The Uninspiring Antitheses To Populism

Many have written insightfully on the reasons that seem crucial both to understanding Brexit and the parallel populism carrying Trump into office. Richard Baldwin, Branko Milanovic, even Tom Friedman's latest shed much light on the political-economic fractures and their causes. Useful data analyses have teased out the statistics  past and present county-by-county or even town-by-town. There are those like Cambridge Prof Nicholas Boyle, who evaluates the nostalgic psychological shortcomings of the Brexit demagogues, their disciples, and sychophants, so ill-suited to the 21st century, and which might be extended to American exceptionalism. Some like Martin Wolfe and George Magnus are critical of incumbent elites for their accused culpability which allowed this to happen, and still others (like the itinerant Chris Arnade) take an anecdotal approach to give the neglected and the angry representative faces, and a narrative rarely heard. As a “front row” kid who hung (and whenever possible still hangs) with the “back row” kids, I find this illuminating and fascinating, though not specifically useful for understanding how and why our formerly enlightened democracies have descended into illiberalism and absurdist nostalgia.

Inequality, leftoutism, the cumulative impact of technological change and the social and economic globalization that have industrially-hollowed out swathes historical manufacturing, urbanization, immigration, stagnant real wages, diminishing affordability of housing (and the inflation in much of the aspirational basket of goods) exacerbating the effect of stagnant real wages, a Facebook Syndrome that makes it plain and clear how great everyone else is doing and  how crappy one's own life is, rapid technological change, the relentless demise of religion with no spiritual replacement or purposeful endeavor, increased longevity amplifying conservative share of population, as well as the cumulative under-investment (particularly in the US & UK) in public goods such as education, affordable housing, public transport and healthcare, all have a role in explaining the reasons less-astute people might find comfort in Populist ideas that someone else (like The EU) Is The Cause of My, Your's, and All of our Problems (and that Brexit BTW will be The Solution) or embrace the view that reversing almost every piece of progressive legislation and dismantling almost every multilateral trade, financial, social and legal infrastructure that over several generations we, ourselves, have helped build in the world, will somehow improve our lot, and contribute to OUR future prosperity AND Make America Great Again.

Beyond comprehension except when seen against the anti-thesis. First, let's take stock of the obvious: “Globalization” (in the broadest sense) is a powerful force in the timeline of history. It will likely continue whatever the length of the present populist interlude. As the world shrinks socially, economically, and politically, our problems (and solutions) are increasingly transnational. Global social and cultural convergence is, and will, remain rife. Technological change has been rapid and will continue apace.  Trade and international relations are, for the most part, not zero-sum. Winners and losers result from all of these processes. Overall, more people benefit – globally and domestically – than are hurt. However, people who are are hurt by these processes ARE undeniably hurt. Finally, and most importantly, attempts to arrest these processes wholesale will cause the people who are, and will be hurt, to be hurt EVEN MORE (along with many other people who wouldn't otherwise suffer). This encapsulates the prevailing reality of our world, and most thinking people should find the recap beyond dispute.

When it comes to political anger and resentment, there is little distinction between  big losers and little losers, or between real losers and those who only imagine. For doubt avoidance, I am NOT using “losers” in the pejorative deplorable sense, but rather as the opposite of winner.  One cannot ignore inclusion of the racists and xenophobes as losers, for they too suffer from  imaginary loss, either having lost, or in the grips of fear of losing their absolute and/or relative sense of identity, privilege, and entitlement, however absurd, bogus, stupid, deplorable one may judge these fears/feelings/sentiments. The last element are The Old People, with a biologic fear of change that monotonically-increases with age – as crucial to Brexit as to Trump.  The resulting coalescence between losers and old people together represent the most combustible of populist tinder  All it requires is the flame to set it alight – be it Brexit, Trump. Immigration, or any inflammatory otherism of one's choosing. Anything to avoid confronting the hard fact of loss. Any lottery ticket to hope – no matter how stupid or deleterious the premise might be to one's self-interest, or cynically-predatory upon one's ignorance. To the populist and the demagogue, this is The Opportunity – not The Problem.

To everyone else, this is the problem. For there are no solutions for bringing steel mills back to the Monongahela Valley, or the textile mills back to Lancashire. New or growing automakers will not lay their roots in Detroit whatever the rhetoric. The economic geography of these regions former success, not accidental to their waterside location, has moved on. Other forms of modern economic geography networking based upon knowledge are now ascendant, and they are not along the Calumet or in Aliquippa. Supply chains are increasingly global, and digital. Tobacco farming is on the wane. Coal is enroute to ignominy. Even Pit Traders are the stuff of nostalgic history. For these losers, there is no anti-thesis that can compare against the  rhetorical demagoguery of populism's “Make America Great Again” or to a lesser extent, Brexit's “Take Back Control”. None. It can't.  The chain of dependencies that ripple out from now-hollowed-out industrial heartlands further diminishing opportunity. One could lay blame – on aloof Grosse Pointe managers, short-sighted capital unwilling to invest, raiders, predators, etc. but it will serve little purpose. Eddie Lampert did not kill Sears. He just profited from it's demise. Historically, the winners helped cushion the blow of the losers, if not explicitly then implicitly, though less so since the drubbing of Walter Mondale for hinting of at a need to raise more revenue. Historically, people moved. Sometimes across borders. Sometimes across oceans. Who, and what remained, rarely thrived without something miraculous. There is no divine entitlement to having a prosperous income where there is no prosperity.  Even the Crusades were as much about men seeking their fortune as anything else. Life IS tenuous. Earning a superior income without copious luck or patrimony IS hard. The reality, for those losers who've lost, or are in the process of losing decidedly is not one of hope and optimism, whatever MAGA promises.

The winners and those of us just plodding along, can do what we can do. Some will say it has not been enough...and they will almost certainly be right in comparison to what might have been done, or what we, as a nation, can afford. What we can do is, we can allocate resources and effort to improve education for modernity. We can re-educate those with out-dated or redundant skills. We can provide universal, and mobile healthcare coverage to allow people to move more easily. We can provide a reasonable social safety net for those unwilling or unable to move. We can support emergent business with investments in infrastructure that may facilitate their growth. We can attentuate the tax system to incentivize long-term investment for those enterprises that remain. None of these involve militaristic rallies, gimmicky hats with empty platitudes, blaming others for the changing fortunes of modernity's impact or for the  mis-fortune of our economic geography, or for some, our own poor decisions - be it substance abuse or hedonism. Most importantly, none of these things we can (and should do!) penalize the opportunity and futures of the overwhelming majority of citizens, or their hopes and aspirations, beyond realistically and progressively sharing the burden of adjustment to modernity of those less fortunate. Rawls would likely approve and suggest nothing different. Those are the plain and not-too-pleasant realistic alternatives that are before us, that other peoples on this earth are wrestling with, and doing their level best (or not) with which to come to terms.

Unfortunately, this depiction of reality will not win elections. This version irrespective of it's veracity, is not inspirational, but pragmatic. It is not intentionally dark, nor does it, or should it portend hopelessness or despondency. Resourceful people and regions can reinvent themselves. They can overcome adversity, with vision, investment, fortitude resourcefulness (not necessarily in that order). They can do this by looking forward to the possibilities of the future  – NOT backwards to a nostalgia that will not be resurrected no matter how many trade agreements are shredded, new minorities persecuted or patriotic hymns sung. If anything, these new people, these immigrants are your hope – our hope - not our villains  They were the reality of our past. They are the common bridge between the past and the future.

As difficult as it is to counter the siren calls of Populism, we, the majority, must take responsibility our failures. We must accept that we have been unable to outline a future and attendant policies any more inspiring than:

“It sucks for you, but not as bad as it could suck with the Populist narcisstic misogynist idiot” .

Or leaving aside the ad hominems:

 “Yes even though it sucks for YOU, at least with us and our “policies”, there is a non-zero probability it won't suck quite as bad for your kids".

Or how about:

"Well, at least with us in power, there might be some medicare and public transport when you get old and you *might* be able to drink the water. But don't count on that prosthetic knee..." 

Maybe this is better?:

"No really, believe me, just believe me: those scary looking dudes hanging down at the local weren't foreign...they just look foreign. And besides, they really won't hurt you"  

All this is pretty bleak compared to inane but hopeful  platitude of  "Make America Great Again".
One last attempt:

"Honestly...we'll do the very best we can and we will try very very hard not to enrich ourselves at your expense because we actually do care about policies that will help us in the future be the best we can be..".

Whatever HRCs flaws, this lack of an inspiring narrative wasn't her  fault. Progressives have been stymied continuously on so much social legislation that addresses the interests of the losers, and/or helps cushion their loss – from  education, and housing to progressive taxation. If and when we emerge from what is setting up to be the greatest self-inflicted episode of self-harm seen in the modern era, I sincerely hope that pragmatic sanity will help us try and solve our common problems with integrity and common sense and decency.In the meantime, I challenge all of you to define the positive narrative to address the challenges we face. Failure to do so could result in an even longer dark winter of discontent...

Nothing Cures Populism Like Populism

Though skeptical by nature, I tend towards the optimist. The infectious idealism of my mother is difficult to quash. I would like to believe that sound reasoning, so-called sensibility, could sway, teach, influence, impact, attenuate, educate ameliorate, moderate and contribute towards the evolution in the opinions of those under the influence of angry populism. But it can't.

If, like Jimmy Stewart's "It's a Wonderful Life" one could go back in time with the knowledge one has now, what would you tell the people of early 1930s Germany? of 1930's Italy? 1917 Russia? 1975 Cambodia? 1979 Iran? Would you plead with each of them NOT to make the mistake they were each about to make? Each of these shit-shows of suffering most importantly burned Populism as their fuel. Each sold a set of ill-suited solutions to what were mostly mis-diagnosed or the wrong problems altogether. Yes, each had their own issues of place and time, but in all of them, the whim of The People was usurped by the demagogue who history has judged very unkindly...for millions of irreparable irreplaceable reasons. So, of course you would plead, like a Cassandra, with your perfect knowledge of the future that you have seen with your own eyes. You would do everything in your persuasive powers... 

The thing is, in each of those situations, they, i.e. The People, would've all told you to fuck the fuck-off before they trampled your gonads, cut them off, and fed them, and the rest of you, to the dogs. The thing is: you can no more intervene to stop populism once it's left the station, any more than you can tell your kids not to do the stupid shit they will want to do, and are going to do. They can not, will not, believe you or obey you – certainly not because you know better. It is beyond their capabilities when otherwise possessed, be it by FOMO, ideology or mere wishful delusion. Of course, as a parent, (or well-reasonably well-trained, mature, observant non-dogmatic macroeconomist) with more knowledge YOU probably do know better. It's NOT the parental aspect that makes you know better since THAT confers no god-given right. It's the knowledge and experience. Yes, yes, I know that it sounds arrogant. It reflexively causes the: , "who the fuck are YOU that YOU know better, you smart-ass?" response, or the devilishly cleverly dismissive smarm of Michael Gove Fucking experts, right? One needn't spend too much time defending the role and value of so-called experts, as the idea that somehow one would embark on cancer treatment via advice from a KFC clerk, or have one's dry rot treated by your hair stylist is absurd. Moreover modernity IS complex and getting more so every day. The common (and reasonable) response to this challenge is to consult those wiser than you. Young people who ignore informed advice have the excuse of a still-developing forebrain in one's youth. Mature citizens under the sway of populist delusion have no similar excuse The abuse-to-come will be self-inflicted be it from a natural predisposition to conservatism or authoritarianism or any of a multitude of behavioural biases that prevent reason from entering their thick and stubborn skulls, or responding to new information it reveals itself and changes .

And so the young will do what they must do. They will learn the hard way. “Learn by experience” is their catchphrase, and as a parent, I can only only hope that with any luck mine will prove sufficiently less stupid than is required to teach them their lessons without mortal endangerment to themselves or others. But for the entranced masses for whom Populist rhetoric is the panacea - feeling as if it will cure all their ills (and asthma too!), I can only pessimistically suggest that “nothing cures populism like populism”. It is not coincidental that both Germany and Japan, poster-children for the Last Populism are emerging as the present beacons of liberal enlightenment, while the USA & the UK, the two countries who've not experienced the perils of demagogic populism in modernity have slid dangerously far towards the illiberal abyss – dismissive of any and all warnings that there even IS an abyss. 

The only ray of hope I see is that it numerically remains a 50/50 divide. But this is offset by the reality that the levers of Power are in the hands of The Populists. This is true in legal and administrative halls of government, in the media and mediation of information, and the direct instruments of law & order as expressed through the police, intelligence services, and home guards. This makes it feel as if Populism is more numerically ascendant, and makes expressions of opposition and dissent not only more challenging, but physically, economically and mentally more perilous. 

Of course, I think we should and must fight in all spheres, and not shy away from the inevitable battles ahead, in whatever forms of protest and dissent are available. But I am privately resigned that people possessed by Populism, will only learn from their own bitter experiences (or worse carnage of neighbours and loved ones) what are its true costs...

On Selling Short

Oh, roller-skating is exciting,
   and so are volcanoes too.
And a good old-fashioned blizzard
   will put you in a stew;
But of all exciting pastimes,
   or any kind of sport,
There's nothing quite so thrilling
   As the game of Selling Short.

It isn't merely selling
   something which you have got;
It's much more complicated -
   You sell what you have NOT.
And the thing that makes exciting
   (if you don't believe me - try it)
Is that after you have sold it
   You have simply GOT TO buy it.

And so, when you go to buy it,
   If you have to pay the price
Higher than what you sold it for -
   That isn't quite so nice.
And the market is most disobliging -
   Though no one seems to know why -
For it's always down when you HAVE to sell,
   And it's up when you HAVE to buy.

(From Sophronia Tibbs "Stock Market Quotations", published 1926 by John Day & Co.)

So Long Pershing Square

Farewell then
Bill Ackman,
"Activist investor".
Whatever
that
means.

You made
a few good trades,
and a couple of friends
along the way
(like Ezra Mirkin,
and some guy you met
in a cab).

You also made
some stinkers,
and a bushelful-o'-enemies -
on The Street,
in Congress,
at the SEC,
and the DOJ
(to name a few).

"Shootin'-The-Moon"
was your
strong-suit,
but
risk-management
was not.

Which is jolly-fine
when it works,
but rather not
when clusterfucked it doesn't.

You wanted fame,
but got Valeant infamy.
Because
it's likely
that you "lost"
more investors' money
than you ever
made. 

Upon seeing the miraculous photo of a headset-less Mark Zuckerberg walking through an Oculus Sea, I thought that this post, written in 2012 was just as, if not more apt today than when it was written. All comments most welcome. 

Pleasure Principles

“What will fill the vacuum formerly occupied by religion?”

The most thoughtful, as well as the most memorable wedding gift my spouse and I received in 1993, the year of my first (and only) marriage, was neither the most expensive, nor an object. Rather it was a “Brunch” - that uniquely American invention deplored by Anthony Bourdain in Kitchen Confidential as a reliable though odious route for restaurants to recycle anything and everything left over in their refrigerator and pantry. I learned other useful pointers from Boudrain, (who since parlayed that success into a TV Celebrity status that sufficiently provides for his habits), such as never eat restaurant fish on a Monday, and if you're a foodie and looking for best execution, avoid Fri and Sat evenings like the plague., etc. But I digress. This 'Brunch' was a simple but special affair in that it included the company of [the late] acclaimed author, Chaim Potok, and his lovely wife Adena.

Who is Chaim Potok, you might ask? I'd read several of his novels, independently, following on the heels of those  by Nobelists Saul Bellow and Isaac Bashevis Singer, though before I'd been introduced to works of Philip Roth. All their voices rang true. All chewed upon the clash of the traditional with the modern. All seemingly lamented the loss(es) of what was, even when (reluctantly) accepting the victory of modernity's “progress”. And they all struck some chord within me, each ruminating in their own perspectives and style upon issues still-raw-and-contentious (in my own family), growing up as I did on the generational cusp, and witnessing my parents wrestling with theirs over the same.

I think Potok stands out as his breadth of thought was more encompassing. He was first a Rabbi, then a writer, also a theological academic and philosopher (PhD Penn, Philosophy) as well as a graphic artist, and playwrite, though the arts were his first love and a source of conflict with his own (traditional) parents. His  timeline reflected this same struggle: from indoctrination and orthodox study sliding towards the increasingly secular graphical artist and thinker. He may not have been the superior novelist of the genre shared by the four eminent writers, but he probably was the most eclectic and adept thinker. His experiences were varied: an army Chaplain, a rabbi, a teacher, an editor, writer, an artist). Bellow's and Roth's characters and dialogue might have been more realistic, Potok stretched the boundaries of thought further than the others. Like the great Jewish minds (unlike those of current-day Likud), Potok ruminated thoroughly and saw things not categorically, but nuanced – context within context within context.

Beyond these spartan observations, there is little I can add. We drank coffee, and chatted about our experiences, and about faith. I made no effort to hide my lack thereof, though I couched it in the agnosticism of the empiricist versus certitude of the militant aetheist, which was more useful for friendly discussion than Dawkin's axe-wielding approach. More coffee and cakes, and the conversation drifted from the first to third person, and modernity's impacts upon religion. I noted that religion was useful historically as a means control. Fear of God, his wrath (for the Jews) or Hell (for Christians) were powerful tools. And whether a tool for purposes of control, or more recently as panaceas for the spirit, there is in modernity, I suggested, a gaping hole in the psyche and in one's preoccupation that was previously occupied by religion. “What”, I continued, did he “think might or will replace it???!!?”

He pulled on his whiskers for a long time, looked upwards towards the heavens, and then stared deep into the depths of his half-filled cup before meeting my eyes and saying more categorically than he had about anything to that moment ......”Hedonism”. “Hedonism will fill the void...”, and for the first time, I saw resignation on the face of this otherwise thoughtful optimist. It is the same resignation floor traders must have felt as transactions went "upstairs", or that which strikes value-oriented reversion traders horse-whipped by seemingly less-than-explicable momentum, or an allocator feels when assessing the new normal of what used to be the risk-free rate. It is a distinct feeling that the sense one previously made of the world has been palpably altered, leaving it a less-hospitable place as a result.

Conversation rebounded from the after-effects of this pronouncement, for it was clear he knew that however depressing the prognostication, there was nothing he could do. He could analyse this wave, indeed, he could explain it. But he knew it will be as it inevitably will be. Efforts to change the direction of such a tide would be futile. I understood he was not whining. Nor was he living in the past. As was the case with his literature, he sought first and foremost to understand what was going on around him, and make sense of it, rather than tell us how it should be.

In 2012, it seems ironic, that mired in debt with unemployment rife, that our Grasshopper-like spirits' gaze is, as Potok forecast nearly two decades ago, firmly fixed (and growing) upon hedonism. Not spiritualism or New Age-ism, but full, unbridled "Whatever!" I see it manifested in demagogues pandering "7-Minute Abs" solutions, to problems of marathon proportions. I see it in my eldest's seeming addiction to fatuous social networking, or under the spell of inane traditional media at the cost of reading or doing. I see it in the increasingly stylized beach or ski holidays. I see it in the untempered expectations still being conjured and polished by companies and their Madison Ave agents. I see it in the politicians' promises to restore what Americans' believe is owed to them.   

But is this not natural? Should hedonism be a pejorative?  To the extent it plays a part in fueling expectations and pursuit of a lifestyle for the individual that is unsustainable for the group, then yes. To the extent that it prevents sober or pragmatic evaluation  of what needs or might  be done to pursue even weak-form sustainability, then yes. To the extent it discounts the longer run policy pursuits, for the short-run, then indeed, yes. To the extent it encourages anti-social behaviour to finance parochial hedonism, then yes.  To the extent it fuels near-unprecendented greed at the expense charity yielding a coarser way of life for the benefit of parochial pleasure and the privilege of the yet unborn, then yes, it is a pejorative, and we should lament its expansion in filling the vacuum.

Unlike the Apocalyptors and Tin-Foil Hat Brigade, I do not believe 2012 will be the year of the Return of Barter or Oblivion For Mankind, and while it may even surprise to the upside given the hugely bearish expectations of the market and anti-European shills, I do think it will be an interesting year for observing what happens when hedonistic rubber meets the austere reality of the road ahead of us [all].

Where are all the Jewish Momentum Traders?

Many would find financial research a curious pursuit. And while most curious financial researchers have their own peculiar or arcane interests, one area of modern finance continues to intrigue and mystify me: "Why are there so few Jewish momentum investors?" Now before the ADL or JDL launch a protes taking issue with this post before giving it a fair read, let me first clarify several points at the risk of spoiling my punchline. First, by way of full disclosure, I have strong affiliations with The Tribe itself (of Abraham that is) - and little to no affiliation with the Church of Serial Correlation (the Cult of Momentum) or The Turtle Traders. Second, despite the fact that I am an unashamed peacenik, frequent critic of Likud and the last two decades of much Israeli policy, I admire many Israeli's such as Amos Oz, Y. Rabin, D. Barenboim and Y. Beilin, the Jewish faith the Jewish faith, and many things The State of Israel has accomplished. This qualified and tepid opinion, however, does NOT - I repeat does NOT - in any way whatsoever make me anti-semitic. Third, and contrary to your suspicions, the accompanying image, as any native from Calgary might tell you, strangely enough has nothing to do with the Star of David, or Momentum. It is in fact a sheriff's badge presumably labelled to express disaffection over the "mess" and chaos their annual rodeo-related Stampede creates. But it does a nice job of visually marrying my seemingly unrelated subjects.

Having dispensed with formalities and belied critics who might impugn my credibility based upon THEIR politics, I will return to subject: the dearth of Jewish momentum traders. This puzzle initially gestated from meditations regarding the relative contribution of nature vs. nurture upon one's political beliefs. Proposing too much nature, it seems, is a contentious thought to some folk as I've discovered, for after espousing it, I've had people look upon me as puzzled and suspicious as if I were Kim Jong-Il doing a Liza Minelli impersonation, even though it's a quite innocuous observation. It goes like this. Based upon keen but anecdotal observation, populations seem to have roughly similar distributions of political archetypes between what one might broadly categorize as "progressive" or "conservative", irrespective of ethnicity, religion, or nationality of the entire population. Whether it's exemplified by Republican or Democrat, Labour or Conservative, Social Democrat or Christian Democrat there seems to be a rough equivalency in the percentages of these divisions in society. This seems to hold even if the specific ideological anchors have different coordinates in the political spectrum in different places. As other personality traits such as optimism and empathy have been shown to be strongly influenced by genetic predisposition, my probably unoriginal hypothesis by way of extension was quite simply: Why not politics? Perhaps everyone is born with a certain greater or lesser predispositon towards progressivity or conservatism, which themselves are possibly based a general affinity towards being receptive of, and embracing change (in the case of the progressive), or being cautious and suspicious of said change (as befits the conservative). The resulting conclusion: people underestimate the role of such genetic predisposition in political belief structures, in general, and in their own idelogical make-up in particular. While I am not an anthropologist nor a sociologist there are many examples of similar less-than-physical pre-disposed traits in relatively consistent proportions across varied populations (e.g. homosexuality). And while learned people who have studied this are not necessarily in agreement as to which competing theory best explains WHY the phenomena exists, there is little disgreement over the existence of the objective phenomena itself. This is NOT meant to disavow or diminish the influence of nurture, or to discount free will of the spirit which both have a role. But it is interesting, if not uncomfortable, to speculate that we may not be as free as we would like to believe.

Teleport now to what was the floor of the CBOT or the CBOE where, mixed amongst the overly-tall brokers and traders, were speculators of many persuasions. Scalpers, market-makers, front-runners, discretionary liquidity providers, strategic traders, trend traders, and counter-trend traders, some disciplined, some emotional some visceral or instinctive. But here too there seems to be similar archetypical personality divisions: that of the "trend-trader" or "counter-trend trader". One can also think of it as momentum-oriented or reversion oriented (or short-premium option traders vs long-premium option traders for our derivative friends). Might not genetic predisposition have a similar role in whether one felt more comfortable "riding a trend" or "or trying to anticipate a reversal"? Or in "buying a breakout" or "fading a pop"?? Or "Buying growth" or "buying value"? After all, these dichotomies are essentially attributable to the inherent optimism vs pessimism, or safety vs. adventuresomeness which we already have good reasons to believe are strongly influenced by nature.

Whether one agrees or not at this point, I hope you'll see a consistency and logic to this thread so far, that, if not probable, is at least plausible. Now comes the puzzle: if the general population consists of some relatively consistent distribution of, for simplicity's sake, "momentum-traders" and "reversion traders", why does there seem to be such an asymmetrical distribution specifically amongst the Jews? It's certainly not for lack of prowess at making money. Trading is in our blood and has been since our days refueling camels at the Judean cross-roads of civilisation. As a tribe, we account for some of the greatest value investors, but we seemingly can't ride a trend. Even Sol Waksal for example, whose company has the ultimate momentum theme - a cure for cancer, felt compelled to trade his position lest it's value be [temporarily] knocked by some petty little FDA concerns about experimental design. Few would argue that we are over-represented in the world of arbitrage, but under-represented amongst the great CTA's. Or that we have a keen eye for spotting and picking up the four-cent nickels, but have more difficulty sticking around to turn $1 dollar in $10. I could be way off base, but I think there is a pattern here. Is it something peculiar to "us" or is there something about momentum? Maybe it's just the "feel of it"? Or maybe it's the risk vs. reward proposition that is intuitively (or objectively) unappetizing? Or perhaps momentum requires something more of the mind or spirit, something that we simply cannot give?

It would be useful at this stage to better define "momentum". Though I am no expert on the subject, it may be helpful to separate it into different categories. One is "naive momentum" which is quite simply using past returns to predict the future direction of returns. "What's gone up will keep going up". What is outperforming will (hopefully) keep outperforming. For academics analyzing the stock market's cross-section of returns, this phenomena is typically viewed as relative in nature, or normalized performance ranks. Through this lens, persistence in relative return has been found to exist for as yet undiscovered and undiscernible reasons, confounding theorists - especially those espousing market efficiency. But the real Momentum-Men (and they ARE men as not a single famous woman springs to mind), are the practitioners that call themselves "trend-followers" and would perceive themselves as more sophisticated and discriminating than the naive crowd. Here, simple moving averages give way to complex pattern matching techniques and endlessly catalogued contingency tables - all integrated systematically to find the holy financial grail which will allow them to distill the real trend that has the higher probability of persisting and thus being the motherlode that will take an ounce of gold that broke out from $454 to the stratospheric price of $5,000/oz (or beyhond!). This is a periodically prerequisite necessary to pay for for all the shakeouts, false starts, and ubiquitous reversals that are the by-product of the financial equivalent of chaos. That a number of practitioners have been reasonably (if not fabulously) successful employing these methods would seem to indicate that one dismisses them at their peril. Yet, others employing quite similar methods have crashed and burned spectacularly. But there is no shame in making (and losing) a fortune, for aside from being an adventure, it generates notoriety. And with such fame (infamy might be more accurate), one can always write a book, or post his musings on a website, or teach others to trade using trend-following techniques (but hopefully a more complete set than they used - one that incorporates counter-measures against periodically going nuclear). But perhaps the most amusing description of something with momentum was by Leif Ericson (on Peter Greenfinch's website) which he posited "was the battle between those with more money than intelligence against those with more intelligence than money.

Indeed, momentum has its uses, and has made some people (particularly brokers and exchanges, as well as some investors and traders) fabulous amounts of money. But it's not for the faint-hearted, and not without large and attendant risks. But that still doesn't answer why Jews are under- or unrepresented here. What's preventing them from joining the search for the leprechaun with real potfulls of gold at the end of the rainbow for the lucky few?

For a start, it seems that being long momentum requires faith. Similar in nature to the good old-fashioned bible-thumping fire-breathing kind. But faith in what? It's difficult to say just what that something is, and theoreticians remain perplexed. One might say it's essentially faith that the future bias of returns will continue to resemble the past. But is this wise or even accurate? It's not a bad bet with respect to things like whether the sun will tomorrow, whether the leaves will turn color this autumn, or whether the government will suddenly feel geneorous and abolish tax. And it's not unreasonable have some more-then-ambivalent confidence in a directonal movement when something is converging towards some probable equilibria. But the odds and thus confidence intuitively diminsh as one moves farther from equilibria (assuming one has a reasonably accurate estimate of probable equilibria). Consequently, risk increases. By contrast, it is "doubt" which comes easy to us Jews. Faith comes much harder. We desire proof. We NEED proof. A Covenant, for example, would work well. As would a burning bush, or some directives or commandments carved in stone. Recall, God had to crack the whip many times before people were convinced. And it took lots of smiting. And even then, there was backsliding. Moses was skeptical at first and took multiple minor demonstrations of transmutation to convince him. And I would guess that when he took his demands to the Pharoah, he probably had his doubts. At least until Pharoah's kingdom was over-run by toads. That was his nature - to doubt.

Maybe we eschew Momentum because we're just contrarians? While it's true that we are always up for a good debate, it is unfair to say that we are contrarians for the sake of it or just for kicks. Having said that, one must remember that we are wary of crowds as historically, when we Jews have seen the crowd coming, it was time to leave. And fast. Over the generations it's become burnished in our minds. But suspicion of the herd is not pathological. When there is sale on, we are the first to queue up and often lead the stampede. No obvious contrarianism there. And one must not forget that the God of the old testament is severe. He can (and often did) take away what he'd bestowed, not to mention the ever-present threat of smiting. Momentum needs time, and these things in combination have always made time an issue for us which, while it makes us good bankers, does put some behavioural boundaries upon our holding period. The old saw "One in the hand is worth more than two in the bush", would take on special meaning if one not might be around to collect.

Jews are studious, value education, and usually pretty rigorous. The faith required of a momentum investor resembles closing one's eyes when taking risk. We are used to and not shy of taking risks, but they are typically calculated risks. Like the risk of taking that "Home Office Deduction" against our income tax. We can do the math. But we disapprove of pure gambles. When was the last time you a saw one of our tribe win a large Pick-6 jackpot?!? Or when was the last time your Jewish friend invited you to go the racetrack, or wager on the greyhounds? We intuitively know lotteries are poor odds. That's why when we went to Vegas, we would rather "be the house" and "be paid" than "pay the house" and be played. When we do go to casinos as a customer its for the free drinks, and not for thrill of trying our luck against the odds. We prefer investment to speculation. At least with an investment, one can estimate probabilities and calculate expected returns. And hedge. Only then do we pray. And when we pray, we pray to God not for "good luck" but rather that the hedge holds.

Without being disparaging, momentum is useful as a discipline for people who have no other. And some form of discipline is better than none. We've an inherent intellectual flexibility which in investment terms is important in order to integrate new information and fight against hard-to-overcome cognitive biases. Maybe that's because we've always been moving and have had to learn the ways of new people and places. Unlike the way many conservative strict-constructionists in America prefer an ossified constitution, or the way fundamentalists of all religious persuasions strictly interpret their religious texts, Jews are constantly re-examining and re-interpreting the meaning of their scripture (amongst other things). Trend-following is a disciplined system that proxies for intelligence-derived flexibility. It dictates change in response to something, even if that something is facile, and often ill-logical, and frequently uneconomic. Our nature results in a demanding need to know "why" and to reach our conclusions by way of intellect, rather than faith. This creates decision flexibility (to react to, or incorporate change) which inhibits belief anchoring without sacrificing understanding.

Or perhaps we're just not optimistic enough to "close our eyes and buy"? It seems that most momentum traders are optimists by nature. Optimistic in their belief market solutions are always better. In conservative republicanism. In low taxes. I would not deny the suggestion that as a people we are not renown for our positivism. Not in art, literature, nor psychiatry. But in finance, optimism is independent of, and should not be confused with, momentum. Sometimes there is good reason to be optimistic about the direction of price movement, and sometimes not. And while I would agree that optimism serves many useful functions in the human struggle for survival, it's been shown by researchers that pessimists perception of objective reality is in fact closer to objective reality. Optimism is an important tool in sports, healing the mind and spirit or achieving personal goals, but it cannot and will not move market prices. Full stop. Objective reality (or at least reasonably accurate perception of reality), on the other hand, is extremely useful and of paramount importance when assessing probabilities, making expected return calculations, or discerning the sign and location of the fat tail..

What is the final take-away? Though untested, and unproven, the asymmetry seems to result from an unusually strong combination of natural predisposition towards progressivity inherent in our genes coupled with a multitude of social nurture factors emanating from our idiosyncratic history, religion and culture, all which reinforce our predilection for value and the counter-trend. This is not to discount the potential contributions momentum can make. But that doesn't mean we have to like it, or for that matter, pursue it, which in aggregate, we apparently don't. After all, no one really "likes" insurance, but we still buy it....


(NB: This was first published in 2005 - well into the last momentum cycle, but nonetheless a few years early in its veiled critique of momentum's popularity amongst investors)

Financial Psalm 11

1 In FANG we take refuge.
    How then can one say to investors:
    “Flee like a rat on a sinking ship?"
2 For look, the Pessimists bend their bows;
    And Shorts set their arrows against the strings
to shoot from the shadows
    at the heart of the momentumous(1) uptrend.

3 When the foundations are being shaken,

    and all the Lord's investment styles fail,
    what can righteous investors do?”

4 FANG is in the holy temple;
    FANG sits on the heavenly throne.
FANG observes everyone on earth;
    their algorithms and adware examine them.

And there are no others who compare.
5 FANG examines the righteous,
    but for those who are short or who love privacy,

    FANG hates them with a passion.
6 On the wicked doubters, FANG will rally,
    burning their portfolios and relative performance;
    and redemption of the wrong kind will be their lot.

7 For FANG is righteous and holy, and you will not be

    cast from the Garden of Affluence for following.
    FANG loves monopoly; and dominion over all,
    and the upright will share their growth.

1 - momentumous is the archaic biblical reference for momentum

Bear Market in Integrity Continues (Late 2015 edition)

Things, people, and/or ideas believed to have integrity, now seemingly compromised...(the second third  fourth latest updated and expanded version). The bear market in integrity continues unrelentingly…2015 edition.

Volkswagen
Porsche
Audi
Fantasy Sports
Theranos
Mt Gox
Lufthansa
NFL Football Air-Pressure
Bill Cosby
Pot Noodles
Michel Platini
"Kids Company" Charity
Student Loans
Rabobank
US Secret Service
Energy MLPs
Glastonbury
Tesco
Whole Foods Market
Bruce Jenner
American Police Conduct
Rachel Dolezal
Airbags
Red Meat


SCOTUS
Jimmy Savile (tnx Anon)
Rolf Harris (tnx Anon)
US Veterans Administration
The Red Cross
CPI
Justin Bieber
Abenomics
CPS
The London Gold Fix
Chris Christie


Snooker
Intrade
US Govt Agency Data Release
The UK National Health Service
Swiss Train Safety
Nick Clegg
IM Confidentiality 
Austerity
BBC Management & Oversight
SSL
Risk Parity
Whistleblowing
Segregated Customer Accounts
Investment Consultants
Bloomberg Privacy
Dark Pools
Intrade
London FX PM Closing Prices
Meredith Whitney


Reinhart & Rogoff
Gold
Jérôme Cahuzac
Japanese Yen
Jamie Dimon/JP Morgan
Bitcoin
Banca Monte dei Paschi di Siena 
LULU
IKEA Meatballs



Wen Jiabao as "Humble Servant of The People
Lance Armstrong
Top Ten Lists
NYSE
Facebook
Austerity as an Economic Panacea
Harvard Students' Academic Honesty
BLS Statistics
Cyclical Recovery
Book Reviews
Strong Computer Passwords
Toyota
'Organic' Food
Money Velocity
Patents
Undecided Voters
Hospitals
The Food Pyramid
Purity of '.999 Fine Gold Bars
Penn State Football
"Top of the Pops" 
Fareed Zakaria
The "risk-free" rate
LIBOR as a Benchmark
Public Sector Pensions
HFT as a Beneficial Provider of liquidity
Diversifying properties of Hedge Fund's
Einstein's Theory of Special Relativity 
Celtic Rangers
Macroeconomic Forecasts
John Paulson
FRB Open Market Operations
Standardized Educational Testing
Swiss National Bank
A Relaxing Cruise
WTI as Oil Benchmark 
Olympus Corp.
TEPCO
Payment Protection Insurance
DSK
HM Revenue & Customs
Sony Playstation Network
Google
Privacy
Social Mobility
Actuarial Return Assumptions for Pension Funds
Marmite
Ryan Giggs
Acupuncture
USA Govt AAA
France   AAA
Voicemail
Boob Jobs
Snooker
David Einhorn
Nuclear Power
Deepwater Drilling
Tiger Woods
Professional Cricket
Sumo
Professional Cycling
High-Frequency Trading
Professional Baseball
FIFA
Professional Tennis
Municipal Bond Underwriting
The Catholic Church 
Track & Field Athletics
NCAA Sports
US Congress
UK Parliament
Analyst Research
Credit Ratings
Banks
Newtonian Physics
The Stock Market
The Food Pyramid
Incentive Stock Options
Reinsurance Brokerage 
Lou Dobbs
The Mortgage-Backed Securities Market
Hedge Funds
Social Security
Government Balance Sheets
Tooth Fairy

Errr ummm Professional Wrestling is starting to look good by comparison - at least it makes no pretensions to be anything other than it is. What's left?

Giving The People What They Want

We live in a golden age of near-exponential knowledge-growth and consolidation in general, and more particularly, as it relates to drug discovery. That said, while Moore's Law incessantly drives down the cost semiconductors and related electronic equipment, and algorithmic software innovations are on the cusp of driving down the cost of much previously-expensive financial intermediation, healthcare, medicine, and pharmaceuticals specifically appear to marching in the opposite direction. This is as true for the eye-popping costs of newly-discovered and recently-approved medicines that may be weakly palliative, new drugs novelly treating rare diseases, or improving upon existing treatments to, as carpet-bagging scums Martin Shkreli and Valeant have brought to the public's attention, gaming a system easily gamed in order to take the insured population by the ankles, hold them upside-down and vigorously shake them until each and every penny, nickel, dime and $100 notes is loosened and falls from their pockets. It stinks, and it is disappointing to have seen Wall Street's best and brightest enthusiastically jump on the bandwagon and bankroll (as they did with Bill Erbey), so odious an arbitrage.

As a result, gobs, and gobs, (and gobs!) of money have been thrown at nearly anyone mining the drug-discovery coalface. Many are ostensibly genius-caliber scientists with attendant leadership skills and huge personal ambition. Future generations may thank them. But any leisurely walk through the woods of (listed) industry cannot help but anecdotally marvel at the sheer number of endeavors funded and floated, most of which will, inevitably be worth nothing to their equity investors. VCs may have exited, managers will have collected meaningful salary and bonus (and sold shares), investment bankers will have extracted their dues, but the ordinary biotech miner-forty-niner, ever wishful of scoring a Celgene or Pharmacyclics, will, if history is the judge, be rather more disappointed.

Noticing that my skepticism is getting ahead of me, I will tell you that I believe there is much to admire here. It – the “can-do” attitude, the lack of fear of failure, the willingness to pursue dreams – is the stuff that got us to the moon, and will cure cancer. But it's also the stuff that gave us Ory Weihs (who's made a small fortune getting paid rounding up on-line punters and delivering them to on-line gambling sites), Bernie Ebbers, and Enron and a list of contrapreneurs too long for this post.

Back when I was a boy (camera pans and zooms on to grizzled redneck with long white whiskers in blue overalls, in a rocking chair on the porch of a rural cabin, dragonflies buzzin' and banjos pickin'), there were practical limitations on floating wild-eyed out-of-the-money longshots. Minimum revenue thresholds, an operating history, the presence of profits, were prerequisites on most of the main bourses. Some was regulatory, some was due to scars burnished on popular wisdom from the 20s and subsequent crash. This never stopped people losing money in stocks, but it seemed to help limit the most egregious opportunism outside the ever-present bucketshops. Importantly, this meant companies were funded and often stayed private for much longer, until they came good with some revenue, and some profitable trading history, or less fortunately, had their plugs pulled by their (former) sponsors. It also meant that "professionals" were in charge of the investment process (FWIW). Sure, there self-described polymaths who were out of their league and blinded by the science and a sweet tongue, but there were also many highly-informed specialists, separating wheat and chaff, who carefully chaperoned the growth and magnificent contributions of the flagships.

“Netscape” changed that forever. Netscape was the Klondike-find that transformed and fueled the lust for exponential growth stocks as lottery tickets in the national imagination. And what The People want, The People get (with a bit of help from investment bankers, stockbrokers, and all variety of charlatans). The wanted The Internet, they got the internet. They wanted fiberlightwaveoptics, they got it NT, AVNX, JDSU at 11-digit valuations. They wanted Merchant Energy, and so the trucks arrived. Solar? Errr ummm ignominiously, obtained. Black gold? Granted and presently vomitting all over the west, Bakken, and Marcellus. Nothing, it seems, cures high prices and the hunger that fuels it, like high prices.

And so, here we are, today, with Biotech, present for decades – both blue-chip investment grade and the speculative garden variety, but never in as full-bloom as witnessed in 2015. Every investor with a stock portfolio seemingly has some biotech spec in their portfolio. Some research rocket-fuel, some drug-discovery beta. How many times have you heard your friends' regret about dumping Incyte @$5 (now $125/shr) or "taking profits" in Regeneron in 2011 after it doubled to $40 (now $475). Even my brother-in-law, a conservative stock-broker with income-oriented clients has taken to sexing-up their dossiers portfolios with exotic galloping  biotech  I've never even heard of. This is a reliable tell-tale (his clients are still suffering indigestion on their  MLPs). Apparently, the only thing worse than buyer's regret, is seller's regret, or, as it happens, not buying at all.

Cynics may question my motives for writing this. They may accuse me of being sore “to have missed out”. But for the record, let me say that I've lost money with the best of them, falling prey to most behavioural flaws underpinning investors losses, and really I just wish I could contribute more to this great wave (and shorting stock hardly rates as a worthy societal contribution). So instead, I've decided to help future biotech scions (and their bankers) by helping them conjure names for their future empires. Some may scoff at this effort, but so numerous are the listed companies that finding a suitable name is always challenging and may soon become a major problem.

You see, Biotech naming is a Scrabble-players fantasy. There are Improbable combinations of X's, Y's, Z's, and V's creating a realm of high-scoring naming possibilities, only a portion of which will seduce investors, and demonstrate just how uncreative HF managers are in their own choice of names.

(1) To start, choose a place name, favorite latin description of a vital organ or disease, or just a mainstream biological or life-science chemical term you might remember from high-school. (Tip: If using a place name, try to coin one evocative of health (Portland?) and avoid the rust-belt (Buffalo BioScience or Detroit DermoGenetics just sounds wrong!). (Tip: If using initials, use no more than 3; avoid word-images,  use only consonants,and  try to evoke something vaguely familiar)

(Sample terms: ) Cell, Bio, Epi Pro

(Sample Places: Portland, Cascade, Ranier, Olympic, Redwood, Eureka)

(Sample initials: RTW; QBZ, STP)

(2) Insert dazzling cool-sounding but ultimately generic biological or laboratory term.

(Tip: Use at LEAST one, but stringing two or three together works well too. Parsimony is not your friend when trying to seduce the punters.

(Tip: Capitalize the second and third term as well for important and lasting effect)

(Tip: Keep your Latin  dictionary handy if you get stuck)

(Sample Dazzlers: Epi, Med, Bio, Cryo, Derma,Gen, Gene, Ogics, Pharma, Mune, Immune, Med, Sys, Exis,Oral, Tryx, Tech, Onco, Cardio, Viro, Fibro, Zyme

(3) Finish it off with an appropriate bookend to seal it. Pay close attention to the alliteration. It should roll off the tongue so when investors are bragging about their latest Biotech investment, they won't feel inferior to their friends.

(Common Closers: Labs, Therapeutics. Research, Pharmaceuticals, BioPharma, Science

(Tip: If economical in stage 1 and 2, do not hesitate to choose a double-barreled ending. Like the English upper-class, there is some benefit to conveying superiority in your name choice)

(4) Putting it all together: Just do it. It's fun! Try a few and see if you can create investors' next ten-bagger!  Here goes....

FibroZyme Therapies
CryoDerma Oncopharmaceutical

ViroGenoLogics

Epitryx BioLabs

Eureka ViroImmune Bioscience

Medexis OncoScience Labs

Dermologic Drug Discovery

Vespasian Gene Therapeutics

BioCryoSys Pharma

BioCardial Research

(enough for this this week....!)

Finding Fault in Fault-Finding

My spouse is an expert fault-finder, never failing to expose, highlight, broadcast, lay bare, unshroud, feature, examine, emphasize, reiterate, assert, underscore and remind ME of MY faults, weaknesses, inadequacies, shortcomings, failings and defects.

And of course, my spouse is often "right" insofar as I am quite imperfect, and (one of) the first to admit this rather human condition. For I am, at times, inattentive, inconsiderate, insolent, indolent, unthankful, unhelpful, ungrateful, unwittingly stupid (ignorant and dumb), uncommunicative, uncompassionate, unsympathetic, unconcerned what other people think of me, selfish, self-centered in addition to the bevy of other failings I cannot immediately recall but almost certainly possess.

To my credit, I am predisposed towards open-mindedness, possess a reflective streak that, more often than not, allows me to recognize (and regret and remorse) when I do something jerky. I also have a strong desire to improve, and be better tomorrow than I was yesterday. I do not always succeed, but my intention is good, and I believe my life is one of making demonstrable efforts in this general direction - both big and small.

Nonetheless, incessant criticism can be wearying, even to a principled, thick-skinned critic such as myself. Often, what makes it particularly difficult for the partner on the receiving end, is when valid criticism leaps from 'the action' and becomes personal, i.e. a complaint or critique supersedes the transgression itself. This is highly-corrosive and ultimately self-defeating for the critic IF the purpose of the criticism were well and truly about solving the specific problem.

This latter facet of an erstwhile objective issue is revealing.  Psychological literature abounds with explanations and understanding, the majority which centers on projection and avoidance. These underlying motivations do not preclude the legitimacy of any offending faults or transgressions, nor grant blanket license to the offender to ignore what may very well be serious issues. Such behavior does, however, give cause to examine the situation, and one's parochial motives, more closely. In a perfect world, this would mean introspection and self-reflection to insure, as Elvis Costello aptly put it, "one's aim is true".

When I read the persistent outbound criticisms of "Europe" emanating (mainly) from the political and journalistic right in Britain, I cannot help but sympathize with the Continentals. In these circles, Europe stands accused of being the cause of so many of Britain's ills, and the focus of such vitriol, one would be forgiven for asking what precisely is at the root of their anger. Make no mistake: "Europe" is far from perfect. They rarely miss an opportunity to miss an opportunity;  possess diverse often-clashing national identities; frequently shoot themselves in the policy foot; suffer internal squabbles that are difficult to even caricature; err on the side of consumer protection and often over-burdensome regulation, and have shoe-horned themselves into a currency union before the requisite amount of fiscal union to insure long-term stability and confidence. Anthropomorphizing them, they are guilty of these and countless other faults.

But the British penchant for Continental fault-finding is, I believe, disproportionate to Europe's so-called transgressions, and the sport, as pursued by the most enthusiastic and prolific of British Eurobaitors is, I posit, driven by projection and avoidance, in addition to the more obviously-cynical domestic political expedience.

It is far-easier and more comfortable for one to highlight other's flaws and shortcomings than it is to confront one's own problems - particularly when these flaws are close to the core of one's being. Practical, perhaps, but far from enlightening. Rather, Britain's most vociferous and persistent EU critics might do well to focus upon Britain's poor and deteriorating public education, underinvestment in virtually every aspect of public infrastructure (pubic transport, healthcare, roads, housing, communications), galloping inequality, negligent regulation of privatized natural monopolies, pervasive racism and xenophobia, rampant NIMBYism, a crumbling increasingly fragmented internal union, erosion of and unwillingness to enshrine fundamental human rights, as well as a first-past-the-post political system increasingly incapable of aggregating and representative more fragmented interests. Europe, the EU, the Euro, have NOTHING to do with these problems. When Britain begins to truthfully and earnestly acknowledge and confront these profoundly important problems, she might find herself better-placed to offer practical substantive advice to others on their ills with an aim that is true.