Just sit right back and you’ll hear a tale, a tale of a fateful trip,
That started out in Iowa, with an App vote-counting blip,
The mate was a stone cold socialist, the skipper old and pale,
The rest of them were also white, and also mostly male,
They set their course for Old Milwauk, but fought the whole way through,
They stomped their feet and shook their fists, and said some mean things too,
But most of all, they saved their hate, for the guy with the orange skin,
Wherever else they disagreed, they cannot let him win,
And now it’s Super Tuesday time, in the windy month of March,
It looks to me like Bernie-gan wears shirts that need some starch,
So lots of folks in 14 states, will cast their votes and smile,
But just like on the TV show, they’re stuck on Bernie-gan’s Isle,
— With apologies to Gilligan, the Skipper, and the rest of the U.S,S. Minnow crew…
Well, that pretty much sucked, now, didn’t it? I’m referring to ___________. Into which space you can feel free to insert just about any of the myriad recent buzz-kill incidents you choose. For example: the worst market week in living memory, my crude “Theme from Gilligan’s Island” re-lyric, or the rapidly spreading Coronavirus.
With respect to the last of these, I shared my clearest risk management thoughts on the topic on Wednesday. And now, four days (and several hundred basis points of incremental retreat by the Gallant 500) later, I find they still hold.
Feel free to view them, or, as appropriate, review them, at the following URL:
https://www.zerohedge.com/news/2020-02-26/coronavirus-risk-management-note
Because, while I doubt that I’ll be able to get through this note without further reference to the BIG C, I don’t want to use this precious space to rehash the whole thing in risk management perspective, yet again. It was a long week. For all of us. And I’m tired. Probably you are too.
So let’s revert to some harmless fun, in the spirit of the theme presented above, shall we? While NOT watching the second of the most recent debates (my time was much more sublimely engaged during those hours), it occurred to me that the current field of Democratic Presidential aspirants does indeed bear a striking resemblance to the characters of Gilligan’s Island, the iconic 1960s sitcom whose attention occupied thousands of hours of my youth which I cannot, under heaven, reclaim.
If I’m right on this score, then we know which one is Gilligan; it’s Bernie. Looks crazy, sounds crazy, but somehow, unthinkably, he’s perpetually running the show. Everyone around him expends inordinate energy either preventing or minimizing the impact of his misanthropy. But they always fail. The Skipper? Joe Biden. Oh sure, he’s way skinnier than Alan Hale, Jr., but he has the same, blustering, chest-puffing affability as the former, is equally geographically challenged, and one can literally visualize him taking off his cap in anger and frustration, and whopping Bernie/Gilligan over the head with it.
The Millionaire? Please. We know who fits this role. All he has to do is remove a few zeroes from his net worth and it’s a perfect match. Similarly, if Liz Warren wasn’t born to play the role of The Professor, well, then, I’ll be a Monkey’s Uncle. Erudite? Yes. But dour, humorless, and, ultimately, ineffectual. Professor W has a plan for everything (she can make a transistor radio run for years without electricity) but none of them work. Maryanne is also an easy call: Klobuchar, the wholesome Farm Girl. We need to cast our sights further afield for our Ginger, but once we do, we find our answer. It’s Tulsi, who a) is still in the race; and b) is certainly the easiest on the eyes of all of the 2020 wannabes. Including Trump.
I stop there, recognizing that I have omitted one key character and one of the contenders for the Big Prize. Feel free to connect the dots. But if you do, please note that it is you who is doing so. And not me.
And this crew seems stuck for all time on Bernie-gan’s Isle. They will make another attempt at escape this coming Tuesday, and while they may or may not succeed at long last, hilarity is sure to ensue. Ironically, the burgeoning panic arising from the Coronavirus may pump some perverse wind into their sails. Maybe, for example, they can hang the blame for CV on the Big Guy. We just don’t know. And I am hesitant to offer much risk insight beyond what I’ve already written. Which can also be found (sans those annoying adverts), at the following link:
From a market perspective, a review of the carnage is largely redundant, but alas necessary. I’d include some charts here, but I just can’t bring myself to do so. The socialized viral fears catalyzed the most rapidly unfolding SPX correction in market history. As gloriously and repeatedly prognosticated in this space, the Benjaminz that bailed out of riskier assets have flung themselves into the warm, loving embrace of the government bond complex.
Not only did the entire United States Treasury Curve reach historic lows in yield, pretty much the same thing happened all across the world. Vixen VIX nearly quadrupled – having, as recently as Valentines’ Day, offered her charms at a 75% discount to what her suitors must now pay for her attentions. And here, as I often do, I’m gonna break a solemn promise and throw a chart in your collective faces:
While this picture may indeed be worth a thousand words (a platitude often incorrectly attributed to Henrick Ibsen), I feel compelled to add a few of the latter to this haunting image. The Corona storm was already gathering a couple of weeks ago, like a beer truck caravan barreling into Racine, WI on the morning of Cinco De Mayo. And anyone paying attention could’ve acquired gallons of options protection for what now amounts to pennies on the dollar. But no one was. Paying attention that is. Until it got prohibitively expensive. Now, All God’s Children wish to own the VIX and its component options, with price being no object. Please resist this temptation, which is nothing less than reminiscent of Ginger, in that lame’ gown brushing her fingers against your chest in the hopes that you will give her your portion of the carton of chocolates that dropped miraculously from a helicopter in the sky.
You’re still better off hedging with long Treasuries, because if this here panic expands, we’re going much lower on yields. Some of my smartest clients are currently missioning out scenarios about the closing of the Port of San Francisco, and the associated obligation to hoard canned goods. Maybe they are right.
But my best guess is that we’re oversold here. And if I’m correct, it’s by a lot. This intuition solidified for me sometime midweek, when, just as investors were gathering themselves to do some buying, Gavin Newsome announced that the State of California was monitoring 8,400 potential cases of CV19, whereupon the feeble rally devolved into an immediate, ignominious rout. And I asks myself: how many hominids have travelled between China and the Golden State since the virus emerged? A million? More? Of course they’re keeping an eye out on a few thousand folks; them not doing so would, to my way of thinking, be more of a catalyst for an incremental selloff than the fact that they were.
But I offer these thoughts with some trepidation. This here menace could indeed be The Big One, and I wouldn’t, just yet, fade the fear. Either way, we’re looking at one of the biggest cycles of global stimulus (money printing, fiscal inducements, debt forgiveness) the world has ever seen. The end result will be a giveaway of already-scarce financial securities, and I hope you get in on the action. I’d just wait a bit before I took the plunge. Because there’s nothing I see that precludes us going lower first.
Mostly, though, I just dream of an island to which we can escape. Just you and me. Alone. And it’s not Bernie-gan’s Island. Or even Gilligan’s Island. Because on either of these land masses, we’d have to deal with unwanted company.
And with respect to the latter slice of tropical paradise, we should bear in mind that the castaways did eventually escape. And then returned. Once, in one of the finest pieces of cinema ever filmed, with the Harlem Globetrotters. They also, at some point and in animated form, became space travelers, floating around the solar system and beyond in a wooden boat fashioned by (you guessed it) The Professor.
I can’t offer as much hope for the current occupants of Bernie-gan’s Island, though. Some will be voted off the Island, maybe as early as this Tuesday. Most, in any event, will be forced to return, because one way or another, we’ve got to crush The Big Orange.
The rest of us will just be watching all of these doings from afar and hoping for the best. I think from an investment perspective, we’ll probably be OK.
That is, if we follow my published risk management advice, which can also be found, for a select but growing few, at the following URL:
https://www.linkedin.com/feed/update/urn:li:activity:6638495821023232000/
If this is your preferred venue, send me a request. If you promise not to shake your fist and say mean things, I just might grant you access to this heavenly atoll.
TIMSHEL