Citadel Moves To Miami

Ken Griffin Takes His Tax Return With Him

People hear a lot of stuff about Chicago. I lived there for 59 of my 60 years, so I know a little bit about the place.

It’s supposedly got a diverse economy according to mayor after mayor. But, the truth is, Chicago would be a grease spot on the prairie if it weren’t for trading and commodities. St. Louis would have been the center of the universe in the Midwest.

In 1848, the CBOT opened its doors. That brought speculators from all over the globe. It enticed the rail lines to be built to Chicago. Successful traders donated money and made things like the collection of art at the Art Institute. They built many of the famous old buildings on LaSalle St. When the great fire happened, it was the trading community that stepped up and helped Chicago rebuild.

I used to tell politicians we grew “locals” in Chicago like farmers grew corn. Locals were the traders like me that speculated in the trading pits on the floors of the four exchanges; CME, CBOT, CBOE, and MidAm. There were people that really knew the trading business and they worked in the clearing firms, and at places like the OCC.

Of course, CME bought CBOT and the CBOE is still independent. For the most part, traders aren’t on the floor anymore but behind a screen. The floor kept thousands of people in Chicago.

Ken Griffin didn’t grow up in Chicago like me. He went to Harvard but grew up in Florida. He could have gone to New York to set up shop but chose Chicago. It was easy to attract trading talent and it was less competitive.

Griffin became the wealthiest person in the entire state of Illinois and it is not even close. Like the traders before him, he donated millions to Chicago civic life.

Today, he announced he is taking his tax return and moving to Miami.

He tried to change things. He donated $600 million dollars to local charities. He plunked down $45MM in the governor’s race and his candidate will probably lose the primary. Chicago is still the city where we don’t want nobody nobody sent.

There is one reason for the move. He can’t recruit the best talent to Chicago anymore. Chicago used to be the city of big shoulders. Now, Chicago is a city on the decline, and so is the state of Illinois. I got out myself in 2020. Chicago is the city of slumped shoulders.

The reason I left was property taxes and safety. Interestingly, if you are 59 1/2 and draw a pension in Illinois, it’s a zero-income tax state. Property taxes were one reason we crossed Texas off our list to land.

I remember when Dade County, Florida was not safe. It was the 80s and early 90s. But, that’s all changed and people are setting up shop there.

Chicago isn’t safe. It’s always been corrupt. That’s caused the city to have high taxes. 10.25% sales tax rate in the city and some of the highest property taxes in the United States. I know plenty of people paying $25,0000 and up per year for property taxes. Some people I know would say $25k is a bargain. People would deal with the corruption as long as they were safe. It’s not the gem on the lake that it once was. It’s sad.

In my old neighborhood, women get assaulted on the street in broad daylight. Carjackings are on the regular. Shoplifting goes unprosecuted. The alderman does nothing.

The last time I was there, I stopped by my old building and talked to the doorman. He told me it was very different. Not safe. There was a shooting at North Avenue Beach the other day. My wife and I used to go there a lot in the summer and fall.

Everyone is leaving.

Griffin’s security detail had an attempted carjacking once. Guess that “honor student” was surprised at the outcome. Griffin’s building is the toniest one in town and is in the North Michigan Avenue neighborhood near the Drake and Four Seasons hotels. It would be like trying a carjacking on the Upper East Side of NYC in the most expensive co-op.

Employees are not safe going into the Loop anymore. My friend was mugged twice in broad daylight prior to Covid. It’s not Covid. It’s the city prosecutor Kim Foxx and the mayor Lori Lightfoot. It’s the de facto head of the Chicago Machine Toni Preckwinkle. It’s Judge Tim Evans.

By the way, they are all female or black. It’s not as if Chicago is racist. Those days are long gone and have been for a while.

The direction of the city has nothing to do with their gender, skin color, or sexual orientation. The downward spiral is caused by their decisions and where they focus their efforts.

The governor of the state of Illinois is not any better. He’d have very few friends if he didn’t have a wallet. John Kass had some great prose about him yesterday.

As all this was unfolding, Democratic Gov. J.B. Pritzker, Illinois’ own Porcelain Prince who was born on third base thinking he hit a triple, headed off to New Hampshire for some presidential face-time.

President Pritzker? What’s his campaign platform, closing schools and churches while keeping strip clubs and liquor stores open while killing small businesses with a wave of his pudgy pink hand?

“I’d like to nominate J.B. Pritzker as an early write-in candidate for the John Kass Golden Moutza award for his exploratory presidential trip to the East Coast,” writes Brian Gilmartin. “Considering he has accomplished very little during his term, other than kick the can down the road, it’s truly humorous he’s thinking of himself as presidential material.”

The question on everyone’s minds is who is next to leave? There are huge high-frequency trading firms based in Chicago. No doubt, with Covid they embraced remote work. But, those kinds of firms like everyone to be in the office.

Miami sure seems enticing. It isn’t just because it is zero tax. It’s because a network is growing there. Traders from Wall Street and Chicago are moving there. Venture money from San Francisco is moving there. Crypto is thriving there. Hedge funds are moving there and setting up shop.

If I were running an HFT firm in Chicago, I would have a Miami office.

Just a point of information. Miami has a Republican mayor. The state of Florida is Republican, and growing its Republican base. The new move-ins aren’t going to be voting Democratic and the Democratic Party is losing Hispanics and Blacks. A big difference between Chicago and Illinois who can’t wait to put jackboots on your neck and shake you down for a little more money.

Our venture fund had a small portfolio company, MLTech, move from Chicago to Miami. An aside, I just saw ML’s recent results. Trading strategies on their platform had positive double-digit returns with no real drawdowns in the recent crypto crash where all crypto tokens lost double-digit value.

The exchanges could move there but won’t in the near term. There is one thing that would cause them to move overnight. If the city of Chicago or the state of Illinois decided to put a transaction tax on trading, they’d be gone in an instant. I am not sure they’d fight it if it was proposed again. What’s the use? CME Group has leases but owns no real estate in Chicago. Data centers are fungible. CBOE just opened a brand new trading floor but that is easily replicable somewhere else. If the exchanges move, the OCC surely would move and so would all the support companies that drive their business models from the exchanges.

What would be left in Chicago?

Big law? Big Four accounting? Consulting? McDonald’s. Some satellite corporate offices for companies like Google.

The convention business used to be a big part of the Chicago economy but that has dribbled. Las Vegas and Orlando are dominating Chicago these days. Manufacturing used to be a big part of the economy, but it moved to Indiana and Wisconsin.

Chicago used to be a vibrant city. Not anymore. It’s over.

Believe me, I miss it. But, I wouldn’t go back right now.

Time for new kings of Miami Beach to emerge

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