By: K(en(neth Louis) G(rant)
With apologies to Dr. Sigmund Freud
Don’t get me wrong; I’m big into Freud. For one thing, his middle name was Schlomo. Which you have to admit is way cool. And being the father of modern psychology, particularly in these mad, psychotic times, is pretty impressive to boot.
But on this topic, and for reasons about which I am not particularly proud, I happen to be credentialed to go toe-to-toe with him. He may have invented psychoanalysis, but I highly doubt he burned as many stogies as have I.
Most people, and rightly so, think of a cigar as an offensive, combustible obelisk of processed tobacco, wrapped in a tobacco casing which served as the trademark appendage of perhaps the two most towering figures of the Twentieth Century (Winston Churchill and Groucho Marx).
Well, yes. All true. But you should trust me when I tell you that a cigar can be anything else you wish it to be. A daydream. A cantaloupe. The bridge section of the Beatles’ “A Day in the Life”. The knockout trigger of a wonky derivatives contract.
The remotest star in the farthest off galaxy in the universe.
Moreover, if you accept my assertion that a cigar can indeed be anything into which our imagination and whimsy transforms it, it devolves to us mere mortals to determine what, in our field of observation and experience, is a cigar, and, what, alternatively, ain’t.
And, as Sigmund, Groucho and my other co-religionists join me in bidding “good riddance” to the troubling year of 5780 (and in hoping for better tidings in ’81), now is as good a time as any to see where matters stand on the ol’ cigar-ometer.
I reckon we should start with the just-departed RBG. My verdict: definitely a cigar. I tend to play for the other team philosophically, but let’s give credit where credit is due. She was one of a kind. Courageous, Authentic. Courageously authentic. Authentically courageous.
So, I hope everyone understands that when I say light her up and smoke her, I do so with the utmost respect.
But just when the last thing we needed was another psychodrama to add to our depressingly long list of them, the specter of her replacement now changes the already-mind-numbing calculus of our politics. For the record, I’m against the concept of trying to fill her seat before the election, because this will guarantee that when the Dems take over (if not 2021/5781, then sometime thereafter), they will pack the court.
Plus, it is, at best, jump ball as to whether the Senate will confirm any nominee under heaven, and I feel sorry for those running for re-election (Ernst, Collins, others) who might find the air getting hotter (and smokier) around them as the saga unfolds.
But Orange is as Orange does. He will certainly take a shot, and we’ll just have to live with the results.
Let’s now move on to last Wednesday’s Federal Open Market Committee Meeting, during which Chair Pow pretty much froze the Fed Funds rate for the next three years.
A glance at the “Fed Effective” rate over the past three trips around the sun illustrates the incongruity of the statement.
A little over a year ago, the rate was as high as 2.50% but hit zero in the immediate wake of the crisis, only to rise again to the usurious level of 0.09% as of Friday.
And at this point, we’re in completely uncharted territory. In terms of economic conditions and monetary policy, we’re beyond the remotest star in the remotest galaxy. I thus don’t put much stock in Chair Pow’s prognostications, however clairvoyant they may prove to be, about rates three years out.
To me, it was a “no cigar” move; not even close (sorry, but I had to bust that out and maybe sooner is better than later), and I think the markets pretty much ignored it. But investors did indeed take heed of his dire short-term outlook for the economy, and then hit the sell button (not hard, but conspicuously).
Which begs the question: is the three-week pullback a cigar? With respect to its response to the FOMC, I say the answer is no. To me, the sequence falls into the oft-repeated paradigm of a dovish Fed action, to which the immediate response was “holy sh!t, the Fed thinks things are really bad”, only to follow on with the revelation that “holy sh!t, rates are gonna be suppressed, like, forever”.
Whereupon investors go out and do some shopping.
But there are other reasons for the market selloff, as there always are. Even under the most cigar-like lens one can conjure, the late August valuation altitudes were perhaps a little bit oxygen-bereft. Nobody, at least with RBG-level authenticity, could have confidently been piling cash into risk assets at those levels. And in fact, they’ve gone in the opposite direction; selling, not aggressively but noticeably.
And, as we lurch towards November 3rd, the markets will feel the increasingly compelling pull of the political vortex. Is this election cycle a cigar? Decidedly not, and this should be a cause for concern for investors of every stripe. The two sides are at long daggers, the process sets up for mad disruption, the media reports unilaterally according to its affiliations and agendas (as do, in my opinion, the pollsters).
I’ll ditch my cigar to offer one example. Though you may not be aware of this, over the past month, Israel has signed astonishing normalization deals with two Arab nations: The United Arab Emirates and Bahrain. Other such arrangements are in the pipeline, including those with Oman, The Sudan, and Morocco. My theory is that the trend is owing to the growing threat imposed by Iran on its neighbors. The Ayatollahs in Tehran are feeling the heat from America’s re-imposition of sanctions and are sidling up to China. The sheiks that run the other countries are terrified and are taking action.
End result? Israel has more allies in the region than it has boasted in the seventy-two years of its existences.
It is, arguably (or perhaps inarguably) the greatest sequence of regional diplomacy since the founding of Israel in 1948.
And the press has barely taken note. Now, I’m gonna tread lightly down this rabbit hole, but I think it’s fair to opine that had such events transpired under, say, the previous administration, there would be galaxies of press plaudits and grown men (and women) weeping with joy in the streets.
Now? Not so much. Barely an “oh yeah, a couple of countries which, for seven decades, have sworn the destruction of Israel are now setting up diplomatic and trade relations with them”. My guess, though, is that on this Rosh Hashanah in Jerusalem, there is more joyful recognition of the progress.
For these and other reasons to numerous to inventory, I can confidently asset that our current political cycle is anything but a cigar.
But come what may, on November 4th (which happens to be my birthday), whatever oblong object that is thrust in our faces is what we will be compelled to consume. We can smoke it, chomp on it or… (I will leave other options to your imagination), but will be forced, inexorably, to address its presence, and, ultimately, to dispose of it.
In the meantime, we’ve got the rest of September and the always-docile month of October to endure. Lots of big events are pending, so stay tuned. And please, please please, keep jamming, and stay on your toes (note: in risk management parlance, this is referred to as The Toe-Jam. Fair Warning: It is a topic to which I may revert in coming editions).
Your world, my world, our world could look dramatically different over this period, and here’s hoping that it assumes contours that matches our wishes and dreams.
For now, though, we’d do well to bear in mind that while things aren’t always what they seem, sometimes they are. Sig-Schlomo was right in this sense. Sometimes a cigar is just a cigar.
But sometimes it ain’t; sometimes it never is. And the key to our fortunes lies in discerning the difference and making our moves in accordance.
Not gonna lie, though. The whole thing kind of wears me out. And I know what I have to do. It’s just a matter of getting to it is all.
At the moment, though, there’s no need to guess what my next step is. I’m going into my backyard to burn one. I’d love for you to join me, and more than that, to think of my cigar as the key to whatever your soul desires.
Even though the breeze routinely changes courses, I’ll do my best to sit downwind from you.
And, in closing, I ask you to acknowledge neither Captain Jeffery Spaulding nor Rufus T. Firefly ever extended you a better offer.
TIMSHEL