He who double crosses Tuco and leaves him alive understands nothing of Tuco
From “The Good, The Bad and The Ugly”
I have chosen, to kick off ’25, to dig deep into my bag of tricks – to perhaps the quintessential Spaghetti Western – Sergio Leone’s the 1966 classic: “The Good, The Bad and the Ugly”. It is a sprawling epic with a wandering plot, but in addition to Clint Eastwood’s career launching performance, it also features perhaps the coolest film score in a decade of great film scores, AND the irrepressible Eli Wallach – a Brooklyn-born Jew who absolutely crushes it as Tuco, the Mexican Bandito, who, among many other things, utters our titular phrase.
Tuco is indisputably The Ugly in the film, and he wears it well. “Blondie” Eastwood is The Good. Lee “Angel Eyes” Van Cleef The Bad. Wallach, arguably though, steals the show.
The universe is replete with essays that utilize the G/B/U motif, and I thus felt more comfortable diverging nominally from the construct. But it’s not as though there’s NO good going on out there, and I’d be remiss if I didn’t begin on this happier note.
To my way of thinking, the best thing that’s happened thus far this year transpired on Friday, when the razor-thin-majority House Republican Caucus, with only minimal petulance, managed to re-appoint Speaker Mike Johnson to this important post, the occupant of which, among other formal duties, stands next in line after Vancey Boy if 47 somehow turns tits up and a new White House occupant is required.
Not gonna lie – I really like this guy. He’s kinda nerdy looking, yes, but so articulate, and a demonstrated compromiser to boot. I was pretty certain that the wing nuts in his crew would block this — reminding us yet again of their inability to come together and actually govern. But they proved me wrong.
Market participants should view this as unmixed good news, as there’s much riding on, say, their ability to extend the 2017 tax cuts – a challenge the outcome of which would’ve been very much in doubt had they chosen to spend the next several weeks squabbling over who gonna sit over Papa Bear’s left shoulder this March, when he delivers his State of the Union Address.
I’m also pleased that the courts threw out that nonsensical Net Neutrality regulation, under which, as a matter of law, ALL users of ethereal bandwidth must pay the same rates. In time-honored fashion, this was nothing but a sop to favored constituents disguised as exactly the opposite – a righteous leveling of the playing field for the little guy. But as matters now stand, huge revenue generating enterprises – ranging from Netflix to the Crypto Bros to the AI pioneers are hoovering up all bandwidth (a finite resource) – to the detriment of us normal schmucks. And the only hope that exists for us is to remove price controls/government intervention and allow market forces to set pricing.
And even The Bad ain’t that bad. Two items come to mind. First, a pox on whoever took a surreptitious image of my liver and then cajoled The Surgeon General to demand the placement of cancer warnings on the nation’s strong waters. In fact, I’m pretty sure they used an MRI image of this organ in the accompanying press release; might force distillers to display my innards on the newly mandated warning labels. If so, my risk management advice is to look away, yes, but drink up.
I also read with some disappointment that the British Crown has removed the Royal Seal designation (first dispensed by Queen Victoria in 1854) from Cadbury Chocolates, which I love. Not sure how much it hurts the enterprise, but I have a cousin that used to work for its Parent Company, and I would always needle him to bring me a sample of the primo shit produced by his firm. His invariable response:
“Cadbury is our premium brand”. To which I would always reply “No, David, I’m talking about the stuff in the vault, that they serve at Board meetings and one bite makes you see God’.
I think all I did was to confuse him.
Indisputably Ugly are the rash of domestic terrorist attacks, the most prominent of which transpired on New Year’s Eve — in the French Quarter, FFS! The gnarly looking perp was taken out at the scene, and now, as ever, we look for answers.
But it was Ugly – so prominently Ugly that it removed that fetching devil Luigi right out of the headlines.
And, in terms of the markets, it’s been a mixed bag – some Cadbury, but also some of those horrible jelly- filled confections. We got a dose of the latter when the trading year commenced on Thursday but managed to gather ourselves and gin up some recapture by the close of the truncated week’s proceedings.
Funds are flowing, but thus far in indiscernible ways. Banks, perhaps aspiringly seeking more lucrative uses for this liquidity, put a huge dent in Fed Reserves:
Contemporaneously, investors withdrew lots of cash from these depository institutions and dumped it into Money Market Funds:
I don’t think we can read to much into any of this.
Meantime, investors, having turned ignominious tail since approximately mid-December, are entering this year’s proceedings with a healthy dose of reticence:
And I say good on them. There’s Good, Bad and Ugly, out there and in these early innings of the contest, we know not which will prevail.
Regular readers (at any rate those who consume the full measure of its content) are aware that I am encouraged by the landscape. There are trillions of dollars of cash to be deployed. Whatever one’s politics, the regime change should be an inexorable improvement for the prospects of the capital economy, relative to the status quo.
So, maybe Thursday’s close will prove to have been a near term bottom; maybe not. But I strongly believe that wherever we find said base, there is a significant climb from these depths that awaits us. After which, as is our fate, these hypotheses will yet again be tested.
Meantime, there’s gold in them thar hills. As there was in The Good, The Bad and The Ugly when the script finally migrates to its main plotline. It will take energy and wiles to find it, just as it did in the film. Without revealing too much, find it they do. But in doing so, Bad Angel Eyes is left dead, Good Blondie rides off with his half, and the final member of the trio – Ugly Tuco — finds himself with the shiny yellow stuff within his reach, but outside of his grasp.
He is double crossed and left alive, presumably with a major score to settle. And we can take two risk management lessons from this. First, as investors, that we may indeed find the filthy lucre but grabbing it and banking it is another matter.
Also, and as importantly, I caution you to beware of Tuco. He’s still out there, uglier than ever, and he has not forgotten.
TIMSHEL