You thought the leaden winter, would bring you down forever,
But you road upon a steamer, to the sirens of the sun,
And the colors of the sea, find your eyes with trembling mermaids,
And you touched the distant beaches, with tales of brave Ulysses,
How his naked ears were tortured, by the sirens sweetly singing,
And the sparkling waves were calling you, to kiss the white laced lips
– Clapton and Sharp
May the road rise to meet you, May the wind be always at your back.
May the sun shine warm upon your face, The rains fall soft upon your fields.
And until we meet again, May God hold you in the palm of his hand.
— The Irish Blessing
No. I wouldn’t start from here.
By way of context, our title is a punchline to an old Irish joke: the response of a Dubliner to a visitor’s request for directions.
It strikes me as being so perfectly Irish, replete with every bit of that country’s whimsical, selfeffacing stoicism. Their humorous acceptance – of their fate and their surroundings.
And, on this last day of January, I’d like to dedicate this column and theme to two personally impactful sources – both tied, albeit indirectly, to the Emerald Isle.
The first is to my friend Robert McHale, with whom I worked THE BIG HEDGE FUND more than twenty years ago. I bailed too early on the joint, but Rob and I had kept in routine touch ever since. He died unexpectedly a couple of weeks ago, and I wanted, in my small way, to honor him:
Rob was an Ops guy, with a great deal of that humble self-knowledge that characterizes the country of his forbears. He was Irish, through and through.
He never aspired to be a titan; simply did his work with humility and extreme competence. He liked to trade, and, for the entire course of our acquaintance, we would swap market hypotheses. Eventually (and paradoxically) I hung the nickname “Rabbi” on him.
We were the Rabbi and the General. It was our private joke. And now I’ve got to remove him from my weekly distribution list. Fare the well, Rob.
And as the other Irish blessing goes “may you be in heaven an hour before the devil knows you’re dead”.
The second shout out goes to the epic James Joyce novel, “Ulysses”, which celebrates the centennial of its existence as a published work this week. It all takes place in Dublin, on a single day: June 4, 1904 – a date, each year, that pointy-headed literary dilletantes such as me referred to as “Bloomsday”.
Its protagonist is a misanthropic cat named Leopold Bloom. He’s a Jew — turned Catholic (by peer pressure) and living in one of the most Catholic metropolises this side of Rome. Nobody really likes him. He is perpetually thrown shade by his peers. He spends Bloomsday trying to take his mind off his adulterous wife’s pending tryst with a local playa – scheduled for that very night. He wanders Dublin trying to fit in, and seeking answers to questions, which, by all accounts, only he is asking.
Ulysses is a tough read, and I’ll throw out a brag to y’all: not only did I slog through it but enjoyed it immensely. One hack, for those who wish to travel this road, is to use “Sparks Notes” or some other literary supplement. Otherwise, you might not know what the hell is going on.
But my main takeaway from the book, which follows the rough outline of Homer’s “Odyssey”, is that a single day’s voyage, for any of us (even a poor schmuck like Bloom), can be viewed, through the appropriate lens, as being an epic journey.
It sure feels that way in the market (with all that intraday vol), as well as the capital and political economies – all of which are a tangled mess. How is one, anyone, to manage through it?
Well, like I’m telling yas. If I were you, I wouldn’t start from here.
And this is true no matter where your bearings currently place you. Not gonna lie – this is about as muddled a set of conditions I’ve ever encountered.
Take, for instance the view from macro-land. The week began with putrid PMIs – particularly on the Service side. We move on to a big build of Retail Inventories and a miss on Durable Goods Orders.
Think about that for a minute. In an environment where no one can shut up about supply chain bottlenecks and empty shelves, retailers are overstocked, and no one is ordering the big stuff.
Oh, and in case anyone cares, our Retail Trade Deficit just hit a new high, surpassing, for the first time and with little notice, the quaint threshold of $100B:
On a happier note, our first look at Q4 GDP came in at a boffo 6.9%. But the associated inflation index – a fave of economists known by the obtuse moniker of GDP Price Deflator, dropped, eerily at the same 6-9 level. Kinda sleezy, no?
And on Friday, almost out of nowhere Q1 GDP estimates – from the Atlanta Fed and others, plunged to 0.1%. Which by my number crunching is a ten basis points above the threshold of Recession.
Credit markets also continue to feel the strain, particularly those in the junk bucket, now registering the widest non-lockdown spreads since late 2018.
Finally (not because there is nothing else to report but rather because I’m tired), with Russian Troops massing on the Ukraine border and brutal winter weather bearing down across the nation, Nat Gas prices increased by a solid third over the past few sessions.
All this enabled some tough talk out of Chair Pow at Wednesday’s FOMC presser, but one could read the stress on every line of his face. If I were him, I wouldn’t want to start rate hikes from here, and I think he knows this. On the other hand, he probably doesn’t have much of a choice.
And, reviewing all this from an investor perspective, we’re looking at a slowing, inflationary economy, still impaired by pandemic pressure, but forced, nonetheless, to contend with the need for higher interest rates.
So, how do you want to build your portfolio? Well, if I were you, I wouldn’t start from here.
Admittedly, it’s probably too late to offer this painfully obvious risk management advice. Most of you began long ago, and cannot, by definition, start again.
Nor do I believe you can end your journey now.
The path remains twisty, as evidenced by Friday’s baller rally, which enabled our misbegotten equity indices to register their first weekly gains in several fortnights. FWIW, I don’t take this as ushering in a (Irishman) Van Morrison “Glad Tidings from New York” vibe. Better, I believe, would be an extended selloff which might clear the decks and enable some of us more rational playas to play.
But that doesn’t appear to be what the fates have in store for us. My data suggests that there are plenty of large capital pools eager to pounce on any respectable dip. They and the retail masses are likely to ensure that stock prices remain in the opaque range of overvaluation for the visible future.
I therefore predict incremental frustration, but also surprises – some of them even pleasant – along the way.
And if you doubt this, ask yourself the following question: what, at any point, would be probability of entering a year, as we did in 2022, with the Cincinnati Bearcats and the Cincinnati Bengals reaching the semifinals of their respective football tournaments?
No, it’s not a straight line we travel. It wasn’t for Rob, nor for Bloom. Nor for Joyce. The first editions of “Ulysses” contained thousands of errors. It was subject to decades of censorship. It didn’t rise to its appropriate place in the literary pantheon for several decades. Even now, lots of critics consider it to be nothing more than literary word-salad.
It seems that no one ever finds a good place to start. But we begin our journeys, nonetheless. Stoic, self-deprecating persistence remains the key. Sometimes, it even works. And, when it does, as the Irish Blessing offers, the road, indeed, rises up to meet us.
TIMSHEL