Nov

14

F & SOver and over again, we see the market moving in trepidatious concert with the father figure of the moment. It used to be the fake doc and then it was the scholarly economist chair, and now it's the former chair of the white shoe firm that maintains the Chinese wall with its former colleagues. On past occasions it's the Sage, and every now and then, a big executive like the head at Intel or the basketball player from Conn.

What's particularly damaging to the market is when these people bow. The spectacle of the Intel chief bowing and begging forgiveness I believe forever tarnished the aura of high p/e deservingness that his company with 59% profit margins might have deserved. The news that the former white shoe chair knelt in front of the chair of the Democratic party and begged her to pass the bail out bill was the death warrant for the market for a time. And now that he changed horses in midstream and gave up on buying mortgages directly, a position he had previously begged for, "based on a different set of circumstances" was the death knell for the market.

The trader has the Dostoiyefskian tendency to feel guilty about their activities from the time they were small. And they wish their father figure to be strong and not to kneel. When these figures regain the respect of their kids by being strong, maintaining the stiff upper lip, etc., we can expect a much better market. How would you quantify this and what other instances of kneeling as a bearish indicator have you seen?

Anatoly Veltman writes:

You mean like when Chancellor of the Exchequer raised discount rate 9/16/92 three times (from 3% to 7%), before rolling it back to 3% by the end of the same day… and recognized that ERM snake was in fact beheaded?

James Lackey replies:

The return of the dipsy doodle is a good start. The most damaging current meme is that the markets are at fault…  and market prices do not forecast. "Free markets need help and regulation from governments," The dog is chasing its tail. Government regulations are what cause markets to come up with crazy schemes to avoid the previous market patches, in Microsoft terms, a "hot fix."

A more direct answer is price discovery. Once we all figured out too many prices were rigged they panicked and traders bought as usual. Then when the father figures changed the rules to bailout their kin, we went on strike. No traders, no liquidity for the markets. Now the prices are caught in the crossfire of the Hatfield-McCoy feud. Do not blame the hired guns.

Art Cooper adds:

Obviously the market and economy respond positively to strong leadership, as this relates directly to human emotions (animal spirits) which are so essential a part of Main Street economics, finance and the financial markets. Hence, the Great Depression market responded positively to a strong leader who declared that "The only thing we have to fear is…fear itself," even though his economic policies were in fact counter-productive to recovery (see Jim Powell's "FDR's Folly").

Kim Zussman interjects:

The child is racked with disorienting insecurity when they first witness their parents own uncertainty, indecisiveness, and fear. Now the children are being dragged by their mother to a new daddy with undetermined rules of discipline, while being told that the last daddy was really an immoral fraud.

It's hard growing up, especially with a fickle mother.

James Lackey writes:

I listened to Santana's show tour warm-up in 2002 or so. Later that evening he was on an interview, local radio, and was describing his so called comeback. His rebirth was through collaboration with new young artists. His quote went something like, "I wanted my teenage kids to know dad can jam, and how the system works, sure they saw my old awards and shows from back in the day… but to a teenager..it's now that counts." The gist was, the only reason he did the work was to prove a point to his children… boom… the return of a father figure.

J.T Holley writes:

Highly apropos, like all great literature, call me crazy if ya'll don't see it that way, this has been written in William Golding's Lord of the Flies.

Kids abandoned due to crash from adults.

Ralph pleads with Piggy about Simon's death: "You were outside, Outside the circle, Didn't you see what they did" (paraphrased).

Piggy before his murder: "Which is better? Law and rescue or hunting and breaking things?" (paraphrased). Then the rock falls.

Kids rescued from abandonment and panic/chaos when Ralph looks up at Naval Officer (adult).

I guess the big question right now and maybe one that Golding proposed is who is going to rescue the naval officer and his boat? In other words who saves the adults themselves?

Now substitute War, Atomic Bomb, Ralph, Jack, Simon, Piggy, Naval Officer, Naval Ship with traders, investors, banks, citizens, government, and politicians.

Kevin Eilian writes:

Before it became a quote dejour by Mac and others, R*bin's upper lip, bone straight poker face, "the economic fundamentals are strong,"– you believed it. He made sure he did, too, as his net worth was tied to white shoe IPO.

James Sogi says:

Demographics is the counting of the "father figure" issue. We saw the effect in the aging of Japan. Now we are seeing the aging of America. The rest of the world is quite young, averaging something like 15 years old… Many of our parents are sick, old or dying or died. There is a changing of the guard. The boomers are retiring. America is aging and gaining weight. Though America "the great white father" is kneeling or brought to its knees, the emerging world will rise in its place over time. I would watch this trend over the long term. The world is becoming multicultural. Witness, O witness, the non white majority in California.

Russ Sears adds:

I have been thinking for the last few weeks that all of this could have been avoided if the investment bankers had learned a few lessons on risk management from a mother of a smart, curious two year old or a teenage boy. You can't just tell them no and then ignore them once they've moved on and not still expect some experimention to happen. The alerrt mom always seems to have an instinct, before the father, when silence is a clue they are into something or when the truth has been stretched. How the mother always is prepared to contain while still delighting in their first taste of chocolate cake or discovery of girls and love. The good mom has the sense to help them limit these new found divine obsessions, before they ruin their mental and physical health.


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7 Comments so far

  1. Ralph Di Fiore on November 13, 2008 1:31 pm

    Victor, A great post on the importance on literal and figurative fathers. I would encourage you to write a book about Arthur Niederhoffer and the traits he had that made him a great father. From what I gathered in Education of a Speculator, Arthur had few equals in the area of fatherhood. It would be as much a social benefit to society as your Spec books have been a financial benefit.

  2. reid wientge on November 13, 2008 2:48 pm

    This from the Times UK on-line.

    Peter, 36, a former sales trader at a large US investment bank, (In Tokyo, JAPAN ) believes that the women of Heartland have developed a sixth sense for layoffs. “The five-year reign of the Roppongi Hills scene bred a pretty canny strain of Japanese woman. I fell in love with at least one of them. It is scary to see how quickly they’ve disappeared from the bars. And they started disappearing early: these girls are a market indicator to which we should all pay attention.”

  3. George Parkanyi on November 14, 2008 12:17 am

    You’re right about the right kind of father figure having a calming effect. I remember John Templeton being interviewed after the 1987 crash, and his demeanor and body language as well as his message was all “Hey, these things happen; don’t worry about it; this too shall pass, and you can trust the economy - it’ll be fine.” Calm, re-assuring, but very importantly - no negativity. He didn’t blame anyone, he wasn’t angry about anything, just an up-beat “it’s all part of life, and its never as bad as you think”. THAT was re-assuring.

    What’s disturbing is when father-figures try to divert you away from your own resources, and instead try to rally you to a cause or worse, against someone or some group. The worst examples of this type of father figure are Hitler and Mussolini. Seductive, strong, decisive, yet in the end highly destructive.

    It’s not always about strength and self-confidence, but it can be about courage and self-sacrifice. The true father figure inspires, uplifts, and empowers you; not himself. Mahatma Ghandi was a great example of this type of father figure.

  4. David Higgs on November 14, 2008 6:02 am

    Pater noster, qui es in coelis… Given the world's projected growth of 12% more children over the next 10 years, should giveus hope of continued growth, and all is not lost. yes, "the great b|ack father" has his work cut out, but he can do it , yes he can.

  5. Steve Leslie on November 14, 2008 8:52 am

    I think on the great father figures of the 20th century. What were some of the characteristics they exhibited. They were men of confidence, men of character. They had an undying faith, and projected an air of defiance and power and calm. When you were in their presence you just knew that although the answers were not directly available or apparent, but that some how some way they were going to find a way. Their tenacity and drive would see you through no matter the obstacles.

    I think of such amazing events such as the Apollo 13 mission with "Failure is not an option." To "I have a dream." or "I shall return." I think of a fat man smoking a cigar, wearing a derby exclaim "We shall never surrender." An overage actor whose career as a politician was all but crushed say "Mr. Gorbachev tear down these walls."

    With this in mind, I shall submit a partial list of the great men and father figures of the 20th century. Think on the positives that they projected and how you knew that when in their presence, you were in the room with greatness.

    Theodore Roosevelt
    Woodrow Wilson
    Gen Pershing
    FDR
    Gen MacArthur
    Gen Patton
    Sec of State George Marshall
    Winston Churchill
    Albert Einstein
    Martin Luther King Jr.
    Paul Volcker
    Ronald Reagan
    Jack Welsh
    William Seidman
    Robert Rubin
    Greenspan.

    There are hundreds perhaps thousands who deserve mention. However this should suffice to help describe what characteristics great leaders, great "fathers" exhibit. Someone once said "Character is displayed not during calm but during crisis,"

    sl.

  6. Steve Leslie on November 14, 2008 9:12 am

    I agree that that Vic and Laurel have much more literature in them and a sequel is long overdue.

    Until then a few very good ne. excellent books on Father figures come to mind:

    Tuesdays with Morrie by Mitch Albom.
    Big Russ and Me by the late Tim Russert
    Zen and the art of motorcycle maintenance by Robert Pirsig
    Training a Tiger by Earl Woods
    Fith of my Fathers by John McCain
    The Last Lion by William Manchester
    Brighton Beach Memoirs by Neil Simon

  7. Nic Chalmers on November 19, 2008 11:41 am

    Is there any research that compares the average age of the electorate (those that bother to vote) to the avarage age of the elected? Also, is the success/failure of the government in question in any way correlated to the gap in average age of the two groups of people?

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