“HERBIE (to WAITER): Go ahead. Give me a number. Give me a number. A random number.
WAITER: Twenty-three.
HERBIE: Beethoven was 23 when he composed his first piano sonata. In 1923 Jack Bentley set the record for average by a pitcher, batting .427. There are 23 chromosomes in the human egg. Also the human sperm. 23rd President? Benjamin Harrison. Asian countries along the 23rd parallel of Southern latitude—”
Quiz Show
Welcome aboard, ’23! I won’t say the weather is fine, but it has improved. Your predecessor, true to form, went out with a nasty storm, which, among other niceties, killed over three dozen good folks in Buffalo, not to mention placing one of our better airline enterprises into existential jeopardy.
Your numerology offers a wealth of fodder for glib analogizing, an embarrassment of accessible riches from which, as indicated in the title, I have already selected. Perhaps the lowest hanging of this fruit is Michael Jordan’s jersey number (and, for the early part of his career, LeBron’s).
Perhaps appropriately, when I think of sports figures donning the number 22, all roads point to Bill Buckner, the misanthropic first baseman who let that slow roller slip between his legs in the 1986 World Series, thereby ending the Mets’ curse but extending that of the Red Sox. Billy Buck logged – yes – 22 seasons in the Bigs, with the Dodgers, Cubs and Sox, donning No. 22 for the first two of these gigs, but switching to No. 6 in Boston.
Perhaps he should’ve stuck with 22. Because, for me, he will always wear the double deuce. He was a pretty tough out for more than two decades but will always be remembered – perhaps exclusively — for his unfortunate ’86 error. There is a morbid joke about this — that so distraught was he about his fielding transgression he threw himself under a city bus – only to have it roll between his legs.
’22 was that kind of year.
21 evokes images of Roberto Clemete, who died in a plane crash – almost 40 years ago to the day — on a charity mission — from his native Puerto Rico to Nicaragua. He bounced with exactly 3,000 hits, and his is one of two number (along with that of Jackie Robinson’s 42) retired across all MLB.
Fast forwarding to 24 makes me think of either Willie Mays — or the Neil Young song “Old Man” (“24 and there’s so much more”). Which I am. Indisputably.
Almost as inarguably, though, the most pertinent application of 23 is that it is the number of chromosome pairs in a human DNA module (also, as Quiz Show Herbie points out, within a human sperm). Much information is contained in these globules – offering opportunities for erudition, and, for the truly enterprising, commercial benefit.
In terms of the latter, an outfit called 23 and Me has made a mint by crunching the DNA of millions of willing consumers – all for little more than a Benjamin (Franklin, not Harrison: 23rd President of the United States). I have little interest in this, but if you wish to check it out, as your risk manager, you’ll get no objection from me. I’ll only offer the holiday wish to the fellas out there that if your kids participate in the project, their chromosomes resemble your own.
But my interest is in 23 and You. Specifically, what you will do in this randy, dubiously-chromosomed investment environment. Much will depend upon your Portfolio Management DNA (and from this perspective, picking up a 23/Me kit probably wouldn’t hurt), but it will also do you well to attend to the external environment.
To me, it looks like a Double Helix of DNA-like complexity:
I’ll leave it to the legion of trained microbiologists who comprise the lion’s share of my readership to unpack this fruit salad. All those A-T’s, T-A’s, C-G’s and G-C’s verily make my head spin.
And so does this here market. We ended ’22 with the Gallant 500 down > 19%; Captain Naz falling a tidy 33% — the latter, due to the unforgiving caprices of non-linear math, thus wanting a full 50% rally to recapture historic high ground. The wearying yield curve remains in a configuration which renders the above-supplied DNA image as simple as a trace of the shortest distance between two points.
Whither the economy is headed is, of course, anyone’s guess, but the subject of considerably vigorous debate. Some of the smartest folks with whom I reason are convinced that it’s about to collapse, but if so, the number crunchers at the Atlanta Fed (who just increased their Q4 GDP estimate to a gaudy 3.7%) failed to get the memo, and the better-compensated (if professionally precarious) economists at Goldman Sachs just reversed their call. No Recession, they now say.
And here’s hoping they’re right.
I enter the new season, however, focused on three imponderables:
- (Natch) What will the Fed do?
It looks as though they’s planning on a few more hikes. And probably they are. But if they are motivated to do so by a desire to increase the attractiveness of their Special Repo Facility, it would appear that such incentivization is ill-foundedP
Probably, this doesn’t mean too much, but to pointy-headed watchers of the Repo markets, it is astonishing, nonetheless. Usage has verily quadrupled and this at an odd time on the calendar. Normally, at year end, banks, short of cash, are taking the opposite side of this trade – selling excess securities to the Fed and banking the proceeds.
I find this an enigmatic symptom of a monetary system gone off the rails and will say no more.
- Commodity/Energy Prices?
Perhaps nothing more meaningful transpired in the second half of December than China’s surprise 180 on lockdowns. It seems, now, that the People’s Republic is open for business. If so, it should put significant upward pressure on Commodity Prices – because the Chinese – all 1.4 Billion of them – use a lot of commodities.
And if you’re looking for a touch of the weird, a survey of ’22 commodity prices indicates that the best performer is nothing other than Orange Juice. Which – be it fresh squeezed or concentrate — no one even drinks anymore. The worst? Lumber. Which we still use in abundance. For example, even with the Buckner/Clemente/Mays era long passed, baseball bats are made from tree trunks and branches – mostly good ‘ole Maplewood.
I’m not guessing these trends are sustainable.
NatGas prices – in the US and Europe — have fallen dramatically, but I continue to focus my concern on a resurgence of Crude Oil prices, which, I believe would goose Inflationary Expectations considerably and break the hearts of all those hoping for a kinder, gentler, Fed policy sometime later in ’23.
- Do We Have a Credit Crisis?
NGL – I think we will. Eventually. Global debt has exploded and is now approximately 3x what it was in 2007.
But this ain’t 2007. The Capital Markets Banking System is surely healthier, better capitalized, than it was 15 years ago. Underwriting standards, loose back then as a factory district street walker, are now gnat’s ass tight.
But the astonishing debt levels are at thresholds where, in my judgment, they simply cannot be repaid, and must instead be monetized (funded, that is, with newly minted fiat currency). This is likely to be passing unpleasant.
I don’t believe the reckoning is on the immediate horizon; probably won’t transpire in ’23 at all.
But there are some ominous signs to the contrary, including the following, which caught my eye:
Notably, this surge derives not from new issuance of junk, but rather from the deterioration of the credit quality of existing paper. I the continuation of trajectories in the coming months.
Eventually, we gonna have to pay The Man. And I don’t believe it will be an easy or gratifying task.
*****
So, my main worries for ’23 are a surge in Energy Prices, a capricious Fed, and some sort of unexpected, chain-reacting credit event.
And I certainly would be fading any early rallies.
However, come what may, ’23 is upon us, and will be over before we know it.
Because nothing lasts forever. 22 didn’t (thank God). Not on the calendar and not even for Buckner. Who wore Number 6 in Boston and booted that grounder into Baseball infamy. Michael Jordan ended his career wearing 45. LeBron, talents now residing with the underachieving Lakers, sports a 6 – perhaps, but not probably, in homage to Billy Buck.
Neil Young is no longer 24, but 77. How much more there is for him is in the hands of God.
So, let’s do our best to nail this newly begun year, shall we? Even if times are tough, it’s in our DNA to prosper. And, come what may, here’s hoping that 23 and You is an uplifting tale.
TIMSHEL