$SPX 666: 15 years later, did the devil win?

SPX 666: 15 years later, did the devil win?

We’re not saying Neel Kashkari (current president of the Minneapolis Fed, and former assistant secretary of the Treasury under Hank Paulson) is the devil incarnate or anything like that. But he did play a key role during a devil of a time for the American economy and markets (overseeing TARP in late 2008) – and looking back 15 years to the day – one can’t help but wonder exactly whose hand might have been at work when the post-GFC S&P index finally bottomed at the infamous number of 666 on March 6th, 2009.

Why pick on Neel? Not because it’s all his fault. But because we found a number of quotes from him over the years, talking about his experiences from that time in retrospect (and we credit him for his honesty) that seem to really capture the essence of why we believe the actions taken in 2008-2009 (and then again when we doubled down on them in 2020) have led to the society & culture we have today. Neel (and perhaps you would agree) might have looked at those actions as a “necessary evil” at the time – but we emphasize the “evil” nonetheless (even if the human perpetrators didn’t intend it that way) in a way that has only become more apparent over time.

Neel might have just been an innocent bystander or well-intentioned enabler at best (we won’t bother pondering over the worst) but when you look at the way American values & behaviors have changed over the 15+ years since #QE first began in 2008 (and for all the nominal “growth” in “value” the “markets” have experienced since SPX 666) you can’t help but notice a correlation. The Devil’s work? (or at least the Devil’s market?) We’ll let you decide.

“This is not the time to worry about moral hazard or whether people are incentivized not to work.”

“if our biggest complaint is that some workers and small businesses got help when they didn’t really need it, that would be a wonderful outcome for our country.”

“In 2008, there was great anger across the country because banks had taken risks and Main Street bore the consequences.”

“Americans were angry at the thought of their “irresponsible” neighbors getting a bailout.”

Neel Kashkari

https://www.minneapolisfed.org/article/2020/op-ed-what-the-2008-rescue-package-can-teach-us-about-todays-relief-bill

it’s very likely that we’d have to turn to the taxpayers to bail the banks out again, and I don’t think most Americans think that’s acceptable.

It’s in their financial interest and in their shareholders’ interest to grow as large as possible, and unfortunately, the risks are then borne by society.

Neel Kashkari

https://www.npr.org/2016/02/18/467112859/he-led-the-financial-bailout-but-says-banks-are-still-too-big-to-fail

“The shareholders got bailed out. The boards of directors got bailed out. Management got bailed out. So from their perspective, there was no crisis

Neel Kashkari

https://finance.yahoo.com/news/fed-apos-kashkari-wall-street-172000046.html

“I think the legacy of the financial crisis is the extreme polarization that we are experiencing every day.”

“we violated core American beliefs. We have beliefs in our country that have been passed down from generation to generation. A belief in free markets. If you take a risk you get the upside but you get the downside. That’s been with us for a couple of hundred years and we violated that in ’08. And when you violate the core beliefs of a society I think it leads to great anger.

Neel Kashkari

Whatever you think of Neel, again, it wasn’t all his fault. And we’re not trying to pin the blame on him. We’re not even trying to pin the blame on any human being who lives above ground here on Earth – though we might question the temples at which some of these enablers do their dirty work (and perhaps also their worship?)

Yes, we’re suggesting bigger (and darker) forces at work.

Some even made light of the situation:

“Yes, wouldn’t that be ironic? One hell of a terrible market bottoms at the sign of the Devil. Maybe the apocalypticists are right!”

Alan Brochstein, CFA

https://seekingalpha.com/article/124821-in-this-devil-of-a-market-could-666-be-the-bottom

While others take a more subtle swipe at some of the parties involved, while avoiding calling them out directly for their “evil” deeds:

“Gains since 666 have been driven in large part by the Fed’s forays into bonds.”

“Will we suffer a catastrophic return to the devil’s number? That depends on the exit from QE.”

@johnauthers

Hint: We never exited.

https://www.ft.com/content/3cb7838e-a547-11e3-8988-00144feab7de

We have a slightly less subtle view:

It’s been quite a run since the March 2009 low of $SPX 666.

Feel like you’ve been running with the bulls? 🐂

Or maybe with someone else? 😈

The “#value” of your portfolio might depend on your #values.

#runningwiththedevil #moralhazard #Fed #QE #ZIRP

Coincidence? We think not.

And for what it’s worth, the results are pretty clear:

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