Zombies to the Left, Cronies to the Right

Nov 25, 2015


Baltimore, Maryland

Richard Russell died on Monday. He was the author of Dow Theory Letters and the source of many of the 'old timer' remarks we have referenced for the last 15 years.

Richard was a believer in 'Dow Theory'. The idea, as we understood it, was that markets follow long, deep trends, from top to bottom...expensive to cheap...and back again.

The 'Primary Trend', he called it. And the goal was to always be on the right side of it. He even had a proprietary indicator - the PTI - which, he used to say, was smarter than he was.

It sounded easy enough. You tried to identify the primary trend...and then you stuck with it, long or short, until it reached its climax.

We had our doubts about the predictive power of the theory, but we always admired Russell's market instincts.

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The 'old timer' in him always had some insight - a comparison with a market in the 50s...a souvenir from his trading in the 70s...something a great investor had said to him in the 90s - that always made the Dow Theory Letters worth reading.

Then, there were the war stories. Especially later in life, he recalled his life as a bombardier in the Second World War. He flew dozens of bombing missions over Germany and Italy. He lived in terror that he would be shot down.

As a Jew, if he even survived the crash, he figured he would be in big trouble. And the more flights he made, the greater the odds that he wouldn't come back.

When the war in Europe was over, Russell's unit prepared for the assault on Japan. Having beaten the odds in Europe, he was sure that he'd never make back from Japan alive.

Often, he remembered how relieved he was when Truman dropped the atom bomb on Hiroshima and Nagasaki bringing the war to a close.

Russell was a thinker. He thought about politics. Art. Music (he loved jazz...and slept with the radio tuned to a jazz station). And he kept us all entertained and informed with his observations and recollections.

But mostly, he was obsessed with markets. And his enthusiasm, knowledge, and experience all came through in his daily writings, which he kept up until he was 91 years old.

Richard, we'll miss you. RIP.

Enough controversy...

Our trip back to the US went without a hitch. In Dublin, you can do 'Pre-Clearance' with US customs, which speeds your entry a bit.

Airport security is the sort of crowd-based reality we were talking about yesterday...

It exists in fact, but only because people believe certain things. They think they are made safer by pretending that any passenger may want to cause mayhem and that thorough screening for weapons removes the threat.

Is it so? Probably not.

First, because there really aren't many people who want to commit suicide on a commercial airline.

And second, because the screening process probably wouldn't stop a determined, death-bent terrorist anyway.

But we've had enough controversy.

Today, we're determined not to write anything that might give offense or unsettle readers.

But we promised to take up the subject of Argentina's president election. And you can't talk honestly about politics without offending at least half the population.

So we give a 'trigger warning': If you believe democracy circa 2015 is the finest political order ever to grace humankind...and that it is the ne plus ultra of civilisation, never to be improved or perfected...stop reading here.

Because it ain't necessarily so.

Elections are 'advance auctions of stolen goods', wrote Baltimore's own HL Mencken. Today's we write about the bidders.

At the risk of oversimplifying, the fault line in Argentina's election on Sunday was roughly between two groups.

Zombies versus Cronies

On the left were mostly zombies. On the right were mostly cronies.

The difference between the zombies and the cronies is not the amount of stolen property they are after...for both groups want all of it...but the unit price.

Cronies go after big-ticket items like government contracts, farm subsidies, and market protection.

Zombies - perhaps because they are more numerous - tend to favour unemployment comp, payoffs to union employees, and welfare programs.

That is the way it works south of the Rio de la Plata as well as north of the Rio Grande.

Mauricio Macri, the crony favourite, won Sunday's polling in Argentina, beating out the Peronist/Kirschner favourite, Daniel Scioli.

Macri is from one of the richest families in the country and was educated at Columbia and the University of Pennsylvania's Wharton School.

Being rich has its advantages, of course. But it comes at a price. Macri was once kidnapped and held in a basement box until finally ransomed by his father.

The story reminds us of Julius Caesar. He was captured by pirates who demanded ransom. Caesar said to them: 'You better hope they don't ransom me, because if they do, I'll come back and kill every one of you.' (Or, words to that effect.)

Caesar's family did pay the ransom. And Caesar did go after the pirates. They were caught and put to death, though Caesar allowed them to be strangled before they were crucified, in an act of mercy.

As far as we know, Macri never caught his captors. And he never had them crucified. Which just shows how much public life has degenerated since the Roman Empire.

You wouldn't expect a guy like Macri to have much of a chance on the Pampas.

After the huge immigration of Italians into Buenos Aires in the early twentieth century, the zombies are thick on the ground.

Not that there is something necessarily zombified about Italians. But it was the era of syndicalisation inspired by communists, socialists, and radical anarchists. The Italians joined the urban labour unions and favoured handouts to...guess who...themselves.

The showdown with the old Spanish cronies - whose fortunes rested on the rich farmland outside the city - took place in the mid 40s. That was when Robustiano Patron-Costas faced Juan Peron.

Patron-Costas had made his fortune refining sugar in Salta province in the far northwest. He was an investor, businessman, and entrepreneur. Peron had spent his career in the army.

As military attache to Mussolini's Italy, he learned how fascism worked. He discovered the secret to winning elections, too: promise the zombies more of other peoples' money.

Peron won.

The problem with socialism...

The voting population of the Buenos Aires proletariat had become so great that it could control the whole nation.

Since then, zombies - through the Peronist party, experts at zombie manipulation - have won almost all the elections.

And the few times they haven't won, they were able to drive the president from office before he finished his term.

But the trouble with socialism, observed Maggie Thatcher, is that eventually you run out of other peoples' money.

That is the problem that caught up with the Kirchner government.

It promised the stolen goods, just as it always had. But it was becoming harder and harder to find something to steal.

Inflation is running as high as 30%, according to private estimates. And the government doesn't have enough money to meet its upcoming debt payments, let alone pay off the zombies.

Something had to be done.

So, on Sunday, the voters elected the crony candidate. His job will be to rebuild the economy - giving out generous plums to his friends and supporters in Cronyland, of course.

Then, when the zombies take over again, they will have more of other peoples' money to work with.

Bill Bonner is the President & Founder of Agora Inc, an international publisher of financial and special interest books and newsletters.

Disclaimer: The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

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3 Responses to "Zombies to the Left, Cronies to the Right"


Jul 22, 2017

Very insightful. Could you present a similar article for India. We would love your insights!


Rushabh Doshi

Nov 26, 2015

Nicely put!


Sriram Gopalan

Nov 25, 2015

What a brilliant similarity to the Indian political scenario today. The Congress and the Left as well as other regional parties are our zombies while the Bjp is the crony today. While the former is indulging in the so called policies to please the poor the latter is obliging the rich. As Bill rightly pointed out the zombies are today left with little options for stealing.

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