Will all readers of signs and portents please get together and get your stories straight? Thursday I posted on some theories provided by a British (actually Scottish) hedge fund manager, Hugh Hendry, that seemed to focus on a 25-year bubble cycle that began, without explanation, in 1991 when Citibank nearly went down. This was all mysterious, but why not?
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In Friday's papers more time frames for disaster bob to the surface like the remnants of the Titanic. In a New York Times hosanna to George Soros -- he's got another universal explanation of history coming out -- he mentions, again sketchily, that our current crisis began 25 years ago. Doing the quick math, I get 1983. So what was it about 1983 that set us off on our current path to today? (Read the book, I can hear him muttering, I need the money!) Well, 1983 marks the rebound from the nasty Paul Volcker, high-interest-rate battle against inflation that produced the intense Reagan Recession. Coming out of that recession were hot markets and the go-go '80s with their upsurge of raiders, hostile deals, LBOs and for those seeking all-purpose demonology -- Michael Milken's junk bonds -- which have come to symbolize the development of new, deep, abstruse, often strange markets. It's pretty hard to make Volcker a culprit, but Ronald Reagan, with his supply-side gospel and tolerance for greed, is available. After all, to Soros, it's a hop, skip and a jump from Reagan to Bush the younger.
If Soros is marking the beginning of the current crisis in the development of junk and the Alan Greenspan era of relatively loose money, he might as well have opted to go back a bit further, say to 1975, which saw not only the decision to let the dollar float (giving young traders like Soros something to do) but also a series of deregulatory moves that ushered Wall Street into the modern age of finance, most famously the end of fixed brokerage commissions. If you believe that the current crisis is a product of innovation and financial engineering on Wall Street, 1975 is your year, which is technically 33 years, but who's counting? Still, for Soros to say that the current crisis brings all that to financial evolution to a head -- whether it begins in 1975 or 1983 -- doesn't exactly help us out going forward. Even Volcker, in his recent speech to the Economic Club of New York, admits that you can't go back. So what's Soros' larger point? OK, I get it: Read the damn book.
So we've got 1975 and 1983. Another contestant: Lloyd Blankfein, the Goldman, Sachs & Co. chief, who seems to believe things went awry 55 years ago, or (doing the math) 1953, at least according to Wall Street Journal reporting of the Goldman annual meeting. Good year 1953: I was conceived. Other than that, and a few large events like the end of the Korean War, Joe McCarthy, the death of Stalin and early television, times economically were pretty good, if very different from today. Wall Street was the size of a peanut. The stock exchanges could snooze the day through. Unions were strong, the middle class robust, the Depression still fresh in memories. Cars looked like Vegas show girls, and people smoked cigarettes and drank Manhattans. Now 1953 was 24 years after 1929, which -- oh my -- might make Blankfein a follower of the Hugh Hendry's 25-year-bubble cult. Or at least he's in that mixed neighborhood.
It's all a mystery. If you go back 50 years, why not travel back 79 years to 1929? Big year. The Fed was created in 1913, that ominous year. And Alexander Hamilton was Secretary of the Treasury in 1790. ... - Robert Teitelman
See story about Soros from The New York Times
See story from The Wall Street Journal
See earlier Hendry story from Dealscape
