“And so this is Christmas, and what have you done”
Another year over, a new one just begun”
— John Winston Ono Lennon
I know the timing isn’t ideal (given performance conditions at all), but with only a handful of shopping days left before Christmas, and, presumably, a passel of Secret Santa cycles still on the docket, I thought I’d seek to offer some suggestions to the SS laggards among you.
So, let’s say, for instance, you picked your boss (who owns five luxury residences, and is about to board his smoke to his crib in St. Barts) out of the hat. What do you get for the underperforming hedge fund manager, fit to be tied about ’21 returns, but otherwise possessing everything?
My advice is to go big. They won’t be impressed with a bottle of wine (of whatever vintage). A tie or a scarf? Please.
It so happens, I may have the perfect answer. How about a big ‘ole statue of one of the most iconic figures of the early twentieth century?
Of course, I’m referring to the bronze image of Theodore Roosevelt – 26th President of the United States. Standing a full ten feet in height, and spanning seven feet and two inches, he is bound to impress even the most discerning of potential potentate/recipients.
Best of all? He’s already giftwrapped. Just pop a red bow up there and you’re good to go:
Yup, there he is. At the post on Central Park West, which he has occupied for eighty years – twenty years longer than his actual life span. But you can’t see him because he’s inside that container. I feel that in his boxed-up condition, he’s an eyesore, but like I mentioned above, he is conveniently packaged for anyone wishing to gift him to someone with the juice to appreciate a truly majestic present. It might (or might not) impact your bonus, but it will show your boss (and the world) that you aspire to the sublime.
The official word is that Teddy’s on his way to Medora, North Dakota (North %$#@ Dakota, FFS!), as a loan from the City of New York. But my guess is that any number of you ingenious buggers who comprise my readership could still cut a slick deal with city officials to secure him and gift him out.
Not sure when he’s set to make the trip west, but with the latest round of vexing virus outbreaks — descending upon NYC and other locales, maybe it’s just as well that they’ve got him sealed up. We wouldn’t want him catching – or, worse still, spreading – the disease, now, would we?
I will state that a new covid outbreak is a fitting, if depressing, way to usher out the difficult year of 2021 – one which we entered with such great hope that we’d turned the page from this festering bat circus, that we’d lanced a boil that had been plaguing us the preceding year.
But (nod to John Belushi) noooooo. The virus refuses to take the hint and bounce – even with the advent of a new administration that assured us its superior morals and competence alone would correct the problem. It didn’t. The virus mutated. First to Delta and now to Omicron – the latter of which I warned y’all about many weeks ago.
And much to my incremental frustration, we can’t even pronounce the latter correctly. Read me people, because Omicron is my fave letter in the Greek alphabet. It is pronounced, phonetically OMMI- cron. Not OM-NI-cron – the latter of which isn’t a Greek letter at all. I feel that if we stand any prospect of beating back this scourge, proper elocution will be an important element of the strategy.
But any way we enunciate it, I reckon we’re gonna have to carry the Big O into ’22. My anecdotal observation is that few are getting very sick from it, but it will cause incremental disruptions – to the capital and physical economies. Heck, it already has. Football teams, as measured by number of eligible participants, are being reduced to the size of basketball squads. The Radio City Rockettes have been forced to shelve their fetching little costumes for a second consecutive season.
And a resurgent covid is, in my judgment, only one of the problems that confront investors in the New Year. Next on the list – natch – is Inflation, which hit us with a variant of its own this past week. On the heels of a 6-8 Consumer Price Index print, Producer Prices – estimated to have increased by an astonishing 9-2, actually clocked in at a gut-punching 9-6. And this wasn’t the only disappointing drop of an economic statistic. November Retail Sales, estimated to have risen by a respectable 0.9%, came in at a limp 0.3%.
Back in my school days, they assigned a tidy mash-up term to the combination of weak economic growth and rapidly rising prices – stagflation. But then again, I did my economics grad work at Columbia University, which is now, for the most part, closed – not due to covid, but rather owing to a strike by underpaid untenured instructors. I wish them to know that I sympathize with their plight, because I myself was once among their number — an underpaid untenured instructor at Columbia University. On the other hand, the fair wage for slogging through the grading of > 100 handwritten final exam essays during Christmas Week, is, in my judgment, incalculable.
Here’s hoping that the Lion Lecturers and support staff win themselves a fairer shake. And I’m somewhat optimistic on that score. Because as I read in the WSJ with much astonishment, the group is now represented by – get this — the United Auto Workers of America.
The article went on to inform us that the UAW counts, as 25% of its 400 membership – 100,000 nerdy, untenured academics. Last time I checked, there are no auto plants on the Columbia campus. And, to the best of my knowledge, the assemblers of cars do not routinely hold office hours. It’s therefore a rather perverse alliance, and one that I think that this tells us a great deal – not only about conditions in this fair land, but about where we’re headed.
Yup, to me, it looks like a tough slog – for the General Populus, and, in particular, for the investor class. Viruses, runaway inflation, higher interest rates, an historic credit bubble, the prospect of incremental fiscal redistribution through higher taxes and increased entitlements – our risk cups are certainly full and may very well runneth over.
As such, I’m urging my clients to enter gingerly into the New Year. ‘22 will be different than ’21, and for all I know, it may be better.
But it may be just as bad. Or worse.
Above all, I think ‘22 will take its sweet time in its unfolding, that what transpires in the winter may not resemble what unfolds in the spring, and in the seasons that follow.
My read of the consensus entering the new sun circling cycle is that the above-named risks are under-accounted for in the prognostication calculus. All them analysts are too sanguine for my blood, and this, perhaps, worries me most of all.
I believe they’s all just spitballing.
We could begin with a big rally. Or a big selloff. Either trajectory is likely to be a fade.
Investors are likely to render their judgments on the outcomes of a handful of high-drama issues, including, but not limited to:
- Public Health Conditions
- Inflation
- Fed and Fiscal Policy
- Credit Market Health and Sustainability
- Interest Rates
- Political Developments and Prospects in an Important Election Year
- Energy Prices
All these matters are deeply in play, and all are cause for concern. The path that each takes, is, at present, unknowable. Meantime, a wide range of asset classes feature, on a relative basis at any rate, counterintuitive pricing patterns, emblematic of the vexing confusion out there.
Consider, for instance, the last on the list. As illustrated in the following chart, cross-geographic price dynamics for Natural Gas are, to me, bordering on nonsensical:
A Tale of Two Continents — U.S. vs. European Natural Gas:
So, investors (who ought to know) are suggesting that we (blue line) Americans will face a cozy winter, while some of our friends on the (white line) Continent are likely to freeze to death.
In a world as fungible as that in which we dwell, it strikes me that both can’t be true.
And then there’s all those yield shenanigans. I was surprised as anyone that the investing masses reacted to Powell’s ambiguously rendered taper talk by buying up both stocks and bonds. The rally in the former asset class faded quickly, while the latter continued to surge. Bond yields in the face of a superficially hawkish policy statement remained submerged, but the high-flying tech names that are supposed to benefit from these low yields staged an ignominious and counterintuitive retreat.
It doesn’t make much sense to me, and I really don’t know what to tell you other than to proceed with caution. But this much is certain. It will all play out as the Good Lord intends in the coming months: a reality we should bear in mind during this holiday season.
And so this is Christmas. Maybe your Secret Santa is already in the books, and if so, I hope you had fun. If not, my suggestion still stands.
We won’t be reasoning together again until the holiday is over, so here’s wishing you a blessed one. If you don’t wish to give Teddy-in-a-Box as a gift, perhaps we can, at any rate, draw some benefit from his experience.
One day, you’re a weak and sickly kid. Next, you’re charging victoriously up San Juan Hill. Before you know it, you’re President of the United States, and, a few years later, turn tits up, prematurely, at the age of sixty.
Twenty years later they bronze you and mount you in front of a museum on the Upper West Side, a place you occupy, with your foot-bound companions of color, for more than three generations. This outrages the easily offended masses, so they decide to remove your friends, as a prelude to boxing you up and shipping you to the North Dakota Badlands.
It just doesn’t pay to get too comfortable. Anywhere under heaven. And, during this holiday season, it will do you no harm, as you make your plots and plans, to take this into consideration.
TIMSHEL