Sometimes (ok, pretty much all of the time) I wonder whether we, as market participants, lionize the wrong people.
Personally, I don’t think it’s a good idea to lionize anyone, because if we knew everything there was to know about our fellows, we’d invariably be disappointed in all of them, the same way we’re frequently (if secretly) disappointed in ourselves.
Whenever you’re tempted to hold another human being up as a model of some virtue, consider for a moment all the things you’ve said, done and thought about saying or doing in your lifetime that you wouldn’t necessarily be excited to share with the rest of humanity. Then consider the fact (because that’s what it is, a fact) that the person you’re deifying has also said, done and thought a lot of unsavory things.
I mention this on Monday because I was struck by the juxtaposition between the way Cathie Wood’s open letter to the Fed was received by some market participants predisposed to sarcastic derision and the way in which Paul Tudor Jones’s wholly nebulous remarks to CNBC were regarded by many of the same investors and traders.
Wood delivered a reasonably thoughtful, short essay making the case that the Fed is attempting to manage the unmanageable, at the risk of creating a deflationary spiral. “Without question, food and energy prices are important, but we do not believe that the Fed should be fighting and exacerbating the global pain associated with a supply shock to agriculture and energy commodities caused by Russia’s invasion of Ukraine,” she wrote, before asking if it’s possible that “the unprecedented 13-fold increase in interest rates during the last six months has shocked not just the US but the world and raised the risks of a deflationary bust?”
Let’s pause and be honest with ourselves. A little bit of self-reflection and honesty goes a long way. I know, because they (self-reflection and honesty) literally saved my life seven years ago. If any one of the half-dozen deflationists so popular in contrarian macro circles had written what Wood wrote on Monday, they would’ve been celebrated on social media, and the Fed summarily lampooned by their followers for missing the “obvious” risk of deflation. “Just one mistake after the other,” they’d say.
But because it was Wood writing to a 1.4 million-strong mass market audience (many of whom only follow her to criticize), and not some half-baked deflationist pandering to a few thousand gold hoarders toggling between Reddit threads and Kremlin-sponsored financial agitprop, it drew a barrage of overtly cruel social media replies, some of which I couldn’t quote even if I wanted to (and I don’t).
Meanwhile, it was Paul Tudor Jones’s turn to take advantage of CNBC’s open forum for preening billionaire hedge fund managers to stay relevant, while giving the network’s daily viewers a rare reason to unmute the television. Jones served up a veritable cornucopia of nothing, including the groundbreaking observation that, “Inflation is a bit like toothpaste. Once you get it out of the tube, it’s hard to get it back in.”
And to think: We awarded the Nobel to Ben Bernanke on Monday! A day when PTJ became the four-hundred-eighty-seven-millionth person since the invention of toothpaste to compare it (toothpaste) to inflation. (Incidentally, the same crowd of people who spent too much time tormenting Wood’s Twitter account also spent what looked like hours on Monday wailing into the digital void about the purported injustice of Bernanke receiving an award.)
Jones’s on-air Colgate epiphany wasn’t the only revelation CNBC uncovered on Monday. The network also got an exclusive with Jamie Dimon, who, over the years, wrenched a kind of begrudging reverence out of an otherwise hostile peanut gallery for whom a pious dedication to being unapologetically abrasive can eventually atone for the original sin of being a banker.
Dimon, in remarks to Deutsche Bank veteran Julianna Tatelbaum, offered something even more insightful than Jones’s copy-paste inflation analogy. “You can’t talk about the economy without talking about stuff in the future,” Dimon said. “And this is serious stuff.”
That alone deserved an award for profundity, but Dimon wasn’t done blowing minds. “These are very, very serious things which I think are likely to push the US and the world — I mean, Europe is already in recession — and they’re likely to put the US in some kind of recession six to nine months from now,” he added, rambling.
Underscoring just how perilous and indeterminate these times of ours really are, neither Jones nor Dimon — men who history will surely rank in stature next to Plato, Thomas Aquinas, da Vinci, Locke, Bertrand Russell and Einstein — could say how deep the recession they couldn’t say if we’re in yet might be, or how long it might last in the event it starts or has started. (And yes, that awkward wording is intentional. Read it again. It’s supposed to be funny.)
“I don’t know whether it started now or two months ago,” Jones mused. “But I’m assuming we are going to go into one.”
“It can go from very mild to quite hard,” Dimon told Tatelbaum. “I think — to guess is hard.”
If you take one thing away from my daily missives, I hope it’s a laugh. If you take two things away, let the second be that nobody knows anything. For all the derision Wood and Bernanke incurred on Monday, and all the headlines Jones and Dimon grabbed for saying nothing, none of it was deserved, because none of us knows anything. We’re all — every one of us — clueless, deeply flawed, equally insignificant wanderers meandering about a floating rock orbiting a dying star.
Socrates was, famously, the wisest man in human history. He conceded what no one since has ever truly been willing to admit, and implicitly suggested that the only path to true knowledge goes through an admission of total ignorance: “I neither know, nor think that I know.”
In recent years as I approach my seventh decade, I have felt dumber every year. But now I wonder if I’ve always been stupid and I am just now realizing it.
I didn’t know I had Socrates to thank, but I’ve long considered that anyone willing to positively say he or she does not know about something is about as reliable a sign of intelligence as any I’ve otherwise discovered.
I think a bit of the derision at Wood is that she purports to be an oracle on so much, from every flavor of technology and quasi-technology and genetic engineering and next-gen finance and, now, inflation and deflation too! Dimon talks about things that he probably actually knows about, and has steered JPM through very successfully for a long time. Also, he has access to more data about inflation and deflation than Wood, or indeed most anyone.
His comment about a recession in six to nine months is kind of discouraging. Not the “recession” part, but the “in six to nine months” part. Who actually enjoys this pre-recession period?
The only thing I know is that I’m going to be wrong…a lot. I used to be a permabear and watched the market fly past me for the last decade. Once I started reading this site, I flipped and now am on the more optimistic side in general. Given that, you should probably use the George Costanza strategy of doing the opposite of what my instincts say you should do.
Not a giant fan of ms wood, but I would guess some of the derision is based on her gender. I read her remarks on your site. They were reasonably thought out whether you disagreed with them or not. Derision not justified in my view.
Of course a lot of it is based on her gender. This is the most insecure industry in the world. Can you imagine what it did to egos to see a woman accumulate that much AUM across her products in part based on ESG strategies and the like? If you want proof, just ask some folks if it’s based on her gender and watch how irritated they get. The fact that folks get irritated at the question is proof positive that the answer is a resounding “yes.”
If her letter to the Fed had been a sell-side note that used a bunch of jargon and needlessly complicated charts to make the exact same points, and it’d been written by an analyst called “Mike Johnson” or “Adam Jones,” literally nobody would’ve commented or cared. People are still mad at Cathie for making a bunch of money. It’s pretty much just that simple. The fact that there’s an obvious tie-in to long-duration equities which benefited enormously from monetary largesse and subdued inflation is just a bonus for critics.
To be fair H, you derided her in these pages from time to time. I don’t think it was because she was rich or a woman, but because she was at her last zenith.
Yeah, I did. In fact, I called the selloff in the Ark complex on multiple occasions, repeatedly warning in early 2021 that rising reals were kryptonite for her and that even if they stopped rising and retraced lower, reals were unlikely to make new lows beyond the deeply negative they’d already reached. I wrote so many articles about that that I probably couldn’t go back and find them all if I had to.
A woman indeed, famous and successful in the financial markets?! Reminds me of the really smart and savvy one I once watched push aside all the testosterone-driven egomaniacs on a trading desk with her superior skill. Not only outperformed them, but traded insults and sexual innuendo with the best (worst!) of them. That was decades ago, and it’s sad to see that the world, especially in this industry, has barely lit a candle to illuminate the dark ages of prevailing attitudes.
Sorry but no.
Sexual innuendos are now pretty much firing offense (also – as traders morphed from ex truck drivers to MBAs and coders, it naturally decreased) and it’s now dangerous for traders to frequent strip clubs together, even if it is in their own free time, with their own money.
Things may still be a long way away from perfect but don’t tell me things haven’t changed.
Very good point. It made me reflect. Cathie is a beacon of faith in the power of technology to change humankind. She has convinced a huge number of retail traders to buy low-to-negative-profit companies and hold. Many who bet against her funds earlier got burnt terribly. I can’t think of another fund manager who has influenced retail investors as much as she has. One could argue Elon owes large part of his inflated wallet to her.
Maybe retail investors like her because she is clear and explains her thinking, yet she is not condescending in her missives, unlike Dimon’s “but you can’t talk about the economy without talking about stuff in the future — and this is serious stuff”.
Everyone is taking their book.
Everyone wants free money.
The problem is, asset price inflation becomes food inflation, and energy inflation, and every other kind of inflation.
You buy a 500k house, 100k down, and it appreciates 30% in one year. Hooray! What a genius you are. Of course, you are entitled to that windfall profit, because you are you.
Now you’re own investment, the 100k, is now 250k. You sell the house, and have made basically one year income for having done nothing.
That free money will go somewhere.
That’s the problem.
All these people are screaming that the Fed is taking away the punch bowl.
Well guess what, the Fed must take away the punch bowl. There’s no choice if you want money to mean anything.
+1.
I would add: the rent is too damn high. Home prices are too damn high. Auto prices are too damn high. Health insurance costs too much. Higher ed costs too much. A damn cheeseburger costs too much. I could care less about the fate and fortunes of Ken Griffin, Steve Schwarzman, et al. They had a good run. Time to get back to basics.
The punch bowl was in place for 12 years and it didn’t make a bit of difference vis-a-vis real economy inflation — only asset price inflation, and that asset price inflation didn’t “go somewhere” other than into more assets (and sillier assets).
What’s different now is the combustible mix of monetary policy, fiscal policy and geopolitical turmoil centered on de-globalization. The idea that this is all down to Fed policy is plain wrong, but more than that, nobody actually believes it. It’s just a talking point.
If the pandemic didn’t happen, there’s no QE 5, no move back to ZIRP, no rush to buy suburban mini-mansions, no supply chain implosion (beyond what was already in motion from the Trump years) and no global fiscal bonanza. And if the war didn’t happen, there’s no European gas crisis and no accelerated bloc-i-fication of finance and commerce (which is inflationary).
Getting here was more complicated than ZIRP and QE, and getting out of here is likewise going to be more complicated than raising rates and QT. Just ask Zoltan, who last month said, of the idea that beating inflation ca. 2022 is as simple as hiking rates, “That’s just not how the world works.”
For sure. But CBs are not gonna get us out of this by doing more of what they’ve been doing. I believe that’s the definition of insanity. Yes, we’ll see more emergency QE, as we saw last week in the UK. But it took $5 trillion of stimulus to keep the U.S. economy from collapsing during the pandemic. I don’t think this is a wash, rinse, repeat kind of moment.
Heisenberg, thanks for the constant education, illumination and imbedded humor, even if I often have to reread your prose to actually comprehend what you are getting at. Best damn $7 every month.
H-Man, as Socrates put it before drinking the hemlock: “The hour of departure has arrived, and we go our separate ways, I to die, and you to live. Which of these two is better only God knows.” ? Socrates
Meno paradox
The mindset in that second to last paragraph is why Heisenberg is, for me, something I try to keep up with every day. Completely. To the extent I can. Since it began.
There is nothing else current which is so honest, nor so accurate.
Ironically (or probably not, because of the very sentiment this mindset represents) honesty and accuracy may not be the most valuable of traits. And I mean ‘valuable’ here in multiple ways. But I certainly value the light it shines through the darkness, the circus mirrors, and the carnival barkers that take up so much of our bandwidth on a daily basis…
“ The smartest, cleverest people, tell the smartest cleverest lies to themselves about them selves.“ approx Nietzsche
Socrates brilliance was understanding this.
He merely listened very well and understood that the more sophisticated and relevant a person was the better they were at disguising opinion for truth. Relevance is a form of power. To his credit, Mr. H puts little value to someone’s relevance.
The housing industry is heading for a recession. The financial service industry and the rentier class also. Carpenters are not shedding tears in their beers about this yet. Financial service and rentier class are already wailing like babies.