Turning Passions Into Interests

“He’d give you the shirt off his back” [Morning Reckoning] April 25, 2024 [WEBSITE]( | [UNSUBSCRIBE]( Turning Passions Into Interests Asti, Northern Italy April 25, 2024 [Sean Ring] SEAN RING Good morning Reader, "He'd Give You The Shirt Off His Back." To me, the above quote describes a nice, poor person. There’s nothing wrong with that, but I never understood why that compliment was the highest you could give a man. It's almost like saying, "He's a great guy, but he can't organize his financial affairs." Folks, there's a reason stewardesses tell you to put your mask on first before you help anyone else when you're on a plane. You've got to take care of yourself before you can help anyone else. This leads me to my old neighbors when I was living in the Philippines. [“I traveled over 1,000 miles to show you this strange device…”]( [Click here to learn more]( He traveled 1,000 miles away from home… To show you this strange device on a farm in rural Virginia. You won’t know by looking at it, but a secret company behind this strange device could hold the potential to make you rich over the coming years. [Click here to find out how.]( [LEARN MORE]( The Worst House in the Best Neighborhood Thanks to a horrible storm just before we were moving to Italy, I now have a keen understanding of why real estate agents tell you it's better to own the worst house in the best neighborhood rather than the best house in the worst neighborhood. We didn’t live in the worst house, by the way, not by a long shot. But some of the villas in our subdivision are impressive. They're not McMansions of the cheap American kind. You can't build that crap here with the humidity. The house would rot within a year. But these houses are big, fitted with their own generators, and perfect for this humid climate. Unfortunately, my landlord was a cheapskate and didn't kit out the house we were living in with its own generator. I'd have had no problems besides cash and gas if he did. But here's the thing. These professionals, business owners, and entrepreneurs - all people whom middlebrow bureaucrats would have us hate — are the very people who've made my family's life bearable during the disaster that struck. Our next-door neighbors, doctors both, handed us a 50-meter extension wire to plug in our gadgets. They have a generator and loads of excess kilowatts. Because of this, we were able to reach our families to tell them we were safe. And we slept much better with our fan cooling us during the night. Our across-the-street neighbors had loads of fresh, running water because of their generator. We filled up twelve 5-gallon jugs per day to wash and shower. And we’re not the only ones. Folks are coming from miles around to get their water. And it's nothing to them. Why? One, because they're really lovely people. And two, because it's easy to be generous when you're rich. Money Making as an Interest Years ago, I picked up The Passions and The Interests: Political Arguments for Capitalism before Its Triumph by Albert O. Hirschmann. It's one of those books I bought for my Umberto Ecoian "anti-library." That is, it was for reference and research. But I wish I had read it sooner. It's as rich as a chocolate gateau, an epic treat for those who ever wondered how we went from seeking God to seeking glory to seeking riches — and how and why we did so. Hirschmann takes you by the hand through the seventeenth and eighteenth centuries to show you how those who fought for capitalism won the ideological argument. Regrettably, I can't take you through a full review. But I will tell you about a few things that jumped out at me and how they relate to the issues at hand. Whose Hand Was That? The first thing that shocked me was that the Invisible Hand was an invention of Montesquieu, not Adam Smith. Montesquieu wrote that the pursuit of honor in a monarchy "brings life to all parts of the body politic," and as a result, "it turns out that everyone contributes to the general welfare while thinking that he works for his own interests." That's the Invisible Hand leading you to glory, not riches. But I like Smith's adoption of it for the latter purpose. It was essential to counteract the church's ideas — especially St. Augustine's — that lust for money, power, and sex were man's three principal sins. It's as Easy as 1, 2, 3! First, they tried to repress and coerce man. St. Auggie - I went to Villanova, I get to call him that — and old Johnny Calvin were big fans of this. But it wouldn't take. By the Enlightenment, the day's best and brightest realized that The State suppressing these vices didn't solve any problems. They just created incentives to circumvent authority. Sound familiar? Second, the powers that be tried to harness the passions. This was better, but we're not there yet. Giambattista Vico, the great Italian polyglot, wrote: Out of ferocity, avarice, and ambition, the three vices which lead all mankind astray, [society] makes national defense, commerce, and politics, and thereby causes the strength, the wealth, and the wisdom of the republics; out of these three great vices which would certainly destroy life on earth, society thus causes the civil happiness to emerge. This principle proves the existence of divine providence: through its intelligent laws, the passions of men who are entirely occupied by the pursuit of their private utility are transformed into a civil order which permits men to live in human society. Hegel's concept of the Cunning of Reason echoes this by saying men, following their passions, actually serve some higher world-historical purpose of which they are totally unaware. The State would be a transformational force rather than a coercive one in this role. Essentially, let the people do what they want, as long as they make money and don't infringe on the rights of others. But the central issue was how this transformation happens. This is where David Hume comes in, and The State exits. Hume wrote in his Treatise, "Nothing can oppose or retard the impulse of passion but a contrary passion." As an aside, I remember watching Samuel L. Jackson talk about how getting addicted to golf got him off his drug addiction. For Robert Downey, Jr., martial arts replaced drugs. I thought both their stories were nonsense until today. The great thinkers of yesteryear wanted the body politic to substitute "passions" with "interests." No coercion. No repression. And no State, funnily enough. Just find something more beneficial to which you can get addicted. And boy, does making money suit that bill! Dr. Johnson himself once said, "There are few ways in which a man can be more innocently employed than in getting money." To them, passions were wild; interests, harmless. To be sure, it was important to pursue wealth sensibly. When indulged to excess, it can lead to disastrous results. If only these guys could've seen Enron, Lehman, and Evergrande! But even better, they should see my neighbors — and all those who lent a hand to one another during the crazy disaster a few years ago… Wrap Up I'm not a philosopher per se, so I hope my casual writing sufficed. I think the idea that we're all against each other in some sort of class war is Marxist nonsense. I saw more goodness during the cyclone aftermath than I had for a long time. Yes, the benefactors have money. Yes, the beneficiaries don't have as much. To me, the message is to become as financially successful as possible. That way, you can "feel possession," as psychologists say, and once you do, you can pass on to others what you don't need or want. All the best, [Sean Ring] Sean Ring Contributing Editor, The Morning Reckoning feedback@dailyreckoning.com X (formerly Twitter): [@seaniechaos]( [Trump, Biden, _______?]( There are three potential outcomes of the 2024 presidential election – and not a single one is good for the American people. In fact, the secret “third candidate” that no one’s talking about poses the biggest threat of all… [His identity revealed here.]( [LEARN MORE]( In Case You Missed It… Grab a Coffee… We’re Trading All Night Greg Guenthner, Editor [Greg Guenthner] GREG GUENTHNER Good Morning Reader, The New York Stock Exchange is considering moving to 24/7 trading, the Financial Times reports. At the risk of sounding like an old crank, I must admit that I absolutely hate this idea. Sure, the younger generation might love to trade meme stocks and manage their crypto holdings at 3 A.M. But I need what precious sleep I can get. The last thing I want is my brokerage account pinging me with price alerts at all hours… A market that never closes would kill the excitement and anticipation of the opening bell – and the great FOMO buying sprees that have accompanied so many power hours between 3 P.M. and the close. A 24/7 market would lose much of the drama and personality that make the day-to-day grind so captivating. Perhaps I’m overreacting. After all, I’m probably not the only one concerned about trading a market that’s always open for business. In fact, I’d venture to guess that your local technology bull has been pacing the floor most afternoons this month, praying for that closing bell to ring… Yes, the tech trade is taking its licks following a historic Q1 performance. And while I wouldn’t consider the recent downside action panic-inducing, I doubt anyone who recently bought shares of their favorite semiconductor or Magnificent Seven marvel is too pleased with the April drawdown. The Wall Street Journal laid out the ugly numbers in black and white early Monday morning… The Magnificent Seven mega-caps shed a combined $950 billion in market cap last week. Following this year’s incredible melt-up rally to new highs, this routine pullback now claims the honor of being the largest drop in value ever from this esteemed group. And while there’s no reason to get long-term bearish on the prospects of many of these tech darlings, you can probably figure out why more than half of respondents in a BofA Securities survey claim owning these stocks was the “most crowded” trade on Wall Street, again via WSJ. But the Magnificent Seven names got off easy compared to some less fortunate groups out there. Tech-growth stocks tumbled (many of these plays have been losing ground since early March as rate-cut expectations fell). Consumer Discretionary names dropped nearly 4% on the week, logging their third straight weekly decline Then we have our poor semiconductors… The VakEck Semiconductor ETF (SMH) tumbled almost 10% last week, breaking below a wide consolidation range to levels we haven’t seen since late February. Again, it’s no secret that we’re dealing with some crowded trades here. But any way you slice it, NVIDIA’s 13% drop and Super Micro’s 20% beatdown created some serious psychological pain for the bulls even though both these stocks are up significantly year-to-date. To be clear, I’m not attempting to throw salt in the wounds of any investors taking a hit during this semiconductor downturn. But I do think it’s important to learn to identify when trends like these become overextended — and what you should do when they lose momentum and begin to show signs of a potential breakdown. What’s (Not) Working in This Market… We’ve been talking about some of these bubbly groups since January — and the party was bound to stop eventually. Now, gravity is taking over. I was admittedly early (aka wrong) when I first mentioned a few signs of market froth way back in January. We were entering a seasonally weak stretch for the stock market and I was prepping for choppy, sideways conditions to appear in February, which is usually a tough month for the Nasdaq. Yet as I look back on my concerns from late January, many remain obvious pain points following last week’s tech pullback. First, small-caps were lagging earlier this year following a strong Q4 performance. The Russell began the year in the red and did not break out above its December highs until late February — failing to keep up with the Nasdaq Composite and S&P 500. Select growth names were also noticeably absent from the top movers lists. Tesla Inc. (TSLA) is the most high-profile example. It broke from the Magnificent Seven outperformers after reporting disappointing earnings, losing 25% of its value in January alone. Tech-growth bellwether ARK Innovation ETF (ARKK) was also underperforming by a wide margin in January, no doubt affected by its large TSLA stake and other flagging positions. Fast forward to this week and we have a potential false breakout in small-caps as the Russell 2000 tumbles as much as 9% from its April 1 highs. Meanwhile, TSLA is down a staggering 43% year-to-date and is scheduled to report earnings tonight after the closing bell. Now, the semis are joining the downside party. I think it’s safe to say that we should expect additional weakness to creep in across the market as one of the year’s biggest winners settles into correction territory. Choppier for Longer The melt-up rally that began in early November lasted a lot longer than we initially thought. Now that the momentum has subsided, we should prepare for choppier conditions. That probably means more false breakouts and fewer stocks pushing new highs for the time being… Back when SMCI was ripping higher every day, I laid out your choices: sit on your hands and sulk because you didn’t grab shares, or get to work searching for the next opportunity. For the record, I don’t think a semiconductor correction is the end of the world. But I do think stocks need to go down/sideways for a while. A little pain going into the summer is just what the doctor ordered to bleed off some of the excess enthusiasm. A busy earnings season is already upon us. TSLA and MSFT are coming in hot this week. These reports could set the tone, and align with some other big names that are set to announce numbers soon. That should add to the volatility. The easy weeks are behind us. Time to prep for a little pain as indecision creeps into to an overheated market… Best, [Greg Guenthner] Greg Guenthner Contributing Editor, Morning Reckoning feedback@dailyreckoning.com Thank you for reading The Morning Reckoning! We greatly value your questions and comments. Please send all feedback to [feedback@dailyreckoning.com.](mailto:dr@dailyreckoning.com) [Sean Ring] [Sean Ring, CAIA, FRM and CMT]( is a former banker and financial educator and is the editor of the Rude Awakening. Sean has trained interns and graduates from Goldman Sachs, Morgan Stanley, Citi, Bank of America, Standard Chartered Bank, DBS (Singapore), the Abu Dhabi Investment Authority (ADIA), Bank Indonesia (the central bank), HSBC, Barclays, RBS, and BlackRock. He knows the global economy is being corrupted by forces that most people can't understand and has used his unique and worldly experiences to help people navigate the markets. 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