[In]Securities Guest Blog: Singing An American Tune By Aegis Frumento Esq

November 6, 2020


Singing An American Tune

Writing of the 1960 election, Theodore H. White said that no one had succeeded in transferring power as effectively as the Americans. "Yet as the transfer of this power takes place," he wrote in The Making of the President 1960, "there is nothing to be seen except an occasional line outside a church or school, or a file of people fidgeting in the rain, waiting to enter the booths. No bands play on election day, no troops march, no guns are readied, no conspirators gather in secret headquarters."

So it appeared to be this week, 60 years later. For all of Donald Trump's talk of revolt and violence, and for all the plywood put up by scared shop-owners, this election looks to end with the whimper of trivial lawsuits. All that bodes well, better than we deserve, really. Trump may need to be bodily ejected from the White House, but the rest of us are just as glad to have the whole thing done with.

As I write this, no victor has been called by any of the media sites that typically anoint the winners. I'm guessing Joe Biden will end up being the next president. Not because of the polls, which were as wrong this time as last -- except more so. Nor even because most analysts think Biden will ultimately win Arizona, Nevada, Pennsylvania and even Georgia. No, I've given up on pundits and pollsters. This time, I'm following gamblers.

I'm talking, of course, about the betting markets. These are illegal in the US these days, but still thrive overseas. In my experience, those who wager real money have a better intuitive sense of odds than eggheads with calculators. In fact, research shows that betting markets are at least as reliable at predicting election outcomes as conventional polling. Actually, they were more reliable in the days before there were polls. See http://www.columbia.edu/~rse14/Erikson_and_Wlezien_Prediction
In other words, the advent of polls degraded gamblers' intuitions and made them less reliable. After this cycle, we should rethink the whole polling exercise. I suppose internal polling is useful to educate campaigns about what's bugging particular voters in particular places, but the use of polls to predict outcomes may be a form of misinformation as damaging as any Russian hacker farm or Trump tweetstorm.

Anyway, the betting markets say -- on this Thursday night -- the odds are 7-to-1 that Biden is elected. See, e.g., https://smarkets.com/listing/politics/us/us-presidential-election-2020 . In fact, the betting markets have been favoring Biden since June, as did the polls. However, unlike the polls, betting markets do not tell you by how much Biden was going to win, just that he probably would. So, while the polls were predicting a landslide, the betting markets were just giving Biden a 1.8-to-1 advantage as of 2pm on election day. See https://www.realclearpolitics.com/elections/betting_odds/2020_president/. That's a big difference. The polls predicted a grand repudiation of Trumpism. The betting markets didn't, and in the end none came.

Now the election's over but the counting, and whoever wins, one pundit or another will lecture us about its "lessons." Listen: No one knows what the electorate is telling us, because the "electorate" doesn't know what "it" wants, any more than do we who make it up. Or more likely it -- we -- want many things, and since we contain multitudes, we contradict ourselves. Very well, then. But that means we won't ever find the needle that will satisfy our hopes and dreams by sifting through a haystack of election data. 

The very question -- What do the people want? -- suffers no logical answer. It is very much like a Zen koan. Zen initiates try to achieve enlightenment, satori, by meditating on the meaning of incoherent questions like, What is the sound of one hand clapping? Monks will spend years trying to make sense of such a question, and during their training they will periodically go to their master and present an answer. Invariably, the master will tell them they haven't got it, and send them back to their cushions. The master will never explain it himself. In time, and maybe only for a time, the monk will understand the koan and, for that moment, be enlightened. But the monk is as likely to lose that state as to retain it. Satori is not forever; it must be continually worked for.

In this election, the electorate played the role of the Zen master, and the candidates that of the monk. The candidates suggested various answers to the civic koan, "What do the people want?" They want a nationalist strongman. No, that's not it. They want the economy opened and the coronavirus to take its course. No, you don't have it. They want the wall, and law and order. Nope. They want someone who's not Trump. Better, but not quite it. They want radical progressivism. They want the Green New Deal. They want normalcy and decency. No, none of that is quite it. If they were, we would have seen that blue wave the pundits kept talking about.

And so, we've sent ourselves back to the meditation room. I suppose that's fitting. Our communal problems have taken a half century to fester, some of them four centuries. This year especially we've been battered and shattered and driven to our knees. It will take more than one election to figure out what went wrong. We should approach things realistically, practically. Grab a problem and try to fix it. And if that doesn't work, try something else. Just keep trying to solve real problems in a real way, one after another, relentlessly. The simple answer to the sound of one hand clapping is to ignore the question and just make tomorrow another working day. 

We can't be forever blessed, but we never were. We've only ever been blessed now and then, because blessedness, like satori, comes and goes. We're due for a blessing about now. Let's work at it. But let's get some rest first.


Aegis J. Frumento

380 Lexington Avenue
New York, NY 10168

Aegis Frumento co-heads the Financial Markets Practice of Stern Tannenbaum & Bell, New York City.  He represents persons and businesses in all aspects of commercial, corporate and securities matters and dispute resolution (including trials and arbitrations).  He has decades of experience representing SEC, CFTC and FINRA regulated firms and persons in regulatory enforcement investigations, hearings and lawsuits.  Drawing on his five years managing the Executive Financial Services Department of Morgan Stanley Smith Barney, Aegis has rare depth of experience in the securities and corporate governance laws affecting senior executives of public corporations.  When not litigating, Aegis enjoys working with new and existing broker-dealers, registered investment advisers, and private equity funds, covering all legal aspects from formation to capital raising. Those clients now include industry professionals looking to adapt blockchain technologies to finance and financial market enterprises, including the use of cryptosecurities to represent equity and debt interests. 

Aegis's long and distinguished career includes having been a Managing Director of Citigroup and Morgan Stanley, a partner and the head of the financial markets group of Duane Morris LLP, and the managing partner of Singer Frumento LLP.  He graduated from Harvard College in 1976 and New York University School of Law in 1979.  Aegis is a frequent author and speaker on securities law issues, and is often quoted in the media on current securities law developments.  He is the current Chairman of the New York City Bar Association's standing Committee on Professional Responsibility.

NOTE: The views expressed in this Guest Blog are those of the author and do not necessarily reflect those of BrokeAndBroker.com Blog.