Are we really happy here, with this lonely game we play?
Looking for words to say
Searching but not finding, understanding anywhere
We’re lost in a masquerade
— Leon Russell (This Masquerade)
Can y’all give it up with me one time for Leon? Thought so.
I don’t have a great deal to say here. Saw him a live a couple of times – back when such things were possible. And I’m glad I did because given that: 1) he died in 2016; and 2) even if he were still around, there’s that whole lockdown thing and all, I’m not likely to catch his act again.
His hair was long, and ghost white. The word authentic comes to mind. I reckon that’s about it.
Along with perhaps “Superstar” and “Delta Lady”, “This Masquerade” is arguably his most timeless composition. And I’ve been thinking a lot about masquerades, and their most essential component – masks – a great deal lately. For obvious reasons.
And I don’t know, and frankly don’t care, if someone else has pointed out the following ironies. Because I will share them with you one way or another: 1) masks are all the rage these days; and 2) this rage is bidirectional in nature. More specifically, just at a point when the entire population (whether voluntarily or otherwise) is masking up, in some ways, un-masking is equally ascendant. I won’t go much further into political realms than this. But anyone not outraged by the manner in which Flynn was set up, in full obliteration of due process, subject to an astonishing FBI perjury trap takedown, instigated, as it was, against a Director of National Freaking Security whose desk chair was barely warm, is missing the memo. Those not further recognizing that the judge’s to unwillingness accept an agreement between Prosecution and Defense to drop the matter is an outrageous reach across separated constitutional powers, is adopting a mindset that will come back to haunt them. And the rest of us.
I’ve been pissed off about this Flynn thing since it first went down. And it has nothing to do with whether or not he’s a bad guy. Less than a week into Trump’s term, the FBI sent agents into his office — under the pretext of coordinating intelligence training. Specifically told him he didn’t need a lawyer. Asked him questions about a conversation they’d recorded and committed to memory. Then, when his statements didn’t precisely match the tape, they dropped a perjury charge on his ass. Even a murderer or armed robber subject to this treatment would get the case thrown out on procedural grounds. But not Flynn. Recently, when the setup came to light, the prosecutors dropped the charges. But the judge wouldn’t accept that. So, the case lives on, presumably, with intent to extend it into next year, and (it is hoped) the ushering in of a new president that won’t pardon him. This, at any rate, appears to be the play.
Heaven help anyone on the wrong side of this crew when they take over. Because if you dare to cross them — in real or even perceived fashion, they will roll you.
Meanwhile, This (Masked) Market Masquerade Ball continues, largely unimpeded and untroubled by the goings on outside the dance hall. The Gallant 500 did close down a couple of percent this week – perhaps because those lovely masks that the gowned ladies hold so fetchingly to their eyes have been replaced by grotesque mouth covers. But from its lows — registered about an hour after Thursday’s Weekly Jobless Claims freport brought tidings of another 3M souls entering the ranks of the newly unemployed — the G500 has rallied about 100 handles. Like the saying goes: buyers gonna buy.
But in doing so, they shrugged off such economic tape bombs (released Friday) as a plunge in both Retail Sales (16.8%) and Manufacturing (11.2%).
They further scoffed at the Fed’s bi-annual Financial Stability Report (also dropped on Friday) which warned of dire market outcomes if we don’t straighten ourselves out and tame this here Covid Tiger. And with the news that Big Buffett sold down >90% of his deftly won holdings in Goldman Sachs, Inc. GS is down about 1/3rd since the crisis hit, and I reckon it could fall further. At which point Warren (who is known to do such things) might buy it again.
I reached out to GS Chairman DJ D-Sol about all of this, and, like Leon once told us:
“We tried to talk it over, but the words got in the way”.
I should also emphasize that the masquerade market ball is re-provisioning itself with yummy supplies even now. Secondary issuance of equities is surging, and these goodies are being hoovered – en masse — up by the hungry and thirsty market dancers. Our own Treasury has only begun to lay historically historic amounts of paper on us, and that, too, will likely disappear like cheese puffs into the bellies of the hoofers and tappers. And if it doesn’t, then the Fed will need to belly up to the platter. Because this here economy cannot possibly sustain higher yields. Indeed, they must go in the opposite direction.
Have I mentioned this need for lower rates before? I believe I have, but don’t remember the precise details of having done so. Perhaps I’ve taken too many trips to the punchbowl myself.
However, I don’t mean to suggest that everyone at the ball is wearing masks and shuffling their feet. To the contrary, some of the biggest market ballers of them all: the afore-mentioned Buffet, David Tepper, and my own personal fave – Stanley Druckenmiller – have all weighed in on their astonishment at the intensity with which this equity rager is sustaining itself, and how badly its wind-down might be.
In past editions, I’ve paid due homage to Druck, but let me say again, if there is one single market professional I would wish to emulate, it would be him. Three decades of sustained >30% performance. But that’s just the start. I’ve barely ever spoken to him, but know him to sober, humble, and, like Leon, entirely authentic. He doesn’t often issue public proclamations, and when he does, unlike some of his higher profile peers, it’s not to talk his book. He is known to only opine when he believes he has something of value to convey to his audience.
In keeping with our weekly theme, suffice to say that Druck does not wear rhetorical masks. So, when he took to the (virtual, natch) podium on Tuesday to announce his belief that the risk/reward conditions of the global equity complex are the worst he’s seen in his storied career, we should take him at his word.
And act accordingly.
Admittedly, though, the fact that I’ve issued many written sentiments in the same key over the past several weeks does little to dilute my admiration for him.
Yes, my friends, my fellow dancers, these here are unprecedented risk conditions. I’m not forcing you to change into your more comfortable shoes and head for the exits.
But it wouldn’t be the worst idea to at least consider the option.
********
“There are concrete mountains in the city, and pretty city women live inside them”.
That’s Leon again, and maybe it’s still true. Perhaps, on the other hand, some of these lovely creatures have decamped to more remote realms of late, but I hope and expect that they will return. And soon. If so, I’ve got a few songs of my own to play for them.
And every time I think about these things, I remember “This Masquerade”. And, wouldn’t you know it?
“Thoughts of leaving disappear,
Every time I see your eyes,
No matter how hard I try,
To understand the reasons that we carry on this way,
We’re lost in a masquerade”
Yes indeed, we’re lost in a masquerade, a masked masquerade, a masked market masquerade.
And all I am asking here is that as we breathe through our hideous surgical face masks, which cover our unspeakably beautiful noses and mouths, we take a look around us with a clear head and clear eyes. Eyes that no face mask would ever dare to hide from the light.
Doing so will give us, I think, our best chance to recapture our dreams. It could take a while to get there, but embracing a pretense that the orchestra is playing, the champagne is flowing, and that we’ve nothing to worry about save whirling ourselves as gracefully as possible across the floor is not what I, or, for that matter, Druck, would recommend at the moment.
Stone-cold risk-taker that he was, I don’t even think Leon – if he was still with us – would be advising anyone to let it rip right now. And, since we’re on the subject, let’s close by busting out another one of his best:
“I’m up on the tightrope, one sides hate and one is hope
It’s a circus game with you and me.
I’m up on the tightwire, linked by life and the funeral pyre
But the tophat on my head is all you see.”
Coming from a guy four years dead and gone, it all seems rather clairvoyant.
So please take care, and, as ever…
TIMSHEL