Out of the Box: The Wizard Goes Over the Rainbow
The “Ifs” are if something is going to happen, or not happen, and how it might happen, and then how the market participants will react to it. We are not playing the “Great Game” with the Tin Man or the Munchkins, or even the Horse of a Different Color, you know. All of the participants are boys and girls fanned out across the road, and the globe, and trying to get to Emerald City, and its riches, before the other boys and girls.
“All your troubles are due to those ‘Ifs,’ declared the Wizard.”
-L. Frank Baum, The Emerald City of Oz
The road goes on and on, just like the markets. Good times, bad times, and on we go. The bricks are yellow, which tells you that the light, and the shadows, of booms and busts, can make them appear to be a variety of shades. Stare at them carefully, as you walk along.
“Never give up…No one knows what’s going to happen next.”
-L. Frank Baum
Grant’s Rules remain in force. They are the accumulated knowledge of my forty-five years of heading down the road and while I have grabbed a few emeralds along the way, I am still on the quest. Grant’s Rules were hard won, I can assure you. I have the lacerations, of the various experiences, flayed across my back.
Rules 1-10: “Preservation of Capital”
Rule 11: “Make Money”
Rule 12: “When a company is under Federal investigation for Fraud-Sell!”
Rule 13: “When a company gets an “Ongoing Concern Letter” from its auditors-Sell!”
“You are learning something every day. A baby has brains, but it doesn’t know much. Experience is the only thing that brings knowledge, and the longer you are on Earth the more experience you are sure to get.”
-L. Frank Baum
There are also a wide variety of characters that are on the road with you. One is the Fed, which reminds me very much of the Scarecrow. They crow. They scare. They tell you on October 3 that we are a long way from neutral interest rates and then we are informed on November 30 that we are at just about neutral interest rates. Then, in December they scare us again only to take it all back in January. They may strive for transparency but they continuously create confusion. Now interest rates appear to be headed lower as “uncertainty” prevails. When was their ever “certainty,” I ask.
Did they secretly listen to President Trump, did they consult with Ozma, or the Good Witch of the North, or call Mario Draghi? Who knows who they might have consulted but the one thing you can know for sure, no one will ever tell you. The odds on them ever admitting how they reached their decision are about the same as someone mailing the Hope Diamond to you and then telling you to keep it. So, we just keep going.
“If we walk far enough,” says Dorothy, “we shall sometime come to someplace.”
-L. Frank Baum, The Wonderful Wizard of Oz
Then there are the Cowardly Lions. They are afraid of telling you the truth, so they don’t. They are the smartest, their firm is the best, their new product is the most incredible, and the markets are either going straight to Heaven, on the backs of Angels, or straight to Hell, on the backs of the Demons. Cowardly, you see, and all very far from the truth.
To make it very far down our Yellow Brick Road does have some requirements. You need honest numbers, a methodology that is based upon deductive thinking, and common sense, the experience of the journey, and then some imagination. You also need to be able to “get it done,” which is a trait found in very few people. “Trying” just doesn’t count.
“Imagination has brought mankind through the Dark Ages to its present state of civilization. Imagination led Columbus to discover America. Imagination led Franklin to discover electricity. Imagination has given us the steam engine, the telephone, the talking-machine and the automobile, for these things had to be dreamed of before they became realities. So, I believe that dreams, “day dreams,” you know, with your eyes wide open and your brain-machinery whizzing, are likely to lead to the betterment of the world.”
-L. Frank Baum, The Lost Princess of Oz
And more “Coins of the Realm” in your pockets.
During my long tenure in the financial markets I have seen many schemes to “take over the world.” Let me inform you, no one is going to do it. I have watched Germany, and then the European Union, and then Japan, and now the Chinese, and it is not going to be accomplished. America, by the way, has not accomplished it either, as the world is just too diverse a place, so that everyone’s motives and incentives are not fit for everyone. One size does not fit all.
It is all just a global “Game of Thrones” where every nation vies and competes for strength, position and power. There is nothing wrong with that and, as a matter of fact, there is everything right with it, as long as life, liberty and equality are not endangered. It keeps everyone on their toes and it moves the markets to the place they always go which is the riches go to the best and the brightest, because they understand how to win at “The Great Game.” Strategies change, depending upon the times, but great minds, determination, being a stand-up guy, and innovative thinking, will always prevail. Luck is created, it does not fall from the sky.
I mention your intellectual capacity, along with your reputation, with great purpose. One, without the other, will doom your ability to remain on the Yellow Brick Road. You can have years and years of doing the “right thing” and then one turn to the Dark Side, just one, where you do the “wrong thing,” will end the Munchkins from ever doing business with you again. Your reputation is everything, EVERYTHING!
Guard it like your life!!!
“Somewhere over the rainbow, skies are blue, and the dreams that you dare to dream really do come true.”
She is right of course. If you “Make them come true!”
Mark J. Grant
Chief Global Strategist, Fixed Income
B. Riley FBR Inc.
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