A Big Milepost on a Long Slog

This edition of Musings finds us contemplating something even more daunting than a rip-roaring rally. In exactly two months, the S&P 500 and the Nasdaq soared 40% (intraday basis), the DJIA nearly as much. As evidence continues to mount that the worst case scenarios which held sway early this year are increasingly improbable, expect this trend to continue. This does not mean that the hot months just ahead will not bring at least a few moments when we will wish that we had heeded the old maxim “Sell in May and go away”. I continue to be a net buyer of stocks (experiencing firsthand the more-often-than-not frustration of “waiting on a pullback”), favoring the odds that the energy of decompression, coupled with a resurgence of “going private” activity, will carry this Market substantially higher over the next six to twelve months.

The daunting distraction weighing on this prognosticator’s increasingly distractable mind is the arrival of a somewhat landmark birthday. May 2009 brings me to the point where my age will hereafter exceed the last two digits of the year I was born. It is a birthday which demarks, as well as any, the difference between “early middle age” and, well, “not-so-early middle age”. Another clue I would offer would be that it is evocative of one of the great boneheaded Meddling Class schemes of my generation’s youth: the federally mandated highway speed limit. How can we forget those years of either flouting the law or, out of fear of speed traps, fulminating about intrusive statism as we poked along across the wide open spaces. This birthday leaves me recalling how early on I craved the wisdom of experience, but now recognizing that I probably have more experience than I have time to apply.

My birth date put me smack in the middle of that demographic phenomenon that was tagged The Baby Boom. Boomers are starting to exit the world of work at a quickening rate. In the days leading up to this birthday, I have pondered what I have learned over what has in many ways already been a very full life of work, and what might be the most meaningful changes that have taken place over the passage of a generation. There are any number of tacks one might take with this, but sitting at the top of the pile when I got up to start writing was right out of Gilbert & Sullivan: “Things are seldom what they seem, skim milk masquerades as cream.” (HMS Pinafore). The longer one pays attention to what is going on, the more apparent this becomes. It becomes especially so as one sees how current events gets spun, and then re-spun under the guise of history, and then armed with the knowledge of this reconsiders what we have taken for granted as history. As it applies to the present moment and the ever present question of whether one wants to be an owner in or a lender to a particular enterprise, there is a particularly important discrepancy between objective reality and “what seems to be”. (Price Reality being mainly about the latter.) That would be that in all manner of conflicts, the side that seems to be winning is not necessarily winning, or at least getting stronger, and the side that seems to be losing might very well be gathering strength in ways that are not apparent. We see this played out over and over, in individual lives, in sports, in companies and in nations and empires. On the latter level, it tends to happen at a rate that one has to live a very long time in order to recognize it. (In any case, the momentary distractions which perpetually transfix us usually preclude any such recognition.) “Winners” usually get cocky and overreach, while the putative “losers” just might have it in them to bury their differences, learn from their mistakes and eventually come up with the right game plan. This needs to be kept in mind as we wonder about what has indeed been an unfavorable turn in the tide of battle between the Founder’s vision of individuals “endowed by their Creator with certain inalienable rights” and a collectivist impulse presently operating under the fine-sounding mantle of Progressivism (“liberal” having worn out its welcome quite some time ago). With this in mind, I find myself optimistic with respect to the very near term (the fears which denoted Q1 09 having been so overblown), inclined to pessimism with respect to the next half decade or so, but cognizant that there is indeed a basis for optimism beyond that which we can presently see.

So what have I learned, and in what ways will the years ahead will be most unlike the years that are the basis of my experience? As I consider the implications of one generation giving way to the next, my first impulse (or admittedly, second impulse) is to refrain as best I can from the age old temptation whereby each generation sizes up the next and finds it somehow lacking. There is an inescapable element of this, though, based on something that would appear close to the top of the Very Short Version of the “So what have you learned?” List. That would be that character matters, and that character is forged in the fires of adversity but somehow attenuated by that which we call prosperity. The generation now reaching retirement was begat by a generation that knew from adversity. (The idea of a “Greatest Generation”, proffered a few years back by a TV journalist “more loquacious than a mocking bird with a craw full of jalapeno seeds” might have been a bit overdrawn, but there was more than a little to it.) Those of us who entered their working world thirty or so years ago found institutions riddled with flaws, but with a discernable bedrock of sobriety nonetheless. Animal spirits were certainly present, but they were tempered by the presence of those who had lived through much of the lethal ugliness and economic upheaval which defined 1914-1945.

I strongly suspect that the defining attribute of the Baby Boom generation arises from its good fortune of arriving just as America stood astride the smoldering ruins of the rest of the world. It is to take for granted the prosperity which arises over the course of a couple of decades of global economic recovery. We were born into an economy that had nowhere to go but up. In my earliest attempts to see the big, long term picture, it occurred to me that it would be all but impossible for the US to maintain its relative stature. We had been spared the devastation of war and as such could not possibly improve our situation as rapidly as others who had to start from next to nothing. Europe and Japan were seemingly catching up to us. Much of the rest of the world had imprisoned itself in with the Really Bad Idea that was Communism and so could be counted on for very little except trouble-making. The remainder was hopelessly mired in the struggle for mere subsistence.

What was missing as one tried to make sense of the world in 1979 was an appreciation of the power of ideas. Specifically, ideas which had been incubating during that era, which has been called America’s Suicide Attempt, and were about to define the 1980s. We ended up with something of a rebirth, and growth and prosperity out of quarters from which it was not expected. Three decades later, however, the engines of growth seem somewhat suspect. I believe what we are going to find over the next decade (and have actually been experiencing over the past decade) is that the inexorably rising tide that Boomers took for granted is an illusion. A view of the full sweep of human experience informs us that rising prosperity is anything but inevitable. “Growth” happens when truly liberating ideas take hold in hearts and minds beset with a strong, pent up desire for something better. The trees only grow so high, and then they start to decay. The natural endstate of all things which take root and spring to life for a season is slow motion decline. America, because it has been more of an idea than a place or people, seems to have had a capacity for renewal not found anywhere else. (The U.K. had a brief interlude of renewal in the 1980s but has since relapsed unto decrepitude at a quickening pace.) We witnessed the “miracle” that was Japan from 1946 to 1990, but while many of its great companies will be with us for decades to come, it will never again be the powerhouse we convinced ourselves it had become in 1989.

Joined at the hip with the illusion of an inevitably rising tide is one of the signature whoppers which the Boomers were led to believe. If you were in school in the Sixties and Seventies, overpopulation was the big “something somebody better do something about”. This was a near orthodoxy which no one (to my knowledge) questioned. Our sense of the future was captured in the movie Soylent Green (1973). Today, overpopulation, to the extent it exists at all, is actually a problem of resource allocation, all but certainly attributable to that locale being caught under the dead hand of kleptocratic statism. We are more likely to find people groups which only two or so generations ago thought they could go out and conquer the world now lacking the courage to reproduce themselves. Could we have been any more wrong about anything? This will have tremendous implications in the decades ahead. Not that there is still not “growth” to be had as Chinese peasants and others similarly situated find their way out of unmeasured subsistence and into that which gets counted in GDP. Technology has not brought its last fruit, and a retooling of power generation and transmission in particular will drive “growth” for a few more decades at least. But let’s be sure we understand how much of this thing called “growth” derives from the fact that for a couple of centuries there were more and more of us every year (one supposes there were a few days at least in the mid Twentieth century when population probably backtracked.). Or that it is happens when people are free to find ways of meeting the needs of others, many of whom had to stew in their neediness for a very long time.

One other Boomer delusion that has been shattered and will really matter over the remainder of our lives arises from what seemed like the invulnerable stature of the Fourth Estate. Few things seemed more a part of the natural order for a child of the Sixties than the Six o’clock news or that newspaper whose delivery provided my first brush with the risks and rewards of enterprise (and whose competitor went online-only just last month). These empires are crumbling now, with radio and TV not far behind all but the most well focused of print media in going the way of all flesh. The implications of what the WWW has wrought are manifold and far reaching. What I have in mind is the detrimental effects that seem to be occurring as these institutions wither away. However flawed and subject to God-only-knows what corruptions, the “media” as we understood it during the Twentieth Century provided something of an operable (if not deeply held) consensus around which a penumbra of dissenting viewpoints might form. The Twenty First Century finds discourse fractured beyond recognition Worldviews are divided into camps which defy definition (tribes identified around CNNMSNBC or Fox News might provide something of a handle on the current moment) and stand irreconcilable in a manner not unlike Kipling’s East and West (never the twain shall meet). We have instant information and opinion, but are generating far more heat and smoke than light. We have found that, good golly, everyone having a say is not all to the good. Nearly every time we indulge in a few minutes of reading “comments” we find ourselves aghast at the sort of delusion that seems to spring from too much caffeine and time spent hunched over a keyboard in Mom’s basement. Does anything edifying ever take place, is anyone’s opinion ever changed, on message boards (other than on sites devoted to important practical matters like fishing or home improvement)?

For all its many blessings, including my ability to sit here right now and do this, the Internet has coarsened what can only in the broadest sense be called dialogue. Having nearly extinguished civility, it reminds us daily that civilization is a very thin veneer, more often than not imposed than freely accepted (and if imposed, at the cost of quenching the human spirit which is the engine of any sort of sustainable prosperity). I would close this missive by sharing my greatest fear for the few decades that will hopefully define the rest of my life. The incipient incivility and lack of an operable consensus rendered by the ways we communicate will exacerbate the amplitude of social and political upheaval. We find ourselves at the moment ruled by what is best described as an Academic Class: omnicompetent experts trading on the authority of that which they call Science and seemingly oblivious (in the way only academics can be) to what the whole Twentieth Century taught us about the efficacy of central planning. The mechanisms of political finance have aligned them with what have from time to time been described as “money interests”. They are in over their heads. Their actions will produce consequences which include misery and ruin. Eventually, a confused and ill-informed populace will react to the miseries which have been heaped upon them. If we are fortunate, it will be a political reaction, but we cannot count on it being limited to a mere electoral recourse (particularly if that mechanism is further subverted by corrupt censuses and similar machinations). We should be concerned about a populism which turns against what they consider academic, scientific and “money power”. As such reactions tend not to be well thought out, it would likely extend to whole groups of people identified as such. We should not be surprised, then, to see a quickening of the virulent anti-Semitism which has been reasserting itself in the Old World of late. A healthy polity here in the US would probably forestall the spreading of this epidemic, but a healthy polity, like so much else we considered at the dawning of the Age of Aquarius (the Seventies were so lame!) cannot be taken for granted. We should all hope, even pray, that this is not a signature development of the second decade of the new millennium. In the mean time, stay long, stay strong, and never let a presupposition sit too long without re-examination. And if you are old enough to remember when TV came in three channels plus “public”, be grateful, every day, for all the innovation that has extended “middle age” well into years that used to denote “elderly”, if you got there at all.