It’s the same story the crow told me, it’s the only one he knows,
Like the morning sun you come, and like the wind you go,
Ain’t no time to hate, barely time to wait,
Woah-ho what I want to know, where does the time go?
— Jerry Garcia and Robert Hunter
Where, indeed, does the time go? In this week’s episode, we traverse quite a-ways backward, to the days leading up to the Revolutionary War – and the provisioning of the original Continental Navy. We was, at the time, fixin’ to do battle with the Brits, and needed some seafaring vessels to supply our troops. In karmic preparation for same, one of our founding sailors, a chap named Christopher Gadsden, contributed a (now eponymous) standard to the flagship.
It looked something like this:
Simple, elegant, but unambiguously menacing is Gadsden’s Flag, which still rises in the breeze in certain vicinities of the realm. It upsets some folks, perhaps appropriately so. The color scheme is anything but inviting, and the image of a cobra — coiled and ready to strike, is, shall we say, a tad unsettling.
To some, the missing apostrophe is also problematic, but I make allowances for such things, because, though widely unacknowledged now, English language spellings and usages have evolved over the ages. Bigger issues revolve around its association with conservatism in the Deep South, which some view as a microaggression in and of itself.
At any rate, and under the magnificent leadership of General Washington, we did win the fight to separate ourselves from the yoke of British colonialism and have been getting by on our own for well-nigh ten generations. No more tea levies; no more taxation without representation. A new nation, conceived in liberty and dedicated to the proposition that all men are created equal, endowed by their creator with certain inalienable (God I love that word) rights – to life, liberty and the pursuit of happiness.
You know the thing, right? But does any of it still apply? We are taxed – more so every day, but are we represented? Are all men created equal (and what about women)? Were they ever?
Depends, I reckon, on who you ask.
But all the above is arguably irrelevant to our purpose. Because I’ve re-lyriced Gadsden’s Flag phrase – first by adding the missing apostrophe (which Frank Zappa deemed the crux of the biscuit), and, perhaps more importantly, by substituting the word tread with trend.
Don’t trend on me. I mean it.
And my mascot is not a coiled snake, but rather a sloth in repose.
The markets appear to be heeding my warning. Our equity index forces, including, most notably General Dow, Captain Naz, Ensign Russ (who, to the best of my knowledge, was not present when they first unfurled Gadsden’s Flag), and, of course, the Gallant 500, have all been lumbering, endlessly trendless, since we were all dreaming those nocturnal dreams, mid-summer. The Dollar Index has spent over 90% of its time at a sleepy 92 handle, throughout.
There’s been some volatility at the long end of the Treasury Curve (who among you think you can manage the capricious movements of Madam X?), but short-term borrowing rates have not moved more than a few basis points – all around the polar vortex of 0.000%, for years.
If one wishes to seek out trends (perhaps to find the exception to the rule) one need look no further than shipping costs, container rates, and (for the truly intrepid) energy prices. Or prices for just about everything in the real world. But I’m gonna channel my inner, reposing sloth in this respect and ignore this logistics complex. And everything else.
In my business, there is an oft-quoted phrase: “the trend is your friend” and sometimes it is true. But some of the best investors I know believe that the big paydays almost always transpire on the countertrend side of the ledger. Like getting long a year ago April, when covid started raging, but before the Fed started blasting out Benjaminz to beat the band.
Or the biggest countertrend trade in history (or at least this century): “buying”, during this period, Crude Oil at negative forty dollars a barrel. If you made this purchase, and held on to them greasy buckets, they now fetch $72 apiece, producing a return for you of beyond infinity.
But how do you make money – trend or countertrend – when there are no trends to be found?
Good question but unfortunately, I don’t have a great answer. The best I can come up with is patience. You hold onto your best rendered themes, in smaller sizes if necessary, and wait for some coherent market pattern to identify itself.
We may have a good spell to wait.
On the other hand, we may not. There is, after all, a (yawn) FOMC meeting next week, and they could surprise us. I seriously doubt they will, though, as: a) its hard to envision any surprise that the market would take constructively; and b) they seem to be going especially out of their way not to upset us.
Down the road in D.C. is another story. Around the White House and the Capitol, they like upsetting us, want nothing more than to make us cry. Well, some of them, anyway. They go to our most fancified events wearing dry goods that tell of their intentions to tax us (as if we weren’t taxed already). Then they take their tchotchke bags, hop in their SUVs and go home.
But, on the other hand, they lack the element of surprise. Their every utterance is captured, for time immemorial, on the interwebs. They are doing everything they can to pound on us, and, rather than disguising this, they’re frigging broadcasting it.
But surprising or not, they’re having a difficult time bringing down the hammer to their satisfaction. Perhaps this is owing to the reality that fiscal policy is a blunt instrument (think sledgehammer) and they’re trying to aim their blows at those they don’t like, while sparing the folks that they view with favor. Thus, they tell us that higher taxes are needed, that the better off must pay their “fair share”, while seeking to carve out the decidedly un-woke concept of Carried Interest (don’t ask), and to eliminate the cap on State and Local Taxes that hit disproportionally upon their well-endowed philosophical chums on either coast.
We begin, so I’m told, with infrastructure, but the bill does not include walls — built with cannon balls or any other materials. It does feature effete-by-comparison mottos: not “dont trend on me” but rather “build back better” or some such drivel. The cannon balls come immediately after – launched as part of the $3.5T spending/$3T tax reconciliation blowout which could smash everything into smithereens.
Because all this has been a heavier lift than anticipated (which is good), I kind of expected a rally this past week, but the tape had some pronounced weight to it. In result, the Gallant 500 bounced for the weekend at its lowest levels in a month. Fancy that.
Perish the thought that a couple of down weeks turns into a trend. Nay, my friends, trends are made of sterner stuff than this. But they must start somewhere, and I’d hate to see equities suffer the fate of Silver, which puked hard on Friday and is down > 6 bucks (> 20%) over the rolling quarter. Among other matters, if you are the guy singing our theme song, and live in a silver mine that you own rather than rent, you now have even more reason to call your residence “The Beggars Tomb”.
But as far as the broader market goes, it’s a buck dancer’s choice. There’s nary a trend to be found, so investors remain friendless. And confused. So, take my advice and stay nimble here, OK?
*****
Our flagman, Christopher Gadsden, rendered myriad significant services to the cause of the Revolution. He served in the Continental Congress, funded nearly all of South Carolina’s contribution to the war effort, and rose to the rank of Brigadier General. In 1780, before the outcome was secured, he refused to cut a surrender deal with the Brits and instead spent nearly a year in solitary confinement. He also served as S. Car’s Lieutenant Governor and would have certainly grabbed the top spot if not for the ill health he suffered during his prison stretch.
His legacy, though, is most prominently reflected in his flag. And it’s motto: “Dont Tread on Me”. It’s a phrase that remains appropriately in vogue, in certain quarters, to the present day.
But in my opinion, our modification of same is also presently applicable, leaving us market types to improvise as best we can, and still making the following query, which won’t be answered before the lord’s good time.
“Woah-ho what I want to know, how does the song go?”.
TIMSHEL