Synopsis: A recent article compared the strength in equity markets to a beloved 90s sitcom. But I wasn’t laughing.
Jerry and Larry slunk from their yellow New York cab and ducked into Tom’s Restaurant. Outside traffic edged noisily along Broadway and college kids from nearby Columbia University stood in loose groups discussing incredibly important topics.
Inside, ensconced in a fake leather booth that smelled like chicken salad, the two comedians were downcast and overdressed. Suits made them uncomfortable. And by suits they meant the network executives that had gathered around them like carrion birds in their wood and leather lined board room at NBC headquarters.
“Well, they said they liked it. In general. They said it’s smart and different.” Larry was trying not to allow their enthusiasm to be curbed.
“Smart and different? What, like Rain Man?”
“No, not that smart. Good movie though. Had some funny moments.”
“But they also said it is a little too New York, and a little too ethnic.”
“No, our pilot.”
“Ouch” said Larry nodding. “Not good.” Audiences who screened the pilot asked for funnier sketches from a more diverse cast. Dejected, the pair of New York humorists were dismissed to reconsider their situation comedy about a standup comic who found inspiration in the lunacy of his friends and family.
“No, it could have been worse,” said Jerry. “He could have actually killed us instead of just ending our professional lives. So, there’s that.”
The waitress came and chased away their banter, mumbling something that might have been a question. When they looked confused, she pointed to the pitcher of coffee she carried and they nodded.
“Soft talker,” Larry noted when she’d gone.
“You see her hands?” Jerry asked.
“No, I was busy figuring out how to drown myself in a pitcher of coffee. Or poison myself licking envelopes. Why?”
“Man hands. Hands of a man.”
They drank coffee for a bit in silence.
“Does that look like Keith Hernandez to you?” Larry asked.
“From the Mets? The guy at the counter in that puffy pirate shirt? Couldn’t be.”
“No, I guess not...Got any script ideas?”
Jerry sighed. “One, but it is for later. After we’ve established the neurotic who lives with his parents as completely pathetic, we do an episode where he pitches a sitcom. It doesn’t go well and he winds up in therapy. Again.”
“I don’t like it.” Larry said shaking his head.
“What’s the deal with that? Why not?”
“Too New York. Too ethnic.” Larry was grinning.
Jerry threw up his hands. “Serenity… serenity now!”
But serenity remained elusive for Jerry Seinfeld and Larry David, co-creators of The Seinfeld Chronicles. Months of rework by NBC writers and executives kept them busy. In the end, Seinfeld (the show) dropped the Chronicles. Seinfeld (the character) kept George and Kramer from the pilot and added an ex-girlfriend who was rhythmically deficient, named Elaine. The plots were simple, exploring mundane aspect of life that everyone related to like waiting in line, looking for a parking place or what to do with the remaining chip after you’ve dipped and taken a bite. And the characters never learned anything from their misadventures. Everyone remained indifferent and sometimes callous, never seeming to grow or become a better person. It was so close to real life that diverse audiences not hailing from New York still fell in love with it.
By the fourth season, the duo could pay homage to their creative beginnings in a show titled The Pitch. It aired on September 16th, 1992 and featured George telling the NBC executives that he and Jerry had created a show “about nothing”, with no plot and no story lines. While an unconventional approach, George remained defiant when the suits balked. “Look, if you want to just keep on doing the same old thing, then maybe this idea is not for you.” George, who never learned from his mistakes, ruined their future in television.
I was reminded again of Seinfeld this September, by a CNBC article calling the recent rise in stocks a bull market “about nothing.” Market researcher Ed Yardeni notes: “investors are watching for something to happen. When nothing happens, especially nothing bad, investors are bemused and show their appreciation by throwing more money at the bull.” In other words, we are doing the same old thing, though we should be more defiant. Seinfeld was different and smart. Comparing Seinfeld to the stock market is different and wrong.
There are at least two major factors contributing to the ongoing bull market:
1) Overall wealth is rising. Average household debt service is lower than it was in 1980 and the savings rate, at 3.6%in August, has trended upward since the financial crisis. More money saved means more demand for financial instruments, a key driver of stock and bond markets in recent years.
2) Corporate earnings are up too. They rebounded strongly in 2017 and are forecast to continue their upward trend. Increasing earnings make stocks more valuable. Even those of us not living in New York should realize that.
Pardon me for not being a soft talker on this topic, but I don’t want someone who hasn’t learned from previous mistakes to ruin your future. This bull market, however many seasons it lasts, isn’t about nothing.
Note: You can review the original History Lessons about Seinfeld at: https://www.linkedin.com/pulse/history-lessons-nothing-patrick-huey-cfp-/
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3. JPMorgan Asset Management. Guide to the Markets, 3Q 2017 as of August 31st 2017. Slides 7 & 19.
We are pleased to present a white paper detailing seven standards of service for financial advisors and non-profits.
Synopsis: A violent duel on the plains of Weehawken, New Jersey shocked the world in the 19 thcentury and then captivated Broadway two hundred years later. What can investors learn from the death of Alexander Hamilton?
"One!" In the early morning of July 11 th , 1804, a hot and humid breeze wafted intermittently off the Hudson and perspiration ran in rivulets as two men strode away from each other and toward infamy.
"Two!" Early morning light slanted through the trees and the cliffs of the Hudson River Palisades loomed silently overhead. The dueling ground near Weehawken, New Jersey was also ominously quiet, save for the gentle lap of the river, the bobbing of canoes and the ominous counting of steps.
"One moment. I need to adjust my spectacles." The combatant wearing glasses tugged them into position, then looked though his pistol's sights to check his aim. The countdown resumed. When it was complete, the men faced each other at a distance of ten paces. They assumed the fighting position, pistol muzzle down and eyed each other coolly, though the day had become stifling.
From across the river came the metropolitan sounds of sixty-thousand inhabitants of New York City coming to life. The duelists needed to be done with this to avoid any uncomfortable questions or complications. Dueling was illegal in New York and New Jersey.
The man in glasses raised his pistol for the first time since the Revolutionary War. The discharge shattered the calm of the morning and he smelled the acrid smoke as the ball left the smooth bore barrel. He'd aimed high and wide, wishing to maintain his honor without killing the other duelist. It was common practice to thus prove one's courage and conclude the proceedings without injury. Alexander Hamilton, hero of the Revolution and first Secretary of the Treasury, was satisfied.
His opponent was not. Aaron Burr, sitting Vice President of the United States heard the ball whine past his head. His pistol came up and the second discharge echoed off the cliffs above. This one did not miss. Hamilton grunted as the shot entered above his right hip, the ball careening into his lower rib cage and sending bone fragments into his liver and diaphragm. Hamilton collapsed and died thirty-six agonizing hours later. Burr was led quickly away toward the waiting canoes and would soon be charged with murder, though he finished his term as Vice President immune from prosecution.
Thus ended a long and bitter political rivalry between two men who had once practiced law together, but whose relationship soured during the bitter presidential politics of the post-Revolution period. Today, it is best known as the penultimate scene in the hip-hop Broadway musical Hamilton .
Here are three steps to follow for investors doing their best to keep out of harm's way:
"One!" Learn from others' mistakes . Hamilton's own son was killed on the exact same dueling ground just three years prior. There were plenty of ways for dear old Dad to maintain his honor without a shot being fired, but he continued to press his luck until it ran out. Today, there exists plenty of research detailing the missteps investors agonize most over. But most don't heed the warnings and avoid any advice at all, even from straight shooters.
" Two!" Understand it isn't just about you . It sure was nice of Hamilton to avoid taking a killing shot at Burr. Too bad Burr didn't have the same thing in mind. Similarly, investing in capital markets is a showdown with millions of others whose strategy and tactics may be very different from yours. Make sure your own approach is based on research and fact, not just gut feelings. In other words, make sure your plans aren't half-cocked.
"Three!" Put politics in its place . Loving or hating the government, or anyone in it, isn't an investment strategy. Investors have done just fine with various parties in power since men like Hamilton and Burr created them. Their confrontation shows that our current political situation isn't the worst division in our history, no matter what the cable news channels say. For smart investors, it is just the same old song and dance.
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Synopsis: The French Capital fell on June 14th, 1941 after German forces launched their lightning war (Blitzkrieg) against and around inadequate French defenses. Here are three lessons learned that can help modern investors trying to hold the line against an army of worries.
The old man took a long drag of his Gauloise cigarette, the ash growing impossibly long in his gnarled hand and wrinkled fingers. It was June, but he wore a sweater, feeling cold despite the season, and the café was unnaturally quiet except for the rumble of what sounded like thunder in the distance, growing ever closer.
“What news?” he asked. The papers had stopped days ago. To deprive a Parisian of his newspaper was like taking a limb and the old man felt adrift. His companion was a younger man who waited tables at the café and, though it was closed, had come anyway because he could think of nothing else to do.
“Just rumors and stories. They say the Maginot Line has broken.” An impressive looking line of fortifications, the Maginot Line was built on the French border with Switzerland, Luxembourg and Germany to deter an invasion by the latter.
He waved the comment away. “A relic of the last war. Is it not so?” The line did not extend to the English Channel to avoid giving offense to neutral Belgium. And if the rumors were true, the Germans had simply dashed around the Maginot Line and rolled it up like a cigarette paper.
“Indeed. They say our army surrendered at Compiegne. The same place as the 1918 armistice. Their Little Corporal doesn’t lack a sense of history, does he?”
“He lacks much else.”
The thunder was now a constant rumble and the men looked up to see all manner of vehicles humming down the Avenue des Champs-Élysées. Military trucks with German markings raced ahead of open staff cars flying the flags of the Reich. And there, in the middle, was the Little Corporal, now Chancellor of Germany and conqueror of France, serenely taking in the spectacle as his army occupied Paris.
“It would appear the rumors are true,” the old man deadpanned.
They were quiet for a time, watching the vehicles and marching soldiers who followed. The young man said: "There is a story going around. You know, there is a marker, a great stone thing in Compiegne. It reads: Here on The Eleventh Of November 1918 Succumbed the Criminal Pride of The German Empire... Vanquished by The Free Peoples Which It Tried to Enslave."
“I know. I have family in Compiegne. I’ve seen it.” He exhaled a long plume of smoke toward the soldiers on the street.
“Hitler was, of course, furious. But he conducted the negotiations, brought France to her knees and on his way out, said to his thugs: blow it up. And they did. Just like that.” He snapped a finger for emphasis.
The old man furrowed his ancient brow, then spat. “So, now we have no past as well as no future?”
“C’est la vie, non?” The young man shrugged. “We must endure.”
Indeed, that is life. And it would go on, though the struggle would be real and the consequences often dire. The café would reopen in a few days with a distinctly different clientele, mostly German officers who drank much and tipped poorly or not at all. And it would be three long years before the city was liberated, the papers arrived uncensored and the Germans were on the run. But endure they did. Here are a few lines about the Maginot to help you endure as well.
1. A partially applied plan isn’t worth much. Lacking a fully formed plan? You may end up lacking much else. Whether it is defending your frontier from invasion or executing a long-term investment plan, you have to go all the way. Any holes you leave due to inattention or lack of knowledge have the potential to be exposed at the wrong time.
2. Sometimes you need a little help from your friends. You can recover from bad decisions and tactical errors through patience and with assistance. The Allies helped liberate Paris in 1944 after testing their strategy and tactics in the Mediterranean. Be patient and don’t be afraid to ask for help from those who have developed their expertise.
3. Fighting the last war won’t get you far. Generals, politicians and other strategists demonstrate a host of cognitive biases in their decision making that lead them to prepare for the last war instead of the next one. Trench fortifications and static warfare were so 1917. Find yourself fearing delinquent debts and bank blow ups? Stop fighting the last war and focus on the future.
Synopsis: Ernest Hemingway worked for over a year writing and revising The Sun Also Rises. Financial writers don’t have that kind of time to perfect their narrative. A two-step process will help investors decide if any story should keep them from running with the bulls.
The fiesta had ended badly. It had begun brilliantly, but ended badly. Flaming and sparking, the fiesta ran white hot, spitting and hissing until it faded to nothing. The writer thought of this while drinking strong coffee and watching workers gather spent fireworks in the square in the late morning. The cafés were putting out the good furniture, gathered up and stored for seven days while the fiesta went on. The coffee was strong and helped him keep the general feeling of lousiness at bay.
The morning ended and afternoon came on. Bill came down and met him in the café. They ordered shrimps and beer while shop owners swept the streets. The town felt cooler now that the rains and the crowds had come and gone.
“Fella, that was some fiesta.” Bill’s face had a weary, parchment look to it.
“Some good, some not.”
“Well, the bulls were excellent.”
He nodded. “Yes, the bulls were very good.” He did not really feel it, but he said it anyway.
“Quite right. I say, that Ordonez fellow was wonderful to see.” Bill was from Michigan and as American as apple pie. But a few weeks with the English and he’d taken up their speech. He liked the bullfighter named Ordonez.
“Wonderful. I may just write about that.”
“About the bulls?”
“About all of it.”
Bill was quiet for a time. He ordered more beer from the waiter. “All of it?”
“Well, how would it go? Give me the draft version if you please. Let’s talk it through.”
“Well, a man living in Paris and his friend from the States take a trip to Pamplona for the festival of San Fermin to watch the bull fights.”
“They are joined by some English ex-pats and the man is in love with one of them.”
“Well, she is engaged to one of the Englishmen, but has had an affair with another man on the trip. Everyone drinks too much and there is a big row. The end.”
“What about the fishing?”
“Yes, I’ll write about that too. They fish the Irati river and teach the trout a hell of a lesson.”
“Well, that about sums it up. Tough sell for your publisher, though. Too life-like. No one will believe it.”
“Must not be daunted, though. Write it anyway and see what happens. Secret to my considerable success? I was never daunted.”
Ernest Hemingway was not daunted. He turned his sojourn to Spain, featuring his friend Bill Smith from Michigan and a mishmash of other ex-patriots, into The Sun Also Rises. The novel propelled him to stardom and made him the premier writer for what became known as the Lost Generation. His style became legendary for being long on dialogue and short on adjectives, adverbs and the semicolon. Having learned his craft as a journalist, the result was spare, direct prose focused on telling the story. He got quickly to the question: “and then?” And only stopped when the tale was told.
Hemingway was also known to be a tireless and fanatical revisionist, rewriting, reworking and stripping out unnecessary prose. After beginning the book immediately after the festival in July of 1925, he had his fist working manuscript by the end of the Fall. His editor still felt that “it is almost unpublishable.” In May 1926, Hemingway would again refocus, stripping out detail and deleting the first sixteen pages. By August, after another trip to Pamplona, he finished the proofs for the novel in Paris for publication in the Fall of 1926.
Today, journalists face more pressure to publish quickly than Ernest “Papa” Hemingway ever did. In a 24-hour digital news cycle there is very little time to rework and revise. Hence, we get a lot of information, usually without the full plot or context. Finance journalists usually don’t ask the important question “…and then?” They will leave you (or me) to fish for it.
Take, for instance, a recent Wall Street Journal article that mentioned that interest in the VIX, ostensibly a measurement of short-term market volatility, has risen of late:
“There is a pattern emerging here: A Google Trends search shows the last time interest in the VIX was this high was August 2011, when tumult in Washington over the debt ceiling sent markets tumbling.”
Well, two can play the Google game. A Google Finance search will show that the S&P500 returned over 79% since August of 2011. If it all turned out the same this time around, like Hemingway and his friends, we’d all have a lot to drink about. Of course, it won’t turn out exactly the same. Past performance is certainly no guarantee of what the future holds. But there is no reason to be more nervous than usual about something that last happened in 2011. Here is how to read this story à la Hemingway:
1) Strip out the extraneous information. The VIX hasn’t been this high since August 2011.
2) And then? The bull (market) was excellent.
Papa, I think, would be proud.
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