Next Quarter is Always (at least) a Day Away

There comes a moment in every young man’s life that he consciously acknowledges to himself that he is in one of two camps.  One camp is a man that cannot escape his conscience.  The other is a man that can rationalize anything.  I truly believe if you sit and think about all the men you know you can confidently bucket them into one of these two camps.  I also believe some men are one camp by nature while others will be led by experience in childhood.

I’m not here to judge which is right and which is wrong or if either is right or wrong.  I will say that men of conscience are at a disadvantage in a our modern world.  A world where news stories are no longer verified, where men are guilty until proven innocent, where who you know will always trump what you know and where a flashy car will always outsell a sleeper (a sleeper represents the antithesis of today’s world).  These modern characteristics very much suit the man who can rationalize anything.  For he understands the world.  He knows the right things to say and to do.  The right names to drop and the places to make a reservation to impress that girl in apt 901 who just got the fake boobs.

A French saying has stuck with me from my youth in Canada it is, “Chacun son gout”.  And to prove I did once speak French quite well I know that’s missing an accent circonflexe and aigu.  But more importantly I’ve always thought what a great saying.  It means “To each his own (taste)” and what I took from that is that the world takes all kinds.  The problem with today’s world is it isn’t built for all kinds of men.  More and more it celebrates only the headline rather than the content.  The catch phrase will stick while the moral of the story is lost.

I realized this first hand during a merger between two large brokerage firms back in 2008.  One, and the one I worked for, was the subsidiary of Credite Agricol (Calyon Financial) and the other of Soc Gen (Fimat).  On paper the merger looked great.  Fimat had good assets in Asia and Europe but Calyon’s management team was about 3x as efficient as the Fimat management team.  And so the plan was to bring Fimat’s assets under Calyon’s much better management team.  Directly after the merger things became down right violent between the two management groups as they were fighting for their jobs.  I remember the CEO of Calyon, who I respect as one of the greatest leaders I’ve worked for, told his management team to act professionally and under no circumstances lower your standards of professionalism.  He said the firm will make decisions based on what’s best for the company period and so do your jobs the way you’ve shown you can and you’ll be fine.  Within about a year the entire management team of Calyon was gone, including Rick Ferina (CEO of Calyon).  The Fimat management had played the dirty pool in order to win.  They were able to sidestep their conscience of accepting the right choices based on what would be good for the new company and its 3k employees and to rationalize their crude and selfish actions.  And in the end, for them, it worked.  Unfortunately within 4 years the ex-Fimat management had essentially destroyed somewhere in the realm of $4B in equity.  So everyday this management team went to work they destroyed about $1M in equity.  Eventually Soc Gen bought out Credit Agricole for pennies on the dollar to gain 100% ownership of Newedge and then stripped the company completely to reduce the capital costs required to maintain the group.  This was a real wake up call for me.  And don’t get me wrong I understand this happens everyday in business.

But the point is this type of behaviour, where one’s conscience doesn’t guide one’s actions, results in massive dead weight losses just like Newedge.  Where true value is destroyed rather than created.  When we look at America today all we see is dead weight loss.  There is literally no part of American society that has seen value creation over the past 6 years.  Our schools are deteriorating, our infrastructure is falling apart, the job market is worse than it’s been for 25 years, families are breaking up at a higher rate than ever before, and entire cities that were once the epitome of American industry have succumb to dead weight loss.

Many will point to the stock market right away and say there’s been massive value creation.  But I would argue the stock market is the poster child of dead weight loss.  In fact, one could quite literally point to Household debt, National debt, Median incomes, the stock market and total QE dollars to define dead weight loss, which is, in its simplest form losses resulting from an inefficient allocation of resources.  And if the Fed has done anything over the past 6 years it has enacted the greatest misallocation of resources the world has ever seen.

And yet these men and women remain unaccountable to anyone.  In fact, we still put these people on a pedestal.  We pay Bernanke a quarter of a million dollars per speech, now that he has retired, to tell us we are absolutely fucked and watch that shitty little grin on his face while he says it.  Likewise we pay Greenspan the same to tell us everything he said while holding his appointment was a lie.  Rather than prosecuting these men we make them rich beyond their wildest dreams.  And so it goes that today’s world makes men like, well pick any senior policymaker of the past 20 years, who belong to the camp of rationalization into heros.  While men of the camp of conscience like Ron Paul are chastised and become the butt of jokes in main stream media, which then of course make their way into every household in America.  Yet when you ask people what makes a good leader and a good man they will describe the character of a Ron Paul.

But when it comes time to celebrate or select a leader we succumb to the flash of a good headline.  And so we suffer the fate of having chosen such men as leaders who surround themselves with like minded men, and we never question our choice.  Because although we experience hard times we are being told by these leaders that we are happy, that we are prosperous and that great times are always just a quarter away like some ugly rendition of Annie’s hit theme song, Tomorrow.

The sun’ll come out next quarter
So you got to hang on ’til next quarter, come what may!
 Next quarter, next quarter, I love you next quarter
You’re always at least a day away

I know that sounds funny but it really kind of validates Gruber’s point to the sheer absolute stupidity of the American voter.  As much as none of us like to be called stupid, if it quacks and acts like a duck…. it might just be a duck.

This is your nation.  These leaders work for you.  They are using your money to fund ISIS, Fast and Furious, NSA, America’s 12 newly built civil concentration camps, militarizing your local police force and everything else they spend on, most of which we have no idea.  So as much as these camp rationalization men don’t want you to remember that, it’s true.  But you must first acknowledge one of the most inherent and understated problems of modern society.  Specifically that we celebrate men of who are willing and able to rationalize anything while punishing men of conscience.  And I can assure each and everyone of you that as long as this continues next quarter will always be at least a day away.