High Prices

Over the years several magicians worked their version of the levitation trick. A few more modern day ones reside at the Eccles Building in Washington.

But as everyone deep down knows it's a trick, a mirage of sorts that's designed to capture and fascinate the audience, suspend their disbelief for a brief period. Those magicians over in the Eccles Building have been suspending their current levitation version for quite a while now, going on a near decade.

So that brings up what is and has been an important question for quite a while, too. When does it all end? The real answer, the truthful one--imagine that, using a term like truthful when it comes to the Street--is your guess is about as good as your next door neighbor. That is, unless he or she is an economist. In that case, yours is most likely a couple of times to the third power better.

The most likely best answer has nothing to do with economic voodoo data and econometric models hatched in academic cellars but more likely zen. That's correct, zen. How long does it take? However long it takes. It will end when it ends. And it will take market historians years to figure out what actually triggered the end.

No doubt economists will waste reams of climate-change recycled paper rolling out articles mostly written for themselves to let us all know what happen and why. That's what functionaries, otherwise known as experts, do, waste our time and bore us to tears. We had a friend who was trapped in a relationship that he told me one day over lunch was so boring he was actually spending 7.567 hours a day crying. And that was minus any regression to the mean. I had never met his wife. And when I asked if he was married to an economist, he started sobbing uncontrollably: "How'd you know? Harvard!"

He kept sobbing. No matter what I said. It was getting embarrassing. The place was high noon full and the people at all the other tables were staring at us. The manager finally came over, called me aside and demanded that I leave.

"Me? What did I do?"

He gently placed his hand on my shoulder and nudged me in the direction of a sign on the wall above the counter. "We don't tolerate the e-word in this establishment. You will be asked to leave immediately."

A physician friend of ours many years ago told me this story. When he was a resident at a large, cold indifferent big county teaching hospital, he was assigned an old gentleman in his late 80s. His body was frail but his mind was laser-beam sharp. He spent his entire career trading commodities, starting out as a young man trading cotton in Memphis. The old guy was terminal and they both knew it.

My friend the physician said the hospital was so crowded they had to move the old guy's bed into a spare closet were there was only room for a rickety metal nightstand and one chair. A withered, yellowing birthday card from a niece somewhere back east sat on the nightstand. The date inside the card, one of the old guy's few possessions, was 10 years old. He proudly showed the card to anyone and everyone who showed any interest.

For most that passed in and out of his room he was understandably just an old guy really late on the back nine of his life. To my friend he was a treasure trove of information, in some light worthy of the status of a national monument, the way he could pull long forgotten streams of commodity prices out of his head, each with its own fascinating story. 

Now my friend the physician had a secret, secondary interest, a burning one to learn all he could about commodities and hoped one day to trade them. So when he found out about the old guy's past, he struck up a friendship and would take time out each day to sit and visit. One day he asked the old gentleman what commodities he traded.

"Everything from cattle to cotton to soybeans to wives," the old guy chuckled. "I made millions, lost them, made the back again and lost them. It was a quite a ride."

As the end approached and they both knew it was, though he said they never discussed it, my friend spent more time at his bedside exchanging quips and such, telling stories.

"Is there one thing you learned over all those years," my friend asked?

After a brief pause, he said the old guy fastened those clear cobalt blue eyes on him and smilingly said: "Here's something you might want to remember. It's a point those politicians, regulators and bureaucrats never get and probably never will. The cure for high prices sooner or later is high prices."

And that's when this charade will end. Someone will decide that prices are too high. The butterfly will flap it wings, the tsunami will start...... and it won't matter one damn big econometric model or another what anyone says.