Now, before y’all get any ideas, this note has nothing to do with race – to me a wearying, abused topic if ever there was one. Instead, I revert to my singular obsession: The Beatles.
In 1968, they released a double album, with nothing but the band’s monochrome embossed name on the cover, against a snowy, virginal backdrop. It is referred to, for all time, as The White Album.
It was a tough interval for the lads. Arguably, the beginning of their end. Their indispensable manager – Brian Epstein, had just been murdered. Contemporaneously, and seeking spiritual direction, they debarked to the ashrams of India, whereupon they found that their would-be spiritual mentor – the Maharishi Mahesh Yogi – was little more than a horndog, sniffing after the Farrow sisters. Paul and Ringo quickly grew bored. And bounced.
They wrote some good music over there, but on the heels of the perhaps over-thematic “Sgt. Pepper’s”, it was by and large a hodgepodge of compositions, recorded more as a compendium of individual solo tunes than as a group effort.
One could hardly blame them, after Pepper, for hitting a thematic wall, and so it is with this column. Which lacks a coherent theme. Case and point: I am also inspired, in the lead-up to “Spinal Tap II”, by the sequence in the original where the suits decided to release their most recent album “Smell the Glove” not with its intended cover that featured a woman on all fours, with a man’s gloved hand in her face, but rather, and to the disappointment of the band, with a plain dusky cover. Which their misanthropic manage described as “simple, beautiful, classic” Choosing also to look on the sunny side, guitarist Nigel Tufnel adds: “it’s like, how much more black could it be? And the answer is none. None more black”.
The White Album. And None more black. Indeed. It is, from a thematic perspective, all I’ve got for you this week.
It’s not as though there isn’t content upon which to focus. Because there’s some. So maybe we’ll just get to it early.
The Alaska Summit. Nah… …nothing to say about that.
The Gerrymandering Wars? I can think of scant more solid evidence of the accelerated deterioration of our mode of governance than this nonsense. Two political parties cynically rigging electoral maps. Each claiming righteous cause while accusing their opposite number of the most odious hypocrisy. I could say more, but the topic only gives me a headache.
Which leaves two subjects that merit perhaps more a more sobering probing. The first is the prospect, socialized in viral rumor, that the Federal Government is contemplating the purchase of a portion of once- iconic chip manufacturer Intel.
What could possibly go wrong? Yes, there’s precedent here. A great deal of this sort of thing, for instance, went on during the Great Financial Crisis. Taxpayers took huge stakes in the Big 3 Auto firms, under the partially plausible justification that America needed an auto industry. But Ford, GM and Chrysler had at that time transformed themselves primarily into finance companies, getting their clocks cleaned when credit markets turned tits up.
But the government stepped in, the industry was saved, and we only lost $10 Billion in the effort.
The Federal Balance Sheet, at the time, also expanded to include AIG, Fannie and Freddie, but these companies were so enmeshed in the global derivatives/financial engineering morass that the collapse of any of them (particularly AIG) would’ve probably destroyed the banking system. And, speaking of the banks, they also were recipients of large public investment – funds that a couple of them – recognizing that once the government has a piece of the action, they control the whole show – tried to refuse. And their refusal was rejected.
Then there’s Amtrack. Which has always been majority owned by Washington, and which has streamlined operations with such breathtaking efficiency that it currently loses only $5B/year.
All of which begs the question: why do we need a chip company? Answer: we don’t.
Because we already have them. Most notably, NVDA, which: a) currently sports a market cap that exceeds that of the entire Russell 2000, and b) is, in many ways, an entire economy unto itself. There’s also AMD and a bunch of others. Collectively, they’ve been eating Intel’s lunch for the better part of a generation. If any combination of them want to pick up what is, after all, still a pretty spiffy portfolio of tech assets, I would have no objections.
But the government? Just no. More than anything else, it extends a disturbing pattern of increased incursion into what should be private affairs, which is only impeded by protocol and pushback by the proletariat. Otherwise, Goldman would have a new Chief Economist – one who presumably would limit his commentary to plaudits aimed at the current administration, we’d be inefficiently attempting to domestically manufacture all kinds of shit we’re better off importing. Companies would be paying through the nose for the privilege of selling their products abroad, and the top law firms in the country would either be disbanded or graced by new leadership.
OK; maybe the law firm thing would be a step in the right direction. But please.
And beyond this, the conflicts of interest are mind boggling. Like, who gets government contracts? Classified information? Advanced knowledge of corporate plans – upon which to trade? And where does it stop? Are taxpayer dollars to be allocated to the task of crafting a diversified portfolio of corporate assets? And if so, who runs the thing? I won’t say much about this but having worked for many years in the service of a former hedge fund manager who is currently Secretary of the Treasury, I’d say there are better choices. Maybe, for instance, the Commerce Secretary, whose Wall Street firm, while, unfortunately on the Sell Side, was a perpetual profit machine.
So, let’s just hope this doesn’t happen. And, moving on, we come to the heart of the matter, the one factor which, in my judgement, will drive valuations for the next year and beyond.
I am referring, of course, to the trajectory of interest rates. I am on record as being well-nigh convinced that they on their way down and this across the Curve. Well, this past week did my hypothesis no particular favors. There was a horrific PPI print, followed by a stronger-than expected showing in Retail Sales. Both of which argue against lower yields. But I stand by my hypothesis, nonetheless. Why? Because political forces impel the plunge. And, in the present day, after voting soundly for a removal of government interference in private affairs, we find ourselves, instead, in an environment where politicians determine all matters of import – according to their private whims and agendas.
The FOMC does not meet for another full month, but the action picks up this week, with the righteous ritual of the Jackson Hole Economic Symposium, held high in the Teton Mountains. It is sponsored by the Federal Reserve Bank of Kansas City, because somebody figured out that they needed to give the KC Fed something to do. Chair Pow speaks on Friday morning, and I continue to believe that his job is on the line – in result of his comments and his subsequent guidance of upcoming Fed decisions. I believe that if he fails to deliver the goods, Trump will fire him.
The pretext, as previously discussed, will be the $2.5B upgrade of the Bank’s HQ, which I must admit is something of a travesty. In a better world, he would’ve simply rebuilt the Kansas City Fed, a building that is elegant in its simplicity:
It’s a short jump from the point where the Kansas River flows into the Missouri, which of course merges with the Mississippi, and the out into the Gulf of Mexico (yes, Mexico). Allowing its members to make a quick, watery exit any time the need to do so arises.
The Washington Fed is similarly proximate to the Potomac, with its easier egress into Chesapeake Bay and the Atlantic Ocean. It perhaps has occurred to Powell and his crew that whether in KC or The District, it may be well-nigh time to aweigh anchor.
I doubt that DC’s newly installed National Guard troops will do much to impede their exit.
Of course, this geography lesson is mere sideshow, in a column that has been designated as themeless.
But as the Summer swiftly winds down, I think that investors can relax a bit. The economy is performing competently. Rates, as mentioned above, are coming down. I wouldn’t call these ideal risk conditions, but they’re pretty close, and, as they won’t last, I’d encourage all to enjoy them while they can.
The White Album ends with the rambling, incoherent Revolution #9, in my view a one-finger salute by Lennon, which stands in sharp contrast to the sublime, compact masterpiece Revolution #1.
I think we’re living more in a #9 world. The Revolution of the early part of this decade failed. As many such Revolutions do. As did the Revolution that Lennon ambiguously touted in #1. What replaced it is little more than noise.
But it’s our noise, and we must take it as we find it. The Beatles, after all, regained their footing, ending their fabulous innings with the highly underrated Let It Be, and the justifiably lauded Abbey Road. And as for us, I ask you to light on the best of it, because all our lives, we’ve been only waiting for this moment to arrive.
It is here. So, let’s set aside nonsensical Revolution, and Come Together, as it were.
In other words, let’s do it (in the road if necessary).
TIMSHEL