#wallstreet

Checking privilege or checking presumptions?

CM has lost count of the times the white privilege moniker has been thrown about as a way to shut down debate. There is an almost uncanny wish for liberal whites to white-shame other whites these days. It seems that 99.9% of those who throw the white privilege word are white themselves. The tacit argument is that they feel they gain acceptance with non-whites by denying their own identity. Have non-whites come out en-masse demanding this? Virtually none that CM has met.

The left is obsessed with this idea that all minorities are distinct groups who share identical thoughts and beliefs. Take the radically leftist inspired C-16 compelled speech laws in Canada where the trans community took what was supposed to be a compassionate piece of legislation as one where they felt betrayed by the lack of consultation and presumption of shared voice. There is a fantastic scene from Freedom Writers to this very point. Do these supposedly justice for all human rights crusading cultural Marxists assume all minorities are facsimilies within their clusters? Why do these activists become self appointed spokespeople for these groups? It is exactly this type of condescending action which creates the very division they are trying to stop. Diversity of thought among individuals, anyone?

Take these posters from the University of San Francisco (uSF). Karl Marx may have recently turned 200 but his legacy lives and breathes in California. So much for universities being the cradle of free and open thinking. The University of Texas has the MasculinUT program which is equally obtuse. Men must not feel obliged to express unrestricted masculinity. Do not pass Go, do not collect $200 – why not castrate male UT students or force inject female hormones instead? Let’s not start with the mind-bending educational programs forced on pre-schoolers across the world. The designers don’t even hide the agenda. Not to mention Bill 89 in Ontario which allows the state to remove children from parents who don’t accept their gender identity in time. Or a Massachusetts kindergarten that has banned the use of the word ‘best friend’ for the sake of inclusivity. We’re even being told to ask for an infant’s consent to change their diaper. It is a slippery slope that the left wants considered mainstream when it is patently empirically extreme.

Apart from the deeply condescending nature of the uSF posters, are Christians the only religion that should feel privilege? Why not Buddhists, Jews, Hindus or Muslims? Do those groups not observe religious holidays? Do the majority of Muslims protest Christians celebrating Christmas? No. Do Christians take to the streets when Muslims celebrate Ramadan? No. When you’re busting to go to the bathroom do you consciously check cisgender privilege? Most likely not. It is surprising more cisgender women don’t cross the border to use male bathrooms when their line in long. Probably because of a group assumption that men are less hygienic and might leave the toilet seat up.

Let’s look at some of the leftist thinking about ranking ‘privilege’.

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Take the quick test above. According to this table you will need to become an other, intersex, gay, trans, Middle Eastern, homeless, blind, disfigured, short, Muslim scientist (presumably climate professors get extra negative scores) to maximize all potential disadvantages. There is no worse combination for future victimhood in the liberal identikit than a tall, white, straight, cis male who works in finance. Although thankfully Australians are regarded at the lowest spectrum of whites. Still, how unfair to the Japanese who have gone through two decades of virtually no economic growth and untold natural disasters to be compared to Aussies that have had 25 years of unfettered economic expansion and face some dangerous snakes and spiders. Or is that a function of the Japanese being required to check their colonial past throughout Asia in the early 20th Century?

White privilege is just another tenet of group categorization. Should whites pay a tax to offset their level of privilege, presumably relative to their position on the chart above?

Going back to the white privilege shamers, many of those CM knows have backgrounds in finance. In an industry that is often tagged for having a penchant for deregulation, free spirits and mugging Main St. is anything but, when so many scream to the world at their virtuous moral code. How many of them support so many ideologies around equality of outcome despite most of these ‘white’ investment bankers being the first in line to cry foul if their ‘supposedly’ superior skill sets have not been rewarded accordingly. So while on the outside they protest so much injustice and inequality, they scream like libertarians internally. They can’t have it both ways. CM has always been a libertarian and believes in equality of opportunity rather than equality of outcome.

CM appreciates there are injustices throughout the world but the worst way to achieve it is by compelling it, even under the veil of affirmative action. The case studies of doing so are overwhelmingly conclusive of producing the opposite outcomes. If everyone is assured the same result, why bother studying or striving for the extra mile? It is counter intuitive. It is also downright demeaning to assume that ALL ambitious minorities are crying to be given a leg up.

The most recentwhite privilege jab was over a discussion of the freedom of speech of NFL kneelers. Because many of the players happen to be black, CM needed to check white privilege. The only argument CM made was that these NFL players were employees who have a boss. How dare CM silence these people fighting for a cause! CM argued that no one is claiming they do not have a right to protest but if their bosses are witnessing customers (aka fans) deserting the games, hence impacting revenues which ultimately impedes the ability to throw multi millions to the same players something has to give. Put simply they have a business call to make. Make it all about police brutality but when harsh economics ends up seeing players sacked, don’t cry to CM. Is your boss unfair to sack or demote you if you are not prepared to please customers in order for the business to stay afloat? Just take a knee and see how far you get. CM bets none of you will. You know full well the boss is entitled to expect a return on the money he or she pays you. The boss isn’t doing it solely out of generous spirit. The NFL bosses aren’t questioning free speech but forecasting the net present value of the franchise.

The irony is that most of the kneelers (although CM read that Colin Kaepernick does invest into some of the causes he is protesting) do not invest their own spare time to fight those injustices. Many are trying to stay out of the courts given their all too frequent misdemeanors off the field – rape, DUI, resisting arrest, dog-fighting etc. Yet the white privilege shamers come forward with the argument that fans should put up with it. The liberal creed is that ‘social justice’ must be beaten into viewers. Do these SJWs get that the more they hammer these messages home the further they drive the people they’re trying to convince away? If we can white shame these spectators enough they’ll cave, right? Wrong. Little do they realize that these same fans might have financial, marital or employment stresses that the game is supposed to take them from? Is it just white fans seeking remediation? Most certainly not.

White privilege was hurled at the US education system for unconscious racial bias. What The NY Times article failed to document was that 99.6% of ALL kids stay out of big trouble which would result in serious disciplinary action, including arrest. All too easy to dumb it down to colour alone, yet when looking at liberal (Brookings Institute) or libertarian (Heritage Foundation) think tanks, both point to broken homes as a major cause of problems in graduation rates and disciplinary action. This has been documented over decades. Yet the liberal view is that all this division can only be attributed to white privilege. Torn asunder if black libertarians like Thomas Sowell, Larry Elder or Candice Owens don’t tow the line.

Skin colour seems to be a single-variable regression to white shamers. Does CM tell his half-Japanese kids to moan and complain that they are mixed race? Or does he try to impart to them the value of hard work, diligence and making their way through application and effort? They hopefully get the message that their father has tried to impart to them many times that the ‘taste of victory’ is umpteenths times greater the harder the challenge. Did Oprah become the world’s highest paid entertainer for hard work or just because she is black? Should we gut the NFL and put in less competent white players to ensure that ethnic balance is restored along the lines of population weights? Would fans want to pay a premium to see inferior performance? White shamers would suggest they would. Common sense would say not.

Yet, white privilege is the problem that if fixed will supposedly solve everything. Australian nurses and midwives are being told in the latest code of conduct to check white privilege and admit their colonial past to expectant mothers of other backgrounds. No seriously, instead of focusing on ensuring safe deliveries they are being asked to bow down to this ridiculous indoctrination. Will mothers giving birth feel empowered that the midwife grovels or marvel in the miracle of bringing life into the world?

Little by little, freedoms are being forcibly removed from society under the guise of political correctness. Reasoned debate is ignored. Outcomes are engineered in a way that ensures the data fits the legislation. Canada is one of the worst examples of this in action and the latest polls against PM Justin Trudeau reflect the backlash. Instead of debating sensibly through democratic means, the left wants to channel their doctrine through education and compelled speech. The left shouldn’t be surprised when a growing list of countries throughout Europe are becoming fed up with centralized control and voting at a sovereign level to disassociate themselves. Even if Brussels still tries to influence those constituents as to how they democratically choose to sustain their cultures, as evidenced this week in Italy.

Take the UK stance over Islam. British authorities seem so afraid of their own shadow that they have introduced a two-tiered approach to the control of citizens that would even make Lenin blush. Not initially by design but by avoidable mistakes. The dithering non-confrontational nature of the Brits means that they muddle through issues which end up making them more uncomfortable and put the population in a worse position, period. There are undoubtedly swathes of Muslims who detest the way they are tarred with the same brush as the more radical among them that are behind terrorist activity or grooming under-age girls for rape and sex trafficking. Rightly so. Any group of Christians would feel equally appalled to have their faith associated with sexually deviant priests molesting young boys. Therein lies the danger of generalizing groups rather than correctly targeting individual perpetrators, regardless of whether religion has been taken out of context to commit crimes.

Radio presenter and founder of Quilliam, Maajid Nawaz, has openly critized the UK authorities for pandering to political correctness.

For too long in this country, we have ignored the issue of grooming gangs. Of young vulnerable teenage girls who have been victimised, drugged, raped and abused…Whether it’s the Rotherham case or all the other cases that were replicated across the country, it is both the conclusion of the prosecutor in the Rotherham case…or indeed the official inquiry into why it took so long for these young vulnerable under-age girls to get justice – both of those concluded that fears of racism prevented us from coming to the defence of vulnerable under-age girls…Fears of racism meaning that the state was scared that it would be accused of being racist if it rightly arrested and prosecuted largely British Pakistani Muslim men in their abuse of under-age white teenage girls…If we hadn’t all been silent, if we had all addressed this issue head on when it needed to be addressed, when it was time to address it, then the void would not have emerged for the populist agitators to fill that gap…

Nawaz holds no punches. The British government has presumed the majority of Muslims may get offended so 1,000s of innocent under-age (white) girls became sacrificed on the altar of political correctness. One Labor politician claimed that these rape victims should shut up for the sake of diversity. Should that be categorized as a white privilege offset? Presumption is a dangerous game. Are people surprised when the cover up is finally exposed that Britons become enraged? It is hardly a win-win for the Muslim community at large to have this fester beyond the squalid state it already has become.

Yet examining the state of UK prisons, inmates identifying as Muslims number 15% of the population despite being 7% of the UK population. Is that a sign the judiciary is being biased against the Tommy Robinsons of the world? No. While the drive-thru jailing of him last week apears overly biased, the explosive growth in the Muslim prison population would not exist were the courts targeting non-Muslims. If only the courts were able to expedite justice for these poor girls as quickly as Mr Yaxley-Lennon.

Examining the huge surge of violence (against fellow inmates and guards), an 800% leap in unexplained deaths (aka murder) and the 6 fold jump in call outs of the tactical riot squad within UK prisons over the last decade coincide with the doubling of jailed radicals. It must worry the law makers no end to how they solve for this disturbing rise in crime and stick to politically correct narratives.

The simple solution is to engage a broader section of all communities beyond those that have clearly produced no tangible results. When will they realize it is not working and DO something about it, rather than presuming the several speak for the whole?

If liberals desperately covet diversity and identity politics for the good of peoplekind, they are going the wrong way about it. Shaming others has proven to be a recruiter for the right. To put this in chess parlance –

The best chess move is the one which your opponent least wants you to make

Instead of ostracism and presumption, try engaging individuals rather than expect them to accept accusations of association to groups that they may abhor.

Waking up to a horror of our own creation

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Some will say I am a pessimist. I’d prefer to be called an optimist with experience. At only age 16 (in 1987) I realized the destructive power financial markets had on the family home. Those memories were etched permanently. We weren’t homeless or singing for our supper but things sure weren’t like they use to be. It taught me much about risk and thinking all points of view rather than blindly following the crowd. That just because you were told something by authority it didn’t mean it was necessarily true. It was to critically assess everthing without question.

In 1999, as an industrials analyst in Europe during the raging tech bubble, we were as popular as a kick in the teeth. We were ignored for being old economy. That our stocks deserved to trade at deep discounts to the ‘new economy’ tech companies, no thanks to our relatively poor asset turnover and tepid growth rates. The truest sign of the impending collapse of the tech bubble actually came from sell-side tech analysts quitting their grossly overpaid investment bank salaries for optically eye-watering stock options at the very tech corporations they rated. So engrossed in the untold riches that awaited them they abandoned their judgement and ended up holding worthless scrip. Just like the people who bought a house at the peak of the bubble telling others at a dinner party how they got in ‘early’ and the boom was ahead of them, not behind.

It was so blindingly obvious that the tech bubble would collapse. Every five seconds a 21 year old with a computer had somehow found some internet miracle for a service we never knew we needed. The IPO gravy train was insane. One of my biggest clients said that he was seeing 5 new IPO opportunities every single day for months on end. Mobile phone retailers like Hikari Tsushin in Japan were trading at such ridiculous valuations that the CEO at the time lost himself in the euphoria and printed gold coin chocolates with ‘Target market cap: Y100 trillion.’ The train wreck was inevitable. Greed was a forgone conclusion.

So the tech bubble collapsed under the weight of reality which started the most reckless central bank policy prescriptions ever. Supposedly learning from the mistakes of the post bubble collapse in Japan, then Fed Chairman Alan Greenspan turned on the free money spigots. Instead of allowing the free market to adjust and cauterize the systemic imbalances, he threw caution to the wind and poured gasoline on a raging fire. Programs like ‘Keep America Rolling’ which tried to reboot the auto industry meant cheaper and longer lease loans kept sucking consumption forward. That has been the problem. We’ve been living at the expense of the future for nigh on two decades.

Back in 2001, many laughed me out of court for arguing Greenspan would go down in history as one of the most hated central bankers. At the time prevailing sentiment indeed made me look completely stupid. How could I, a stockbroker, know more than Alan Greenspan? It was not a matter of relative educations between me and the Fed Chairman, rather seeing clearly he was playing god with financial markets.  The Congressional Banking Committee hung off his every word like giddy teenagers with a crush on a pop idol. Ron Paul once set on Greenspan during one of the testimonies only to have the rest of the committee turn on him for embarrassing the newly knighted ‘Maestro.’ It was nauseating to watch. Times seemed too good so how dare Paul question a central bank chief who openly said, “I know you think you understand what you thought I said but I’m not sure you realize that what you heard is not what I meant.”

We all remember the horrors of the collapse of Lehman Brothers and the ensuing Global Financial Crisis (GFC) in September 2008. The nuclear implosions in credit markets had already begun well before this as mortgage defaults screamed. The 7 years of binge investment since the tech bubble collapse meant we never cleansed the wounds. We would undoubtedly be in far better shape had we taken the pain. Yet confusing products like CDOs and CDSs wound their way into the investment portfolios of local country towns in Australia. The punch bowl had duped even local hicks to think they were with the times as any other savvy investor. To turn that on its head, such was the snow job that people who had no business being involved in such investment products were dealing in it.

So Wall St was bailed out by Main St. Yet instead of learning the lessons of the tech bubble collapse and GFC our authorities doubled down on the madness that led to these problems in the first place. Central banks launched QE programs to buy toxic garbage and lower interest rates to get us dragging forward even more consumption. The printing presses were on full speed. Yet what have we bought?

Now we have exchange traded funds (ETFs). Super simple to understand products. While one needed a Field’s Medal in Mathematics to understand the calculations of a CDO or CDS, the ETF is child’s play. Sadly that will only create complacency. We have not really had a chance to see how robots trade in a proper downturn. ETFs follow markets, not lead them. So if the market sells off, the ETF is rapidly trying to keep up. Studies done on ETFs (especially leveraged products) in bear markets shows how they amplify market reactions not mitigate them. So expect to see robots add to the calamity.

Since GFC we’ve had the worst post recession recovery in history. We have asset bubbles in bonds, stocks and property. The Obama Administration doubled the debt pile of the previous 43 presidents in 8 years. Much of it was raised on a short term basis. This year alone, $1.5 trillion must be refinanced.  A total of $8.4 trillion must be refinanced inside the next 4 years. That excludes the funding required for current budget deficits which are growing despite a ‘growing economy’. That excludes the corporate refinancing schedule. Many companies went out of their way to laden the balance sheet in cheap debt. In the process the average corporate credit rating is at its worst levels in a decade. Which means in a market where credit markets are starting to price risk accordingly we also face a Fed openly saying it is tapering its balance sheet and the Chinese and Japanese looking to cut back on US Treasury purchases. Bond spreads like Libor-OIS are already reflecting that pain.

Then there is the tapped out consumer. Unemployment maybe at record lows, yet real wage growth does not appear to be keeping up. The number of people holding down more than one job continues to rebound. The quality of employment is terrible. Poverty continues to remain stubbornly high. There are still three times as many people on food stamps in the US than a decade ago – 41 million people. Public pension unfunded liabilities total $9 trillion. Credit card delinquencies at the sub prime end of town are  back at pre-crisis levels. We could go on and on. Things are terrible out there. Should we be in the least bit surprised that Trump won? Such is the plight of the silent majority, still delinquent after a decade. No wonder Roseanne appeals to so many.

A funny comment was sent by a dyed-in-the-wool Democrat, lambasting Trump on his trade policies. He criticized the fact that America had sold its soul for offshoring for decades. Indeed it had but queried that maybe he should be praising Trump for trying to reverse that tide, despite being so late to the party. Where were the other administrations trying to defend America all this time? Stunned silence.

Yet the trends are ominous. If we go back to the tech bubble IPO-a-thon example. We now have crowd funding and crypto currencies. To date we had 190 odd currencies to trade. Of that maybe a handful were liquid – $US, GBP, JPY, $A, Euro etc – yet we are presented with 1,000s of crypto currency choices. Apart from the numerous breaches, blow ups and cyber thefts to date, more and more of these ‘coins’ are awaiting the next fool to gamble away more in the hope of making a quick buck. Cryptos are backed by nothing other than greed. Yet it sort of proves that more believe that they are falling behind enough such they’re prepared to gamble on the biggest lottery in town. One crypto used Wikipedia as a source for its prospectus.

Yet the media remains engrossed on trying to prove whether the president had sex with a porn star a decade ago, genderless bathrooms, bashing the NRA, pushing for laws to curtail free speech, promoting climate change and covering up crime rather than look at reporting on what truly matters – the biggest financial collapse facing us in 90 years.

There is no ‘told you so’ in any of this. The same feelings in the bones of some 30 years ago are back as they were at the time of Greenspan and Lehman. This time can’t be avoided. We have borrowed too much, saved too little and all the while blissfully ignored the warning signs. The faith and confidence in authorities is evaporating. The failed experiment started by Greenspan is coming home to roost. This will be far worse than 1929. Take that to the bank, if it is still in operation because you won’t be concerned about the return on your money but the return of it!

Plunging credit quality more troubling than market rout

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The Dow plunged 1175 points (-4.6%) overnight. 4.6% is a lot and yes 4-digit drops optically look worse but off the higher base we get higher (record) point drops. One thing to contemplate in a rising bond yield market is corporate credit quality. Since 2006 the average credit ratings for US corporates issued by the big agencies have seen the number of top rated (to the left) fall while those with deteriorating grades (to the right) soar. That’s right, the 4 categories before “junk” have risen sharply. After many years of virtually free money many corporations have let the waistline grow. When refinancing comes around just how will credit ratings influence the new spreads of corporates who’ve shifted to the right?

The IMF highlighted in 2017  that US companies have added $7.8t in debt & other liabilities since 2010. The ability to cover interest payments is now at the weakest level since 2008 crisis.

This despite near full employment, record level equity markets and every other word of encouragement from our politicians.

However if this is the state of the corporate sector at arguably the sweet spot of the economic cycle CM shudders to think the state of potential bankruptcies that will come when the cycle truly takes a turn for the worse. This is a very bad sign.