Truly, I do not mean to be obtuse here. Most of you know about the Raw Dog. Presumably, though tragically, many of us have ridden it more than once – to the potential detriment of our health and reproductive objectives.
So be it.
The Raw Dog thus abides, nay, pervades, across many realms of our existence. I got to thinking about this after having taken my prized 1945 Martin in for some repairs at my favorite guitar shop on the Upper East Side. The Brothers (yes, the Brothers) did a fine job. The thing looks and sounds great. But I had brought it in caseless, and was prepared to depart with it, in the rain, in the same condition. The Brothers would have none of it, or, as one of them put it to me “Dude. It’s a 1945 Martin. You can’t Raw Dog it”.
So, they guilted me into buying a $200 case for my Merry Martin. And I bless them for it. Raw Dog dodged.
I also been Raw Dogging it for more than twenty years with one of my key business vendors, and recently paid the price for so doing. One of my processes went off kilter and I accidentally requisitioned volumes many orders of magnitude above what I needed, some of it pertaining to content that has not been relevant since the waning days of the Obama Administration. They hit me with the full bill and were in no ways inclined to consider an adjustment. Perhaps I should thank them, because, though a costly lesson, they have compelled me to consider eschewing the Raw Dog altogether.
And, owing in part to these idiosyncratic elements of happenstance, I have become increasingly worried about what I believe to be excessive Raw Dogging in the realms of investment.
The most prominent of these, of course, is the Raw Dog ride we’ve all taken in this era of easy money. Those Raw Dog last gen bankers heroically did all in their power to destroy the financial system about 20 years ago, and nearly succeeded, as we all are aware, in 2008. Then, the Fed stepped in, and, in the intervening decade and a half, have increased the Money Supply by ~2.5x, and their own (now nominally dwindling) holdings by a factor of 8. In result, the Gallant 500 is (from its lows) a 7 Bagger:
Col Naz bottomed out at a titch above 1,000 just before Thanksgiving, 2008, with the Fed Effective Rate at 0% and its beggarly Balance Sheet footing to just under $1 Trillion. Quantitative Easing began the following March. On Friday, Nazzy finished at yet another all-time high of 17,643. The math, for the moment, is beyond me, but even those who don’t own a calculator can see that this is a pretty hefty return profile.
The unadorned pooch ride to untold riches for the select-few, on the backs of the uncooked canines that run our Central Bank, is enough to make me weep with joy.
So, with Inflation at any rate statistically tamed, it is small wonder that said riders were now near deliriously anticipating a return to Raw Dog easy money, taking the form of rate cuts and perhaps even a termination of the viciously cruel policy of Fed Balance Reduction.
But then Chair Pow took to the podium and broke everyone’s hearts by barking out that while the next moves will be easy side up, anyone thinking that the festivities would commence before Spring at the earliest should think again.
Well, of course, the mutt riding mob threw an infantile temper tantrum, unthinkably selling off stocks in the last 90 minutes of Wednesday’s session to the indecorous tune of > 1%.
And this is when I really started to be fed up with the Raw Dog rally. Because, why on earth would the Fed even consider cutting rates in, say, March? Inflation is down, the economy is pumping along at a steady growth rate. Jobs are plentiful (if somewhat less than glamorous) for anyone who cares to hold one.
The market is a rocket ride.
The Fed might cut rates soon – if for no other reason than it can. But what benefit, other than further pumping up already-engorged asset prices, would it bestow? And, though wildly imperceptible, something could go wrong with the strategy. The economy, for instance, could overheat. Perpetually over-extended debtors, busy setting issuance records in these early days of ’24, could go on an incrementally unsustainable borrowing binge. Something could blow.
Yes, it’s unthinkable, but not impossible.
So, the selloff reminded me of the kind of tantrum one of my darling grandsons would throw if denied a second ice cream cone. Like puerile investor hissy fits from days gone by, however, the act wore thin quickly. The Fed wasn’t to be scared out of a judicious pause because a few overfed spit ballers sold some stock. I didn’t believe it would last. And it didn’t. Markets recovered approximately half of these reversals on Thursday.
And the sheer folly of an imminent rate cut was reinforced on Friday, with a blowout jobs report that not only obliterated estimates of newly created gigs, but also showed meaningful growth in wages and other bennies.
So, by Friday, risk assets had recaptured their lost ground (and then-some) from the foot stomping selloff we endured on Wednesday afternoon. Then, the Raw Dog Tech Titans began to weigh in with earnings. Zuck was able to salve the wounds he suffered from the grandstanding assault he received on Capitol Hill (aka Raw Dog Roundtop) by watching his stock trade up ~20%, adding a cool $28B to his wealth count by the following morning. Maybe he should seek to testify before Congress more often. META has risen from 90 to nearly 500 in approximately 1 year. Retail Raw Dog AMZN also blew out, while AAPL disappointed nominally, and now languishes towards the back of the pack.
And, unless my ears deceive me, I believe I hear some barking mongrels in the distance. There are still earnings to howl through. We’ve a week’s respite ere the next round of inflation statistics assault our senses, but the time will go quickly.
Most assuredly, there’s epic geopolitical Raw Dogging from D.C. to Damascus. And in terms of domestic politics, well, I don’t even wanna think about it. The 2020 South Carolina Democratic Primary unleashed the Raw Dog sthat obliterated Bernie and elected Biden. This year, the Carolina Canines made not even a pretense of wrapping their packages and merely gifted their Palmettos to Bull Goose Raw Dog Joe. Raw Dog Don is set to win the state and lock down his nomination, trouncing our last, desperate firewall: former Governor/Favorite Daughter Nikki in consequence.
The City of Miami just concluded its annual Hedge Fund Week sequence. From what I hear, there was a great deal of Raw Dogging throughout, but perhaps the less said about that the better.
The NFL Conference Championship Games featured Raw Dogging at its most extreme, resulting in less favorable outcomes relative to my rooting interests in each case (Note to RD Campbell: I admire your aggressiveness on 4th down, but up 14 with 9 mins left, you gotta take the points). This sets up Superbowl LVIII – to be held in the Global Raw Dog Capital of Las Vegas,– as perhaps the Raw Dog GOAT.
So, I fear that the rooting out of the Raw Dog will be a somewhat quixotic task, and, in truth, I do not wish to eradicate it entirely.
To wit, I asked The Brothers what they thought my heretofore caseless Martin was worth in today’s market, and they told me between $15K and $20K. I paid about a thou for it 20 years ago, and have never, till the above-described episode occurred, kept it in a case. True, the percentage accretion falls just short of that produced by Col Naz, but it nonetheless is the best return on investment I’ve ever achieved. It’s only a paper gain, however, because, as I told The Brothers, I never sell guitars; I only buy them.
So, I can’t say I want to kill off the Raw Dog entirely, for either myself or my readers.
Let’s just go easy now, shall we? Because not only do them naked pups bark, but they also bite.
TIMSHEL