“In another time’s, forgotten space, your eyes looked, at your mother’s face,
Wildflower seed, through sand and stone, May The Four Winds take you safely home”
— Franklin’s Tower: Lyrics by Robert Hunter (Music by Jerry Garcia)
Well, we’re now a full 3/4ths of the way through this crazy year, and the obvious question is as follow: are we having fun yet?
My best guess is that for most of us, we won’t know the answer until the end, until yet another of those endless series of ball drops in Times Square is hard upon us. It is, after all, only at that point that we will understand, with the divine benefit of retrospect, whether or not the rewards we will have reaped across 2019 will have justified the madness we have endured.
In turn, this implies that the tidings wrought by Q4 will be crucial to the overall narrative. And in this edition, we will attempt to take a measure of what’s on tap. For what it’s worth, matters appear very opaque to me at the moment, but when did that ever stop me from offering confidently-rendered opinion?
However, before we get to all of that, we must first pause to pay tribute to the recently departed Robert Hunter: the elusive-yet-somehow-ubiquitous lyricist for the Grateful Dead. At the point of his passing, his life and times evoke images of a gentile, heterosexual version of Alan Ginsberg. Like Ginsberg, Hunter was everywhere, but always, it would seem, hovering in the background, commanding little attention and seeking even less.
And it should surprise to no one that I have a measure of frustration with Hunter. And it’s not his fault. To be sure, he wrote some solid lyrics in his time. Think Uncle John’s Band. China Cat Sunflower. Sugar Magnolia. I could go on, but why?
But I will admit to tiring of all of those cowboy figures, all of the bootleg whiskey references, of lighting off to Chino, babe, trailed by 20 hounds, of boxes of rain, and of watchmen shot right outside fences.
And mostly this. I always wondered why Jerry never wrote any of his own lyrics. I mean, it’s not like he wasn’t enormously articulate, like he had nothing to say. Heck, his was the face and voice that shaped the consciousness of an entire generation, myself included. Moreover, being something of a hack songwriter myself, I have always felt that the real challenge, the elusive prize, is the writing of a good hook. Chords and melody. They need to grab the listener, and when they do, all is right in this godforsaken world.
And he (or she) who writes the tunes, has, in my judgment, won the right to pen the lyric. Say what you want, oh sublime hook-writer, as this is the sweet payoff for creating something that is musically valuable and sharing it with us. You’ve earned our obligation to listen to what you have to say. And I, for one, would’ve loved to hear what was on Jerry’s mind, which I’m sure it would have been fascinating.
But he subcontracted this privilege to Hunter, and it would be unfair to state that Hunter let him down. He didn’t. But Bob Dylan (with whom he in later years collaborated) he most certainly was not. Hunter, has now left us, though, presumably for that Happy Hunting Ground in the sky. And as we honor his efforts, at a point when the Q4 hunt for investment returns is about to begin in earnest, I am reminded of one of his better lyrics: the lines purloined for this modest tribute, which I believe merit our attention.
Because, among other matters, hunters of every stripe must be guided by these winds, The Four Winds, and perhaps, for those who seek investment outperformance as their prey, the glide path of The Four Winds might be as important as they’ve been for quite a while.
Will The Four Winds blow you safely home? Truth is, I don’t know for certain, but perhaps we can review them for the insights they may portend.
The First Wind is Domestic Politics, a topic of which I’d rather dispense sooner than later because they are now in depressing crescendo. They were already a chart topper before House Leadership chose “Now” over “Never” in terms of their Impeach 45 obsession, and at present, there’s no turning back. Now, I don’t know anything more than anyone else about this latest episode, and therefore will seek to keep my musings somewhat balanced. There appears to be solid momentum building at the moment, but the strategy risks backfire in spectacular fashion. Because in the words of Ralph Waldo Emerson: if you strike at a king, you must kill him. Do the current allegations rise to the level of 67 Senators voting Trump’s fat ass out of office? Well, maybe; maybe not. In the meantime, Team Pelosi is gonna have to hustle. They need 218 votes, and (again unless there’s more here than meets the eye), they must all come from the left side of the aisle. Simple math suggests that at least 20 of them need to be sourced from House Members representing districts that Trump won in 2016; maybe more.
The preparations for trial will kneecap the entire Progressive Agenda, probably up until the election. And the trial will be a Pig Circus. In the meantime, Pelosi herself has already yielded once and for all her podium and gavel to those cheerful ladies otherwise known as The Squad. Moreover, the episode virtually ensures that Biden is toast. Trump’s intervention into a foreign investigation was about a company on whose behalf Biden himself intervened in similar fashion, to the great benefit of his own son. And Biden is out of office, so he can’t be impeached. But his campaign can be fish-gutted in the higher cause of bagging the progressive hunters’ bigger game: The Big Guy himself. Somewhere in Minnesota, Al Franken must be enjoying a good chuckle over this. But the rest of us have scant cause for mirth.
Thus far, the market has chosen to by and large ignore the preliminaries. Unless there’s more, this trend will probably continue. But I reckon we’ll have to wait and see.
Wind Number 2 is a familiar one to this readership: the extraordinarily accommodative monetary policy (delivered to us (no doubt) from heaven — through the earthly devices of Central Banks), and the likelihood that it will continue on for the foreseeable future. This is an enormous tailwind for market participants, of such great force that, I’d be continue to designate it Wind Number 1, had it not been upstaged in spectacular fashion by the latest Washingtonian shenanigans.
I think that the continued assertive monetary policy support across the globe will, at minimum, provide support to financial valuations, and am therefore encouraging my clients to retain sufficient bovine sensibility to the dips. And I’ll throw another one in here, just out of love. Owning longer-dated US Treasuries offers, at the moment, one heck of a hedge against other longs, because if “riskier” assets start to fall out of favor, the incremental bid on domestic govies should be something spectacular to witness. But I suggest you do more than witness. I think you should participate.
The Third Wind, a big, yawning, impenetrable gust, is our trade negotiations with China. But we’re not going to waste much space on this squall. Because that’s just what it would be: wasted space. Nobody knows anything about anything about this really. And I will only add a couple of minor additional points here. First, the markets are likely to continue to be whipsawed by every associated (mis)information blip about that comes its way. And they wouldn’t mean anything if not for my second and final minor point on China trade: The Impeachment Wind at the top of our charts probably greatly increases the likelihood of the world’s two superpowers striking some sort of deal – perhaps even before year end.
The Final Wind (Number 4 if you’re keeping score) is the inevitable, inexorable flow of data that we must endure in the first half of each quarter; Q4 included. In normal times, #4 would also be higher on our Hit Parade, but as should have been made clear in preceding paragraphs, it also has been rudely upstaged.
But trust me on this: these data flows are coming, and from our current temporal points of observation, they offer a mixed bag of tricks and treats. Macro numbers are yawningly tepid, likely, in the month leading up to All Hollow’s Eve, to offer up neither fright nor delight. Our first insights will come our way on Friday, with a September Jobs Report which, if the prognosticators’ prognostications hold true, will offer no insight at all. Steady but uninspiring jobs growth, high employment levels. Very modest and on balance insufficient wage inflation.
Adhering to the macro side of the equation, the GDP estimates of the federales are perking up – to an acceptable >2%. But we won’t get our first glimpse of these estimates till the last part of October.
Before that, of course, the earnings season will be in full swing, and the signals we’ve received this far don’t offer much cause for jubilation. Q3 earnings are expected to feature the third straight quarterly cycle of negative profit growth. There have been an exceptional number of pre-announcements; most of them to the downside. To wit, Factset indicates that out of 113 tech companies who saw fit to leak their performance ahead of schedule, a record 82 have telegraphed incremental bad news.
But I’d encourage my hunters not to lose heart. At least not yet. For one thing, Q3 is typically the Kitchen Sink Quarter, where CEOs ram all the negative news they can into their messaging — in the hopes of looking like conquering heroes — at year end, when, just as a matter of coincidence, their compensation levels are determined. I further have a hunch that some of these tech darlings will exceed the low bars they have unilaterally fixed, when their turns at the podium come upon them.
And I encourage you to look, at least for an instant, at the bright side. Winds 1, 3 and 4 tell us we’re facing a domestic constitutional crisis, are on the brink of an all-out, crippling trade war, and in the midst of a pretty nasty earnings recession. But financial instrument valuations are at or near all-time highs. Of course, if you ask me, we have little else but Wind 2 to than for this largesse.
Will The Second Wind blow us safely home? Perhaps, but asking the man who gave us these lines is no longer an option. Robert Hunter has by now entered his happy hunting ground, while the rest of us must seek our prey across this more wretched veil of tears. I myself remain optimistic that we won’t return to our caves empty-handed, because hunting under difficult conditions is our forte.
And let me tell you, it beats trying to generate returns by planting yourself at the MGM Grand in Las Vegas: a place where you can walk out a winner, but only if you can spit madder game than you probably got. Most don’t, and should thus proceed with caution. So, rather than chasing Q4, let’s allow it to wander into our traps. Meantime, we can cool our heels in the comfortable realms of Franklin’s Tower.
It ought to be a pretty wild ride, one way or another. So don’t try to laugh your past away, but do try to make it, just one more day. By watching the wildflower seeds, through sand and wind, The Four Winds just might blow you home again. And with that I can only add the coda:
Roll away the dew.
TIMSHEL