Guest Post: Seeking Solutions In An Uncertain World

Tyler Durden's picture

Submitted by Todd Harrison of Minyanville

Seeking Solutions in an Uncertain World

“We used to play for silver, now we play for life; ones for sport and one’s for blood at the point of a knife.” --Grateful Dead

We
live in interesting times. During the last two years, a financial virus
spawned and infected the economic and social spheres as a matter of
course.

This isn’t just about money anymore. Our civil
liberties, the foundation of free market capitalism and the quality of
life for future generations are dynamically shifting as we traverse our
current course. (See: The Short Sale of American Icons)

I
once offered that Shock & Awe was a tipping point through a
historical lens; as Baghdad blew-up on CNN, I somberly sensed America
would never be the same. That’s not a political statement -- we don’t
know what would have been if we didn’t invade -- it’s simply an
observation. Almost overnight, world empathy turned to global
condemnation.

If we’ve learned anything through these years, it’s
that unintended consequences tend to come full circle. Whether it’s the
moral hazard of bailing out some banks, the gargantuan profits of a
chosen few -- Goldman Sachs (GS), JP Morgan (JPM), Bank America (BAC), Morgan Stanley (MS), Wells Fargo (WFC)
-- the caveats of percolating protectionism, or the growing chasm of
social and geopolitical discord, times they are a-changin’ and it’s
freaking people out.

As speculators are vilified and hedge funds
are perceived as acceptable casualties of war, financial fatigue will
evolve in kind. We’ve already seen the burnout manifest in trading
volume -- upwards of 70% of the flow are the robots -- and we’ve
witnessed it in financial media, with reported ratings of some of CNBC’s
marquee shows down as much as 25% year-over-year. (See: The War on Capitalism)

Sun-tzu
once said, “If your enemy is superior, evade him. If angry, irritate
him. If equally matched, fight and if not, split and reevaluate.” As we
navigate this socioeconomic maelstrom, an increasing number of people
are weighing their options -- and some of the smarter folks I know are
“going dark.”

What does that mean? They’re selling businesses, unwinding trading
operations or otherwise distancing themselves from the capital markets.
The thematic reasoning is straight out of an Ayn Rand novel: “I can’t
compete and when I do, the rules of engagement change in the middle of
the game. I’ll let the powers that be vanquish themselves and return in
three to five years to sift through the remains.” (See: The Last Gasp Bubble)

The
first time I heard this, I took notice. The second time, it piqued my
interest. Now, with four or five savvy seers pulling the plug, I felt
compelled to communicate these observations. I’m often early and
sometimes wrong but I’ll always put it out there; while few are talking
about this, it’s on many people’s mind.

I’ll also share that the
most lucid thought I’ve had since offering in 2003 that we should "sell
tech and financials, buy energy and metals and open a taco stand in
Costa Rica" is to edge away from NYC. While I’m not the panicky type --
heck, some would say I thrive under pressure -- I would be remiss if I
didn’t offer the respect of that honesty. I’m unsure of the genesis of
this particular vibe -- quality of life or proactive self-preservation
-- but the intuition is palpable and ever-present.

As it stands,
I'm not in a position to do that -- this is where we are and this is
what we do -- but my personal choice doesn’t alleviate the overarching
societal shift or the collective tension that seems to be percolating. I
speak with a ton of people in an array of industries throughout the
world and "business is great" feedback is a rarity.

More often
than not with increased frequency, the sentiment skews in the other
direction, as do anecdotal data points such as thinning crowds at
concerts and excess capacity at high-end restaurants and sporting
events. There are of course exceptions -- $10 million plus homes in
Manhattan are well-bid, due in large part to Wall Street bonuses -- but
they’re an outlier in the broader array of our societal fray.

Last week on Minyanville, we shared the following feedback from someone within our community. And I quote:

I read your exchange on “going dark” and wanted to share some
anecdotal evidence. I owned a chemical and manufacturing corporation
that employed twelve people. We sold the company in October, 2009 for
three reasons: expectations of higher future tax rates (income and cap gains), lack of clarity in regulations and the perceived coming wave of governmental policies.

Looking
at that last sentence reminds me of why we decided to take our cards
off the table after a successful run; the words EXPECTATION, CLARITY,
and PERCEIVED.

All of these lead to one thing -- uncertainty. It
was hard enough to make a dime with the relative stability of the
previous period. Change the operating environment and in my mind, you
change the probability of success. Smart people (being presumptuous
there!) don’t wager in that environment!

Now, I’m not suggesting we cower in a corner, buy guns and butter and
get all Mel Gibson on each other. Further, I understand most folks
aren’t in a position to seize the day and walk away. I’ve written in the
past that if we’re not part of the solution, we’re part of the problem
and that remains true, now more than ever; society, at the end of the
day, is simply a sum of the parts.

As we wrestle with reality
and attempt to operate in the best interests of ourselves and those we
love, some have chosen to extricate themselves from an increasingly
tenuous struggle to focus on the little things in life. I suppose
they’re lucky to have that option and their actions are consistent with a
widespread reprioritization following the Great Recession. I’ve written
about them before; net worth vs. self-worth, having fun vs. being happy
and the caveats of looking for validation at the bottom of a bank account. (See: Memoirs of a Minyan)

For
those motivated to power through to better days and easier trades, the
actions of a few effects the lives of many; we, the people, need
motivated, innovative proactive problem-solvers to remain engaged as the
second side of the storm approaches. While our financial equation is
multi-linear and ever-changing, my sense is that we’ve got four to five
years of perseverance and preservation as a precursor to the profound,
generational opportunities that will emerge thereafter. (See The Eye of the Financial Storm)

Looking
at this emerging trend of “distancing” another way, we know the
opposite of love isn’t hate, its apathy. Through that lens, folks
walking away from the capital market construct may indeed be another
step in the steady migration from what was to what will be. We often say
the leaders who emerge from the crisis are rarely the same as those who
entered it. At the very least, it should be noted that several former
leaders have removed themselves from the running.

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Turd Ferguson's picture

"Now, I’m not suggesting we cower in a corner, buy guns and butter and get all Mel Gibson on each other."

Why the fuck not? Typical Wall St wuss. Goes right up to the edge and then backs off.

 

Tom Servo's picture

Off topic.

Shorebank went into FDIC recievership (wasn't that Barry S's baby?).... 2.16 billion *ouch*

www.fdic.gov

 

JLee2027's picture

Anyone who continues to whine about Iraq and Shock and Awe is a liberal who's now undergoing a sober awakening. 

InconvenientCounterParty's picture

In the near future, a "liberal" may be defined as a person that gives bread and water to a starving person. A "conservative" will by some calculus decide not to.

Rick Masters's picture

Hey Jlee is that short for Julie cause you sound like a woman. Nag. Nag. Nag. Seriously this is a finance board stop trying to censor people thru your political intimitatuion, just like a little woman.

JLee2027's picture

Telling the truth about liberals is nagging? 

No, I'm not going to stop until the liberals stop whining.

Getagrip's picture

Hey Turd, ease up on Todd-he's one of the good guy's (Wall St. matrix convert). I think he's trying to say that if we get to that point, ya might want to head for Mexico and take your chances with the cartel. Nice hat... 

harry tuttle's picture

Your response should always reflect your level of certainty.  And, like the Boy Scouts say, "be prepared".  Alternatively, "hope for the best and prepare for the worst." 

Mr. Harrison is, nonetheless, clearly calling it like he's seeing it at the moment.  In that context, it would seem that some version of "going dark" might well be prudent.  For some, that might simply mean playing the cards close to the vest or, possibly, cashing in altogether and getting small.  If you're more certain than he is, best get on to the guns and butter there Turd, I know I have.

HT

Mitchman's picture

It is difficult to not feel that the best thing to do at this time is to save one's powder and watch TPTB destroy themselves.

merehuman's picture

Mitchman, +1000 . Here is hoping sooner than later. The whole world is waiting...

JLee2027's picture

It's hard praying for destruction, so I try to say something simple like "Lord remove those in power who abuse it".

Of course that would be most of the government...

Getagrip's picture

Amen! Remember, God will give us what we ask for. We have what we wanted. Welcome to the harvest... Dr. Charles Stanley (In Touch Ministries) 140 days of prayer to redeem our Nation. Keep Praying...

 

 

 

 

 

Village Idiot's picture

Let's hope "the whole world" isn't waiting - we have enough to work out without the rest of the world breathing down our necks. Screw that.

Village Idiot's picture

To the junkers,

maybe Ishould elaborate - if our financial system goes into cardiac arrest, we will need a safe place to revive and reinvigorate the patient.  While "the rest of the world" may be waiting, I can assure you that many governments will be less than concerned for our well being.  Setting aside the " we deserve it" aspect, we do need to get back on our feet as soon as possible.  It's not all roses in the real world.  I know that doesn't come as a surprise to anyone here.

Rick Masters's picture

News FLASH:In the world outside of this board and the typical ZH paranoia fringe sect (which isn't all of ZH and I know i've been here from day one), Most, like 99.9 percent of people do not want the painful medicine thay y'all are proposing. They don't.

NotApplicable's picture

"Almost overnight, world empathy turned to global condemnation.

If we’ve learned anything through these years, it’s that unintended consequences tend to come full circle."

One man's unintended consequences are another man's raison d'être. Black swans/white swans etc.

World empathy was turned to condemnation for a reason. That day (official start of the Iraq war), I made a conscious decision that drinking every day was required in order to survive its implications.

Bartanist's picture

There are other solutions.

As Einstein said: "An education is something we get when we forget everything learned in school".

There is more to our life than the obvious. The enemy that works to divide us understands. Do you?

Cast away the improbable.

DoChenRollingBearing's picture

OK, how about drinking and gold?

I really don't have any idea who the enemy is anymore, other than those who take away our liberty and money (.gov and banksters).  To Hell with 'em.

May I have some more gold, Sir?  And another sip of that ice-cold vodka, Sir?

SWRichmond's picture

I really don't have any idea who the enemy is anymore, other than those who take away our liberty and money (.gov and banksters).

I'm assuming by dot gov you include the rent-seekers, as do I.  If so, then your list is complete.

And another sip of that ice-cold vodka, Sir?

At my age, drinking and training are incompatible.  Guess which one is falling by the wayside?

DeltaDawn's picture

search "colloidal gold" to drink it (if you desire).

downrodeo's picture

I don't often say this but, it sounds like you could use some Goldschlager.

JLee2027's picture

World empathy was turned to condemnation for a reason. That day (official start of the Iraq war), I made a conscious decision that drinking every day was required in order to survive its implications.

Stop it. The condemnation was 100% contrived.

DaveyJones's picture

boy those iraqis are good actors and the dead ones are so Stanislavsky

downrodeo's picture

What a thing to say. I suppose you must have evidence for this, or were you just telling us  what you think?

TooBearish's picture

The 2-20 multi billion $ hedge fund model is seriously coming into question.

Small is beautiful if you want to play the game.

Anyway, there is way too much capacity in the "financial services" space, its about time it was sized more proportionally to the overall economy.

What we need is PhDs designing better energy and transportation solutions rather than sussing out leveraged CDO, CLO, HFT crap to make a living.  I say tax the everliving crap out of those activites and get the programmers and engineers working on a fuel cell for the home to replace the gotdam oil burner.

Theres an industrial policy on the cocktail napkin for ya.  Booyea

sid farkas's picture

I'm an HFT programmer with a degree from MIT. How about stop taxing me so I can pay back loans/afford a home. Then I can get on with more worthy (in your mind) pursuits.

By the way, how do you know what *we* need? If you need something, pay for it, otherwise MYOB.

 

 

TooBearish's picture

Congrats, you are clearly applying your hard earned skills in the most lucrative field with your qualifications and creativity.

My point is that if we had an industrial policy, perhaps if there were the proper incentives, talents like yours would serve society a greater good (beacuse not everyone can go to MIT) and pay you equally or better in a career away from financial engineering.  Its such a shame that you feel the need to rent capital and steal from pension funds in order to make a living.

 

I do know we "need" energy - just a thought on the fuel cell thingy.  But now I will try to MYOB.  

sid farkas's picture

This is the problem, the only "proper incentive" is free enterprise. When you say "industrial policy" you're talking about putting government in charge of it. We already know what that brings us, terrible investments in ethanol and solar tech. Pouring money down the drain chasing nuclear fusion, which is perpetually 50 years away from becoming feasible.

Really good ideas are always considered crazy before they become widely accepted. That makes them the least likely ideas for government to fund. I have crazy ideas of my own which may or may not turn out to be good, but I know the only way I'll get to look into them is if I self fund them.

I know what theft is, it's stealing from hardworking people via taxation, to fund things like war and "industrial policy".

 

Ultranaut's picture

In the real world we have a government. It's an unavoidable situation that we have to make the best of. An industrial policy which re-allocates capital from the assholes on Wall St. into actual productive activities is a much better idea than pretending free enterprise will solve the problem. We don't have free enterprise, and we never will so long as Wall St. is calling the shots.

 

The reason crazy ideas don't get funded by the govt. is because they are inevitably used as fodder for political propaganda.

Maniac Researcher's picture

In the real world we have a government.

 

I'm surprised you didn't get junked for merely admitting that here, Ultranaut. It's nice to see a realistic view rather than the all too common "after (I hope) everything collapses I'm going to do X.."

We don't have free enterprise, and we never will so long as Wall St. is calling the shots.

Hence, in my mind, the real question: how do we end Wall St.'s stranglehold on the government? I see many intelligent people that could devote their mental energies to this problem. This is what I am working on - instead of jumping directly to the conclusion that nothing at all can be done until after a collapse.

Jeff Lebowski's picture

We already know what that brings us, terrible investments in ethanol and solar tech.

Maybe I misread that...

We already know what that brings us, terrible investments in ethanol and solar tech.

Holy Santa Claus Shit!  Now you did it...  Prepare for the wrath of Leo...

 

akak's picture

Oh, the shame and horror, to be flogged by Leo with the intellectual and moral equivalent of a wet noodle!  What dishonor, what disgrace!  How COULD anyone bear it?

The wrath of Leo = a kitten's 'roar'

Rusty Shorts's picture

@sid farkas

"Really good ideas are always considered crazy before they become widely accepted"

 

You mean like the expanding earth idea? expanding oil? expanding forest?

 

Bartanist's picture

LOL ... the only propr incentive is personal freedom. Maybe you see "free enterprise" (which is not really free BTW) as the only proper incentive.

Do you realize that you are a slave to "fiat"?

What is fiat exactly? There is more to life... work on it.

Village Idiot's picture

"There is more to life... work on it."

bumper sticker!

 

1100-TACTICAL-12's picture

Let me know where to purchase this one.

juangrande's picture

There has not been "free enterprise" nor will there ever be. Enterprise can exist only within a framework of laws and protection, be it thru "agreed upon" society or tyrannical power. It all costs something. But to work for something that you know benefits most instead of an elite few can dramatically change your state of mind. As far as pouring money into these examples you proffer; a mere pittance compared to some more wasteful and destructive spending. More distraction and/or political bone throwing than anything meaningful.

JLee2027's picture

Free enterprise is conducting your business following God's law and without Government interference or nannyism. That is the Christian and Founding Fathers view of free enterprise. 

RichardP's picture

God's law includes debt forgiveness in Jubilee years, giving to Caesar what is his and giving God what is his, taking care of family and then others, and the commands to replenish the earth, turn the other cheek, and do unto others as you would have them do to you.  Are those the laws you were thinking of when defining Free Enterprise?

DosZap's picture

Richard,

Jubilee year debt forgiveness applied only to Jews( also,we are not under the Law, and most here are not Orthodox jews)............the rest, I can agree with.

Debt forgiveness is called Bankruptcy now.(if you qualify)

RichardP's picture

My point exactly.  He did not distinguish among which of God's laws his Free Enterprise would be governed by.  So - not a useful statement, being so vague.

JLee2027's picture

There is no need to distinguish. 

Oh regional Indian's picture

Juan, good points.

Truth is, we are at a point in our evo/devo-lution when we will begin to question the meaning/worth of everything. Including enterprise/work (free or otherwsie), contribution (to self or society) and all the associated structures that have brought us to where we are today.

For a sobering look into the effects of "free" Enterprise, please see the following, on wealth distribution courtesy Business Insider:

http://tinyurl.com/2enhvcv

When the "balance" is so far off (and we can be assured that in a fractal world, it reflects our general out-of-balance-ness), hard resets lie ahead.

The tone of this piece sounded like a dirge to me.

ORI

http://aadivaahan.wordpress.com

abc123's picture

Sid, you should just make money quietly (good for you!!) and not try to justify yourself.  It only makes you look pensive to defend your "proper incentive".  You know the game is rigged and you should not preach.

Today, "industrial policy" puts several enemy sovereigns ahead of the US: it dictates the production of smart technical people, it provides a tariff shield and it encourages vertical integration that leads to better national security around vital industry sectors.

You can wrap yourself in a flag of "free enterprise" to justify yourself but in the mean time the Chinese are stealing us blind.  We are losing that battle. 

We need to create things here so there is tangible value underpinning our money -- not just services.

 

tmosley's picture

Right, and keep looking the other way while your masters pick our pockets?  I think not.

When Wall Street is getting money from the Fed and the Feds, anything you do is our business, by definition.  Of course, if your particular firm doesn't accept money from Federal sources, then kudos.

I'm all for not taxing people, though.

sid farkas's picture

no bailouts here. We are not TBTF, I can count the number of people in my office on one hand.

Bartanist's picture

Classic... almost as fulfilling as a Yatch full of fiat.