Just. Don’t. Do It. Buy a vowel that is. Call it Kenny G’s Wheel of Fortune Rule for Risk Management. If you’ve been living under a rock for four decades, I’m talking about the ubiquitous, mindless Merv Griffin-created game show that works as a strong early evening sedative for millions of Americans (and, in modified form, apparently, Chinese as well). It is loosely based upon the ancient childhood game called “Hang the Butcher”, and involves contestants taking turns guessing letters until the population of blank spaces is sufficiently exhausted to enable one of them to reveal the phrase hidden in the in the blanks – a practice the solver undertakes with both unmixed joy and solemn, impeccable diction.
On the T.V. version, to the best of my knowledge, no butcher is actually hanged. Instead, show contestants/puzzle solvers actually receive both monetary and life-enhancing prizes such as a car or a trip to a fabulous vacation resort. Said players are warned in advance that they had better bring their checkbooks with them to the filming of their participation, as, at the close of every episode, state and federal revenuers are the first to greet them with immediate demand for the satisfaction of tax obligations tied to their winnings.
Often, TV programming quirks are such that “Wheel” is aired in the precise time slot as that of reruns of “The Andy Griffith Show”. And, though it pains me to admit it, this unfortunate turn of scheduling has caused more than one interruption in my otherwise sustained state of marital bliss: my wife is a serial “Wheel Watcher”, while I am a lifelong, borderline obsessive fan of “TAGS”.
Invariably, I lose almost all of these remote control standoffs.
So, in the interest of familial harmony, I myself have become a “Wheel Watcher”, and often marvel at the show’s ability to run its affairs (if the backdrop can be taken as a valid indication) with the set (wheel, puzzle board and all) directly established on such presumably problematic premises as the beaches of Waikiki, in front of the Liberty Bell, or even occasionally, atop a mountain in the Swiss Alps (the last of these with Pat in the obligatory lederhosen, and Vanna, natch, dolled up like a Swiss barmaid).
On the other hand, I find myself perpetually frustrated by what I am convinced is an overly dilutive tendency for contestants to waste their hard-earned winnings on the purchase of vowels. The earlier in a given contest this occurs, and the longer the puzzle sequence in question, the more the practice enrages me. I mean, how hard is this to grasp? If you’re an early spinner in a 5 phrase/30 character puzzle, and you successfully request a “T”, why on earth would you follow it up with the purchase of an “E”? You’re not likely to have solved the puzzle on that particular spin, so you’re only helping your opponents, right?
Thus, a critical corollary to Kenny G’s Wheel of Fortune Rules for Risk Management (KGWoFRfRM) is as follows: the importance of KGWoFRfRM stands in direct positive correlation to the length of the puzzle, and has a material negative beta to the number of spins that have already transpired.
Got that? Good, because I don’t wish to go over this again. Ever.
Unfortunately, however, my observation is that the market has been chockfull of the investment equivalent of over-enthusiastic, premature vowel buyers, committing such financial-equivalent sins as shorting the VIX at all-time lows, trading either side of Tesla, and seeking, yet again, to monetize on the still-yet-to-burst bond bubble of thirty years standing.
On the one hand, this breaks my heart; on the other, or so I remind myself, these dubious actions arguably ensure my continued gainful employment for as long as the band plays.
This past week (perhaps in a nod to Grandparent/Grandchild Week on Wheel) featured nostalgia-heavy motifs of the type of two-way market action that those of us in the geriatric set remember, on balance fondly. The SPX, while dead flat on the month, needed Thursday’s astonishing 1% rally to avoid the infamy of a full 100 bp downdraft. Overall, there was some downward pressure on virtually all asset classes, but the only market that evidenced noticeable pain was the U.S. Dollar Index:
With earnings substantially in the bag, the action remains policy/macro driven. If one wishes to solve the puzzle with only a smattering of consonants and (if you insist) a couple of vowels, it would appear that the ebbs and flows of valuation are for the most part being driven by two factors. The first, by all indication, is the tax reform psychodrama. And I don’t mind informing you that I find this dynamic particularly depressing. I do not believe that what’s currently on the table is either a critically needed unshackling of the masses from economic servitude (as one side would have you believe); nor is it in my judgment a cynical and diabolical handout to the economic elite (the gospel of their opponents). But this is the rhetoric that is being shoved down our collective throats every minute of every day, and I don’t see any possible end to the madness.
I predict that at the end of the process, victory and its attendant spoils will devolve to the side that manages to outflank their opposite numbers in rhetorical hysteria. That this is the dynamic which drives our governance outcomes is perhaps what depresses me most. But that’s where wemare, and my guess is that out of pure desperation alone, the “reformers” may win the day. But they have a hard slog ahead of them, and they can expect no help from anyone in the middle, because, politically speaking, there is no middle ground. “Praise be Nero’s Neptune, the Titanic sails at dawn” Dylan once sang “Everybody’s shouting, ‘which side are you on?’” he concluded. And he was right. About the shouting at least. But I’m not gonna lie: all of the noise is giving me a headache.
But if you want to track this nonsense, it might behoove you to keep your eyes on these yield curve trends, which are showing decades long flatness:
The other audible strain is the well-documented-in-this-space year-end tape painting sequence. According to my calendar, next Thursday is Thanksgiving: the traditional point in the season when such rituals are scheduled to commence. But just as we have already, and for several weeks, been subject to an onslaught of Christmas advertising (Thursday night’s “Wheel”, for instance, featured, by my count, at least 4 cycles of the car with the bow “Lexus December to Remember Sale”), so too have the market bids driven by a need to manufacture optimal year-end performance arrived in premature fashion.
And why not? With realized volatility on the indices in the mid-single digits, and with this year fixin’ to close with a record low of 4 days of down more than 1%, what could possibly go wrong?
In the spirit of the holiday season, I even offer you my blessing in these actions. Just don’t do anything really stupid, though, OK? Like the Grandpa last week who asked for a “J” (a “J”? No one asks for a “J” for chrissakes). It got even worse from there. Later in the show, that particular elderly chap’s granddaughter tried to by an “O”, and got dinged.
I’d like to be able to help these people, but some things are beyond even my considerable powers. So if you do make an investment decision to buy a vowel, and come up empty, though I’m sorry to have to say so, you’re on your own.
TIMSHEL