Bad things happen. How we respond makes all the difference.

Pandemics, natural disasters, wars, recessions, depressions… sometimes we can’t easily control those things. Sometimes we have no choice but to simply let them run their course. Sometimes we wouldn’t really want to interfere with their course even if we thought we could.

When it comes to the economy, though, there’s always a choice. In this case, as Bloomberg’s Ben Steverman writes, the choice (or at least the outcome of those choices) is simple – more inequality, or less inequality.

The decisions we make that lead to one outcome or another, even if indirectly, have much to do with the things we value in the first place, or at least, the things those making the decisions happen to value. Are your values aligned with theirs?

Bloomberg: The Pandemic Will Reduce Inequality—or Make It Worse

“The Black Death took a highly stratified medieval society and turned it upside down. With 75 million dead, Europe’s wealthy landowners couldn’t find enough people to tend their fields. When peasants—the essential workers of the day—demanded higher pay, the elites of the 14th century fought back with punitive laws, forced labor, and taxes. Even so, wages for the lowliest workers soared. In rural England, they doubled.”

“For now, the most obvious guide to what comes next isn’t the Black Death, which precipitated the demise of European feudalism, but the Great Recession, which had more or less the opposite effect. In the aftermath of the 2008 financial crisis, inequality soared to heights not seen since the early part of the last century. At first, elites feared that much of their wealth would be wiped out in a globally synchronized market crash, à la 1929. But central banks pumped out trillions of dollars as monetary stimulus, markets recovered, and what followed may have been the best decade in history for the superwealthy.”

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Time to “Go Kondo” on the economy? It might depend who you ask.

It’s a good idea in theory. Few would probably argue with the idea that sometimes it just feels like our world has become needlessly complex – what, with all the technology, “always on” media, political & cultural discord, social tension, and of course things like credit default swaps and collateralized debt obligations. What happened to the simple things that the “everyman” could understand and appreciate?

The problem is, like most things in life, once you start to peel it back, you realize even “simplicity” might not be so simple. Why? Because we don’t all value the same things. For some, eliminating “stuff” and creating a more “Zen” like atmosphere at home might fit the bill. For others, it might be the choice between “having it all” (i.e. career, family, friends) vs. having to pick and choose in order to focus on one direction at the expense of another. For yet others, it could be a simple case of better time management. And for some, literally, it would be the seemingly simple question of “why can’t everyone else just agree with me and live the way I think they should? Then everything would be just fine.” (we’ll digress on that point).

Simplicity might be in the eye of the beholder. What if I wanted to keep all my stuff, but “Kondo” all the moral hazard in our system that makes it harder for responsible savers & investors to buy the stuff they want via the fruits of their hard work and prudent risk-taking?

What if the simple ability to open & operate a small business in my preferred small town so I could serve the local population with the simple goods & services they want is all I aspired to do in order to live out my values? And what if I had played by all the rules, worked hard “roughing it” at jobs I didn’t particularly care for along the way, sacrificed the expensive, exotic vacations and debt-fueled purchases of big homes and cars, all so I could save up enough money to buy myself that independent lifestyle using the simple math of profit/loss and price/earnings? (well, as long as these guys didn’t show up first…)

Never mind all the complexity associated with trying to “value” an asset in the first place in this crazy Fed-manipulated age we live in, but as a small business owner, imagine trying to navigate the process of getting a PPP loan while you’re at it? Probably not the definition of simplicity.

Nonetheless, the below is a good, relevant piece written by @andreaskluth via Bloomberg Opinion. As you read through, think about whether your economic system is “sparking joy” for you.

Bloomberg Opinion: This Pandemic Is an Opportunity For Radical Simplification

“A reset to what? My guess is that it’ll amount to a great simplification. A simplification of our lives, priorities, schedules, memberships, finances, relationships and maybe even world views. But also a simplification of our societies. That’s because one of the side effects of Covid-19 is to expose the accumulation over decades — at least in the wealthy West — of untenable complexity in the individual, political and economic spheres of life. “

“The proof includes the stunning success of somebody like Marie Kondo, a Japanese lifestyle guru who promises to help unclutter your home.  In practice, Kondo wants you to look at all your stuff and keep asking: “Does it spark joy?” Usually, the answer is no, and out it goes. “

“Collapse isn’t necessarily as scary as it sounds, by the way. It’s merely a society’s rapid and involuntary simplification. “

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Survival of the unfit?

There are enough jokes to go around on what businesses are considered “essential” in this age of coronavirus. In this case, sure, we can only think of one thing people are scrambling to get their hands on more than sanitizer or chicken – and that’s a boarding pass for their next Carinival cruise…

At least we know the Fed has our back.

WSJ: How Fed Intervention Saved Carnival

“The previously unreported tale of Carnival’s rescue shows how effective the Fed has been in turning the debt spigot back on for large corporations. Carnival may still founder if tourists shun cruises over the long term, and its new debt carries a far heftier price tag than previous offerings. But the immediate survival of the company, which employs about 150,000 people, is no longer in question.”

“Elliott’s owner, Paul Singer, and others have warned that this success story comes at a cost. The Fed could be setting the U.S. economy up for a harder fall down the road, they contend, by flooding markets with cash and spurring investors to prop up firms that may not be fit to survive.”

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Would you bother to play if you knew the game was rigged?

To be fair, we don’t know what the balance sheet of mom & pop Quality Electric Co. in Birmingham, Alabama might have looked like in this particular case either – but we’re guessing it couldn’t have been any worse than, say, what was about to happen to Millennium Management and ExodusPoint Capital Management. Unfortunately, in this “race to the bottom, er, bailout” we’ll probably never know for sure how the “little guys” might have fared against the “big guys” head to head, because according to BNN Bloomberg someone stepped in to pick the winners and losers before anyone even had a chance to get to the finish line…

BNN Bloomberg: Resentment grows on Main Street over bailout winners and losers

“…waiting for approval of her US$40,000 small-business loan last week when the government’s first-come-first-served lending program ran out of cash.

“Smaller companies like us are probably just going to be washed under the rug”


“Some billion-dollar hedge funds, too, have benefited from quick Fed action. A number of them, including Millennium Management and ExodusPoint Capital Management…”

“The basis trade was in a position to tank… The Fed responded, limiting losses. Both Millennium and ExodusPoint declined to comment.”


“…if one of the lessons of 2008 is to help Main Street as well as Wall Street, the lesson seems to be only partly learned. Americans live in two separate and unequal worlds, and the bailouts reflect this.”

“I really have no faith,” Shultz said. “I have no faith in the system. In this government. In this leadership.”


Not much new here, really. We wrote about a similar game two years ago… in case this one sounds familiar.

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Risk/Reward: Is “living” enough of a reward?

Most people will probably have a pretty visceral reaction, one way or the other, to stories like this one. Read below, and you’ll probably come to a pretty quick conclusion that Lt. Gov. Dan Patrick of Texas is either one of two things:

  • A “noble patriot” who would give his life for the liberty he holds so dear, and wants to see passed on to his children, grandchildren
  • The worst kind of “greedy capitalist pig” who probably holds shares in the businesses he’s hoping to have “get back to work”.

Being a politician, we can probably assume the answer isn’t fully one or the other, but rather, whichever constituency he happens to be playing to at the moment. In reality, the answer is also probably not so clear, but regardless of Mr. Patrick’s particular intentions, we thought this story was especially provocative and relevant to everything we talk about on this blog.

There are risks and rewards in life – and certainly, in theory, in a capitalist system. How you view those risks depends heavily on how you value the rewards, and how you value the rewards – well, it’s complicated (we think so, anyway).

Take your own view – but understand why the question is important in the first place. Whether Dan Patrick is really willing to die – we’ll reserve judgement for now.

Fort Worth Star-Telegram: ‘More important things than living,’ Texas’ Dan Patrick says in coronavirus interview

“Patrick recounted the numbers of COVID-19 related deaths in Texas — 495 as of Monday night. He stressed that “every life is valuable” but compared them to the state’s population of 29 million people. “But 500 people out of 29 million and we’re locked down, and we’re crushing the average worker. We’re crushing small business. We’re crushing the markets. We’re crushing this country”

“And what I said when I was with you that night, there are more important things than living. And that’s saving this country for my children, and my grandchildren and saving this country for all of us. And I don’t want to die, nobody wants to die, but man, we got to take some risks and get back in the game, and get this country back up and running.”

“Patrick, who recently turned 70, was referring to his comments nearly a month before when he suggested in an interview with Carlson that as a senior citizen he would be willing to risk his life “in exchange for keeping the America that all America loves for your children and grandchildren.”

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Millennials about to get first (or second?) taste of “moral hazard” in the housing market?

In some ways, it’s not unlike what transpired a decade ago in the wake of the 2008 financial crisis – prospective homebuyers, let’s say, the more “prudent” among us (whether early millennials or otherwise), frustrated by the unsustainable and seemingly irresponsible run-up in prices during the prior “bubble” years (roughly from 2003-2007) felt their time had, perhaps, finally come.

The prudent savers would finally be rewarded with opportunities to buy homes at lower prices and and reap the rewards of their sacrifice and eschewing of the “buy now or be priced out forever” mindset that had previously dominated, with all its “no money down” mortgages and “stated income” (read: no job needed) loans that had kept the party going for too long.

Even if this “inevitable decline” came at the unfortunate misfortune of those who had been duped into jumping on the “housing prices never go down” mania at it’s peak (admittedly, for every knowing “speculator” there were some who genuinely had no idea what they were getting into), it’s the way markets are supposed to work, after all – buy low, sell high; responsible savers get rewarded while irresponsible debtors get punished; the good old laws of supply & demand, finally returning to earth. As far as moral hazard goes, there’s a little on both ends of the spectrum, to be sure, but if we’re all playing by the same rules, it’s hard to argue how this should all end up, right? What’s fair is fair, no? Not so fast.

Sure, we’ve all heard the stories of the unfortunate souls who did actually lose their homes during this post-crash period, and the resulting drop in prices that occurred in some markets more so than others. We feel for those people because we don’t advocate for people getting thrown out on the street under any circumstances, really. But, the post-crash story that gets less mainstream attention is how inconsistent that outcome really was – and how many more people, for better or worse, actually got to live “mortgage free” for years in their over-leveraged homes while banks held back on foreclosures to keep supply off the market, thereby keeping prices artificially inflated, and thereby denying those “prudent savers” their opportunity to get in the game, make good on their sacrifices, and help return the market to a more sound, stable footing. No, the Fed ensured that scenario would not have an opportunity to fully play out as it stepped in with the ensuing decade’s worth of #QE and #ZIRP to ensure markets would stay inflated, and only those existing owners of assets (and in the case of those over-levered housing speculators from the 2000s, whether they ever really had any right to own their assets in the first place) would be made whole, first and foremost, while the relative value of the savings of those who “sat on the sidelines” would be devalued.

Related reads:

Imagine if baseball worked like monetary policy? (from 2017)

10 things I might have done differently if I knew paying my mortgage would become optional (from 2017)

For some “prudent” millennials with sufficient savings, over the most recent decade of the 2010s, they finally had to bite the bullet and “buy in” at whatever price the “market” was being propped up at. Life goes on, and eventually, we all need a place to live, right? In this case, they at least had to bring a down payment to the table, and prove they had the income to support the debt. In this case, at least the math made some sense – at least according to the formulas of #QE #ZIRP era math. Whether these “prudent” buyers were actually getting a good deal for their years worth of hard work & sacrifice – well, that still remains to be seen.

Enter COVID-19 and the 2020 “everything” market crash. History will eventually tell us how this all plays out, but there’s bound to be moral hazard somewhere. Will the “first wave” of “prudent” millennial buyers be made to look like fools for having capitulated and bought homes during the 2010s era of Fed-driven asset inflation if the market is actually allowed to bottom out in the 2020s after all? Or will a “second wave” of millennial buyers experience the same lesson the first-wave buyers did – that saving & waiting is its own kind of fool’s game?

Either way, it’s bound to be lesson in not-so-market economics. Exactly who the winners & losers will be in this case remains to be seen, but if we had to venture a guess, we assume no one will be playing by the rules.

In the meantime, some sentiment from a certain cadre of millennials for whom, we assume, homeownership is not yet a thing:

CCN: Housing Market Supply Shock Blindsides Crash-Crazed Millennials

CCN: These Entitled Millennials Are Cheering for a Housing Market Crash

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Is everything feeling “just peachy” to you?

MarketWatch: Opinion: Wall Street wants you to believe everything is peachy

“What happened to prudence for investors in the stock market?”

“The most important point is that the stock market is now back to about the same level where it was in October 2019. Since then, the coronavirus has caused many deaths, many jobs lost, a lot of trauma and massive economic dislocation. A conclusion that can be drawn is that the stock market believes that none of that matters, otherwise it would not have reached back to the pre-liquidity injection level.”

“It is career suicide for a Wall Street analyst to stay bearish if the market continues to go up. On the other hand, if the market goes down and the stock market analysts are bullish, it is not their fault — they just couldn’t foresee the coronavirus’ effects.”

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A gut-check on values with Chris Cuomo.

A silver lining of being stricken with COVID-19, it seems, is an opportunity to take a step back and re-evaluate those “bigger questions” – you know, the ones whose answers we tend to take for granted. Whatever your politics (or whatever your opinion of Chris Cuomo’s) the man brings up some of our favorite points below – whether he intended to or not.

While the recent actions of the Fed might force him to re-think that last part about his “saved money”, all other things being equal (if only), we couldn’t agree with him more.

Of course, it all comes down to values.

Cuomo for next Fed chair? Or Treasury secretary, maybe?

NY Post: Coronavirus-stricken Chris Cuomo trashes CNN gig during radio show meltdown

“I don’t want to spend my time doing things that I don’t think are valuable enough to me personally,” Cuomo said. “I don’t value indulging irrationality, hyper-partisanship.”

“I’m basically being perceived as successful in a system that I don’t value,” he continued. “I’m seen as being good at being on TV and advocating for different positions … but I don’t know if I value those things, certainly not as much as I value being able to live my life on my own terms.”

“That matters to me more than making millions of dollars a year … because I’ve saved my money and I don’t need it anymore,” he said.

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When even your hedge fund peers think you’re “morally corrupt”

All we can say is, the system allows it. So, what does that say about the people participating in the system? How about the ones who created the system in the first place? (or better yet, the ones who allow it to continue?)

Bloomberg: Hedge Fund Managers Claiming Bailouts as Small Businesses

“A manager with a healthy business who takes advantage of a program that isn’t “precisely defined, is not only showing poor moral judgment and potentially hurting the reputation of the alternatives industry, but it’s also probably crowding out struggling workers and businesses severely impacted by Covid-19

“One manager, who asked not to be named, said he was outraged when he received a note from his accountant analyzing his potential eligibility. Why, he asked, would a hedge fund that collects management fees, and can make money if it’s skilled, avail itself of a government handout?”

“It’s a complete abomination,” agreed Nate Koppikar, a partner at San Francisco-based money manager Orso Partners. He noted that firms that avail themselves of the money may later be publicly identified under the Freedom of Information Act. “

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Emptiness into Fullness – a timely Easter metaphor?

Speaking to a (literally) empty congregation at St. Patrick’s Cathedral in New York City (but virtually streamed), Cardinal Timothy Dolan earlier today gave his annual Easter Sermon.

Drawing a metaphor between the “empty tomb” that was found by Mary Magdelene that morning and the “fullness of Christ” it allowed to emerge, and the feeling of “emptiness” we feel on this particular Easter Sunday vs. the “fullness” that Easter normally represents, Cardinal Dolan may have hit on a profound point that’s even more relevant to the moment than even he might have intended.

In other words, it’s the idea that “emptiness” might lead to “fullness” if we turn away from what has gone empty – whether it be Jesus’ dead body in the tomb, or the daily activities of our lives in the age of COVID19 (i.e. going out to eat, commuting to the office, taking that ride to the mall, taking that vacation, buying that new car, buying that second house, going to that cocktail party) – and instead, use the opportunity to fill ourselves with a new, perhaps better, sense of purpose and renewal. What may have once filled our lives with “purpose” (or at least filled the time) might well be dead (at least for now) but will we bother to take the opportunity to re-evaluate if we were filling it with the right things in the first place?

Well, we know the Federal Reserve for one hasn’t been thinking that way, for any “dead bodies” (at least the well-connected ones) always manage to be kept alive through bailouts and QE, even if just as zombies, before they ever have a chance to actually die. Therefore, much like the “market” itself, true renewal is never allowed to actually happen. A seemingly eternal cycle of propping up the dead bodies, and crowding out the new ideas and investment, has been the rule of our era.

That said, if we want to learn from the lesson of Easter – a pivotal point in history, that led to the branching off of what would become the world’s largest religion (whatever you think of the institution itself, think about the millions who follow it, and for a reason) – we might take a moment to think if this could be a turning point for our economy and society. At least, it might be a moment to take a critical look at our economic system – is it truly serving the needs, wants, morals, values of its people? Or are Jay Powell, Steve Mnuchin (and the likes of Janet Yellen, Ben Bernanke, Tim Geithner, Hank Paulson, Alan Greenspan, etc… before them), along with all the connected Wall Street insiders & lobbyists, playing the modern-day role of Pontius Pilate & the Romans in a world that’s thirsting for a better way forward?

There’s been a palpable feeling of emptiness out there, especially since 2008, when it comes to our current system of money & finance. Perhaps this Easter Sunday might mark the subtle beginning of a new way of thinking that, hundreds of years from now, we might look back on and celebrate as “year zero” of a more enlightened existence.

Hope & faith.

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