By: K(en(neth Louis) G(rant)
Yup, Gotta say a few words about Gale. Galloping Gale. Who galloped off and left us this past week.
But first a point of clarification. Gale Sayers was not the Galloping Ghost. That moniker belongs to a Chicago Bear of an even earlier vintage (back when they wore leather helmets, embraced, rather than avoided, concussions, and when the term “going both ways” referred exclusively to a footballer who played both offense and defense): Red Grange. Running Back and Defensive Back. The Original Galloping Ghost. Maybe the only one. That is, until Galloping Gale shed his mortal coil.
Perhaps now there are two Galloping Ghosts; maybe not. I don’t decide these things you know.
Never saw Red play but was a huge fan of Gale’s. The way I would describe him would be as follows: he was the Jimi Hendrix of the NFL – running with riffs that nobody could imagine, much less replicate – before or since. For me (and in retrospect), when he blew out his knee in ’69, it marked the beginning of the end of the Sixties. The Beatles announced their breakup that month. Sayers returned, a shell of himself, in 1970, which of course was the year Hendrix died.
Now he’s galloped away (this time for good), and America, Chicago in particular, shed many tears. It’s been a tough month in Chicago, kicked off by the shuttering of the iconic Palmer House Hotel, which had been hosting the hoity toity, dating back to a time when the hoity toity’s main residences were caves. Didn’t think it could be toe-tagged, but, these days, the unthinkable is exactly what goes down.
And it’s been a tough month all around. As is widely known, September is, historically, the worst lunar cycle for equity valuations. And this year (even if with respect to nothing else) has followed script. The Gallant 500 is down a decidedly ungallant 5.7% at the point of this correspondence, and this after Friday’s 160 basis point rally. Captain Naz, up >2% on Friday, was knocking on the door of a double digit, month-to-date drop the night before.
Still and all, Friday’s rally was heartening to observe – particularly as it transpired during the penultimate trading session to Yom Kippur – 5781 – which should feature a respectable amount of fasting, (hopefully) a passel of repentance, and (presumably) not much trading activity. It should also be noted that the sands of Q3/2020 (Julian Calendar) are running low, and, as such, ‘tis the season for some enthusiastic tape painting. If so, protocol suggests a bid through at least Tuesday 9/29 (decorum demands that one refrain from this unholy exercise on the final day of the period).
But because we’re talking football here, I’d say Friday surge, perhaps set to bleed into early next week, was an exercise of running up the score.
And, on the whole, I think, absent a further ignominious retreat over the remaining three sessions, the quarterly performance is one that should please us. The G500 gained ~6.4% of third quarter yardage, through some occasionally fierce pressure from the other side. The tape may feel heavy at the moment, but perhaps we should bear in mind the conditions that prevailed coming into the sequence on July 1. Covid was breaking out aggressively in geographic regions, where, based on climate alone, the defense was thought to have been the strongest. The country was, in near-full-scale lockdown, including in such improbable jurisdictions as Michigan’s Upper Peninsula and all of the Great State of Maine.
Social unrest was in full crescendo, barely five weeks after that cockroach cop cut off George Floyd’s carotid artery,
The smart money was proclaiming – heaven help us — that the NFL season itself would never transpire.
So, from that perspective, and looking forward from July 1st, would any investor not have rushed in to lock down a 6.4% index gain? I think not.
So why, in heaven’s name, does everything feel worse right now? Like our offensive line is failing to create even the miniscule amount of daylight required for Grange or Sayers to bust off a big one?
It requires little imagination or cognitive effort to understand the fear and gloom. All of our most dreaded risk factors are fully in play. No clarity on the trajectory of the Public Health crisis. Domestic politics are a complete sh!t show and likely to get worse. But let’s throw the Big Dog a bone here (Big Dog’s gotta eat, right?), and focus, for an instant, on credit.
The recent statistics are beyond terrifying – give off a feeling that must be akin to what the Citadel Bulldogs must have felt like coming out of the tunnel to face #1 Clemson. The final was 49-0 – a whupping that can only be characterized as merciful, considering that the latter pulled most of its starters in the beginning of the second quarter.
And, in terms of credit markets, the following two graphs tell the tale. First, last week, the Bank for International Settlements released its Q1 Debt to GDP estimates:
So, the world, as measured in GDP terms, is 30% more into The Man than it was heading into the ’08 crash. And here, it’s important to bear in mind that the series ends on March 31, 2020; we won’t know the tallies for Q2 for many weeks. Anyone want to take The Under on another surge? Didn’t think so.
Now we move to issues of solvency, and here, though it shames me to do so, I am forced to revert to a graphic I lifted from – of all places – this week’s Barron’s (via Bloomberg):
I know this ratio is a bit obtuse, even to me. To the best of my understanding, an interest rate coverage level of < 1 implies that the enterprise’s entire year’s earnings is less than its annual vig.
Let us hope that the lenders are more understanding here than, say, what is thought to be the attitude of the hard guys in Jersey City. And again, bear in mind that these statistics only take us through 3/31 – when lockdowns were said to be a fortnight’s operation; before we reached the definitive conclusion that the American economy was formed and continues to operate, principally, as a means to perpetuate racebased economic inequality. Neither metric, at any rate, is likely to improve over the near term.
But don’t you despair, my lovelies. Daddy’s indeed gonna buy you that diamond ring. The credit situation is so dire that the Central Banks will be forced to put their magic printing machines into overdrive. They’ve bailed us out thus far in 2020 (I don’t even want to think about where we’d be if they hadn’t) and must continue on, This here debt monetization thus ain’t over; in fact, it’s just beginning.
But we’re gonna have to be patient before these goodies come our way, and some of us may take a pounding in the interim. Hopefully, we won’t blow out a knee like Sayers, because we’re gonna need that knee to lean on during The National Anthem. Don’t ask me why; don’t know. But kneel we will. Kneeling won’t save us – not in this world or the next – but when did that ever stop us?
And now I fear it’s time for me to gallop away myself. Not like my hero Sayers, or even like the Old Gangster Sayre. But in my own way. At my own pace.
You may not recognize it as a gallop, but it’s the closest I can come. And I think we should be generous with one another as to what, in the first instance, constitutes a gallop, which I believe differs for each and every one of us. For some, it is more of a lumber; for others, it generates six touchdowns on twelve touches, playing for a team that finished the season 1-13.
So, gallop with me, won’t you? Even if you have to stifle your gait to do so.
And whatever else you do, please, please, please, don’t give up the ghost.
TIMSHEL