By: K(en(neth Louis) G(rant)
So, let’s set the scene. The year was 1983, and Spinal Tap North American Tour was winding down in utter disaster. Gigs had been cancelled due to lack of fan interest. The band got lost on the way to the stage in the bowels of a Cleveland auditorium. They played a Stonehenge-inspired set that featured replicas of the monument, which (due to a transcription error) were 12 inches, not 12 feet, high, and “in danger of being crushed by a dwarf”. The most recent of its endless roster of misanthropic drummers had died by choking on vomit (not his own). The lead guitarist and road manager had both quit. However, at the end-of-tour party, which almost no one bothered to attend, pipe-smoking optimist/bassist Derek Smalls found himself waxing on about great opportunities for the band to explore new horizons.
“We’re lucky” said Smalls “I mean, people should be envying us, you know”.
To which lead singer David St. Hubbins replied “I envy us”. And Smalls could only agree.
And it all kind of reminds me of the present moment. The US Tour of 2020 is winding down in what can reasonably be called a disaster. There’s a pandemic that we don’t understand and have no insight as to when it ends. Remediation measures have crippled the economy. Social unrest is at a multi-generational high. Cities on flame. Millions newly jobless. Mortgages and rents unpaid.
There’s a presidential election in a month, and the two sides are hating on each other more than at any time in anyone’s memory.
Yet, if nothing else, all of this presents us a once-in-a-lifetime opportunity to change our direction. We can re-imagine policing, criminal justice, health care, energy, race relations, education, the judicial process itself, electoral protocols, professional sports, all forms of entertainment, our very language.
People should envy us. I envy us.
And in fact, there are any number of justifications for us to be both the subject and the object of our own jealousy. For example, and with characteristic understatement, tomorrow, PBS celebrates its 50th Anniversary. For most of us the milestone will pass with little note, but the outcome was far from certain, as, in the wake of the last crash, there was a concerted effort to deep six it. What saved PBS? Well, I gotta believe that the following viral (circa 2008) meme was a major contributing factor:
Defund PBS? Sh!t Just Got Serious
Now, nobody in their right mind would dare mess with these mofos, right? And they didn’t. PBS survived, arguably thrived.
And fast forward to the crisis of 2020. Did anybody threaten Sesame Street or any of the PBS crew? Quite to the contrary, not only was their funding completely secure, but Congress even kicked in an extra $75 Large as part of April’s coronavirus relief package.
Taking another glance at the picture above, I count that as risk management in its most sublime rendering.
And a glance market (in which I ply my trade and where I am invested) paints me in emerald hues. There was a touching, green, tape painting rally into the end of the quarter, which was prophesied in these very pages. Our equity indices shrugged off that disaster of a debate and other nasties to close up ~1.5% on the week.
We woke up Friday morning to the news that Orange Man was feeling a little green around the gills, and in fact had gotten the covid hisself.
45’s medical condition kind of blotted out the impact of a pretty interesting September Jobs Report, the last before the election, which showed some solid gains, but at a decelerating rate – relative, at any rate, to the digits issuing from the BLS during the heat of the summer. The Gallant 500 took it all in relative stride and is currently throwing of a >3% ytd gain. Though you wouldn’t know it from recent days, Captain Naz is crushing it at ~+23% year-to-date.
And as Captain Naz goes, so goes all of us. Because we are Captain Naz. And I envy us.
Moreover, anyone accusing me of whistling past the capital markets graveyard should be made aware that America sports the only major market equity complex registering gains for the year. Other than China. But, what, I ask, do we have to do with China?
But just as in ’08, when Burt, Ernie, Cookie Monster and the rest showed us when they thought we were fixing to stiff them, sh!t is now getting serious. Not to harsh anyone’s mellow, but with the rules of electoral engagement changing by the day, with plausible outcomes that could permanently shift how we roll on all fronts, with the very real prospect of complete government control of (sorta) vital sectors such as Health Care, Energy and Financial Services, with a highly sketchy earnings season beckoning, with the Prez laid up in Walter Reed…
Well, it ain’t no time to be sleeping at the switch my lovelies. I’m not sure the true worth of stocks, bonds, foreign currencies, commodities, cryptocurrencies or cannabis (well, maybe I do have some idea of the value of cannabis), but it does strike me that the current equilibrium is shaky at best and unlikely to hold. It’s a fair bet that all of them asset classes will be on the move, soon, and materially.
And again, if one, for some irrational reason, wishes to search for potential valuation change catalysts, this little tidbit from Bloomberg might be as good a place as any to begin:
Careful observers will note that these trendlines apply to the European High Yield markets, and what, one may ask, do we have to do with Europe (Except Sweden. Because Sweden is cool)?
It can be hoped (but not necessarily confidently anticipated) that the stateside numbers may in fact be a whole lot better. If so, I envy us. But then again, I always do.
Envy us, that is.
Because we have the most righteous, all-knowing, omnipotent central bank in the galaxy: The Federal Reserve Bank of the United States. Originally founded by Alexander (m$^%ther f*@&king) Hamilton. Its pistols are trained, loaded and ready for action, and unlike its founder, we can be confident that the Fed won’t throw away its shot on some forlorn morning in Weehawken, New Jersey.
The Fedmeisters are on official record encouraging their pals on Capitol Hill to stroke in some additional stimulus of their own. They have implored Congress to harvest some fruit from their rich fiscal vineyards. There is ots lof speculation out there that with the President huffing down mad doses of Remdisevir and an election now just four weeks away, the twain of left and right might actually reach an accord here. My guess is that if so, investors will squeal with delight.
At least for a time.
It all should be fascinating in its unfolding: the irresistible force of our dubious re-imagining journey meeting the immovable object of the Fed’s need to prop up (inarguably elevated) asset valuations. Over the intermediate term, my money is on the Fed – under virtually every conceivable outcome. If the virus re-emerges in angry, menacing force, if Team Blue runs the table on 11/3, if, on 11/4, we have no idea the identity of our elected officials, they will be there to print money — to send to people not to work, for redistribution to atone for the sins of our forebears (whether the committed them or not) and for the above-mentioned full-scale takeover of the Health Care, Energy and Financial Sectors.
If, on the other hand, the pandemic withers with a whimper, if the electoral outcome is clear and balanced, if business continues – if not as usual then as “the new usual”, then the borrowing binge will continue, and the Magic Fed Money Machine will be rendered just as essential as ever.
There are morality tales aplenty across this entire narrative, but good luck unpacking them. I can’t. One day, we will look back in wonderment at it all (or, at minimum, our progeny will do so). We are in wonderment now, but it is of a more limited nature, because we don’t know how any of this will end.
But I envy us anyway. In no small part because of the (Spoiler Alert) happy ending associated with Spinal Tap. In sublime denouement, the original saga ends with the killer lead guitarist rejoining the band on stage, and ultimately as a permanent member. Even the road manager returned to the scene. The lads are older now, but still rocking, and occasionally even perform a live gig. They continue to shuffle drummers, who somehow always drop like flies shortly after joining the band.
At the present moment, they could do a whole lot worse than booking an engagement on the fabulous PBS Series: “Austin City Limits”. Maybe they could do some covers of Janis, who died 50 years ago today. Because I love Janis. As much as I love Jimi. Almost as much as I love you.
But there’s nothing I love more in a rock saga that ends with the band reuniting (except you; I love you most). Because really, that’s all we need. Us and the band. Jamming like there’s no tomorrow.
Because there may not be a tomorrow. And we should do everything in our power to avoid that outcome.
So please join me in envying us. I really don’t see any other way forward.
Trust me here brothers and sisters: it’ll do you no harm.
TIMSHEL