Guest Post: Apocalypse Trades: Neither Things Nor Bureaucracy

Tyler Durden's picture

Submitted by JM

Apocalypse Trades:  Neither Things Nor Bureaucracy

Given the utter implosion of the American consumer and Hurricane Irene, it is fashionable to be apocalyptic these days.  One should be disinclined to acquiesce to such visions.

One should not be blamed for being seduced:  a Federal Reserve apparatchik dictates the path of every asset class by his whim.  Regrettably, there is no reliability in predicting such whims of fate.  There is, of course, value in speculating to the end of anticipating probable decisions.  But it is sometimes best to ignore these perturbations as best one can and undertake reasonable, empirical explorations that buy what is cheap and sell what is dear.  Remember the words of the wise:  “there is nothing new under the sun.”
One should stick with time-honored traditions that ignore credit ratings and do one’s own diligent investigation of companies.  This obtains bonds that will be money good in a wide class of evil or jolly circumstances.  One should buy shares of companies with prudent managers who understand the best way to be black swan proof is to avoid excesses in both debt and austerity.  One should follow the general but not too rigid proviso that said managers respect their investors enough to return a healthy portion of their capital back via dividends in reasonable time.  If the prevailing opinion of the market is such that they trade below book value, then one should be doubly pleased to acquire them.  It can be more painful to carry on this way undismayed, but there is nothing like pain for feeling alive.

It is commonly held that financial markets are “gamed” against retail investors.  Fair enough assessment of some dreadful practices.  But for the enterprising, this rigging itself creates opportunity through market volatility.  One can game the game by buying into volatility spikes, that is, when all are pressing the sell switch.  This takes patience and discipline.  One should not condescend to buy shares of a mature business so disrespectful of its owners that it offers no dividend:  tosh on these.  One should not nurture delusions that an established company with a multiple reflective of 200x earnings is capable of growing into it:  insufferable presumption.

Above all, one should trust in people and their businesses to navigate uncertain waters, and view with distrust things and bureaucracies.  It is prudent to hold small tangible stores of wealth as a counterpoint to ever-increasing financial complexity, but only in small quantities purchased at fair prices.  This not said to be injurious.  It is said because bargain investments in people are most desirable.  People are creative, pliant, and resilient in ways that metals, commodities, or bureaucracies can never approach.  Firms and concerns of that sort are options on people, bounded by their limitations and fueled by unlimited desires.  In contrast, bureaucracies are condensates of other institutions, deadening instruments with negative carry on the human soul.  Some exceptions will arise.

The Scourge of Bureaucracy

The “bread and circuses” theatrical in the United States Congress last month ended with a stop-gap, thoroughly provisional approach to resolving the debt ceiling.  It led to some relief at the front end of the treasury CDS curve, which was ominously inverted.  This inversion is a measure of the childish depravity politicians now represent.

While the steepening of the curve seemed to provide a favorable wind in the sails, there is something disagreeable afoot.  It is the extent of the steepening at the long end which says all is not well.  Irresponsible kicking the can down the road is being priced into the protection premium on treasuries.

Notably, these curves are illiquid.  At the 5Y mid, the most liquid point on the curve, there has been a 7% increase in premium in the month following the debt ceiling deal.  This is nothing short of dramatic. 

The CDS market is simply the prevailing view of a given crowd regarding the credit worthiness of a referenced entity.   The crowd in question here comprises tier 1 banks, bond market dealers and a few other agents at the margin.  It is their view that prevails here.  The short-term resolution, if it can be called that, is more than offset by the long-term deterioration in credit-worthiness by their estimation. 

There are no easy remedies for this state of affairs.  But provocation that aggravates the situation serves no good.  The United States can borrow virtually unlimited sums for 10 years at 2% interest.  This capacity should not be spoiled due to the whims of the Crassus’ and Brutus’ in Washington D.C.  Drastic cuts in public expenditure will surely contribute to greater unemployment.  But without earnest action that aligns expenses closer to revenues, the problem of credit-worthiness reflected in CDS will invariably lead to limits on borrowing at precisely the worst time.  Neither austerity, nor total avoidance of painful responsibility is the right course Aristotle was right: the mean course is virtue.  The mean is anathema to apocalypse.

The Superfluity of Things

Tangible stores of wealth are indeed seductive, and apocalyptic overtones add to their allure.  But what is tangible can be taken.  Trading in apocalyptic settings has minimal gain and even the most tangible things carry risk:  there is no profit in an unshakable faith in them.  The only unshakable faith should be in one’s capacity to foster a world worthy of wonderful and useful ideas, avoiding religious matters.

It is here that the rules themselves change in unpredictable ways.  Bureaucracies collapse:  the largest predators in the food chain become extinct.  The best hope is to rise out of it and rise quickly and the smaller, nimbler, and more cunning can live to see brighter days.  There is no science to living in such circumstances.  But perhaps there is an art in it.  If the world does melt under the unlaboring stars, one should not despair of it. 

There will always be ways to support something good in this world.  And with all respect for wise words, there are new things under the sun.  There are always opportunities to bring something new and vibrant into this world in spite of surrounding gloom. 
Here is one example to consider.  A man carried coal during World War II.  During one night bombing attack, some 80,000 people where he lived were killed.  While his family was spared death, this fire-bombing destroyed his home.  His family effectively collapsed.  This man’s father was a successful lawyer before the rules changed on him.  But during the war he was injured and could not work anymore.  His father’s accumulated wealth evaporated during a sharp devaluation of the currency, by a factor of 100.  The family could not live on past savings and investments, and this young man nearly starved to death. Anyone with family or friends in the countryside was supposed to move there.   But this man had no relatives or friends in the countryside. 

There was an admirable resiliency in his society, in some sense enduring to this day.  Desperate, homeless young men and women formed close-knit groups led by their teachers.  These teachers held great honor and did more than impart knowledge of subjects.  They imparted knowledge of living, shared food and clothing, and gave encouragement.  This young man was lucky to have this teacher.  He was rather timid and not talkative at all, a bonchan, but his teacher always encouraged him and pushed him to learn.  The teacher imparted that learning was not a game at all.  It was something very serious that imparts what is genuinely wonderful onto the coldness of the world.  If there are such things as guardian angels, then the connection between this teacher and this student is an example of such divine work.  Perhaps it was simple inexplicable luck. 

During this time, life became harder and harder, but the young man went deeper and deeper into study as a response.  He describes this obsession for knowledge as similar to an alcoholic’s thirst.  After the war, he wanted to continue his studies and become a professor.  Finances and circumstances forced him to accept being an elementary school teacher instead.  But he never lost his thirst for knowing, reading Sugaku on his way to and from work in a country rapid being rebuilt from nearly absolute devastation.  He learned a spectrum of general topics like sheaves, algebras, and categories.  In his mind he came to see remarkable relationships between analysis, geometry, and algebra and he had a desire to unify them. 

He came across a problem that shocked the mathematical world of the 1950s:  there were linear partial differential equations with variable coefficients that had no solutions in the space of distributions, not even local ones!  He developed a solution to this problem and in the process created a framework to convert functional analysis into a coherent whole instead of scattered fragments united only by common techniques.  He saw that a manifold is the geometric analogue of an algebraic commutative ring.  In an amazing step, he saw that going to the non-commutative case led to a powerful treatment of partial differential equations.  These ideas were radical indeed.  Gradually the novelty and just plain weirdness of them wore off and some people began using these ideas in a garden variety kind of way.  Algebraic analysis still remains somewhat unexplored by the mainstream to this day, save the French.  The French above all others have an impeccable feeling for the truly profound. 

The man was Mikio Sato, and few living mathematicians exceed him.  What is most fascinating is the extent to which his world collapsed around him, and how swiftly it was rebuilt.  In less than a generation, equity markets were destroyed then booming again and personal wealth exploded upward.  Opportunity returned in spite of radiation, physical destruction, political and economic collapse.  So it was, so it will be. 

Japan’s rebuilding is more than a copy of its former state.  One can argue that the solar panels on virtually every roof and the integration of robotics and the virtual world intertwine with the time-honored tea ceremony in ways that front-run the rest of the world.  Mikio Sato was a part of this rebirth, enriching it, making the world more interesting and full of new vistas, simply by pursuing his own personal need to understand.

People’s needs transcend things.  There are always material needs like food, shelter, and clothing:  satisfying these alone makes one no better than an animal.  There are social needs that make some men rise to be little lower than angels and some men descend into nothing more than demons.  These are best understood as thirsts:  sometimes twisted into a thirst for dominance and power, sometimes is a simple longing for closeness and belonging.  But there is a thirst much nobler in man.  He creates ideas to nurture and cherish.  These rebuild and give something to all. 

“They can take land and money and all your things, but they can never steal what is in your mind.”  A friend told me these words.  They were told to a son from a father living in 1930s China to explain why all of a possible inheritance did not leave land or silver for an only son.  Instead his father poured the inheritance into a physics degree from Peking University.  He told his son those words, which he in turn passed on to his own daughter.  I passed them on to my sons.

I have no illusion of being extraordinary or that what I do changes the world:  I use mathematical methods, but I am no great mathematician.  What I do simply supports both the beauty and the ugliness in the world.  At my best, I can make the world better by my actions.  Anyone can.  Should new things under the sun realize the worst of men’s fears, should epic fail overtake me because I honor the time-honored, I shall be open and receptive.  I shall still support the world in ways that will never fail to unfold.     

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Crisismode's picture

This article is written by a mentally-deficient, mentally-masturbating, brain-dead idiot.


Oh, and did I say it was worth reading?





DeeDeeTwo's picture


How is crapola like this making it onto ZH?

Why does every random hack think they are Hemingway?

Conor's picture

Actually, I found the article to be inspiring.

And in the times of apocalypse, those without belief in a Savior will have nowhere to go with their unrelenting loneliness and despair.


thewhitelion's picture

"Black sock down?"

Not really sure what this means, but DAMN, I wish I had said it!

Transitory Disinflation's picture

The post I replied to mentioned Apocolypse Now... it reminded me of the film Black hawk down but then I remembered "socky" the sock puppet version....


Socky has made it into a few films:


Socky Balboa

Black Sock Down

Asockolypse Now


More here

Snidley Whipsnae's picture

"The only unshakable faith should be in one’s capacity to foster a world worthy of wonderful and useful ideas,"

...and, we are going to eat the ideas and they will sustain us?

...Sounds like another crusader in a quest to change human nature.

Good luck with that one!

To the author of this article: Keep stacking while you are crusading!

jm's picture

The article has nothing to do with changing human nuature.  It is about man's amazing ability to do pretty good with the hands he is dealt. 

Snidley Whipsnae's picture

" It is about man's amazing ability to do pretty good with the hands he is dealt."

I beg to differ... We were delt the most perfect world in the universe that we yet know of... It contained everything needed by all it's inhabitants... It was the 'perfect hand'...

...and, we have turned it into 'the tragedy of the commons'...

In order for humans to avoid turning a perfect world into a 'tragedy of the commons', human nature would definitely have to be changed.

Spin it as you will, jm, the facts are there for all to see...

TheFourthStooge-ing's picture

The perspicacious mind will endeavor to cultivate a succinct style of locution. The capacity for taking complex ideation and distilling it down to its essence can engender thoughtful reflection, whereas excessively loquacious verbiage could be misconstrued as nothing more than persiflage.


Azannoth's picture

Too bad most people on ZH lack the intelect necessary to grasp and appreciate you post, oh well

mick_richfield's picture

I guess I also lack the intellect to appreciate your bad spelling, grammar, and punctuation.  But hey, that's just me.  I'm sure your comment is a lot smarter than it looks.

Did you know there's a spell-check button, little Azannoth?

TD -- could we talk about the, um, captchas?  Maybe turn them up to 11?



Pay Day Today's picture

A compassion for, and interest in, all mankind.

Having said that, the 1950's was a pretty good time to build an industrial economy from wartorn scratch. Energy and materials were plentiful and were supplied to Japan in bulk by friends.

Any new rebuilding now - would need to be a different, less energy intensive future.

Long-John-Silver's picture

Industry in America has been outlawed by the EPA, FDA, and the Justice Department.

nmewn's picture

"and the Justice Department."

Yeppers. They have now gone after Gibson guitars, citing Indian Law.

Interview (complete with Air Force One flyovers and inane reporter questions) follows...

caerus's picture

WTF they went after gibson?!?! this aggression will not stand man...

nmewn's picture

They have been after them since 2009.

They raided them and stole/seized a half a million bucks worth of their customary black ninja attire of course. 


caerus's picture

bullshit dude...what's next prs?

caerus's picture

who's gonna make the guitars?!

Pay Day Today's picture

As long as you guys don't forget that it was a few tens of thousand American citizens on corporate boards who made the decisions to move thousands of US factories to China.

They, and their shareholders profited massively from the downsizing of American industry.

nmewn's picture

"They, and their shareholders profited massively from the downsizing of American industry."

You've piqued my curiousity.

What type of American industry are you in favor of having returned here? And how do you propose to lure it back?

JohnG's picture

Large scale marijuana farming.  And opium (as opposed to hopium).  Why should the Afghani's and CIA have it all??  Hell, we pay for the CIA.

And coca farms.  Big ones.

Decriminization bitches!

NuckingFuts's picture

Why not supply locally what there is a demand for. To me it seems basic economics. But there are those who think it's wrong. Well I think corporate rape and pillage is wrong.... Why not make that shit illegal?

+1 why should the CIA have all the fun?

Hobbleknee's picture

Because the government made it too expensive to do business in America.

Mentaliusanything's picture

Your looking at another reason why America is drowning. Raiding Gibson what next ,Harley - Davidson for excessive Noise pollution or unsafe glare from the chrome....

Endangered Wood my ASS - your being anally inserted and begging for more from limp wristed Girly boys.

America tear this wall down

nmewn's picture

"Your looking at another reason why America is drowning. Raiding Gibson what next ,Harley - Davidson for excessive Noise pollution or unsafe glare from the chrome....

Endangered Wood my ASS - your being anally inserted and begging for more from limp wristed Girly boys."


First they came for the poor who drive clunkers. And I did not speak out for clunker drivers because I did not drive one. Then they came for Cap'n Crunch. And I did not speak out for Cap'n Crunch because I did not eat it. Then they came for our lightbulbs. And I did not speak out because I use flourescent. Then they came for my doctor. And there was no one left unmolested to speak up for him or me.

Its the Crabs in a Bucket Syndrome.

A place populated by a crab-like people living in the depths of a bucket. They will only reach out when one of the other crabs takes hold of the lip of the bucket to escape. They will always, instinctively, grab him and pull him back down into the seething mass that is their world.

I did it by Occident's picture

they can take my guitar wheny they pry it from my cold, dead hands!

Jeez, these laws are getting ridiculous, er, wait too late...

Nate H's picture

"“They can take land and money and all your things, but they can never steal what is in your mind.” "


Wise words. All financial capital -stocks, bonds, even cash and gold - are markers for real wealth: natural capital (trees, oil, water), built capital (tractors, houses, spoons, backpacks), social capital (friends, family, networks), and human capital (health, knowledge, skills etc.) Gold and silver are a bit closer to natural capital than paper is, but markers nonetheless.

blingblingbert's picture

You can have all the gold in the world but if you can't share time with family and freinds the wealth is worthless.

A Lunatic's picture

I'm pretty damned certain that a .357 mag will steal whatever treasures you have secreted away in that mind of yours.

LowProfile's picture

My SAIGA semi-auto 12GA trumps your pissant .357.

Make my day, cunt.

Rodent Freikorps's picture

I just need a better power source and I can go into production with my man-portable, flechette firing rail gun.


JohnG's picture

Guess you'll have to wait for jm's fusion then.  Prolly be a while.  Like never.

Rodent Freikorps's picture

Until then, it just won't be man portable.

Kind of like the powered armor....

mick_richfield's picture

Bah.  7mm Remington magnum, bolt action.  One shot.

JohnG's picture

When used properly, the .44 Automag will remove the fingerprints - Dirty Harry

TheFourthStooge-ing's picture

When used properly, the .44 Automag will remove the fingerprints - Dirty Harry

Good luck finding ammo and (especially) magazines. You might as well be using a Gyrojet.


toady's picture

I'm not sure about the stealing part.

Eliminate, sure, I believe that.

reader2010's picture

Jews learned their hard lessons in Nazi Germany. After all, real wealth happens to be portable/marketable knowledge. 

Moe Howard's picture

They sure are accumulating an awful lot of worldly goods for having learned a lesson. Can you point out where they are not? I see the opposite. I knew Jews who paid more to park their car for a month than my rent for a year, big cars, furs, gold, you name it. What was that lesson again?

Dr. Acula's picture

Two of my favorite people were Jews: Ludwig von Mises and Murray Rothbard.

Neither lived extravagantly AFAIK.


reader2010's picture

Leaders like Hilter or Stalin, for instance, can take away your factories, farms, and property. But, they cannot take away portable knowledge in your head as long as they don't kill you.  Sergey Brin, a Russian Jew came to this country at age of six. He built up his specialized knowledge in math and computer science through his schoolings here in this country. The next thing we know is that he started Google, and has become one of the wealthiest guys in the world.  Precious metals, investment-grade diamonds, and rare fine art paintings will preserve money's purchasing power. However,  real wealth comes from portable knowledge.  

tekhneek's picture

blah blah blah BUY GOLD AND SILVER.