Dead cats, dead rats, can’t you see what they were at, all right
Dead cat in a top hat, wow
Sucking on a young man’s blood, wishing he could come,
Sucking on the soldier’s brain, wishing it would be the same
Dead cat, dead rat, did you see what they were at?
Fat cat in a top hat, Thinks he’s an aristocrat
Thinks he can kill and slaughter, thinks he can shoot my daughter
Yeah right! Oh yeah!
Jim Morrison
This is nothing more than a protean rap, busted out by Jim Morrison towards the end of Side 3 of the Doors’ magnificent double disc “Absolutely Live”, recorded, for the most part, at the long gone and now much lamented Felt Forum, in New York City, in mid-January, 1970. For my tastes, if there is a better live album ever recorded, I don’t know it, maybe don’t want to know it. Maybe this is in part due to finding the band so fully in the pocket, their longstanding rep for erratic live performance (itself owing to Morrison’s fatal unreliability) notwithstanding.
Our theme offers an opportunity to transition glibly to the markets, whose participants often refer to a rally amid an extended selloff as a “dead cat bounce”.
But this piece has nothing to do with the counterintuitive upward migration of deceased felines (or, for that matter, rodents), whether encountered in the markets or in the wild. Rather, and as was the case when Jim, supported by John, Ray and Robbie laid this down, I prefer to now launch into “Break on Through (to the Other Side)”.
Which much of the market has tried, but failed, to accomplish.
As September ’23 is now in the books, we can certainly describe it to have lived up to that month’s reputation as the most gruesome of the year. And the carnage was everywhere. The Equity Complex got pounded, with the Gallant 500 shedding 4.6%, General Dow down 3, and Colonel Naz (now facing the threat of being busted down to the ranks) shedding a full 6%.
As did Treasuries, and this on a global basis, causing, among other annoyances, Mortgage rates hit levels last seen in the previous millennium.
Energy markets surged, but this is hardly good news for investors – particularly in a rising interest rate environment driven by policy makers obsessively battling against inflation.
USDJPY continues to flirt with the ominous 150 handle, but, like the song says, failed to break on through.
In the real world too, we continue to hit walls that we fail to breach. The UAW general strike, for instance, ensues in broadening configuration.
Our legislators careen towards yet another round of government shutdown brinksmanship, with the latest headlines indicating the passage of a six week can kick Continuing Resolution – devoid of incremental aid for the Ukies in their righteous battle against the Rooskies, and in spite of a Democratic Congressman (a former school principal) apparently undertaking the adolescent stunt of pulling the fire alarm to delay the vote.
This issue, I suspect, is likely to harsh our collective mellows for many months to come. For one thing, the extension only runs until mid-November, implying that the same headlines we’ve been perusing all week will re-emerge in about a month (when, presumably, the fire alarms will be guarded and secured). Moreover, and as less-than-widely understood, the government doesn’t shut down all at once. First, they stiff their vendors, then, perhaps furlough some of their staff – a hardship which we all can presumably endure. It takes months and months for anything essential to be threatened, the last and most menacing of which would be to disrupt the flow of payments on the $33 Tril we owe. Were this last eventuality to come to pass, we would truly have broken on through. But it’s not to be – particularly in an election year. They’ll come to an agreement, and name the public as the winners, if for no other reason than because nobody wants to hang a Treasury default on their resumes.
Meantime, the President continues his bumbling, confused pandering, taking a full 12 minutes out of his busy schedule to march with the down-trodden Detroit assembly line crew. His likely opponent in the ’24 election has taken to his own social media platform to demand the court martial and execution of the recently departed Chairman of the Joint Chiefs of Staff. In addition, he’s calling for the raiding of the offices of his political enemies and the removal of certain unfriendly media outlets.
Our oldest senator, one Dianne Feinstein, gathered to the dust of her forebears this past week, leaving her heirs to divide up a billion-dollar pittance between them. (Is it just me, or are these SF politicians exceedingly skilled at accumulating wealth? I mean like Joe Montana good. Jerry Rice good. Steph Curry good. The Pelosis are worth a quarter bill. Gov Newsome clocks in at >$50M. There must be something particularly lucrative about running the Bay area into the ground in the name of social and economic justice).
We thus enter Q4 full of dead cats, dead rats, and yes, even dead aristocrats, but having failed to break on through.
None of which is conducive to investors springing out of bed, on this, the first day of quarter, with anything resembling a bounce in their step.
It’s not all bad I reckon. Q3 GDP estimates, not to be released for more than a fortnight, are nothing short of gaudy. The gears of the great American job creation engine create continue to hum along serenely, with the next indication coming this very Friday. Plus, there’s so much cash floating around that it’s hard to envision anything akin to a crash unfolding.
But risks abound. First and foremost, in my judgment is the trajectory of the Energy Complex, with alarmists suggesting that WTI could rise as high as $150/bbl. And it’s hard to argue their logic, what, with a policy mix designed to cripple domestic production, with the Strategic Petroleum Reserve depleted to 40-year lows, and with geopolitical tensions across the global oil patch that are, shall we say, less than accretive to global production/distribution.
But pricing dynamics say otherwise, placing WTI in dramatic backwardation, indicating a clear expectation of declining crude oil prices in the months and quarters to come:
Here’s hoping they’re right. Because if the $150 crowd prevails, well, I don’t want to think about it.
Naturally, all this has profound implications for Interest Rates, which will be highly correlated with energy prices. And with equity valuations. Particularly in the already beleaguered Naz-land.
We’ll now have monthly/quarterly data, and, of course, earnings, to consume, and I suspect that when the dust settles, we will still have failed to break on through.
Because, while change happens all the time, with day destroying night and night dividing day, breakon- throughs take eons.
Consider, if you will, the history of the Felt Forum, maybe the best-named music venue of all time. But much to my chagrin, I find, in researching this here piece, that its nomenclature is not derived as a funky, modern tribute to the meeting place of ancient Roman Senators, but rather as an alliterative nod to the president of the adjacent Madison Square Garden: Irving Felt. It went through many appellations in the ensuing decades (based, of course, on compensated naming rights): The Paramount Theater, The Theater at Madison Square Garden, The WaMu Theater (in honor of the debacle-creating depository institution Washington Mutual, which went tits up in The Crash), and the Hulu Theater.
In ’23, it reverted to the bland Theater at Madison Square Garden. But to me, it will always be the Felt Forum. Where so many of the greats played. The Velvets. Jimi. Janis. Cream. The Kinks. Zappa. The Dead.
And the Doors. If you put on Side 3 of Absolutely Live, you can hear Jim’s Dead Cat rhymes pounding off ts felt walls. Approximately 6 months later, Jim was gone, and, to this day, no one knows exactly what happened.
Yes, he got to the other side, but as your risk manager, you’ll just have to trust me when I tell you that there are better ways to break on through.
TIMSHEL