If the good times are all gone, then I’m bound for movin’ on,
I’ll look for you if I’m ever back this way…
Ian Tyson
Though I cannot verify its accuracy, someone recently relayed the following quip to me.
Jack Nicholson (yes, that Jack Nicholson), was once asked, given the abundance of nubile virgins and other passionate females at his perpetual disposal, why he continued to show a preference for professionals — in the realms of L’Affaires du Coeur.
To which he replied “I pay to leave”.
I think he makes a good point, but I ain’t gonna spell it out for you. Either you pick up what he’s laying down or you don’t.
It’s that simple. At least when it comes to L’amour, toujours l’amour.
The domains of investments, markets, and the capital economy, are, in my judgment, more complex. Here, it is difficult to merely conduct your business, execute financial settlement, and be on your way.
Because if you could, I suspect that many among you would choose that very option. Right now.
Even I – a lonely risk manager from outta town – have been sorely tempted to figure out how, and for how many ever shekels, it might cost me, to purchase my exit from the sorry morass of conditions that currently confront us.
But for me (and I suspect, for others among you), the strategy begs the question: “what then”? Because, you see, I still got bills to pay, and no other means for doing so than by plying my trade.
Maybe I just need a break – to brighten my mood, so to speak.
Which was not improved by a recent visit to an otherwise authentic bagel joint on Broadway, whereupon I was compelled to fork out twenty big ones for a raisin bagel with cream cheese (otherwise known among us stone cold ballers as a schmear).
My crack econometric team informs me that part of this financial abomination is owing to (yes) a large increase in the price of bagels:
Bagel Prices (aka Wallet Schmears):
And, largely because I must, I will cop to having asked the gentleman behind the counter to throw some smoked salmon and tomatoes on top.
But prices for those commodities are stable to down. There is a shortage of cream cheese, which – not gonna lie – is quite concerning to me.
But a full Jackson for a schmear? I’m telling you right now, the American Consumer Economy is not likely to survive such an outrage.
And I wasn’t even done yet. Because a $20 schmear is bound to make a guy thirsty, right? So, to wash it down, I next went to the local Dunkin’ Donuts, where I was compelled to cough up $5.25 for a large lemonade. I figure the wholesale cost of the juice to be under 5 cents. Same for the cup. I am a big consumer of ice, but what can that set back the franchise owner?
Yup. I reckon somebody made out pretty good on that there trade. But not me. I got took. Twice. So, then there was nothin’ left for me to do but the obvious: get outta town.
You can probably guess what happened next. My fuel gage was huggin’ the E, so I had to fill ‘er up. Which set me back more’n 90 large.
Talk about paying to leave…
I am further annoyed about this whole Depp/Heard thing. Not that I paid any attention to the details, but the whole thing seems so representatively sordid, so exemplary of the type of nonsense upon which we put all our time and energies lately.
But beyond that, after winning his judgment, JD promptly went on tour with the magnificent Jeff Beck. One of my heroes. And this hacks me off. Johnny is what I would describe as a competent amateur guitarist. However, I’m thinking, I can out-shred him considerably. But am I on stage with Jeff Beck? No. I. Ain’t.
Meantime, I took no joy in being right about the rally in risk assets failing to sustain itself. I think we’re right in the middle of valuation ranges, which, albeit with wide bands, are likely to prevail for the period that is visible on the horizon.
And it’s nearly an impossible environment in which to either trade or invest. And I don’t see what ends it. We’re now nearly 15 years into a market construct under which we could be nearly certain that any time the pain reached certain levels of unpleasantness, the government would bail us out. But that was then. I don’t see any bureaucratic cavalry anywhere on the current horizon. And even if there was, there’s not much they could do to save us.
Strike that. There’s plenty they could do. Like take the handcuffs off the domestic Energy Sector. Incentivize R&D. Cut regulations — such as those that catalyzed the recent and continuing Baby Formula shortage. Unleash the astounding technological innovations that have manifested out of the lockdowns themselves. Particularly those in Telecommunications and Biotech.
But instead, we’re begging the Arabs to dribble out a few more drops of the Bubblin’ Crude, and we are hamstringing these other sectors. Witness the halving of the value of the Benchmark Biotech Index, which is chock full of new products and, for practical purposes, infinite demand:
Biotech Index: Heal Thyself!
Matters have devolved so thoroughly that the HF GOAT of Biotech – perhaps the GOAT of the whole HF industry, is now taking capital on quarterly liquidity.
His fund had been closed to new investments for much of the preceding decade. For my money, with his benchmark down 50% in barely six months, now wouldn’t be the worst time to take a look at his offering.
But I’m here to provide enlightenment and erudition; not to hawk hedge fund offerings.
And the last thing the Government apparently wants to do is to energize the bleeding edge sectors of the American Economy. Clearly, they believe to do so would run against their political interests, but I’m not sure they have the political calculus quite nailed here. Maybe they should get their heads out of Davos and pay a visit to Davenport.
But instead, our leadership will hide behind the Fed as the agent to reverse the reduced Buying Power of the Almighty American Consumer. On Thursday, we’ll be forced to endure yet another set of inflation statistics – with CPI expectations substantially unchanged at recent thresholds of >8%.
But don’t worry; the Fed has the President’s blessing to raise interest rates – and take the blame when: a) this takes yet another slug out of economic output; with b) negligible impact on the pricing pressure we all feel.
Higher interest rates, for instance, are not likely to provide me much relief at the schmear counter. Or, for that matter, at the pump.
Plus, if the Fed gets real aggressive and engages in sufficient hiking such that it takes rates, to, say, 4%, that’s still only half of the current rate of inflation. But the political narrative will be such that the Fed will be blamed, nonetheless.
Along with Russia, which appears to be closing the circle on key regions of the Ukraine. Or maybe L’il Kim, who has now launched more missiles in early June than he did all of last year.
And, in terms of the markets, I find risk assets to be neither cheap nor expensive; probably I’m right on both accounts. Not many catalysts out there for a rally, but so much recently manufactured liquidity that….
But we’ve been through that a thousand times before. And, if the good times are all gone, I’ll be bound for moving on.
There’s really nothing else for the rest of you to do but stay and fight it out; paying for your exit is probably too expensive.
Except with respect to this column, which has blessedly reached its denouement. They don’t charge me for resting my keyboard – yet.
So, I reckon I’ll bounce while the bouncing is good.
I’ll look for you if I’m ever back this way.
TIMSHEL