeptical global observers, and perhaps even to himself, that he could hold his movement together under the protocols of nonviolent protest. But it all went wrong that early Spring on the banks of Big Muddy. Tensions mounted, and then mounted some more. Ten days later, the thugs started looting and the police brought out the clubs/tear gas. A 16-year-old boy was killed.
King escaped out of town, but the situation did nothing but deteriorate. No, he did not want to return to Memphis, but he felt the need to restore non-violent order to the proceedings. So he came back. At 6 pm on April 4th, he stepped out on a hotel balcony and somebody took him out.
And, as of Wednesday, 50 years have gone by since that horrible night.
MLK passed into history, to my way of thinking as one of, anyway, the five greatest Americans ever to have ever lived. If he died before achieving complete solutions to the problems he attacked, it was not for lack of effort on his part. And the task needed to be undertaken. And we are all better for his works. The path he chose took vision, diligence and a holy measure of courage. And it’s abundantly clear to me that the Good Reverend Doctor knew that he was testing the prime-evil forces of nature, much as did, say, John Lennon, and knew that by doing so, he was likely to come out on nature’s losing end.
No greater proof of this prescience presents itself than his final “Mountain Top” speech, delivered at the Mason Temple, the very night before his assassination:
“Well, I don’t know what will happen now. We’ve got some difficult days ahead. But it really doesn’t matter with me now, because I’ve been to the mountaintop. And I don’t mind. Like anybody, I would like to live – a long life; longevity has its place. But I’m not concerned about that now. I just want to do God’s will. And He’s allowed me to go up to the mountain. And I’ve looked over. And I’ve seen the Promised Land. I may not get there with you. But I want you to know tonight, that we, as a people, will get to the Promised Land. So I’m happy, tonight. I’m not worried about anything. I’m not fearing any man. Mine eyes have seen the glory of the coming of the Lord.”
Breathtaking.
I suspect it is more than mere coincidence that the 50th anniversary of King’s death coincides more or less with a rare, contemporaneous celebration of Passover and Easter. His final speech is clearly allegoric to the to the Book of Exodus – the story of the liberation of the Children of Israel and the latter’s subsequent delivery to the Promised Land. But as far as I am concerned, it was an intervening event that stands out as the true miracle of the tale. It is Moses going to the Mountain Top, and returning with maybe the greatest gift of all – the living laws codified in the 10 Commandments. They have stood the test of time, and remain just as they are, just as they were written by the Hand of God, some 3,500 years ago. In the intervening ~150 generations, no one has thought to expand them, reduce them, or amend them in any way. Indeed, no one, to the best of my knowledge, has ever even legitimately questioned them. And that, my friends, is both remarkable, and yes, divine. How sad it all stands – particularly in contrast to the petty moral and ethical squabbles that assault our senses, 24/7, in the present day.
**********
Some years ago I wrote what I hoped was an entertaining piece entitled “The 10 Commandments of Risk Management”. I’d love to share it with you but I can’t find it. There, I covered my usual repertoire, risk more when you’re up than when you’re down, pay attention to the small things, set objectives and constraints and live by them, yada, yada, yada. But my 10th risk management commandment was my favorite: obey the real 10 Commandments. Don’t steal. Don’t lie. Don’t kill. Don’t tale the Lord’s name in vain. Don’t covet your neighbor’s wife. I felt at the time that following these eternal rules of life would be accretive to returns, and that failure to do so would have the opposite effect.
As we close the chapter on Q1 ’18 (and I for one am glad it’s over), it is my sense that these righteous rules for the road may be more critical than ever, because we’re about to enter a very trying season, and the prospects of our reaching the Promised Land are a matter of some doubt.
After a rollicking start to the year, investor wrath emerged, seemingly out of nowhere, right around Groundhog Day, when Phinancial Phil most certainly saw his shadow. After the first frosty winds of early February, the SPX has bounced around, but remains, at the point we went to press, a wintery 10% below its recently manifested all-time highs.
My sense is that we’re entering Q2 in true jump ball configuration. With respect to virtually every risk factor/asset class, plausible arguments can be made for rallies, selloffs and stasis. However, by, say, Memorial Day, I believe markets may have a very different look and feel from that which prevails today.
I feel that the main cause of the current opaque conditions is the potential impacts of public policy, and the maddening inability for rational beings to unpack all of the mixed messages emanating from the halls of government. While I’ve made these points before, I urge my readers to be aware of the following two hypotheses: 1) whatever side of the political spectrum one chooses to plant one’s feet, certain policy paths will unleash a significant incremental rally, while others may catalyze a truly nasty selloff; and 2) whatever the outcomes of 1) the results will set a strong tone for the rest of the year and perhaps beyond.
To resume where they left off in late January, the markets need a number of factors to break their way, all achievable but each littered with doubt. They require strong earnings and quarterly macro numbers. Encouraging forward guidance from corporate chieftains is equally (if not more) essential. But perhaps above all, what is needed is some sense of stability emanating from the banks of the Potomac.
If one casts a tunnel-vision eye on private economy dynamics, there is ample reasons for optimism. Current Q1 earnings growth estimates have risen strongly over recent weeks and are clocking in at an eye-popping 17.3%. And, given the lower valuation elevations that currently prevail, on paper, there’s a tantalizing combination of profit traction and multiple contraction:
But even these, or so say the soothsayers, are in large part an artifact of a tax reform effort which, in retrospect, was arguably a heavier lift than it should’ve needed to be. The odds on likelihood is that once Easter is over, the governmental powers that be will need to have pulled some rabbits out of their collective hats to continue the happy corporate vibe.
And I’m just not sure this is in the cards. As someone who would prefer not to write about politics, and as a guy who was and is hoping that Trump will succeed, I will admit to increasing fear that he won’t hold this together, and if he doesn’t, it’s look out below. His inability to resist placing himself, virtually every moment at the center of whatever infantile psychodrama captures his wandering attentions is starting to wear thin — among even his most ardent supporters. And, while I believe investors are begging to have the opportunity to interpret policy trends as being accretive to business and markets, every time another key advisor quits (or is pushed out) under dubious circumstances, every time he tweets out an ad hominin attack on a perceived enemy, or worse, a public corporation that has gotten under his skin, I believe it further undermines confidence in the prospects for the capital economy.
If the sobriety of the proceedings further deteriorates, I don’t see how the capital markets, which should be feeling the first green shoot benefits of tax cuts and regulatory reform, can avoid losing some of their vigor. And you can look this up: Q2 economic trends in a mid-term election cycle are perhaps the most important determinant of electoral outcomes. It’s clear as day to me that if the mid-terms go badly for the Administration, a Democratic Congress will bring Articles of Impeachment to the floor. And they will pass them. They really don’t need more than a one-vote majority in the House to take this step, and I believe they will move on even the thin gruel of evidence that exists at the present moment. Because impeachment is a political, not legal process, unless something truly nasty emerges, they won’t succeed in removing Trump from office – a quixotic struggle that requires 67 senatorial votes. But I don’t think that will matter much to the markets, who will not one bit like the spectacle of impeachment.
The funny thing is, I’m not even sure that the Democratic Leadership wants to go down this path. Like Pelosi to the GOP, Trump is probably the Dem’s best political bludgeon at the moment. But they will have no choice but to proceed, because tens of millions of their constituents are out for blood, and will accept no less.
Surely the best hedge against all of this (again, from purely a market perspective) is a strong showing in the markets and in the economy in the middle part of the year. And it seems to me as though instead of acknowledging this and acting accordingly, the current Administration prefers to undertake an endless sequence of circular firing squads, taking such forms as trade wars, grandstanding attacks on individuals, entities and concepts, whose sins, whatever they may be, are best adjudicated in non-presidential forums.
Maybe Trump doesn’t know this, or maybe he doesn’t care. After all, if worse comes to worst, he can simply hop on his smoke to Mar a Lago and forget the whole sorry mess. But investors should and do care, and this is why I believe that they may read more into the gargantuan string of data points coming our way over the next several weeks than they do when the stakes aren’t so high. On the whole, I think it’s about as important a time as any in recent memory for risk-takers to remain on their toes.
If anyone has a copy of my “10 Commandments of Risk Management”, I ask them to kindly forward it to me. I think the time has come to move Commandment 10 up to the top of the list, and re-issue it. In doing so, I’d hope and expect for the blessings of both Dr. King and Moses. After all, someone has to carry the torch that they pass, and at least with respect to l’affaires des risks, it may as well be me.
Besides, I (too) AM A MAN, and, as this season of prayer and reflection winds to a close, I don’t think that this would be too much to ask.
TIMSHEL