We are Starbucks, we are Google, we are Nvidia,
And we’ve got to get ourselves, back to the Ha-a-a-mptons…
With apologies to Joni Mitchell.
From time to time, I must revert to the most important Risk Management rule of them all – one that transcends even the eternally enshrined Ten Commandments:
https://genriskadvisors.com/risk-philosophy/
It is as follows: STAY AWAY FROM THE BROWN ACID.
For the uninitiated, this warning was first issued from the stage of the Woodstock Music and Art Fair, held on Max Yasgur’s dairy farm – Not in Woodstock itself, but rather in nearby Bethel, NY.
An improbable near-45 years have elapsed since that August 1969 weekend. Many performers (Jimi, Janis, Jerry, Pig, most of the Jefferson Airplane, half of the Who, Alvin Lee, Canned Heat’s Al (Blind Owl) Wilson and Bob (the Bear) Hite and even the ubiquitous motorcycle-riding organizer Michael Lang) are dead. But themes from that long-ago dream abide, including:
STAY AWAY FROM THE BROWN ACID.
Why the warning? Because, as Festival M.C. Chip Mounck admonished the crowd, “it is not specifically too good”. I haven’t sampled any of the offending doses lately but feel that the warning still holds.
All of which comes to mind as, from my perspective, Wall Street has, increasingly of late, assumed a Woodstockian feel. It’s a big tent. Everybody is welcome, as evidenced in part by a decline in correlations among members of the Gallant 500 host:
It’s rained like a sumbitch over the past week or so, but it did at Woodstock too. At the time, Country Joe and the Fish’s Berry Melton intoned “if you think real hard, maybe we can stop the rain” and, from his lofty perch on the stage, Mounck reiterated the sentiment. By the final morning, when Headliner Hendrix played, the sun was shining brightly.
The event is emblazed in our culture as the high-water mark of the Hippy Generation, and perhaps appropriately so. But of course, there were problems beneath the feel-good vibe. There were 12-hour backups on the New York State Thruway. The sponsors spent most of the festival BEGGING NY Governor Nelson Rockefeller NOT to send in the National Guard. Equipment failures ruined the Grateful Dead set.
Nobody really understood why Sha Na Na was even there.
When everyone went home, the Vietnam War was still raging and would do so for another five years. The Hong Kong flu was taking out a covid-like share of the population.
Racial and social unrest ran rampant. We did land on the moon, though. So, there’s that.
Similarly, in today’s market of Peace Love and Music, we are plagued by a whiny, disaffected public, political unrest, multiple wars, and deep confusion as to our best course forward.
So, what to make of the Woodstock Market? Well, for now, the Wall of Sound still blares, and the partakers still, well, partake.
Thursday afternoon, seemingly out of nowhere, the tape experienced a bummer of selloff, which (in a Woodstockian sense) evoked images of the helicopters that transported most of the top performers to the stage dropping caseloads of brown acid on the masses.
But then, on Friday, it was as if a latter-day Chip Mounck had issued his silent warning, which everyone heeded, and our equity indices recovered most of their previous day reversals.
As a long-time market observer, to me, the puke had all the earmarks of one or more large capital pools, for whatever reason, de-risking. This, of course, is unpleasant, but largely transitory.
Friday’s proceedings began with an outasight, groovy, far out bang, catalyzed by a superficially strong March Jobs Report. The banging continued through mid-morning, against the backdrop of a 4.8 quake, which rocked the entire metro area, but failed to dampen the focus of investors, determined, as they were, to recapture the lost ground.
So, the party continues, but not without trouble spots on the horizon. No, Rocky is not amassing troops on the Thruway, but if he did, it would cost more to fill the tanks of them tanks than it has in quite a spell. Crude Oil and Gasoline are at or near multi-year highs. The Saudis are cutting production. The Gaza War is at a tipping point, with multiple contingencies poised to render it a bona fide global crisis – including those that could send energy prices into the stratosphere.
Treasury Yields are also menacingly on the rise, taking mortgage rates with them – just at the point when the Home Sales season is commencing.
The Fed is going all swishy on the number, timing, and magnitude of those promised rate cuts. I feel that this is wise on their part, but probably less than ideal from a rally-continuance perspective.
March Inflation statistics drop this week, and the markets could react to them. Or not.
The earnings season also commences over the next few days, and oh boy, won’t that be fun? Growth projections are in the 3% range, but in a decidedly anti-Woodstock construct, are expected to be concentrated among a few of those fat cat corporations, whose products we devour, but whom we otherwise hate on:
Apart from all that, I believe that market fortunes and political caprice will become more inextricably entwined as the weather warms. This stands in benign contrast to conditions in ’69, which was post- election, after somebody did both Kennedy and King, and with attendees forced to contemplate the wearying prospect of 4, and possibly 8, years of Tricky Dick. Which turned into a mere 5.5, for reasons that bear no need of reiteration.
Woodstock also transpired almost precisely one year after a somewhat disturbing Democratic National Convention, held in Chicago. And, in sublime keeping with my theme, the Big Donkey Wing Ding will take place at the same location this summer.
Not gonna lie – I’m a bit worried about this. Chi ain’t exactly Yasgur’s Farm these days and things could get out of hand on that score alone. Disrupters will no doubt seek to disrupt – if for no other reason than for the social media photo op joy of it all. I also believe that the Dems, with their shady Super Delegate tools, could try to pull a fast one on Ol’ Man Joe.
By that time, and just up the road in Milwaukee, their opposite numbers will, presumably, have anointed you know who. Problem is that “you know who” could be well on his way to having been designated a convicted felon by then.
Meantime, expect the incumbents to pull out all the stops to pay their way towards re-election. Just this past week, Ol’ Joe busted out that tried and true student loan debt forgiveness riff. Perhaps by mere coincidence, several universities, particularly those in the Northeast, have announced tuition levels rising to the indignity of $90K per year.
I would expect the Administration – particularly if the economy shows any signs of faltering — to put a big fat thumb on the scales of both the Energy and Treasury markets, and, though it be risky, see opportunity on the short side of the former and the long side of the latter.
I still say it’s Woodstock on Wall Street – so much so that I didn’t even notice that our equity indices actually lost ground last week – the biggest such reversal since the aftermath of that nasty Hamas attack in October.
It was kinda like Country Joe’s second performance at the ‘Stock (he was the only performer who appeared twice). I mean, I like Country Joe and all, but two sets might’ve been a bit excessive, and at any rate, I’m expecting the markets to rise again.
Maybe, on the other hand, it’s the brown acid. But no, those days are long gone for me.
TIMSHEL