Did last week really happen?
If so, I missed it.
All sixteen of my linked Apple devices indicate that the calendar did roll forward, and that a troubling, surreal July has now melted into August. I am thus forced to assume that the lost time (in search of which Marcel Proust expended about 2,000 pages) has passed me by.
Among other corroborating events, my above-mentioned linked devices are full of images of Aaron M@&ther F@%cking Rogers taking snaps at the Packer’s training facility.
Aaron M@&ther F@%cking Rogers must have signed. That tells me I missed something. Maybe a lot.
As we left off matters, we were awaiting Big Tech earnings, the FOMC Policy Statement, the first estimate of Q2 GDP and sundry other data tidbits.
Aaron M@&ther F@%cking Rogers remained blissfully at war with the Green Bay Front Office.
But all that sh!t has changed, and I don’t find that we have gained much (other than still having to look at Aaron M@&ther F@%cking Rogers self-satisfied mug twice a year) by the way of clarity, for the trouble. The market took Tech earnings (which were nominally strong) to be a mixed blessing. The FOMC announced nothing, did nothing, and managed to confuse everyone (including, presumably, themselves) in the process.
GDP came in a little light. And investors did not appear to care.
Aaron M@&ther F@%cking Rogers convinced the Packers to re-acquire Randall (Bear Killer) Cobb.
The Fed’s Special Reverse Repo Facility reversed out an amount that surpassed the magic threshold of $1,000,000,000,000, and the tally probably rises from there.
Robbin Hood is now a publicly traded company – even if the investment community it serves was decidedly blasé about its debut.
Thursday marked the 100th anniversary of the date when the 3,600-member National Socialist German Workers Party named an obscure Austrian corporal as its Supreme Leader. Not sorry I missed that one.
And, on balance, I find us no better, and perhaps a little worse, off, for The Week That Wasn’t.
Not gonna lie – I’d really like to get that week back, because – let’s face it – none of us know how many of these cycles we have left to us. But I don’t reckon that’s the way it works, so we’ll just carry on from here.
However, I find the situation, from a market perspective, to be beyond confusing. On the one hand, lots of risks out there – inflation, them new country covid cousins, supply chain aggravations, political civil war, and the like. On the other, the gully wash of liquidity continues to flow. Yields are on the down – all over the world and particularly in Europe. Germany, for example (we won’t say in celebration of the above-mentioned Centennial) is knocking on the door of new Bund rate lows – mired as they have been in deep negative territory:
You Vill Lend to Deutschland. Und You Vill Pay for Doing So:
On a happier note, the NFL pre-season kicks of on Thursday, with a Hall of Fame game between the Cowboys and the Steelers, two teams that carry the divine virtue of having rosters that do not include….
Well, you know who.
And all I can add is my gratitude that, somewhere, they’ll be snapping the ball. Because it gives me something to watch that isn’t inane political commentary, contrived televised game show contests or reruns of Tom and Jerry. And before you call me out on this, the Olympics are simply not an option. They’re not watchable.
The NFL added an extra game to the season, and God bless them for that. Then there’s College, High School and (if deemed necessary as it may be) the CFL.
But I reckon that I’ll also be compelled to keep an obsessive eye on the markets, where I perceive an Irresistible Force of impossibly excessive liquidity careening towards the Immovable Object of an unhinged global capital economy, with no idea where it is, and (thus) no tools to determine wither it is headed.
On balance, I think the former wins the desperate contest, that valuations, for now, will hold, and, holding, are more likely than not to rise. But there won’t be much joy in the proceedings. All the flows are designated for a handful of privileged companies. In this respect, this market kind of reminds me of the NFL salary cap – the big money goes to a handful of roster participants (for example, Aaron M@&ther F@%cking Rogers) while everyone else breaks their @sses and hopes to suck hind tit.
The Week That Wasn’t sets an unappetizing table. Most of the interesting earnings are in the book, and, while, by standard measures, they were strong, they weren’t – in and of themselves — sufficient to supply a boost to the languishing cast of solid companies with outstanding prospects (and clean balance sheets) that are currently disdained by most investors.
This, as I mentioned last week, is what I believe constitutes a form of Alpha Hell for stalwart, diligent portfolio managers. Their names are just not working – long or short. They are stuck in the trenches, lobbing and taking shots like their forebears in WWI (including our above-referenced corporal), observing and experiencing the carnage they encounter in every direction, and no one gaining any meaningful ground for their effort.
It is indeed a war of attrition for the investor class, which hardly claim, much less receive, sympathy from the masses. They don’t have many alternatives but to hold the line as best they can. And need to do so with great care. To add to their travails, as illustrated in the following chart, the less experienced retail investing contingent takes an entirely different view of the proceedings:
I had to review this a couple of times to take in its significance. Non-Professional investor market sentiment has reached a three year high. What do these folks know that we don’t?
We’d better find out.
Normally this is deemed to be a sure indicator that the rally is winding down. Retail is always the last in (and the last out). And, under normal circumstances, I would agree with this hypothesis.
But these are anything other than normal circumstances. There’s just so much money floating around, and so much idle time (published reports are replete with stories of job openings that are going begging and the attendant desperation of business owners to fill key positions) with which to squander it – among other destinations, in the markets.
The Fed is printing more, and Congress is dying to hand it out. And as I’ve stated previously, while Chair Pow gathered himself sufficiently to reference tapering and other hawkish monetary measures, I’m just not picking up what he’s laying down. Especially with the visible headwinds in the economy, the enormous touching intended largesse of our elected federal officials, and a life and death Congressional election cycle creeping ever closer, turning the money spigot to the right is simply not a viable political option.
And, if Delta Dawn truly rages, forcing everyone back indoors, what are our intrepid leaders gonna do? Print even more money and hand it out to the masses, who won’t have anywhere to spend it. Except the markets, which may help Robin Hood, but the rest of us? Maybe not so much.
But even if it doesn’t go down that way, Congress is probably going to give away an extra few tril, which can only be paid for by higher taxes, running the magic money machine at full tilt, or some combination of the two.
The markets don’t want the stimulus, and certainly would take a dim view of higher taxes. If they come to pass, it will put enormous pressure on the capital economy, and will, in turn, take its toll on the real economy. Does anybody think that in this scenario, the increasingly politicized Fed is going to add to the dilemma of its political paymasters by reducing money flows and raising interest rates heading into an election year?
I’ll take the under.
So, I believe that at the index/factor level, valuations will hold the line and maybe climb. But it’s likely to be ugly beneath this shiny veneer.
To close on a more uplifting note, this here condition won’t last forever, and when it runs its course, there’ll be investment opportunities aplenty. Like many aspects of life, it’s a waiting game. I read, for instance, that Aaron M@&ther F@%cking Rogers’ deal is such that it buys him a ticket out of Title Town in 2022.
Maybe, just maybe, then, we can gut it out for a little while longer, and, in the meanwhile, this is about the most hopeful final message I can offer – in the wake of The Week That Wasn’t.
TIMSHEL