Ken has been offering his thoughts on global markets, events, and trends on a weekly basis since early 2006. His rational perspective, based on decades of experience in risk management and analytics, provides all readers with helpful insights, commentary, and context. Both informative and entertaining, the posts offer clarity and simplicity, often using inspiration from his favorite artists and musicians.
Ken also authored Trading Risk: Enhanced Profitability through Risk Control (Wiley 2004), which challenged the traditional focus of risk management on loss avoidance. The book introduced a new risk management program that can help both money managers and individual traders evaluate which elements in a portfolio are working efficiently and which aren’t using an extremely simple set of statistical and arithmetic tools.
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- In Memory of…. Monday, April 22, 2024
Cmaj7, Amin7, Cmaj7, Bmin7
“In Memory of Elizabeth Reed”
******
Don’t fly Mr. Bluebird, I’m just walkin’ down the road,
Early morning sunshine, tells me all I need to know…“Blue Sky”
Forrest Richard Betts
I had a different theme in mind for this week, but it’s an eternal one, so I reckon it’ll keep.
Because, as often is the case, they’s droppin’ like flies lately, and duty impels me to attend to the carnage.
First, I’d like to offer a bit of tribute to my recently departed friend Mark Bagan, Chief Executive Officer of the Minneapolis Grain Exchange. Like the Exchange itself, Mark was low profile but formidable. And he was doing things with MGEX. And doing them, I think, the right way. Always accessible. Always willing to listen. Never avaricious. Never power-hungry.
I heard from a friend that he died this past week. And I feel diminished by these tidings. My mad love also goes out to his wife, Anne, who I’ve known for an improbable 35 years.
Perhaps also a word about Roman Gabriel, the LA Rams QB who was my guy when I was a little fella, first noticing the NFL. Before my moms whisked me from So Cal to Chicago, and I found the One True Way with the Bears.
Then there’s Dickie. And what’s to be said about his passing? Either a great deal or not very much. But let’s try to thread a needle.
Dickie is often overlooked/inappropriately excluded from the shredder pantheon – perhaps because, rising to fame as a founding member of the Allman Brothers, he shared lead guitar duties with the legendary Duane Allman, who justifiably earned his place among the axe-wielding immortals. In addition to his magnificent work with Les Brers, he not only guested on Wilson Pickett’s extraordinary cover of “Hey Jude”, but also was a full-fledged member of Derek and the Dominos during the iconic “Layla and Other Assorted Love Songs” sessions.
When the Wicked Pickett AND Clapton (considered by many – erroneously in my judgment – to be the greatest guitarist of all time) invite you into the studio, it ends the argument about your chops.
A goodly portion of Duane’s eternal fame is also, it must be stated, owing to his untimely death in a motorcycle crash in Macon, GA, in 1971. His legend endures.
But the Allman Brothers (by then down to a single Allman) carried on, with Dickie taking sole command of the six-string solo sections. They barely missed a beat – for a while. But of course, it couldn’t last. Greg and Dickie fought like cats and dogs. Greg himself went off the rails, first letting his manager take the rap on a nasty narcotics charge, and then, unthinkably at the time, marrying Cher.
It took Greg many years to re-establish his cred, and then he and Dickie carried on. But only for a while. Because, by all accounts, Dickie was a difficult character himself. Big ego. No filter. The surviving Brothers held it together episodically through the early ‘90s, but then Dickie was on his own.
His best work, though, is almost certainly his Brothers stuff, including his songwriting output, which includes “In Memory of Elizabeth Reed” (chords supplied above), “Ramblin’’ Man” and “Blue Sky” (lyrics supplied above).
Only now, in no small part due to Dickie’s passing, the skies look kinda grey.
The atmospheric change is abundantly apparent in market realms. Wasn’t long ago that the Naz, the 5 and the Dow were all annualizing at a 100% clip. Now, they’s barely registering a year-to-date gain.
What gives?
Well, the wars in Eastern Europe and the Middle East rage on. Domestic politics are in a beyond depressing state. Inflation has been muted but persists. The Federal Deficit expands like a desert fire. Nobody knows what the Fed is gonna do.
But wasn’t that all the case a month ago? When investors were bidding up risk assets with abandon?
It is my long-held observation, though, that markets will routinely react to identical sets of conditions in precisely opposite ways. And, for the rolling seven months between mid-August and early April, they shrugged off bad news and embraced any data point that could be contorted into a constructive catalyst.
For now, they don’t.
Because, while not widely reported, Captain Naz’s Adjutant General Cousin – the NASDAQ 100, is in full correction mode – down ~14% from highs registered exactly one month ago. Yields are up across the curve, and Mortgage Rates have risen, as the selling season emerges, to an ominous ~7.5%.
Heck, even the fabulous Bitcoin has dropped by ~10% — and this in advance of a concept that nobody understands called “halving”, which holds promise, somehow, to send this crypto top cat into the stratosphere.
Corporate Bonds across the Ratings spectrum are all on offer as well.
Conditions are precisely the opposite in the world of Commodities, where my late friend Mr. Bagan mainly rolled. Breakfast staples Coffee, Orange Juice and Eggs have all become more costly this young but aging year.
And as for Cocoa? Don’t ask (SPOILER ALERT: up 183% in ’24).
Lustrously drawing our attentions away from this is the performance of Gold, which is breaching one material all-time high after another:
I know a passel of folks who’ve been waiting for this breakout since 1971, the year when: a) Duane swerved around that truck and skidded to his death; b) Gabe led his last winning Rams team; and c) the United States abandoned the Bretton Woods Gold Standard. Justifications range from the logical (Gold, in fixed supply, had served admirably as a ballast to fiat currency for about 4,000 years), to the highly sus (they’s lying to us about the Fort Knox inventory; there ain’t none there). And I am completely down with the first of these.
I do not, however, know if this is indeed the moment that the masses demand that their cash be tied to something tangible. But none of the above-described tidings are earmarks of a robust market.
However, as Dickie would’ve presumably wished, the tape keeps ramblin’ on. The upcoming week is data heavy, with the first glimpse of Q1 GDP awaiting us, and equity superstars META, MSFT, GOOG and TSLA – along with many important back benchers — all fixed on the Earnings Calendar.
My stubborn hunch is that there’s a bid down here somewhere. We’ll see Blue Market Skies before to long. But the road will be that much more desolate without Mark, Roman and Dickie across the aisle on that Greyhound Bus where Dickie was born and which we call life.
Best to keep an extra eye open these days. We may own the clothes we’re wearing, and the road does not go on forever. But there’s endless stretches of highway in front of us, and, like it or not, we are compelled to ramble on.
TIMSHEL