Why can’t we be three?
David Crosby
Please believe – I’m of this. Sicker of this than any of y’all. Tired of spitting out tributes to musicians that shaped my identity who have turned toes up.
But what am I to do? They keep croaking so I keep writing about it.
And, to answer Croz’s (cheeky) rhetorical question, we can indeed be three. We are three. You complete your own Triad. First Christine McVie. Then, Beck. And now, Croz.
I must cop to having mixed feelings about Croz. Loved his nasty baritone. Am grateful for his contribution to the Byrds. Can’t deny the fleeting brilliance of CSN(Y). He wrote a few good, and a couple of great (Long Time Gone, Wooden Ships with the magnificent Paul Kantner) songs.
But he mailed it in for decades and carried himself with a discrete absence of humility throughout. Some of this is justified. He made a finite but important contribution to something eternal. But he was arrogant to his betters (including, somehow, Bob Dylan) and dismissive of those he deemed to be made of lesser stuff.
I saw him once on the Upper East Side, picking up what I presumed to be his young daughter from school. I did what I normally do on those occasions – told him I was ready to jam/be his new bestie. He looked at me like I had three – a triad of — if you will – heads.
I had a similar experience with Roger Waters, but, somehow, I feel that the latter was more justified in his disgusted disdain at my overtures. Perhaps this is why I have endured the death of Croz with relative equanimity.
Still and all, we will bid him a bittersweet adieu and pray authentically for his immortal soul.
And move on to the concerns of the living.
The markets, lord knows, are at an interesting pass. I had been expecting them to rally, and they have treated this prospect with near Crosby-like disdain. Not exactly collapsing but hardly rallying, and, overall, mailing it in in Crosby-like fashion.
So, whither from here? Well, largely because it fits thematically, I’d say it largely depends on three contingencies.
The first of these is Earnings. Which are under way, and, thus far, underwhelming. Though we’re less than 25% of the way through, FactSet is projecting the 6th straight quarter of profit margin decline.
Which looks like this:
We are compelled to wait a spell for a clearer picture, though. Most of the Big Tech Dogs (arguably shrinking before our eyes) don’t report till (as the fabulous, also recently departed, Ian Tyson once wrote) February comes.
Let’s hope that their once dominate but recently eroding market leadership trajectory continues, because the tech earnings picture is arguably more dire than that of the broader market.
I reckon we’ll find out soon enough. But, in the meanwhile, it’s not as though we won’t have other matters with which to attend. Which brings us to our second contingent – the strength (or lack thereof) of the economy. In this regard, we will have both PMIs to ponder as well as our first glimpse at Q4 GDP. The prediction models here are cheerier, it can be said, than those in earnings-land.
GDP estimates range from modest to optimistic, but nobody is anticipating a contraction. Yet. Imagine, though, if we experience a sustained, unpleasant, downside surprise, and project its impact on future earnings cycles. Or don’t. Because the prospect isn’t pleasant.
With all of this in the hopper, we can migrate to “three” – the attitude and actions in the realms of central banking. Last week featured a great deal of conjecture as to whether, as telegraphed, the
Bank of Japan would back away from its rate targeting policy, allowing yields to be set instead by – get this – market forces.
The concept was always somewhat rhetorical; last month, the BOJ’s holdings of Japanese paper surpassed, for the first time ever, 50% of the outstanding debt. It has long been uniquely positioned to set yields at its own whim. So, the real question was rather whether they would allow them to float above the outrageously usurious threshold of ½ percent – breached for the first time in a decade December.
They backed off on this madness, and JGB yields retreated – in sympathy – to the more civilized but still Shylock-like threshold of 0.4%
The Mighty ECB is telegraphing greater rigor. Continental rate hikes appear to be on the docket well into Spring (at least).
All of which leads us to the Fed, which next weighs in on Groundhog Day Eve. It will be an interesting week, what with virtually all the Big Tech firms reporting, the January Jobs report and the Pro Bowl (which in a singular sign of the times, will take the form of a flag football game).
But it’s 10 days away, and, in the meanwhile, the investors have weighed in, now projecting with >99% confidence a mere 25 bp hike, taking the Fed Effective rate to the threshold of 5%. I would not quibble with this confidence, but what they’re thinking about the rest of the year remains a mystery. Inflation may be on its way to hibernation. Or not. The much-feared, looming Recession may fail to materialize. Or may come.
I don’t, on the whole, believe that they have an identified strategy at this point. Might be that’s for the best because there’s a lot of imponderables in play.
We also face the melodrama of debt ceiling expansion – one of the silliest exercises on the planet insofar as the outcome is inevitable. We WILL raise it. And keep borrowing. And spending. And be compelled to endure a great deal of smack talk along the way.
For the immediate future, though, I believe it best to train our foci on Earnings, if, for no other reason, because this is where the data flows are most opaque. The Economy is neither surging nor collapsing. The Fed will keep hiking, but probably at a gentler cadence. Corporate Revenues, Profit Margins, and prospects, by contrast, are somewhat inscrutable.
I do suspect that rock and rollers from the Golden Age will continue to expire. In fact, I’m pretty sure of it. They were, as Croz crooned, a long time coming and will be a long time gone.
He made his bones in a magnificent Triad spawned from The Byrds, The Buffalo Springfield and The Hollies. They made a couple of great records and then hung around – for decades, half-heartedly seeking to recapture a magic that eluded them throughout.
No matter, I reckon. They were once three. And so were we. And so will we be again, in a dawn that appears to be a long, long, long time before it emerges, anew, on a distant shore.
TIMSHEL