Tuesday, November 27, 2012

The London Almanack Revisited

I bought a stack of rather old books at an estate sale some years ago. Within the lot I purchased was a tattered, leather-bound, compendium containing six years of "The London Almanack" running consecutively from 1853 through 1858. Thumbing through its worn and mildewed pages I chanced upon general interest articles of the day, court circulars, ministry staffing, board-listings of companies and their periodic changes, social diaries, etc. What stood out was the ubiquity of The Military in just about every aspect of life, and the wholesale absence of Hedge Fund and Private Equity Managers amongst the notable and glitterati-of-the-day. There were the Royals, of course, followed by land-owning aristocrats and the clergy who were well-represented, statesmen and ministers, and the odd artist mentioned here and there, after which, finally, on the bottom rung, the very occasional dash across a page by a City of London financier or budding commercial scion. But atop the pedestal of admiration, clearly stood the man in uniform (and I do not mean the blazer, blue-oxford & khaki’s of HF/PE issue). Today, of course, the military man is wholly absent, and one would be challenged to find a statesman of note outside the most senior ministers or cabinet officials in the vicinity of the social stratosphere. Now, upon the pedestal of the nation's attention, predominantly sit entertainers (NB: sportsmen are entertainers) and money-men.

Of course, in the era of my tattered Almanacks, Britain was solidly an Empire – one that took more than a few muskets and large-cannoned stinkpots to hold the domain together. But one could argue that today, the US Military is no less important to America’s dominance, given the amount of collective wealth expended by our rulers upon soldiers and their toys, and that the The Generals and their Lieutenants shouldn’t be socially licking the shoe-bottoms of Harvard Law grads trading public company shares upon their materially non-public clinical data, or denied their walk down the Red Carpets of NY or LA. Yet outside of General Petraeus, who will now be remembered for his indiscretion in the bedroom, rather than his prowess in the theaters of battle, one would be challenged to recall a single US military figure outside the serious guy who got so furious at Bush-the-Second for stitching-him-up at the UN. This is not a slur, on General Powell, and is intended as the opposite for was a model public servant taking the bullet for his boss, though I do wish (and I'll bet HE wishes) that he'd shredded the shoji-paper-like evidence underpinning the planned campaign in Iraq, which, if he had, HE might have been America’s first black President. Back on topic, perhaps in some places, the military men still rate in the public's fascination and admiration. But today, both in NY and London, the society pages are equally devoid of uniformed men (excepting those wearing a football kit).

Commerce and trade were hardly admirable pursuits for a gentleman in the days of my London Almanack, whilst the business of money itself, was even lower still, as it was, unsavourily associated with usury. Yet between then and now, finance has not only been rehabilitated from its Shylock-back-street ex-communication during the middle ages, but so entirely transmuted in its peception that it sits at the pinnacle of desirablility. Moreover, I would posit, this is not for what it does or what it is, or its social function, but ENTIRELY for the very real bling and glamour that its pursuit delivers to its disciples. Yes, it sounds genteel, important and purposeful when embedded in the NYT Sunday Society page weddings & engagements blurb that refers to the Groom's activity as a Senior Analyst in the venerable buyout firm of Fiddle-Faddle Leveraged Acquisition Ventures, or a Global Macro CDS Long-Short Portfolio Manager at Diddle Doodle & Daddle Hedge Fund Management. But should it's pursuit and its many faceted pursuers deserve their central place in our admiration? For those waiting breathlessly, this is not today's question and nor, despite the barbs, am I judging, but, rather, observing.

And prognosticating...by asking a different question: "Will this place on the pedestal continue to be held in the future? Obvious Answer: Probably not. And this isn’t because The People have voted against Bain-like, Romney-esque balls-to-the-wall maximum edge-of-the-envelope extraction in favour of deeper social meaning – the latter being a direction the people are running away from as fast and furiously as possible. Nor is it because we have, over the last decade, seen a more-or-less continuous exposition of what passed as success for what it has all-too-often closely resembled: cheating, tunneling, gaming, corrupting, mis-representing, to the outright frauding, thefting, and private misappropriation-ing at the expense of others and the system a-la Boesky, Scrushy, Frankel, Skilling, Ebbers, Rigas, Lay, Madoff, Rajuratnam, Kozlowski, Cioffi, Waksman, Gupta, Mozilo, and so forth. Rather, it will be for the same simple reason that in 1856, few could have imagined that the day would come that neither Military officers nor Clergy would reign supreme. That, in time, social mores, usefulness and opportunity would not only make their pursuits redundant, but borderline despised. And just as disastrous and grotesquely-brutal wars pursued at public expense undermined the Military's glamour, dishonest financial extraction and exploitation does similar to finance today. And though the moment of knocking finance off its perch clearly is NOT here…yet, Galleon and SAC-like insider-trading scandals, the kind that the typical citizen viscerally feels to be deeply unfair, and that the cognoscenti have little doubt of their veracity however difficult they may be for public justice to fully prosecute and irrespective of how well-lawyered the directly and tangentially associated may be, hasten the moment such pursuits are purged from our collective fascination. The public's distaste results not from some puritanical Scarlet Letter-like prudeness, but rather because fairness, trust, and confidence, are essential to the functioning of institutions and our social system, with corruption and similar venality undermining the its most basic machinery.

* * * * * * * * * *

With each passing day, larger-than-life archetypically-villainous characters diminish in number. Pessimists may rue the state-of-the-world, and the contents of the evening news may, often enough, cause one to hide all sharp objects in the house, yet, ponder, for a moment, of the idealistic though no less prescient vision of the future conjured 35 years ago by the most vilified of recent Presidents, James Earl Carter. Cars ARE now substantially more energy efficient. The use of alternative energy IS increasing, and America is becoming less-hostage to middle-eastern interests for energy. Home thermostats ARE turned lower. Rivers ARE cleaner. The cardigan HAS made a comeback. Faith HAS become more uniquitious (though I have my doubts about the virtue of the latter two). The iron curtain is gone, and an entire generation in Eastern Europe excepting Belarus, knows little to nothing of the bleak totalitarianism that's become a fast-fading memory. In all the lands of the western hemisphere south of San Antonio there is but a single totalitarian regime (Cuba), though Gordon Liddy would have his ideological issues with Chavez as Paul Singer DOES with Christina K. Gone are the Somoza, Pinochet, Torrijos, Noriega, Fujimori, Stroessner regimes, as are those of the Generals in Brazil and Argentina. Gone is apartheid, the larger-than-life Amin, Bokassa, Kabila, Taylor, Babangida, Mubarak, Rawlings, Doe, Kaunda, Toure, Bongo, Mariam, the ben-Ali family, and Qadaffi from Africa changing the face of the continent, and the lives of the people, dramatically for the better. Saddam Hussein is no more. South Korea is a model democracy, and even Pyongyang has turned down the rhetoric and turned-off the centrifuges. The Burmese generals, too, have relented. And while there remain a few stubborn boogers clinging to nose of power, they are noteworthy for their place on the tail of the political distribution, rather than in the center. This was the Carter doctrine, and somewhat miraculously, it’s arrived.

I point this out because it highlights the increasing difficulty that a James Bond-type hero has in finding a villain of such repute outside the cantankerous vitriol of the blind Abu al Hamza, the apocalypticism of Asahara’s Aum Shinrikyu, gluttonous obscenity of ex-Soviet Oligarchs, or anti-social loners like McVeigh or Breivik. All this makes me wonder whether, if Bob Kane and Bill Finger were alive and penning a contemporary version of DCs' Batman, just who, or what the villains might resemble, and what might be that dark motivating force behind a 21st century Bruce Wayne.
"Having witnessed his father brutally bankrupted and humiliated by the purchase of what were rated as 'AAA' securities comprising of sub-prime loans, the elder Wayne was driven to secretly commit suicide in order to trigger an insurance payment so his family could seat, the young Wayne swore revenge on the criminal swindlers, cheaters Frat boys and similar who conjured and sold the bogusly-rated securities...
. or how about
"Wayne was driven to combat financial predation when as a child, a NY vulture fund bought obligations at pennies on the dollar and then held out at debt scheduling causing his father to lose his job and meagre income, forcing him to emigrate to America in order to feed his family, whereupon he died trying to get across the border. Wayne swore never to forget who was responsible ..."

Imagine the variety of sub-plots, and characterizations of the villains – “….the unscupulous and corrupt hedge fund titans driven by meglomanic visions of world political and financial domination through the hoarding of riches and creation of unlimited Super-PACs to push the evil agenda of environmental devastation and human slavery and.....” Abusrd hyperbole? okay, I got a bit carried away, but the thought of Batman hunting down a Fuld-like or Mozillo-like villain BEFORE havoc has been wrought in order to foil their gestating plots, or crashing a fundraiser at the Hudson Institute BEFORE their or the API's millions are employed on unleashing anti-climate change myths on the unsuspecting citizenry, or taking out vigilante justice upon the perps of a Chinese gang of miscreants reverse-mergering their P.O.S into some shell-co. with a US listing, or helping Alfred use the bat-computer (with some help from his friend Mitnick) to hack into the bank accounts of seemingly amoral HFT predators (and their programmers) in order to empty them into the bemused but thankful hands of Medecins Sans Frontieres, Sea Shepherds or UNICEF, would bring a smile to the face of those who honestly and unrewardingly play by the rules, and, perhaps provide subject matter for DC’s next generation of 21st century super-hero storylines.

I am well-off on a tangent now, and will veer back on point, I cannot help wondering whether, in our annals, we will appear (to future generations) so parochially-minded, and whether a century from now, Dick Fuld's, Paul Singer's or Steve Cohen's grandkids or great-grandkids will take public pride in the source of their patrimony. That is of course if the down-trodden hungry masses of the future continue to have the munificence to allow their offspring - who will have done nothing to earn it - keep their inheritance, with its attendant place in the pecking order reflected in the then-prevailing Almanack.


Chris said...

Beautifully written as always.

I wonder, though: Who or what would take the faceless financier's place in the social hierarchy?

The hero IRS agent, tracking down off-shore accounts and closing loophole deductions, while understandably satisfied with his middle-class lifestyle guaranteed to death by taxpayer-paid pensions?

Farmers, living independently off the land and the..er...farm bill?

I doubt there will be some new genre of hero worship emerging in the next 100 years...more likely we will continue to focus on the rich and influential. I wonder if we will ever separate the former from the latter.

"Cassandra" said...

Thanks, Chris.

In answer to your first question, my spouse is of the opinion that the pedestal will be yielded to those who work to "save the planet" (spouse's exact words).

Anonymous said...

I really like this, long-term social aristocracy rotation is an interesting phenomenon to look at.

That said, I am not really sure I agree with the premises, or perhaps what you are describing is a British particularism.

Indeed, a quick glance at classic French/German literature (say, the Buddenbrooks or Zola) would show you that commerce and trade were very much at the centre of the social stage.

Rather, it's the *type* of commerce and trade that was held in the highest regard that has changed over the years. As Chris points out, we "continue to focus on the rich and influential",

With that reservation, I very much agree that asset seizure is a risk that present money rulers wildly underappreciate. Again, this is probably an anglo-saxon particularism, as continentals (not to mention developing nations) have a large body of evidence that this can and *does* happen at regular intervals.

Great piece all the same.


"Cassandra" said...

Thanks foir the kind words. I am guilty of "history by anecdote", my snapshot being The Almanack. I make no claims to the historical veracity of my narrative. I did, however, think it an interesting and unusual springboard from which to have some fun with a few ideas that have been percolating.

Rich said...

You may want to read "The Hare with Amber Eyes" by Edmund de Waal. It's a family memoir that deals in part with the family's financial vicissitudes. It also describes the rise of anti-Semitism from 1870-1940's and its effect on the family.

It may well be that the number of Jews in finance made the field unsavory to the bigots of the day. Bet there weren't any Jewish generals in the army!

Today more people know of Bill Gates than the financiers, save Buffett.

For the next heroes, I nominate biologists. With the genome open for business, it will provide a rich source of heroes and maybe villains as well.

"Cassandra" said...

Rich, thanks for the reading tip. 1850s was still before the first Jewish "Lord" (NM Rothschild) which wasn't until the era of de Waal's book. Jews certainly thrived historically in finance, naturally filling the void left unfilled by widespread prohibitions on usury. Not that was without its dangers (greedy bankers take note!!)

In England, the departing Crusaders were joined by crowds of debtors in the massacres of Jews at London and York in 1189–1190. In 1275, Edward I of England passed the Statute of Jewry which made usury illegal and linked it to blasphemy, in order to seize the assets of the violators. Scores of English Jews were arrested, 300 were hanged and their property went to the Crown. In 1290, all Jews were expelled from England, and allowed to take only what they could carry; the rest of their property became the Crown's. The usury was cited as the official reason for the Edict of Expulsion. However, not all Jews were expelled: it was easy to convert to Christianity and thereby avoid expulsion. Many other crowned heads of Europe expelled the Jews, although again conversion to Christianity meant that you were no longer considered a Jew (see the articles on marranos or crypto-Judaism)

"Calling the top" of any human pursuit is a mug's game and likely to be wrong, but in the swift current of time, Finance - as an envied pursuit - is likely nearer to the top, than not.

One final thought. I say this not because I think the financial sector is too large relative to the "real" productive sectors. If anything those engaged in what were considered "real" productive pursuits will continue to fall with technology and automationan with capital more abundant, and less-restricted than ever, its role in rationing, and public markets as a venue for centralizing its exchange are diminished.

If capital markets (evidenced by the size of the FX market and derivatives markets and rise of the elecontric shot-term trading herd) are becoming evermore just gaming and entertainment then it feels to be intrinsically more trivial in comparison to other non-productive entertainment pursuits. For example, the hedonism value of movies, games, sport, anecdotally yield far greater immediate pleasure WITH THE ADDED BONUS THAT CASINO GAMBLING also appears to be reasonably more "fair". And while spreads are embedded favoring the house, they are typically well controlled and well-known and it is possible to make the utility calculation of pleasure benefit versus probability of loss. By contrast, I fail to see what pleasure or benefit trading potentially on the other side of SAC's or Galleon's trades, does for anyone's pleasure or well-being.

Anonymous said...

Well said. As someone who toils away each day honestly and ethically in the markets, I'm sick of being scapegoated for each and every problem and pigeonholed with the likes of Mozilo, Kerviel, and Cayne/Fuld/O'Neal. However I can understand why people think this way after all the malfeasance of late. Our industry will be in PR purgatory for at least the rest of the decade, particularly if we are heading to some fiat currency/sovereign debt/entitlements denouement in the late 2010s as i expect.

Interesting anecdote from the new biography on Joe Kennedy you may find interesting. During the winter of 1931-32, Kennedy was so worried about his assets that he said he would be willing to part with half if he could ensure that the other half would be secure in case the system fell apart or politicians relented to the Father Coughlins/Huey Longs of the Depression. I wonder if the likes of some of the names you mention feel the same right now.

"Cassandra" said...

The distinction between fiance and predatory finance is important and "Scapegoated" is apt. The vast majority of practitioners are honest, and as Shiller has articulated, much of finance itself is not only useful but integral to modern prosperity. If your vision of the denoument comes to pass, it would be undeserved if finance in the main is blamed as the culprit any more than a drug-dealer or a crack-pipe is primarily responsible for an addict's habit, or a Sturm-Ruger is primarily responsible for a murder in which its weapon is used. This doesn't absolve them from sharing culpability, but the primary responsibilty must lie with the ultimate culprits, which in the case of pursuing & perpetuating unsustainable policies is ourselves.

Social policies (progressive tax & transfer) have accomplished much in the way of BOTH successfully buying off discontent and keeping consumption power distributed and circulating. I fear the morally righteous wealthy and better off but stagnant still-upper-middle understand little about the forces they are unleashing in the slash & burn of the State. Not that there is isn't need for discussion and detente on important distributive issues - there is - it's that there are supressed dark forces which, once unleashed, are difficult to control as the last Czar would attest (if he could).

Lance N. said...

Batman v.s. Patrick Bateman!

It takes a serial killer to catch a serial killer.