“Now was Milton trying to tell us that being bad was more fun than being good?
[no response]
OK, don’t write this down, but I find Milton probably as boring as you find Milton. Mrs. Milton found him boring too.”
— Professor Dave Jennings, Faber College (Animal House)
Can I get some love for my boy John Milton? Didn’t think so. And, failing that, I’m at least going to ask y’all to get off of his nut. Please. I mean, this November, it’ll be 345 years since he went tits up for the last time. And, for the ensuing 14 generations, he’s been taking an inordinate amount of grief – even from the folks at National Lampoon, who gave us “Animal House”. Let’s face it, when if you’re a 17th Century man who is still receiving pot shots from that crew, several centuries after your demise, you can safely consider that your street cred has been utterly shattered.
On the other hand, I will cop to being among the legions who have cracked open a copy of Paradise Lost, only to give up before slogging through it in its entirety. Well, at least I tried.
Have you?
But our titular quote doesn’t derive from “P/L”; instead, it forms the last line of a sonnet he called “On His Blindness”, presumably written because he himself had recently gone lost the divine gift of vision.
He continued to write, of course, but what of it? Beethoven composed his magnificent 9th Symphony while stone cold deaf. So there’s that.
And JM himself has been on my mind lately, for a couple of reasons.
First, he created a roadmap of sorts for the form of modern-day “wokeness”. Specifically, the element of it in which a young, wealthy Caucasian male renounces his “white privilege”. He was born into the British aristocracy – at a time when they pretty owned everything and did as they wished. He went to Cambridge, and was able to produce his sightless scribbles — mostly due to the largesse of his family.
But in that raucous year of 1649, after the execution of King Charles I and the subsequent establishment of the British Commonwealth, Milton backed that upstart Oliver Cromwell and all of his ill-fated reforms. This move did not please his former paymasters, the possessors of all land and titles in the United Kingdom.
In this way, he kind of set the stage for Beto O’Rourke.
But perhaps more pertinently, I believe our purloined quote is consistent with the risk management advice I would offer to those who seek such guidance. Entering into the critical last trimester of this crazy year, I would go so far to suggest to the professional money management class, the following words of wisdom:
They also serve, who only stand and wait.
Because from my point of observation, the markets are in somewhat of a jump ball configuration. I’m near-convinced that there’s a lot of wild and wooly action that awaits us over the next four months, but: a) it’s not likely to take any observable form for at least a couple of weeks; b) whatever the first direction se it takes is subject to dramatic, un-anticipatable reversal; and c) as has been the case with Hurricane Dorian, I’m not sure course the winds will blow come Tuesday.
So my best advice is to wait a bit – ideally in standing position – before you decide whether it behooves you to load the boat or bail water.
Because each calendar interval takes a life of its own in the markets, and looks very different in the middle, and especially at the end, than it does at the beginning.
And I submit to all of you that a new such interval begins on Tuesday.
We managed to survive the pre-Labor Day sessions not much worse for the wear. Equity indices recovered last week, but not sufficiently to change the index motifs from red to green for the now-concluded month of August.
The bid on debt instruments remained astonishingly unabated.
And in case you doubt this, please reference the following couple of charts:
First, and as has been noted elsewhere. The aggregate value of debt outstanding that is throwing of negative yields has now reached an impressive-by-anyone’s-standards $17 Trillion:
Sharp-eyed observers might notice that its value has more than doubled in a period covering less than the last year. My best guess is that due to both technical and fundamental reasons, this line will continue to ascend into the heavens, ere it comes crashing down. Solicitous global monetary policy is likely to continue, if not accelerate in the coming months, and there aren’t enough investible securities available to demand the outrage of positive yields.
Also, remember all of that hand wringing about the 2s/10s inversion? Well, not to be outdone, the US Treasury Curve is now inverted at maturities from 3 months out to 30 years:
Now, it should be noted that substantially all of this perverse configuration is owing to a frantic bid on Treasuries at the long end of the maturity spectrum. Yields on the 30-year bond crossed below 2% this past week, and there they reside.
The more practical than philosophical among us have suggested that our Treasury take the opportunity to issue 100-year bonds. And they may have a point. Because if Uncle Sam can borrow out 30 years at a lower vig than 30 days, it should absolutely consider it.
But anyone who buys these century babies, which will mature around the year 2120, is on their own. I would expect some serious volatility for the owners, before they are wheeled up to the tellers’ window to retrieve their principal, four generations from now.
I’m guessing, though, that there’s still a tail wind on both stocks and bonds. It just may not manifest right away. If either asset class dips, though, you have my full sanction to go and do some shopping.
But if you want to serve your investors, one way or another, you may want to wait a bit. Because Milton was right about that. And he ought to have known.
A few years after the restoration of the monarchy in 1660, King Charles II got around to forgiving the blind poet everyone still loves to hate. From this perspective, his patience paid off.
Cromwell, of course, was not so fortunate. He died of an unspecified illness, 361 years ago this Wednesday, but in what can only describe as a somewhat squicky move, Charles II, who hadn’t had even a chance to warm the throne much yet, ordered Cromwell’s body exhumed, re-executed, and subject to public display. His head famously rested on one of the pikes outside Westminster Hall for about 15 years, proving perhaps, that standing and waiting is a more effective stratagem, than is, say, regicide and revolution.
So, as the action heats up to what is likely to be a fever pitch over the next few weeks, let’s follow Milton’s example over Cromwell’s, OK? Stand and wait for a bit, and then look for a sign to make your move. The only downside to this strategy that I can envision is that somewhere around the year 2400, some snarky young bloods may see fit to poke fun at you.
But at least your skull won’t be placed on indecorous display from the years 2022 to 2037.
And this, my friends, from a risk management perspective, is what the Good Lord had in mind for us.
TIMSHEL