THERE IS NO NORMAL: What we’ve learned since the crisis of 2008

unicorn_and_rainbowI read exceedingly few financial bloggers. The vast majority of pundits commenting on Wall Street have all the insight and perspicacity of a cat chasing a laser pointer. My favorite is Downtown Joshua Brown, the Reformed Broker. Josh produces link fests while he’s in the shower, blasts out 3000-word diatribes on the train to work, appears on TV, mocks trolls on Twitter, writes a few more blog posts, and releases books – all before 3 pm each day. In terms of productivity, he makes me feel like I’m in a coma, twitching once or twice a week.

A couple weekends ago he released a piece that has been irritating me – in a good way – like the last few kernels of popcorn stuck in my teeth. His piece entitled Escaping the Fear Factory talks about putting an end to the crisis mentality and actively ignoring the collapse junkies out there. He posits that things are looking up, even housing is returning, and we may be on the way to that Xanadu/Shangri-La magical promised land called The Recovery.

Goldman Sachs is back to being Goldman Sachs again, smashing estimates from trading to I-banking to M&A to underwriting.

Bank of America is putting the sins of its acquired mortgage business behind it with every settlement and charge-off.

Even Citi has a request in front of the regulators to up their share buyback.

Morgan Stanley’s just traded through a new 52-week high with very little other than green field ahead of it now that it’s no longer the poster child for hidden Euro exposure.

You may look at the return to prominence of the big banks and say “How unfair!” You will be right, but please compartmentalize that notion. Because it has nothing to do with your duties as an investor.

Headline-wise there are just a few more hurdles, we are told, and then the Era of Crisis 2007-2012 will be germaine only to the historians and the professors.

And with our passage into the new era, we will leave behind the baggage of the old one.

There will be bloggers and journalists and newsletter writers who continue to fight the old battles that no longer matter. They will spend countless hours on “Who really caused the Crisis” and lament the favoritism shown by Geithner and Paulson. They will continue to chase mortgage fraud headlines down the rabbit hole of who-gives-a-shit and expend a great deal of time and energy on fearing high frequency trading and loathing the banks.

To which the productive and creative and ambitious among us will say “Whatever.”

We will stop reading these diatribes, they will no longer enter into our decision-making process. Like the screams of the Wicked Witch of the East as she melts into the ground, their yowls and yelps will grow even more shrill and abrasive as our collective attention continues to fade. This will be embarrassing – like an older family member who seeks to bait you into a heated discussion about Vietnam at Thanksgiving dinner. We will not read or watch or click this stuff anymore.

Phasers set on ignore.

OK, let’s take the phrase: “You may look at the return to prominence of the big banks and say “How unfair!” You will be right, but please compartmentalize that notion. Because it has nothing to do with your duties as an investor.” True enough, right? We’ve got to think of this realpolitik style if we are truly strategic thinkers, and our inner Machiavelli tells us not to let our love of justice overshadow our analysis of raw power. The fix is in, the Department of Justice has assured everyone on Wall Street that nobody is going to jail, the Federal Reserve has, through its relentless quantitative easing and low interest rates, made the world safe for the mega-banks put together by Treasury’s shotgun weddings back in 2008. Even the Republicans are obliging, negotiating on the debt ceiling – since the Party of Business isn’t going to ruin the whole game, political brinksmanship aside. This may indeed get back to normal for investors.

So let’s allow that to be our baseline – Hey kids, it’s time to come out and play! Take out some more debt! Everything is going to be normal again, and we can get back, finally, to growth! Hooray!

Why are you guys still looking so pissed off? Didn’t you hear? Everything is cool again! The world is safe…for investors!

Then what did the last five years mean, and what would it mean that we “normalized” everything?

The government is the savior of the capitalist market system

HAHAHAHA – did you hear the collective sounds of all those Randians and hyper-testosteroned Wall Street rugged individualists shriek in horror? If what happened since 2008 is normal, then we admit that the government is there to save the free market from itself. To take this logic to its conclusion, had Messieurs Paulson, Bernanke, Obama and Geithner not stepped in and actively manage this crisis, forcing megabanks into unholy marriages, turning the printing press on full blast to stimulate the economy, converting clunkers to cash, not prosecuting bankers – then it all would have gone to hell.

I’m not saying I agree with this, but if what happened was a momentary crisis that is now “over,” then we’re essentially saying that this is a form of best practice, a precedent that may guide future actions.

This is now normal.

Authority is now derived from diktat, not talent

We have an entire class of CEOs, technicians and commentators who occupy elite positions in society…just ‘cuz. Before, back in 2007, there was still some notion of the cream rising to the top, especially where money is concerned. Why pay a CEO 420 times what the average employee makes? Because its an investment in “talent,” silly! Why put some blustering jackass on television every afternoon to tell you about hot stocks? Because that guy is super experienced, talented and connected!

Now, we know that those people are not necessarily competent, and in many cases are extraordinarily dangerous. But they still make more than you. Merry Christmas.

This is now normal.

The law does not necessarily apply to bankers

You have a paucity of choices when it comes to financing your home. There are few financial institutions with which you must do business, and even if you sign a mortgage with your local bank, you could be paying money to Wells Fargo six days later. We now know that these financial institutions may get up to activities such as “foreclosing” (seizing the home of someone through the local sheriff) on people who are not their customers, or railroading customers into default, or fraudulently packaging mortgages into a financial instrument and then betting against it, or whatever – guys like Lanny Breuer, head of the Department of Justice’s criminal division will strike a deal to simply not prosecute. Because it wouldbe hard and messy and stuff.

This is now normal.

You folks are really easy to negotiate with

In the last five years we discovered that the American people are an easily scared, very pliable group. The greatest fraud in American history took place, most everyone at the top of the scheme kept their jobs AND got record bonuses, and all the same authority figures remained in place. The supposedly freedom-minded American people sat there and took it while their 29 year old with a new law degree moved into their basement. Nobody marched on Washington to demand fundamental changes. Around 46% of the people ignored the bigger picture, blamed Obama (who took office after the meltdown) and actually posited that the only thing wrong is that the wealthy are too burdened by taxation.

This is now normal.

The new normal isn’t

I think I agree that the system has, through a spasm of dishonor, fraud and inside dealing, righted itself on the backs of regular people. The media did a wonderful job of portraying the systemic failures of leadership as an Act of God. As I am on the road with my show “WTF Is Up with the Economy” I encounter plenty of people who don’t know what happened at all, from the bonuses, to the derivatives to the foxes watching the hen house. To many folks, this is something they deserved, perhaps a holdover from original sin. And since America is such a nation of individuals, most people tend to their own knitting, hoping to find a new job or save some money or retire soon, while ignoring the plights of everyone around them, as if we didn’t just discover how very interdependent we all are.

When I see that the returns on my retirement account are better than average, and that my house may not lose value in the current market, it is tempting to call the situation normal. But the term SNAFU looms large in my head.

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