(2025-04-21) Hunt Wall Streets Not So Golden Rule

Ben Hunt: Wall Street's Not-So- Golden Rule. We’re all familiar with the Golden Rule — Do unto others as you would have them do unto you — and I don’t think it’s a stretch to say that its message of reciprocity and empathy is the bedrock of human civilization, certainly of Judeo-Christian thought. As Hillel the Elder said, “What is hateful to you, do not do to your neighbor. That is the whole Torah. The rest is commentary.”

There’s a variation of the Golden Rule — I don’t think it’s a stretch to call it a perversion — that is the bedrock of the business of Money

That perversion of the Golden Rule is this:
Do unto others as they would do unto you. But do it first.

What mattered is that you must act first when you have even a suspicion of counterparty risk, well before you know for sure whether or not you are ‘right’ about that risk, because everyone else on Wall Street will act first if you don’t. And if you don’t act first, or at least early … if you wait until you’re sure that there’s a counterparty risk … well, you’re screwed.

The first time I experienced that blecch feeling keenly was in December 2007 when I called our Bear Stearns rep and told him that we had decided to leave Bear Stearns as our hedge fund’s prime broker and we were pulling our money out

What you need to understand is that I didn’t like working with Bear Stearns … I loved working with Bear Stearns. Loved the people, loved the attitude, loved the business terms.

It didn't matter.

Once I figured out in late fall of 2007 that if we had a nationwide decline in home prices, Bear Stearns faced enormous potential losses in the mortgage-backed securities that they owned, losses big enough to wipe out the entire bank because of their internal leverage on assets – or rather, once I suspected that I had figured this out, because you never know this stuff for sure unless you’re on the inside — then I knew for a certainty that it was only a matter of time before other prime broker clients of Bear Stearns would come to the same suspicion.

In December 2007, Bear Stearns still traded for over $100/share. In three months, it was below $5, before finally being taken out by JP Morgan for $10/share in a mercy killing

If you’re in the business of Money for more than a nanosecond, you will see this not-so-Golden Rule in action all around you. More to the point, if you want to stay in the business of Money and be successful in the business of Money, you must adopt and live by this not-so-Golden Rule yourself

if you’ve been entrusted with managing Other People’s Money (OPM) you have a moral if not legal obligation to do that rational thing despite the blecch feeling you have inside.

Why am I telling you this story?
I’m telling you this story because I think that Donald Trump a) recognizes he made a mistake by overplaying the tariff card, b) is sidelining the ideologue pro-tariff crew like Navarro and Miran, and c) is actively looking for off-ramps and de-escalation in the China trade war.

And it doesn’t matter.

(rest is paywalled)