The Windy City’s Last Gasp
As the postmodern Babel of the Midwest, Chicago stands precariously at the edge of a profound and irreversible paradigm shift. Once a city of ambition and industry, today its towering achievements cast long, wavering shadows over streets marred by decay and desperation, fueled — let’s be truthful, shall we? — by over a century of corruption. At the heart of this unraveling metropolis lies the Chicago Mercantile Exchange, or CME. Founded in 1898 as the Chicago Butter and Egg Board, the exchange is the last link to the financial might of this city nearly stripped of its fast fading glory. A symbol of Chicago’s past dominance, it remains (for now) a key player in the global financial arena, even as the city that birthed it furiously digs an illiquid grave beside Lake Michigan.
From inner Winnetka to outer Wilmette, the decline has been no overnight affair. Looking back on the unhallowed Covid Project, Chicago was among several perfect targets for a global tremor that could shake loose its foundation stones locally, already hollowed as it was by years of neglect and mismanagement.
Whereas the global fallout from the pandemic fracas was predictably severe, it was the city’s “irresponse” — for what else can it be called? — that set the stage for its final act. Having invited a mixed migrant army within their sphere of association, Chicago’s leaders then funneled hundreds of millions of dollars into subsequent social services suspiciously missing measurable ROI targets that left a plentiful lack of much-needed money either for the crumbling infrastructure or its resident institutions that had long been its financial spine. The coffers, already a tinny sounding tummy, now ring dangerously dry.
At a time when more conservative cities would shore up their defenses, Mayor Brandon Johnson’s administration — wrestling a $30 billion pension shortfall and a city circling the drain — instead proposes an $800 million tax hike. It’s a bold move that certainly threatens to drive out the very businesses keeping the city’s economy commodified. The CME, although not the only institution feeling the pressure, surely sticks out in this game of business brinksmanship. If the Exchange joins the exodus of firms fleeing the Windy City, the shock wave could not only blow Beverly from the Loop to South Lawndale, but reverberate statewide to boot … and a potential CME departure is but one ingredient in a more complex stew of volatility. Chicago’s streets, since before Capone the very setting of opportunity and promise, now tell a different story — one of public disillusionment. The pandemic bugaloo laid bare the city’s already torn social fabric. As quasi-organized crimes from scams and scandals to violence and property destruction surge and evolve, Chicago’s defenses crumble and residents are left wondering if there is any leadership upstanding enough to pull it back from its beleaguered brink.
The city’s financial woes are merely the outer skin of a pungent woke onion that, the more your vexed peeling stings it, viciously bites back at investigation. Long-time residents feel abandoned by a system more concerned with political optics than with lasting tangible solutions to their genuine problems. The humanitarian crisis created by their leaders, ostensibly to expand their influence ahead of growing no-confidence among erstwhile constituents, exacerbates the feelings of neglect. Resources that could have been used either to repair the infrastructure or to fund essential services were instead diverted to support the influx of newcomers. While the moral argument for aiding those in need is undeniably strong, the inevitable buyer’s remorse of socialism is arguably stronger, considering its well-documented toll. The practical implications leave Chicagoans questioning the city’s priorities, when they could instead simply have answers if they thought for themselves. They were intentionally miseducated to begin with, however, and trained to outsource their thinking. As surely as ROI is fractal, opportunity costs compound.
Indeed, this tragic tension between ideals and reality is nothing new for Chicago. The city has always been a microcosm of the broader American experiment, a place where the best and worst of the nation’s ambitions collide. The 1968 Democratic National Convention in Chicago was the epicenter of political and social unrest, as the city turned into a battleground. The streets ran with the same tension and anger that pulses through them today, with scenes of chaos broadcast across the country. Mayor Richard J. Daley, with his iron-fisted approach, sought to maintain order by any means necessary, and in doing so deepened the divide between the government and the governed. The “Battle of Michigan Avenue” became a symbol of the era, a moment when the American dream looked ready to buckle under the weight of its contradictions. Inside the convention hall, the Democratic Party was fracturing, unable to reconcile its internal divisions over the Vietnam War and civil rights … i.e. the age-old free-lunch problem. Outside, the city was burning, both literally and figuratively, as once again, a generation of young Americans was duped into marching to demand change instead of making it themselves.
Fast forward to today, the eve of the 2024 Democratic National Convention as I write this, and while the faces and issues have changed, the underlying tensions are eerily similar. Tensions from global warming to outright hot war in the Middle East echo the unrest of 1968, albeit through a postmodern lens. Security is at a fever pitch, pallets of bricks have been discovered and removed, while nearby business have wisely boarded-up their windows in advance of advertised unrest. Social media, a largely misunderstood digital battleground, is poised to amplify any grievance and turn every local outburst into a meme or movement if possible.
While the tools of dissent and control have evolved, the world watches as Chicago and the DNC alike struggle to figure themselves out. Amid the madness, the CME remains a cool-headed player, though its role as a commodities arbiter is easily overlooked by laypersons. So, while the city burns around it like the premonition of a Fire Sale, the venerable exchange operates within, and even imposes some amount of order upon, the rising volatility. It is the leading indicator to watch.
Unlike the street-side dysfunction, CME Globex, the exchange’s trading interface, transacts with the precision and speed that modern market makers demand. Yet, this pillar of stability is not immune to such historic stressors. The proposed tax hikes, coupled with the ongoing descent into disorder, threaten to drive the CME away from the city that has been its home for over a century. If the CME leaves, it won’t just be a loss for Chicago—it will be a sign that the city’s best days are truly past.
While the exit of other major firms like Citadel and Guggenheim has already shaken the financial ecosystem, the loss of the CME would be the death blow that signals to the world that Chicago is effectively closed for business. The ripple effect would be felt from O’Hare to as far as Traverse City, Bad News Bears for all as otherwise uncorrelated local economies heretofore unknowingly reliant on high earners in commodities and derivatives trading collapse and leave behind cityscapes of desolate storefronts and empty offices reminiscent of Seattle or Santa Monica.
Protests against Mayor Johnson’s policies seemingly echo the Israelites’ cries in the wilderness — voices rising in desperation as they confront a leadership either unwilling or unable to guide them to safety. The CME, though largely insulated from the daily turmoil, is not untouched by the direction the city’s leadership takes. My lower timeframe chart-work suggests that decisions made in the coming months will determine the future of the exchange and, in turn, of Chicago itself.
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As traders are wont to say, “Show me the chart and I’ll tell you the news!”
The parallels between 1968 and today are striking, with the critical difference being the stakes’ unprecedented hight. While in 1968 the battle was for the ideals of a nation, today it is for the city’s very survival. The CME, while not on the frontline of the battle, per se, remains a key player, its fate tied to that of its namesake host. Decisions made by the city’s leaders in the coming months will doubtlessly determine whether Chicago can pull back from the brink, or if it joins the ranks of history’s fallen city-states.
Verily, the departure of the CME would be a major economic blow. As one of the world’s largest financial exchanges, it is a massive employer and contributor to Chicago’s economy. Any actual relocation will lead to job losses, not just directly from CME but from related financial services firms and support industries. The speculative impacts of a CME relocation to Texas would also include further erosion of tax revenues for both Chicago and Illinois in favor of the new host state, while cementing the latter’s growing reputation as a business-friendly financial hub.
While Texas Governor Greg Abbott has expressed bemused interest in CME Group relocating to Texas — who wouldn’t, right? — note that as of now, this angle is purely speculative. The CME has not announced any plans to move, officially or unofficially. Although my charts of CME Group’s stock price indicate trend exhaustion and a potential mean reversion, any actual relocation in the real world would be a complex, multi-year process involving many stakeholders, as well as careful consideration of the impacts on the company and the broader financial markets. The future of Chicago, like that of the CME, hangs in the balance. The choices made in the coming weeks will determine whether the city, and indeed the region, can reclaim its status as a beacon of American ingenuity and resilience, or whether it will fade into obscurity, a relic of a bygone era. The CME, the last great pillar of a once-mighty edifice, may yet stand firm — but only if the citizens find the courage to support leaders who challenge them instead of promising easier living. Chicago’s ultimate fate remains uncertain, but its unwritten future is rapidly shrinking and sooner than later we will know which way the wind blows.
? adrian dyer, 2024
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