News & Analysis
Selective Doubt at the Milken Money Conference
At Milken, Feelings of Malaise ... If a single word captured the mood of the Wall Street contingent at this year's Milken Institute Global Conference, "uncertain" would fit the bill. "There's a lot of uncertainty in the U.S.," said Steven Drobny of Drobny Global Advisors, who was the moderator of a panel on alternative investments on Wednesday. Those words, more or less verbatim, were also relayed by members of panels on mergers and acquisitions, private equity and the global credit market. "People are waiting and wondering what's happening," David Bonderman, the TPG Capital co-founder, said during the private equity panel. "It's an uncertain and dangerous world, and people are being cautious with their cash." ... "The big difference between today and 2008 is that it used to be easier to make money," Marc Lasry, the founder of Avenue Capital Group, said during the alternative investments panel. "Today, you have so many more risks, and things are much more difficult." – LA Times
Dominant Social Theme: Things are tough now but they'll snap back.
Free-Market Analysis: Michael Milken was a Wall Street legend in the 1980s when he made junk bonds into a form of popular financing. He was the black knight on a white horse, teaching Wall Street and Main Street moguls that the market itself would revalue their portfolios efficiently ... if they did not bother.
Today, of course, those days seem almost quaint within the larger context of what the Internet Reformation is teaching us about finance. Milken cannot really be seen by any as a "knight" at all – and that has little to do with his history and much to do with how the world itself is changing.
We have learned, for instance – or so it seems – that Wall Street itself is not necessary from a funding standpoint when good ideas can stand on their own.
We have learned to doubt fiat-monopoly money and its value and issuance. We have learned to doubt the brilliance of central bankers that print money from nothing and inject literally trillions of dollars into the marketplace as if it is their right – and they can do what they wish simply because of who they are.
The most powerful animating force in the constellation of human progress is ... a good idea. The financing isn't important, per se, only that the idea itself be good enough to receive funding of some sort in some manner. But Wall Street's stamp of approval is not necessary.
In fact, ways of capitalizing products such as that which Mike Milken discovered are merely elaborations on a theme – one that seems a lot less convincing than it used to.
It's not that the West itself has begun to "fail" but that confidence is leaking away. The power elite's vision of banking as the driving force behind human innovation simply doesn't seem so overwhelming anymore.
Of course, some of this is being done on purpose, in our view, as we often point out. The idea of the top elites perhaps is to make people so unsure of what they used to believe in that a new world order becomes easier to implement.
And it seems to us people ARE struggling with a crisis of confidence – and it's not just bankers. Many of the fundamentals of modern Western life are coming in for more questioning in this day and age. Here's some more from the article:
As a networking event, of course, the Milken conference still shows all the signs of life: bankers and traders backslapping old friends, swapping business cards and taking meetings with clients at the Beverly Hilton's poolside bar.
... One senior private equity executive, speaking to DealBook in the Hilton's hallway on Tuesday, bemoaned the fact that a single new rule introduced as part of Dodd-Frank Act had forced him to spend $50 million a year on new auditors and compliance officers, whose sole job it was to calculate the compensation of all the employees at a given company. "The rules have changed," he said.
But there are worries beyond Wall Street's profits. At a panel on job creation on Tuesday, talk revolved around the fact that for cities and states, traditional municipal bond financing was failing to provide the money needed for important public projects like repairing roads and building bridges.
At a panel on the credit markets, panelists said that the new regulatory regime was making it harder for banks to lend, and leading to the rise of a shadow banking sector. At various points during the conference, panelists and attendees worried about the rise of China, the future of Social Security and the threat posed by Iran.
This last paragraph is an interesting one, especially. It is not merely the "rise of China" that is of concern but the entire panoply of modern regulatory democracy. We would also point out that each of these "concerns" is a dominant social theme of sorts.
China's "rise" is due in large part to Western financial infrastructure. (In other words, it didn't have to be.) Social Security, based on fungible fiat dollars, is an extremely doubtful long-term retirement facility in the US. And, finally, the threat poised by Iran seems dubious indeed.
We can see elite promotions – fear based mechanisms – are being pulled down around our ears almost on purpose. At the same time, it seems to us that there are other memes that the elites would like to sustain but that are being questioned within the larger, failing frame of reference.
Conclusion: This is a crux question then: How do you manage the end of the world as it is without jeopardizing your larger source of control? Is selective doubt a viable manipulation? Will we find out?