Shall we go? You and I while we can?
Garcia/Hunter
I expected a quiet week, but, on balance, it wasn’t.
Action began Sunday night with those pesky Saudis making the first of two high profile announcements. First, they went rogue and cut production by 1M bbl/day, causing Crude Oil futures to rally significantly — before finishing the week at levels lower than those observed before this shocking lapse in decorum. Within 36 hours, the House of Saud’s finance guys had pulled off what looks like a wholesale acquisition by its newfangled golf league of the venerable PGA.
I really could not give a care about the latter. Golf bores me to tears. I don’t play. And, among the dwindling set of blessings for which I am most grateful is that there does not exist a picture of me anywhere as part of a semi-circle of guys wearing baseball caps and holding a downward pointing metallic shaft. I may not (I tell myself) have a short or long game but I still have my dignity.
Midweek witnessed the thuggish Gensler taking dead aim at Binance and Coinbase. The crypto market is feeling the pinch but has arguable weathered worse storms than this.
Wednesday brought on a literal smoke show (rumored to have originated by a pig roast in Sheboygan, WI), which, combined with a threatening storm that never materialized, brought an endof- days aura – to Manhattan and other locales –which was truly frightening to observe.
Did a dark star crash? There’s no evidence that one did.
Hump Day, also improbably, manifested the migration of the Gallant 500 host into Bull Market territory (trough to peak gain of > 20%). Against considerable odds, it holds this lofty status.
Also on Wednesday, my market hero Druck graciously submitted to a full-length Bloomberg interview and made everyone who was paying attention (including yours truly) feel smart — by outlining market conditions and implications in a manner an entirely rational manner that was also consistent with the prevailing data. Least visibility/fewest actionable trends in his career. America careening into irrevocable insolvency, but not likely to feel the associated pain. Yet. AI probably a secular trend – perhaps as important and potentially causing as long-lasting a rally as the late ‘90s Internet Boom. Political situation a hot mess, with anything that removes both Biden and Trump from the ’24 equation an unmixed blessing.
Druck is currently sitting on his hands for the most part, but looking, over the next several weeks and months, for high probability dislocations. Wherein, upon identification, he is prepared to pounce. I concur with all his judgments and actions, under the gratuitous platitude that great minds think alike.
Speaking of Trump, on Thursday night, the Justice Department dropped a multiple-count indictment on his ass – the second in what threatens to be a string of several — of a former president, for his handling of classified docs. In keeping with the times, Trump himself announced this development to the world.
I’ve long since soured on the guy and would like nothing better than to see his dark political star crash and burn. But c’mon people. There’s a dangerous element of politicization at work here, which only the willfully obtuse would fail to acknowledge. The Fed Fuzz are using their powers in a demonstrably unobjective manner. Moreover, not only is it likely to fail over the short term but is destined to haunt us when the political winds shift.
The Uni-bomber offed himself a couple of days ago, but, perhaps, the less said about that the better.
Topping matters off was a personal experience on Thursday, when, while walking down Broadway, a young (high school-aged) African American woman approached me. She had corn-row braids and, to my shock, was wearing a Grateful Dead tee-shirt. She was raising money for the Brandies High School basketball squad – informing me that she was the only female starting point guard in The City.
I asked her a couple of questions and then emptied my pockets for her. I told her that while she may or may not be the only girl starting point guard in the world of New York high school hoops, she was certainly the only black one who was also a Grateful Dead fan.
She told me her fave Dead tune is Dark Star. Which (along with Uncle John’s Band and China Cat Sunflower) happens to be mine as well.
And it had me wondering – shall we go? You and I while we can?
I will ram this into a market analogue – mostly because I, we, can. Should we dive in here? Valuations are undoubtedly rich, and there are certainly myriad material risks to consider.
But investors don’t seem to care. Case and point, Vixen VIX has gone down to her lowest depth since the immediate prelude to the lockdowns:
All the above comes in advance of what, on paper, should be an interesting week of data flows. The Tues through Thur sequence features CPI, FOMC and PPI. I don’t believe that, within the bounds of Rational Expectations, anyone cares what the Fed does. Hit or stick – the market will probably shrug and move on. CME futures are pricing in a 75% probability of the latter (stick). They’re usually right.
I am a little surprised how little adherence there is to Inflation tidings. May CPI, year-over-year, is prognosticated at just over 4%, or considerably less than half its prevailing levels from just over a year ago. PPI even more so. The Survey says 1.5%, which, if I’m not mistaken is actually below the 2% target — so widely fixated upon by the Fed and its watchers. Overall, investors are pricing in a rate gratifyingly close to this formally articulated objective:
If these numbers are accurate, it’s a helluva a lot of Pi progress in a single year. If they’re off in either direction, markets will react. I don’t believe they care about anything else, but particularly if Inflation is higher than expected, they should move considerably.
But it’s hard to fade the short-term base case. Full Employment, transitorily waning Inflation. No Recession in sight. Crude Oil dropping as the driving season begins and despite production cuts.
So, on balance, I’d say the answer, from an investor perspective, is yes. We shall go. You and I. While we can.
I don’t say we should go terribly far, certainly not out of the galaxy. For, somewhere out there, in a googolplex universe of celestial bodies, a dark star is indeed crashing. From a probabilistic perspective, this is a certainty. Similarly, this here market may feel the pull of dark gravity at any moment.
And we should keep our eyes open. Because things are not always as they seem. When I got home Thursday night, I tried to find my little deadhead hoopster online. And came up empty. Perhaps she was on the level; perhaps she was scamming me.
If the latter, I have no regrets. She earned that cash — through energy, initiative, and ingenuity. I hope she makes wise use of it.
And, in this black hole, dark star, nebula parallel investment universe, my fondest expectation is that you will do the same.
TIMSHEL