I ain’t missing you at all, since you been gone, away
I ain’t missing you at all, no matter what my friends say
— John Waite
Not sure if y’all noticed, but in an historic breach of protocol, I abandoned my post last week — failing to deliver my weekly note – upon which so many of you so deeply rely – for comfort, erudition, and, of course, as an infallible guide path towards investment riches.
It’s only happened once before — across more years than I count. And that on the worstest, most horriblest week ever, just over 11 years ago.
I’m able to offer neither plausible excuse nor suitable justification for this alarming betrayal of your trust. On the other hand, I’m not sure anyone even noticed.
Strike that, I did receive a note from my great pal and erstwhile book editor Pam, asking me if I was OK. And then there was Ben. Who inquired in person.
God Bless Ben.
Even though you don’t probably care, I can tell you that I spent a fair bit of my “week off” singing. Singing what, you may ask (even though you don’t care)? Well, before I tell you, please know that it wasn’t “a Capella”; I accompanied myself on guitar (which for me is sort of the whole point).
And, in terms of the set list, it tilted towards American Standards: “Over the Rainbow”, “Moon River”” (the fabulous Audrey Hepburn arrangement), “My Favorite Things”, “Raindrops Keep Falling on My Head”; and also selections from my more regular repertoire: Neil, The Stones, Bowie and Dylan.
Along with, of course, Paul Simon’s “April (Come She Will)”, which, in time-honored fashion, I’ll be playing all month.
Because A-a-pril is not only upon us, but is, somehow, nearly half over. From a market perspective, I anticipated that she would flutter in daintily upon us. And, while this in no way excuses my indecorous absence, I felt the markets would be in a state of Q2 pre-animation. Data flows were light, and it seemed like it would be a week that would serve little purpose other than teeing up the now-imminent bonanza of valuation-critical information.
I was wrong.
My most recent recorded sentiments indicated a preference to remain short the Treasury Curve and long Commodities (I’ve more or less given up trying to track the path of equities). In terms of accuracy, the results were a mixed bag. Treasuries continued their downward path, but Crude Oil — owing in large part to the brilliant decision to draw down a still-larger chunk of our dwindling strategic reserve (even as we aggressively restrain our own formidable production capacity) — retreated like a little bitch.
Like April herself, I expect she’ll be back.
However, the rest of the Energy Patch is a much different story – nowhere more so than in the realms of Natural Gas, the cost of which, if one dares to look, is now a 2.5 bagger in little over a year:
Jumpin’ Jack Gas:
Sugar is on a similar trajectory, and, channeling the Guess Who, if there’s very little of the sweet stuff tonight in your coffee, given current price trends, your java stash may also be light:
Sugar and Coffee: Lonely Feeling. Deep Inside….
If it’s any consolation, tea prices are pretty much where we found them a year ago and are in fact lower than where the reposed in 2018.
But one way or another, my sabbatical did not transpire against a market backdrop of calm serenity. But do they ever?
Things get interesting Right. About. Now. Banks report this week, contemporaneous to the release of March Inflation figures. And won’t that be fun?
We of course also have a hot mess of a domestic and foreign policy condition with which to contend, and my viewpoints (not that you care) are summarized below:
- The Eastern European War settles into a longer time frame conflict, drawing fewer headlines (in our ADD-laded world, even another Smith-like smackdown may wipe it from our awareness), but continuing to cause enormous disruptions to the global capital economy.
- Inflation plagues us well through the summer (and likely beyond). It may even accelerate.
- Having little other choice, the Fed amps up the heat on the Treasury Complex, jacking shortterm rates and beginning to sell down its balance sheet at the longer end of the curve.
- Credit markets, already feeling the pinch, will remain pressed, with heightened risk of default – particularly emanating from borrowers who rely on short-term paper that they must periodically roll.
- In a blinding glimpse of the obvious, it pays to keep an eye on the housing market here. Affordability – as measured in terms of percent of median pay required to cover; a) (skyrocketing) monthly mortgage payments (30-year fixed rates brushed up to 5% on Friday); against celestial (and still rising) home prices, is plunging by record amounts – just as we are entering peak selling season.
I therefore judge that upon my return, the market economy remains in a quagmire, with the irresistible forces of inflation, credit impairment, supply shocks, geopolitical uncertainty, and other risks, meets the immovable object of the still-galactic level of liquidity manufactured over the past several years.
I anticipate continued bi-directional volatility, accompanied, of course, by that vexing paradigm under which price fluctuations for individual securities are much more acute than what is registered at the index/factor levels. Capturing returns in this environment will remain as challenging as any construct that falls short of an all-out crash. I wish I could return with better prodigal gifts than this, but unfortunately, as I see it, fatted calves are in short supply.
Maybe I should just go away again. Nobody except Ben and Pam (and you) are likely to notice, and perhaps, upon my return, I’ll find some semblance of rationality has returned to the proceedings.
But: a) I doubt it; and b) I wouldn’t do that to you. At least not again.
So, you’re stuck with me, and, as long as you are, I hasten to advise you that the investment game is even riskier than it appears at the moment, and that the condition is not likely to dissipate any time in the foreseeable future.
Of course, if you banish me, I’ll offer up no resistance. And I wouldn’t blame you if you did. Because I have been bad.
But if you do so, know that no matter what my friends say, I will be missing you. More than I can express.
And that, so help me God, is the truth.
TIMSHEL