“If you should rear a duck in the heart of the Sahara, no doubt it would swim if you brought it to the Nile”.
Mark Twain and Charles Dudley Warner
“If you put the federal government in charge of the Sahara Desert, in 5 years there’d be a shortage of sand”.
Milton Friedman
“I was born in the desert, raised in a lion’s den”
Noah Lewis
“I have nothing to do on this hot afternoon but to settle down and write you a line”
Rod Stewart and Martin Quittenton
Let’s start at the end. It is indeed a hot afternoon. And no, I’ve nothing to do but drop y’all a line. I should mention (if for no other reason than to improve your musical erudition) that I lifted this quote from what is perhaps my all-time favorite song – “You Wear it Well” by Rod Stewart.
And you do. Wear it well, that is. Madame Onassis got nothing on you.
And that, perhaps (but perhaps not), is all I have to say about that.
Next, as the fates would have it, I was indeed born in the desert, the one that is nestled about 100 km east of Los Angeles. I can’t say I was raised in a lion’s den, but, then again, I can’t say that I wasn’t. Truth is, I don’t much remember.
And that, perhaps (but perhaps not), is all I have to say about that.
Except this: the desert that forms in the basin of the Big Bear Mountain range, due east of not only L.A. but also of Pasadena, is a quaint little affair. It fails to rise to the dignity of, say, the nearby Mojave Desert, which contains the legendary Death Valley.
And it comes up particularly short when compared to the Sahara, which stretches across a full one third of Africa – from Algeria to Egypt. It ranges 9.2 million kilometers and is surpassed in size (by those who presume to determine what a desert and what ain’t) only by two slightly larger expanses proximate to the North and South Poles.
But please. Those deserts are some of the coldest spots in the world, and I suspect those, er, hearty enough to brave those realms wouldn’t call them deserts at all. If you did so to their faces, they might be offended enough to club you with an ancient but still functional thigh bone of a Wooly Mammoth, drag you by the hair to their caves, and cook you for supper.
During their alternating winters, night-time in these regions last > 22 hours. By contrast, some parts of the Sahara register 98% sunshine in daylight hours and average daily temperatures of 47 degrees centigrade (117 degrees Fahrenheit).
Given its nearly infinite reach, I reckon it would be difficult, but not impossible, to transport a duck born there to the Nile (where it would no doubt swim), but I think that rearing one in its most arid districts might be even more problematic.
Still and all, Twain/Warner have a point; God’s creatures gonna do what they gonna do.
And this is certainly true for those magnificent mallards who noisily debate and ultimately set financial policy. This week, in time-honored tradition, the quackery migrates from Washington and New York to a pleasant setting in Wyoming; specifically, Jackson Hole, for its ritualized Economic Symposium. It’s host is the Federal Reserve Bank of Kansas City (bestowing on FRBKC some reason to exist) and it is one of the two mountain migrations for these birds every year, the other one of course being that swarming orgy of self-congratulation in Davos, Switzerland each winter. I can’t say as I blame them for doing so. It is easy to wing ones-selves to these high altitudes– using either one’s own extremities, or lacking the appropriate bio-functionality, simply gassing up private jets, nestling in, and refining one’s notes admonishing the rest of us for excessive fuel use.
Wiki states that there are over 20 types of ducks in Wyoming, but all ears this week will be trained upon one particular orinth – Jerome (Big Quack) Powell.
He will be laying his latest Daffy wisdom on us at an interesting pass. In a rapidly changing, exceedingly opaque financial landscape, his objective is to effect a precarious balance between his battles against Inflation and his desire to avoid doing gratuitous violence to what appears to be a very fragile set of economic conditions.
I don’t envy him his task. Whispers abound that he will recommit to the mission of taming the pricing beast, and investors have backed this up sentiment by driving Madame X (U.S. 10-year) yields by 50 basis points in August alone. Other markets have reflected similar mindset. The (Almighty) USD is again knocking on the door of two-decade highs.
And there are unmistakable signs that Inflation, channeling it inner Elmer Fudd, is back on the hunt. On this hot afternoon, Natural Gas in both Europe and the United States is surging to all-time highs:
Nat Gas: Flying and Squawking on Both Sides of the Atlantic:
Meantime (and inadequately reported), German PPIs were reported last week at an astonishing >37% annualized. The July figure of +5.3% is an all-time record.
And, of course, the cold weather is still a couple of months off (except in the world’s coldest deserts), and when it arrives, biological ducks and wealthy human waterfowls will simply fly south, while the rest of us suffer through a crippling increase in the price of heating our homes.
Cotton is yet again surging, but we won’t be wearing much of that this winter. Copper is gathering force. I could go on, but you get the idea.
So, Inflation may indeed be ascendant, and Daffy Powell may be forced to measures beyond uttering the favorite phrase of his namesake’s pal — Sylvester the Cat (Suffering Succotash!). Because though it is a culinary mashup for which no financial market exists and thus no pricing information is available, the cost of succotash has almost certainly increased considerably, as well.
I’m not sure what Powell’s gonna say or do, but I reckon we find out this coming week. Lord knows he’ll get no help from his brother and sister public servants across town, who are on something of a roll. Not only have they gathered themselves to spend $1T on microchip and green energy, but they have also allocated sufficient IRS resources to hire enough IRS agents to populate a town nearly ten times the size of Jackson Hole and Davos (villages whose populations are nearly identical).
I have my doubts about the wisdom of this. It seems kinda Inflationary/recessionary to me, and perhaps more importantly, ‘tis a mere drop in the bucket relative to what they wanted to spend.
Which brings us to the last of our four quotes. Friedman was right about sand shortages in the Sahara materializing in a mere half-decade, but I believe, in the present day, the grains would disappear at a more rapid rate. All 9.2 million square km of them.
And that’s where we stand on this hot August afternoon
I recently stated my view that risks tilt to the upside, and, considering recent market action, I did myself no favors by doing so. Stocks and bonds have sold off by noticeable amounts. As has crypto. Most of what’s up is stuff we’d rather see go down.
But the market is the market, investors are investors. If you reared the latter on the remote precincts of Pluto and then transported them to Wall Street, they would no doubt invest.
And I think, as such, there’s still a bid out there.
But now my coffee’s cold and I’m getting told that I gotta get back to work. So, when the sun goes low and you’re home all alone, think of me and try not to laugh.
No, I don’t wear it particularly well. But you do. Unlike the ducks, lions, bulls and bears to which I make reference in this note. Who wear nothing at all.
I wish I could offer a vision of Duck Soup on the horizon. But right now, it looks more like a game of ducks and drakes – skipping stones on a watery surface and hoping for a few perky bounces before gravity drags them down beneath the surface.
All of which makes me want to take a swim. Which is what I think I’ll do. And so, till next time…
TIMSHEL