A “Flipper-ing" Good Memory

Oh boy..here we go again. The Dow and S&P riding high at record levels, Treasurys remaining at artificially depressed yields, top city centre property prices shooting up beyond all logical levels, oil enjoying a still-sticky $100/brl “new natural” level, our old friend Gold fluctuating between cherished store of value and “what use is a gold bar when we’re starving?”, talk of mega-mergers at stratospheric valuations occurring as frequently as Sahara sands falling on London’s cars..oligarchs and just-plain-fools-alike talking at the top-of-their-lungs in bustling city restaurants of their next incredibly profitable “trade”..phewww…one would think the global economy was in full recovery. The terrible endemic of systemic fallibility, that once flowed through the veins of the credit and mortgage markets, forever banished beneath the deep mountain of cash pumped into the system..sadly not. “Out of sight, out of mind” may play enough tricks on the human trading psyche to provide a period of apparent respite and prosperity, but that volcanic build-up beneath that mountain is beginning to rumble once again..and most of the villagers in its shadow are continuing their lives oblivious to the ominous signs.

Unlike Dolphins - proprietors of the animal kingdom’s best known memories (yep, even better than Elephants)..is there nothing those playfully loveable swimmers can’t do? - seems we’ve forgotten the many lessons of 2008. Those dark days are no more..many would have you believe. A strong wave of fresh (ignorant?) optimism has spread relentlessly across the financial industry: Tech acquisitions exemplified by Facebook lavishing $25bn in a couple of months on - in one instance - nascent virtual-ocular companies..even causing high-spending Middle-Eastern SWFs to gawk. Trading titans are pouncing on every opportunity to squeeze profits, venturing bravely in the epic search for yield..sometimes with some misplaced overconfidence (recent emerging market corrections a point-in-case). A return to the good times..we’ve all wanted it..in fact we’ve all needed it. The human emotive response to despair is incapable of sustained depression, we are not wired to be unhappy, that is what drives us - and civilisations as a whole - continually forwards..we crave development and progress, which is absolutely how it should be. However, there is only one way this current situation will end..likely in the next couple of months. Some of the sharper minds out there have already been buying up deep out of the money options on volatility..just look at the Vol/“Fear” index to see why it is overdue a frightening-rumble of its own. 

The probability of another 2008-style crash is low, the world’s central banks will pull out all the stops to ensure that..but the blind belief of “things can only go up” bodes ill for a likely sharp “unforeseen” correction that will at the same time sober..but also push us into the next phase of this dangerous current geo-sociopolitical environment of widening inequality we have created and found ourselves in.

These tensions have been steadily rising all across the social divide for half a decade now, witness the most recent manifestations via the Crimean crisis, where once again the root-cause was the everyday Ukrainian’s inability to comprehend what exactly made him so poor to allow the top 5% of the population control more than half the country’s wealth? It is the never-ending casualty of human weakness - we are inherently programmed in such a way that we will repeat mistakes of the past. We are unable to learn and move on in numbers large enough to enjoy the fruits of our past sacrifices. Unless real change takes place, we are no better than the ancient civilisations that have come and gone since the first-know recorded histories of c. 5000 B.C, their relics lie testament to the ultimately failing-lofty ambition of modern living poisoned with such extreme social inequality.

You ask..has really that little changed in so many millennia? It would appear so. The US was founded on an almost allergic reaction to the aristocratic corruption of the European way - how has that fared for our trans-Atlantic friends now? Well, even in the land of the brave where “anyone can make it”..there is the 1% controlling 1/3 of the country’s wealth and even worse an endemic corruptive vein flowing through the “democratic process”, where wealthy donors are able to bend the ear of the President-to-be at seeming will. Ivy league places are subject to legacy preference and nepotism at alarming rates and the entire country’s process has apparently reverted to the very core of what it had been stripped out from - will future scholars look back at the U.S and mention with a sigh the same quip used when referring to the USSR nowadays “nice idea in theory but ultimately failed in practice”?

Staying with the theme of US institutional corruption, since when does Sheldon Adelson get to decide who the next President is?? This is unbelievable. The people of America have become so anaesthetised by the likes of House of Cards that when they see a billionaire welcoming candidates to his palace in Vegas, callously and openly attempting to manipulate the outcome of US Presidential decision making for real, they sit back and let it roll! The incredulity! The modern day phenomenon of practically idolising billionaires no matter how they’ve made their money (Mr Adelson from one of the easiest sins to take advantage of - gambling) the day we have entered into what should be serious debate as to what constitutes institutional corruption. When people are so easily manipulated by advertising (as per our previous discussions in these pieces) the more control and protection those unable to resist the allure of TV lights should be afforded - something should change here. Democracy? More like Media-ocracy.

Even a recent trip to the UAE, that bastion of class and culture (read that with slight irony please) evoked queasy memories of 2009, harking back to the days when its rulers proclaimed they were “immune to the global economic fever” literally hours before their credit default spreads widened with more flexibility than a Russian ballerina. You know we are in dangerous territory when anecdotal evidence abounds of landlords refusing to renegotiate rents at any lower than double the current rate. Good for them you would say, apart from the fact that there seems to be no memory stretching further back than 2013. Have they really forgotten? Apparently so..those same landlords are mimicked across most hoteliers and retailers (hiking up prices even faster than the skirts of those Dubai clubbing ladies at midnight), refusing to negotiate unless you start at double..start at double?! Ask them why, the response you’ll get is EXPO EXPO EXPO. Jeez. For a country that has a stringent ban on drugs, you have to wonder what the hell is in that shisha they’re smoking!

Humans have evolved and sit atop the animal kingdom food tree for a reason - we have managed to cultivate a control of our tools. One of the most important tools has been whatever humble stone..inked-feather...pen and now iPAD-note-taker has allowed for the recording of experiences and life in general - i.e. memories..memories that are preserved and become part of our history. History - where our mistakes have been noted in all their inglorious, undisguised form for all to read and learn from. Want to know how to avoid repeating the mistakes of the past? - easy, just read history. Even John Kerry - in his talks with Sergey Lavrov - has fortunately been quoted as placing deep emphasis on not repeating the mistakes of the 1938 Munich agreement. 

Memories in this modern tech-age are unfortunately resigned to being told what to remember..it is all too fleeting now. This causes dangerous consequences when warning signals are not recognised through an understanding of the past - those that have memories like Flipper will likely swim away before the economic tide comes out, the others caught-unaware and left hanging to dry.