“Mr. Praline: Now that’s what I call a dead parrot.
Owner: No, no…..No, ‘e’s stunned!
Mr. Praline: STUNNED?!?
Owner: Yeah! You stunned him, just as he was wakin’ up! Norwegian Blues stun easily, major.
Mr. Praline: Um…now look…now look, mate, I’ve definitely ‘ad enough of this. That parrot is definitely
deceased, and when I purchased it not ‘alf an hour ago, you assured me that its total lack of
movement was due to it bein’ tired and shagged out following a prolonged squawk.
Owner: Well, he’s…he’s, ah…probably pining for the fjords.
Mr. Praline: PININ’ for the FJORDS?!?!?!? What kind of talk is that?, look, why did he fall flat on his
back the moment I got ‘im home?
Owner: The Norwegian Blue prefers keepin’ on it’s back! Remarkable bird, id’nit, squire? Lovely
plumage!
Mr. Praline: Look, I took the liberty of examining that parrot when I got it home, and I discovered the
only reason that it had been sitting on its perch in the first place was that it had been NAILED there.
(pause)
Owner: Well, o’course it was nailed there! If I hadn’t nailed that bird down, it would have nuzzled up
to those bars, bent ’em apart with its beak, and VOOM! Feeweeweewee!
Mr. Praline: “VOOM”?!? Mate, this bird wouldn’t “voom” if you put four million volts through it! ‘E’s
bleedin’ demised!
Owner: No no! ‘E’s pining!
Mr. Praline: ‘E’s not pinin’! ‘E’s passed on! This parrot is no more! He has ceased to be! ‘E’s expired
and gone to meet ‘is maker! ‘E’s a stiff! Bereft of life, ‘e rests in peace! If you hadn’t nailed ‘im to the
perch ‘e’d be pushing up the daisies! ‘Is metabolic processes are now ‘istory! ‘E’s off the twig! ‘E’s
kicked the bucket, ‘e’s shuffled off ‘is mortal coil, run down the curtain and joined the bleedin’ choir
invisible!! THIS IS AN EX-PARROT!”
Monty Python
I couldn’t resist the long opening quote here, and that’s not the totality of my transgressions. Because I lifted the reference to the iconic, Pythonic “Dead Parrot” sketch, I think, from a recent editorial in the WSJ.
It can be hoped, at any rate, that y’all get the gist of the interplay between the justifiably vexed Mr. Praline and the dissembling (unnamed) pet shop owner. The latter sells the former a dead parrot, and then, upon the former’s complaint, he heroically sticks to his story.
I admire him for this.
Among the alternative realities he lays before the misanthropic Mr. P is that the bird, exhausted after a prolonged squawk, is “pinin’ for the fjords”. But I think, with his rant at the end, Mr. P resolves the argument in his own favor.
The bird is dead. But it causes me to wonder whether, this reality firmly established, he could not also be both exhausted after a prolong squawk, and, in fact, engaged in some authentic fjord-pining.
Moreover, it seems to me to be a rather timely matter to consider, particularly as it pertains to this past week’s most salient event – the FOMC meeting/rate announcement, and Fed Chair Jay(bird) Powell’s comments during the presser that immediately ensued.
Our chief monetary policy orinth first disappointed his constituents by going the full smash 75, but then, in his written remarks, managed to bouy buoyancy-bereft spirits with the following statement: “As we come closer to that level and move further into restrictive territory, the question of speed becomes less important. … And that’s why I’ve said at the last two press conferences that at some point it will be important to slow the pace of increases. So that time is coming, and it may come as soon as the next meeting or the one after that. No decision has been made.”
This was the “tell” that investors were seeking. Equities and Treasuries rallied in Pavlovian fashion.
Then came the presser, a decidedly avian affair, during which, however, there were neither doves nor parrots to be found. Only hawks. And my extensive research corroborates that this lastmentioned predatory bird will indeed feast on the two more docile species mentioned just before. So it went with the presser, during which Jay-Hawk Powell somehow managed to be loud and clear – lovely plumage extending from his beak notwithstanding.
Investors, reacting to his prolonged, beak-stuffed squawking and knowing they’re next, responded in pain and fright. He made it clear that: a) what he fears most is pausing too early; b) his objective is the time-honored (but perhaps highly aspirational) 2% Inflation target; and c) that the rest of us better buckle in for some unpleasantness, because we are galaxies away from achieving b).
In short, he took the opposite tack of that scamp pet shop owner. Channeling instead Mr. P, he informed us that the pausing parrot has, for now, joined the bleedin’ choir invisible.
This certainly clipped the wings of the buying crowd, which was flat on its back for the remainder of Wednesday and all Thursday, before being hoisted up and nailed to its perch during Friday’s session.
I was surprised as anyone at Parrot Powell’s Presser 180, feeling certain that he directly intended, in his formal statement, to calm the mournful warblings of beleaguered investors, and, by so calming, bestow some illusory life upon comatose capital markets. I was wrong.
I wonder what his game is and can only conjecture that politics is deeply in play with respect to his pet shop owner policy plays.
Specifically, he has now raised rates from zero to ~4% in eight short months and has made clear he ain’t done yet. From a political perspective (his presumed political perspective; he is, after all a Yellen acolyte) the timing is passing unfortunate. He has swooped in to ground the economy right up to the point of an important election, with (if the perfidious polls can be believed) his side feeling wicked gravitational pull. His friend and mentors must be quite angry with him.
But what’s done is done and cannot be undone. The elevated rates are upon us, and the economy will feel their presence. Here’s hoping these moves will help tame Inflation, and for all I know they probably will (or should).
But history instructs us that these levels of Inflation almost never dissipate without an accompanying Recession, which I believe is part of the Fed’s calculus. Better, or so I assume they think, to bring it about, in, say, the early innings of ’23 than a year later, when it might cause even greater partisan damage.
That’s my hypothesis, at any rate. And if it so plays out, we’d best strap ourselves in for (oxymoron warning) an immediate accelerated economic slowdown.
All of which offers a bleak prognosis for risk assets. As perhaps the most overworn of market platitudes admonishes us: “don’t fight the Fed”. I made the mistake of operating against this wisdom in the wake of the lockdowns. Even at the Q2/20 lows, I figure we had much further to drop. But then the Fed came in with its $4.5 Tril, and y’all know what happened next.
Well, if you don’t want to fight the Fed as it giveth, it certainly does not pay to do so as it taketh away.
It presents quite a quandary, no? Because there’s other menacing stuff out there that has nothing to do with Fed policy. We can feel the rumblings of economic deceleration from several sources, and I’ll offer a few visuals in support of these fears.
Q4 projected Earnings Growth is not only careening to terra firma, but has actually crashed through the zero boundary:
As we wearily turn towards Q4 economic estimates, Wall Street economists (who are paid to shade to the chipper in their chirping) are prognosticating an approximate goose egg:
Inflation figures drop over the next several days, and, rather than approaching 2 handles, they’re looking more like 7s and 8s. And, ever so quietly, this is reflected in commodity prices. Brent Crude is creeping back near 100, and the broader basket of Oils, Grains, Metals, and the like, is flapping its wings towards liftoff velocity:
If it all makes you pine for the fjords, know that you’re in good company (myself included).
Yes, our parrot is dead, off its twig. And our pet shop owner is only too prone to sell us another of similar status.
But we ourselves remain among the quick, and, as I conclude this prolonged squawk, I can only advise you to keep your feet firmly nailed to whatever perch you presently occupy. If you cannot do this for yourself, perhaps there’s a perfidious pet shop owner available to assist you.
If we can keep ourselves upright, perhaps, defying laws of logic, biology, physics, and economics, we will emerge to a day when we can rise again.
TIMSHEL