Ah, get born, keep warm, short pants, romance, learn to dance
Get dressed, get blessed, try to be a success
Please her, please him, buy gifts, don’t steal, don’t lift
Twenty years of schoolin’ and they put you on the day shift
Look out kid, they keep it all hid
Better jump down a manhole, light yourself a candle
Don’t wear sandals, try to avoid the scandals
Don’t wanna be a bum you better chew gum
The pump don’t work ’cause the vandals took the handles
Bob
Risk Management Rule #1: when all else fails, turn to Bob.
I got to thinking about Subterranean Homesick Blues when monitoring this whole Titan Submersible fiasco. It’s arguably the first modern rap tune, and, perhaps when taking the Alan Ginsburg abbreviated lyric cardboard sign dropping film into consideration, also the first ever video.
But about this submersible mess, what a wretched parable for modern America. A few jabronis with inarguably too much discretionary wealth pay a quarter of a mil to dive ~500 meters to the ocean floor — to have a gander at the wreckage of the Titanic, itself sunk more than 110 years ago. Something goes dreadfully wrong, and, mercifully we learn, the vessel explodes. Which is a helluva lot better fate than zooming around the bottom of the drink looking for an escape as the sub’s 96 hours of oxygen dwindles away.
Unlike its tragic, legendary target, no band was there to play “Nearer My God to Thee”. There were no Astors, Guggenheims or Strausses aboard. And, from what we now know, no Unsinkable Molly Browns.
Somewhere, somehow, somebody is likely to find leitmotifs of racism, sexism, homophobia, transphobia, etc., here. But I will leave that to the better informed.
Meantime, the rest of us are, to varying degrees, Subterranean, Homesick, and with the Blues. I know I am, at any rate.
This past week’s action reflects same. Equities were under pressure throughout – ostensibly due to the Blue Meanie rhetoric and actions of the world’s Central Banks — and attendant fears of Recession. Treasuries rallied in sympathy. Speculations about declining front end rates, as reflected in long SOFR futures, are at record levels.
But what really caught my eye was the wholesale puke of commodities – particularly inside the Energy Complex. On Friday, WTI Crude dropped to an improbable 67 handle – and this despite what seemed to me to be unilaterally bullish data flows, throughout. The International Energy Association is projecting supply shortages across the entire second half of the year. After the recently announced production cutback, House of Saud flows into Western World receptacles are at multi-quarter low thresholds.
A little nutty, right? Maybe it’s just me, but if the pump don’t work ‘cause the vandals took the handle, I say the price of what issues from said pump should rise, not fall.
But it doesn’t end there. Grains, Metals, Meats, Softs, all sold off hard during the Thursday/Friday session. Maybe it’s the weather? I don’t know, but I do know this: you can’t write a note about Subterranean Homesick Blues without referencing the famous line: You don’t need a weatherman to know which way the wind blows.
And often you don’t. Including in the markets. Because, to me, the retrograde commodity move suggests some serious capital rotation, which bears watching. Recession? Well, maybe. But does this justify an approximate 10% selloff in the Bubbling Crude over the last couple of sessions? Color me a bit skeptical.
Another submerged asset is that fallen siren – Vixen Vix. Which has breached into a salacious 12 handle this past week. Nothing for nothing, but it wouldn’t be the worst idea to give her a tumble – either directly or by virtue of a rendezvous with her skanky sisters – the out of the money Gallant 500 puts.
Normally, I hate this trade, which hedges almost nothing and enriches few but the pimps on the sell side who offer, and collect a fee for, these tempting wares.
But if there’s ever a time to buy, it’s when it’s cheap. And it is. Thus, in a world where the frenzy to buy protection tends to peak after a major dislocation, when the cost of such protection approaches or reaches thresholds of the prohibitive, there’s now an opportunity to grab some portfolio insurance at bargain rates.
However, I think the likelihood of cashing in on this trade is low. We’re looking at a quiet week, and then (cue the trumpets) the 4th of Joooo-lie. It is only in the aftermath of this interval that anything of import is likely to transpire. And, as was ever the case, the purchase of portfolio protection at more remote expirations becomes incrementally expensive.
And I don’t have much else to relate.
I could warn you to look out kid, they keep it all hid. And I’d be right. The DOJ, as was inevitable, went completely into the tank on Joe’s Family shenanigans – perhaps the most astonishing “nothing to see here folks” moment in recent memory.
But what else could we expect? Was Garland and Company ever gonna extrapolate the tens of millions of dollars of payments and associated quid quo pros into plausible theories of what is plainly influence peddling on the part of his boss and crew? Hardly. Instead, they jumped into a manhole and lit themselves a candle.
But all is not lost on that score. The episode – at least nominally implicating a current president and declared candidate for reelection – traverses from the judicial into the political world. If we’re ever to learn the truth, it must be through Congressional hearings, reinforced by compelling evidence that causes the public at large to, well, you know, care.
This narrative, if it is to unfold, will do so unhurriedly. The Republicans who control the House – nothing if not political animals themselves – are likely to slow walk this for a few months, stoking the fire sufficiently to keep it alive, while holding most of their flames until late ‘23/early ’24, when the election blots out the sun and the impact can thus be maximized.
I intend to ignore this flotsam and jetsam and suggest you do the same. Instead, let’s concentrate on your book(s). It is unlikely that the 2nd half of the year will feature as pleasing an investment environment as the first half, and we are best positioned if we focus on navigating the associated risks.
Here’s hoping that we do a better job than Edward John Smith – Captain of the RMS Titanic. We’re a little bit early to judge the performance of Captain Jamie Frederick, who did not steer his submersible into a sub-oceanic iceberg and may have been doomed from the start.
One thing is certain – it will be up to the lawyers to sort out. And to make a fortune in the process. It was ever thus.
For the rest of us there’s nothing to do but mind our own ships. So, in trying to avoid scandals, I recommend that you shed your sandals, learn to dance, get dressed, get blessed, and try to be a success.
And you don’t want to be a bum, so grab yourself a piece of gum and start chewing.
And that, my friends, is all I have to say about that.
TIMSHEL