King Arthur: It is I, Arthur, son of Uther Pendragon, from the castle of Camelot. King of the Britons, defeater of the Saxons, Sovereign of all England! We have ridden the length and breadth of the land in search of knights who will join me in my court at Camelot. I must speak with your lord and master.
Guard: What? Ridden on a horse?
King Arthur: Yes!
Guard: You’re using coconuts!
King Arthur: What?
Guard: You’ve got two empty halves of coconut and you’re bangin’ ’em together!
King Arthur: So? We have ridden since the snows of winter covered this land, through the kingdom of Mercia, through…
Guard: Where’d you get the coconuts?
King Arthur: We found them.
Guard: Found them? In Mercia?! The coconut’s tropical!
King Arthur: What do you mean?
Guard: Well, this is a temperate zone.
King Arthur: The swallow may fly south with the sun or the house martin or the plover may seek warmer climes in winter, yet these are not strangers to our land?
Guard: Are you suggesting that coconuts migrate?
King Arthur: Not at all. They could be carried.
Guard: What? A swallow carrying a coconut?
King Arthur: It could grip it by the husk!
Guard: It’s not a question of where he grips it! It’s a simple question of weight ratios! A five ounce bird could not carry a one pound coconut. Listen. In order to maintain air-speed velocity, a swallow needs to beat its wings forty-three times every second, right?
King Arthur: Please!
Guard: Am I right?
King Arthur: I’m not interested!

Monty Python and the Holy Grail

First off, happy birthday to my grandson and namesake – GHF – who turns 5 — on this 5^th day of the 5^th month – in the 5² year of the Millennium. And yes, to the rest of you Happy Cinco de Mayo.

For anyone out there – if indeed any exist – who does not follow these notes with fervent religiosity –a bit of context is in order. Last week, we covered the proposition that Washingtonian policy has adhered to the time-honored ritual of The Slap/Suck: aggressive assaults on our sensibilities followed by delicious, rewarding retreats. At the end, we introduced the prospect of migration to The Suck/Swallow, raising, but not resolving, whether the former is transforming itself, tidily, into the latter.

The question remains open, but meantime, that slurping sound you hear is the abiding suck of market participants, lapping up those continued good vibes that improbably emerged a couple of fortnights ago, and which somehow have persisted as April has melted into May.

But will it end in a swallow? I don’t rightly know, which is why I turned to the wisdom of Monty Python’s magnificent Holy Grail for some clarity. And, doing so, I learn that swallows must beat their wings approximately 2,500 times per minute in order to keep themselves afloat. And this to say nothing of what it would take to transmit a coconut – indigenous to tropical regions and indisputably non- migratory – across a large body of water such as an ocean.

And no, gripping it by the husk will not solve the problem.

All of which causes me to remain skeptical about The Swallow. It follows, therefore, that the coconuts, back in them days of the Round Table, would’ve been difficult to source, and, presumably, expensive.

So, having checked the appropriate sources, I’m delighted to report that the price of this most delectable issuance from the palm trees of temperate regions has remained stable at ~$800/Metric Ton, for the last several years:

Coconut Prices – Remaining Non-Migratory Across the Ages:

Presumably, if coconut-bearing swallows were ascendent, the supply of the former would increase, and the price would drop. But they aren’t and it hasn’t.

Perhaps perversely in the broader market, the coconuts are multiplying, but prices are rising, causing observers and opiners to marvel at its resiliency.

There are multiple catalysts at play here. Earnings thus far and with about 3/4ths of the precincts having reported in, are stronger than expected, or, at any rate, feared:

Tariffs? We don’t need no stinkin’ tariffs

GDP did blip down a titch, but not so dramatically as had been projected (or feared). The April Jobs Report, painted, by any reasonable measure, a pleasing picture.

Though not yet priced into the markets, on Saturday, those episodically accommodating folks at OPEC+ announced a >400K bbl/day production increase, and this against a backdrop of domestic energy companies committed to run their drills and refineries at full stop, notwithstanding. So, if one’s tastebuds run in that oily direction, there’ll be sucking aplenty out of the grounds and sands — from Alberta to Texas to Riyadh. And this as the warm weather driving season is hard upon us.

We also detect a pulse in Congress, raising the prospect of them passing a budget bill, bearing critical tax components, and The President signing it.

Finally, I’m excited (to the extent that anyone can be) about the advancement of that Ukey minerals deal. I’m sure there’s some Easter Eggs in the fine print, but I know this: we really need the stuff we just contracted to source, mine, purchase and deploy.

But to me, all this is secondary to the divine blessings of The Suck, which, at least for now, has completely obliterated The Slap. The tariffing hand across the importing face has tempered its velocity. The somewhat dubious sources in and around the White House continue to sound the coming glories of fantastic trade deals on the horizon. The reckless rhetoric about removing Chair Pow has diminished.

As long as this continues, we’re probably OK. But my instinct is to remain leery here. Because The Big Slap is, in my judgment, not dead, perhaps not even hibernating, but only napping. It could re-emerge at any time. And soon. Case and point – the FOMC meets this week and should they displease Our Dear Leader – newly energized by a market swooning with delight over his recent sucking efforts – could pull out that big orange palm and do some slapping.

Another example: who the fuck – particularly a POTUS – publishes a picture of himself in full papal vestments?

However, if he keeps his chill on, this here market could do some open field running, re-invigorated as it has been by the delights of The Suck. And there are so many tailwinds, as described above, easing his way, I’m inclined to issue a temporary “all clear” for risk taking.

And as to the swallow, well, it’s premature to proclaim its emergence yet, because, as everyone who has been either sucker or suckee is aware, the swallow can only emerge when the sucking has reached its logical conclusion.

And as those husky slaps are counter-productive, it is my hope that we let go the husk and allow the coconuts to drop noiselessly into the ocean.

Because swallows will be swallows. And the same applies to coconuts. They cannot be flown by little birds from the tropics to the English forest. And even if they could, clicking them together is a poor substitute for the sound of horse hooves.

Ambiguous though they be, these are our realities. So, stay tuned.

TIMSHEL

As the sun asserts itself against what for many of us has been a brutal winter, it sheds some light on the inscrutable doings in our National Capital and their impact upon market conditions.

Whatever form this clarity takes, the emergence disinfecting solar rays should be taken as a blessing. Like many among you, I have felt baited and switched by these First 100 Trumpian Days, with the only consistent thread being that it features a global power grab — issuing from an individual with a somewhat skewed vision who, despite what he believes: a) is not a victim; and b) lacks the juice to achieve his larger objectives.

It pains me to have formed this judgment, because, being a conservative, and even, nominally, a Republican, I entered the year with high hopes that a healthy dose of freedom of choice and action, absent the threat of government interference, might significantly improve the vibe out there – particularly relative to the incessant scolding and meddling imposed upon us the preceding 4 years.

But that was not the strategy we encountered. Instead, we were treated to unilateral reorderings of International Trade, credible threats against the independence of critical organizations, and, of course, endless strings of ad homonym attacks against those holding non-conforming viewpoints — many of them issuing forth from a $6B for “profit media” platform, most of which is, somehow, majority-owned by the President of the United States.

It has been painful in its unfolding. Especially for those of us who disdain government over-reach and who whined like little bitches when Obama and Biden began to run the joint by Executive Order.

Because our side did not just call this bet, it pushed all its chips to the center of the table:

So, it’s clear to me that our boy wants to push matters as far as forces will allow. But thus far, he is finding out (much to our discomfort and his) that he still lives in a world where Acceleration Due to Gravity is fixed at 9.8 Meters/Second Squared. In order to incorporate this constraint, he is thus compelled to adjust his preferred tactics.

We therefore revert to the time-honored protocols of The Suck/Slap – known in more polite society under other handles, such as the carrot/stick. But I prefer the former, finding it, among other things, to be the daintier nomenclature.

Its present form involves aggressive assaults on prevailing relationship dynamics, followed by cuddly retreats. Examples abound. Go hog wild on tariffs only to back off multiple times prior to their implementation. Insult the Fed Chair, demand that he immediately cut rates, threaten his removal, and then issue a big, fat “never mind”. Kick Zelenskyy out of your office and invite him back a few weeks later.

We can speculate all day long whether the migrations from The Slap to The Suck reflect true changes of heart or the yielding to external pressures. Like most, I suspect the latter – particularly the market’s alarmingly negative reaction to the former.

All of which creates a rather tetchy problems for investors – particularly insofar as the best defense against a future full of slaps features anemic market action. And this reality extends beyond the likelihood that continued valuation pressure is the best antidote to you-know-who’s acting out. Because if we gin up a big rally here, it will do nothing but embolden 47 towards incremental misbehavior.

Market participants have thus been compelled to channel Ginger Rogers (about whom it was once appropriately said that she had to do everything Astaire did – backwards and in high heels). They therefore began with The Suck. And suck they did. For 6 weeks. A stiletto-shod Cornel Naz ascended a lofty 10% — from Inauguration Week until shortly after Valentines Day – reaching all-time highs on 2/19 before, no doubt feeling jilted, executing the slap. Here, with the full fury of a woman scorned, she initiated a descent. into the (she) Bear Market territory we encountered earlier this month.

The Slap worked. Trump backed off on most all his Heathcliff Hijinx, and was rewarded the last fortnight at any rate, with a passionate suck. Our indices are still in the red for the year, but certainly feeling more mojo than they were during those wretched days of The Slap.

But this here dance is just beginning, and the next two weeks should go a long way towards determining whether our next sensations will be centered painfully on our faces or joyfully below our waists. The remainder of the Mag 7 (except for the always-tardy NVDA) report earnings, and their temptation to guide down due to macro factors, so as to maximize the probability of glad tidings later in the year, must be substantial. This Wednesday, we will receive the first Q1 GDP estimates, which, whether as predicted in Atlanta, clock in negative or, as prophesied by The Street, be merely tepid, it is interesting to fathom.

The April Jobs Report drops Friday – one day after International Workers Day. And, across it all, we’re looking at accelerated negotiations with Russia/Ukraine, Iran and about 50 trading jurisdictions, all of whom, according to Truth Social, are in a desperate frenzy to cut deals to our liking.

My best guess here is that the upcoming news flow will shade positive. I AM concerned about the earnings calls, but figure that they will be, at worst, tempered. The Administration is certainly incentivized to cop some wins on trade deals, and I expect the rhetoric, at any rate, will be favorable.

I also have a hunch that P and Z are ready to deal, with much of the gory detail hidden from public view, but with sufficient bennies to tolerate Trump’s claiming credit for some world class peace-making.

Iran and China are a bigger problem, as we have bona fide conflicts with both — which stand in sharp contrast to the beefs we have manufactured with the rest of the world — as part of The Slap. But I suspect, short term, we’ll end up with something no worse than opaque even in these realms.

And there remains the enormous latent force of the vacuum lips of a market oozing with excess liquidity. This is my old drone, but it is perhaps more prominent at present than it has been recently. Because most risk asset purchasing pools de-levered during The Slap, and should they choose to continue to suck, can do so with great vigor over an extended interval. Perhaps even longer than we can last – if you catch my meaning.

I am nonetheless compelled to advise my minions to hold their lips in abeyance for a bit longer, or, failing that, to ease into The Suck with due caution. Again, there’s a passel of data flows on the horizon that could kill, or, at minimum, dampen, the mood. The economy, by appearance, is slowing. The status of the Fed Chair and the other members of the Open Market Committee remains unaltered, and, after executing a slap of their own on The Big Slapper (and having lived to tell the tale), they are unlikely, at least at its next meeting Wednesday week, to suck out a rate cut.

Thus far, we have negotiated exactly zero deals with key trading partners. The Middle East nightmare could take a turn for the worse.

I hear very little from a slapped-down Congress about a tax deal, which, if not enacted this year, will cause still-elevated U.S. Corporate rates to revert to the highest level in The Free World. They reconvene today, and maybe they will awaken – ideally absent the obligatory slap that occasionally rouse us from our deepest slumbers.

And then, of course, there’s the specter that will not take its leave – a redux of The Slap. A continued market rally, a couple of optically pleasing trade deals and the like, and we stand every chance of being yet again on the receiving end of that open, Big Orange Hand. And our best remedy against same is to hold open the possibility, if not outright executing, a slap of our own.

Again, I have a hunch that the sucking noise one hears each trading day will continue, and much as I’d like to give the “all clear”, encourage all to go forth and make some money, my reading of conditions, on balance, holds me back from such issuance.

Maybe I’ve been slapped to hard for too long. But that’s the way I see it.

Because Slaps abide. As do Sucks. And I close on a happier note with respect to the latter,

We can count on Sucks at some point in our future,

Swallows, though, are an entirely different, more problematic, matter.

TIMSHEL

It is not ideas, but experience that changes the world.

Milton Friedman

I continue to gather myself for the fight, but at times it proves to be too many for me.

As an ominous sign of same, upon a recent trip to the Chicago area, I had occasion to visit a dispensary. I won’t stoop to the indignity of stating anything beyond that I did not run this errand on my own behalf. Even though I did. And it wasn’t.

The sequence was, as far as these affairs go, rather routine. They ran my drivers’ license through a machine, ushered me into the show room, where a helpful young gentleman guided me through the choices, and I made my selection.

The cashier rang me up, and then it all fell apart. The manager stepped in and applied a Senior Discount to my transaction.

Though it stands not alone, the prospect of paying a reduced rate owing to my advanced years — at a friggin marijuana dispensary — is yet another sign that maybe, just maybe, I have lived too long.

Inside, I was mortified, but I tried not to show it. And I extracted my revenge. By going into a long reminiscence about $10 Mexican Lids — stuff you could burn all night and not even be really stoned.

And of wakings up with a raging headache.

The staff listened politely, but I sensed that they had heard it all before. So, as I exited the premises (located, by no mere accident I suspect, immediately next door to the iconic Lovin’ Oven Bakery), it occurred to me that I ought to consider myself doubly blessed. Because not only did I walk away with more jack in my jeans than the youngbloods who presumably comprise the enterprise’s core clientele, but also because I’m pretty sure that the stash I copped was grown and processed domestically. Had this been a tale of my above-mentioned Mexican lids: a) my $10 bag would’ve set me back $12.50, and b) no Senior Discount would’ve been available.

I’ve no doubt, though, I would have been much less buzzed, because (so I’m told), today’s shit is innumerable orders of magnitude more potent than the stemmy, seedy leaf that we sucked through those home-made bongs made of stacked beer cans and duct tape years ago. And my mood (if in fact I was gonna partake, which I wasn’t and didn’t) is now certainly more in want of altering than in the bizarre world of 50 years ago.

Which – trust me – was a pretty fucked up time. The country had just managed to torpedo that slippery Nixon out of the White House, and, a world away, our army was busily pushing our helicopters into the South China Sea, so they wouldn’t be delivered to the Victorious Viet Cong. Inflation had reached double digits the previous year, and Nixon’s successor, the well-meaning but capability-constrained Gerald R. Ford, responded by handing out WIN (Whip Inflation Now) buttons.

Looking back, it’s no wonder we were stoned all the time.

And the headache lasted for years. Soon thereafter, the Middle Eastern shit hit the fan. The Iranians attacked our local embassy. Oil prices quintupled. There were gas lines. Inflation and Interest Rates hit the high teens. By the time I copped my bachelor’s degree, the weed quality had vastly improved, but the future, for a young buck sporting a Badger Math diploma, looked anything but promising.

I did not share this much of my personal history with the dispensary staff, thinking that if I did, they’d soon send the wagon with the butterfly nets after me. Besides, they’ve problems of their own.

Here’s hoping that the powerful Sativa and Indica which they ingest are offering some much-needed relief. Because I don’t envy them the road they must travel to shape the future. I often tell them, it’s your turn. My generation had its go at it, has done an indisputably creditable job of bitching everything up, and must now pass the torch.

As is often the case, the financial markets offer an insightful, if presently unreadable, madness barometer. Y’all know what happened last week: the deepening of a frightening selloff followed by a one-day recovery that proved to equate to the largest single session valuation gain in market history. The week ended with some bi-directional careening. Perhaps most improbable of all, the panic liquidation of equity markets did not devolve to the benefit of the heretofore thought to be rock solid Treasury Complex. Quite the opposite. Which is kinda funny insofar as it seems like it was only a couple of weeks ago, we were celebrating the first decline below 4% in 10 year yields all year.

Because we were. But now? Hello 4.5%. And, just as the prime housing season unfolds in earnest, welcome back to > 7% mortgage rates.

I am unsurprised, and in fact perversely encouraged, by the confusion exhibited by cross-asset class investors, as I believe it to be justified. Tariffs? Yes. But the issue transcends this dubious episode, involving, as it did, an aggressive, unilateral assault by the Administration on the delicate protocols of International Trade. Upon grasping that these were not well-received by the Global Financial Economy, the Administration backed off, declaring, inevitably, in doing so, a glorious victory in the action. But NGL – it looks to me to be about as much of a victory as our bailing out of Afghanistan a couple of years ago, with all them poor schlubs running beside the plane, several of our soldiers executed, and billions of dollars of cash and hard assets left behind.

Then of course, there’s China, with whom we are engaged in a war of tariff-hysteria, taking the rate on each side to >100%. Seeing as how the two-way trade runs to more than $1 Trillion, it amounts to a >$1T tax/transfer of resources from private entities to the sponsor governments.

One need not look very far to unearth arguments that the Chinese economy, weaker than ours, cannot withstand this heat. To which I respond that we’re talking about a dictatorship that has never gone more than a generation or two without executing a purge which killed and/or crippled millions. Meantime, here in the U.S. we become enraged at even minor inconveniences. Our equivalent of the Great Leap Forward – which may have taken out as many as twenty millions of their population – is being kept on hold for more than five minutes with our cable providers.

I am thus not quite sure we have them quaking in their boots just yet.

Though I’m reluctant to dive into this rabbit hole, it is also a matter of considerable debate as to whether or no trade deficits redound for good or ill. My own belief is that they’re OK. Not great, but OK. It’s certainly true that we ourselves are subject to considerable tariffs and that we import more than we export. But I believe that our consumer culture supports the notion that we can live with these conditions. Most of the jurisdictions with which we do business suppress consumption, reserving material portions of their output to feed the avaricious appetites of Americans. They make do with less, but their companies are better off, and their jobs are more secure.

But make no mistake. As illustrated in the following graph, we are the undisputed Consumption GOAT:

Pretty impressive to have copped 5 of the top 10 spots, particularly given that we are < 5% of the world’s population. And, if the modelers at statista can be trusted, we will soon be at 6.

In order to break these chains, we must meet these countries on their own ground, raising the question as to whether, in order to eliminate an obtuse deficit about which few would know or care about absent the media onslaught, as to whether we willing to do with fewer foreign cars? With higher home construction costs to avoid buying all that Canadian lumber? With lower quantities/higher costs of meds and microchips emanating not only from China but also from other East Asian nations?

I doubt we have the desire, and if the desire, then the willpower, to cut back on these good things, produced, as they are, beyond these shores.

All of which has inevitably confused economic agents of every stripe. Investors are beyond puzzled. And rightly so, because this is one of those unfortunate intervals where they are facing not narrowly defined market risk but rather the more broadly rendered economic risk.

And, as I have pointed out multiple times recently, when we enter these higher realms of exposure, it tends to have a deleterious impact on ALL forms of economic activity. I suspect many of us are feeling the heat even now.

Is this, for instance, the best time to purchase a new home or auto? To start a business? To make a potentially hazardous, potentially lucrative career change? Didn’t think so.

But for the present, our magnificent partakers of everything under heaven appear to be in a stoner stupor, as evidence by the University of Michigan’s Consumer Sentiment Report, issued on Friday:

In defense of those brilliant Ann Arbor surveyors, we’re less than a fortnight beyond the town’s ritualistic Hash Bash celebration, which this year took place on April 5^th. If, still feeling the effects, local responders responded to the questions put forward to them with a red-eyed groan, perhaps they can be forgiven their lethargy.

But enough about them, because U-Mich is the enemy, having most recently reinforced this by taking out my Badgers in the B1G hoops finals.

And, as for the market risk, well, this truth should be self-evident. If the broader economy sneezes, the markets themselves will catch cold. I don’t think this is over and won’t be until (unless) there is a coherent set of policy protocols. Even if they’re bad ones, they would be better than what we have in place at present. Which is nothing discernible. The Administration certainly had an idea to remake (though no one asked them) to remake the Global Commercial Economy, but, as Friedman observed, it is the experience of same, that will change the world. I suspect that we’ll continue to hear warblings about how swell this is working, how countries are lining up in desperation to do a trade deal – any trade deal – with us.

But whether it all plays out for good or ill remains to be seen, and meantime, the risk of the latter outcome is, in my judgment, palpable.

I would thus urge incremental caution with respect to the treatment of your portfolios.

Surely America has endured sadder trials. Last Wednesday was the 80^th Anniversary of the Bataan Death March. Three days later, FDR died. Today marks 160 years since the murder of Abraham Lincoln. The latter supported tariffs, but then again, we were at war with ourselves at the time.

We may be again. Soon. At war with ourselves that is. Hopefully, it won’t feature a Bataan Death March.

But, if you hadn’t already discerned as much, I did dig, ever so slightly, into that little purchase I made for someone else. It may have affected my thinking. So, I think I’ll nod off, dreaming of Mexican Lids and hoping that the wakeful headache that awaits me is less severe than those I suffered back in 1975.

TIMSHEL

Fasten your seatbelts. It’s gonna be a bumpy night.

— All About Eve

Our introductory quote – timeless across the ages but particularly timely at present – is uttered by the Margo Channing (played by magnificent Bette Davis), in anticipation of her stone-cold kitty clawing of Eve Harrington (Anne Baxter, whose maternal grandfather was no less than Frank Lloyd Wright) in the 1950 classic “All About Eve”. The former is a glamorous but aging Broadway star, the latter her protegee/usurper. It’s an entertaining, if a bit hokey and dated piece of filmmaking, which, its despite (or perhaps because of) its rich inventory of clichés, I have seen no fewer than twenty times.

I believe I will dial it up again soon. Because we are experiencing a MARGO Renaissance. And why not? We’ve presumably had our fill of all that MAGA/MAHA (and whatever else) jazz, so it’s time for a new variant. And, as a public service, I’ve come up with one of my own: MARGO.

Because make no mistake: America, from the perspective of the health and well-being of the Capital Economy has, in the blink of an eye, become incrementally risky.

Heck, I even sourced our signature hat:

A few words about this lid. First, while the lady shredder depicted here is certainly not Taylor Swift (looks more like Marcia Brady), because she plays for the other team.

I also note that the topper I selected is not a baseball cap, but rather a knit woolen number – the emerging end of winter notwithstanding. I think this is appropriate if for no other reason than it provides extra protection, in this time of insanity, against our brains leaking out of our ears.

Finally, be advised that my production/distribution partner is an outfit called Hat Public, located (where else?) in windy, fire-infested Santa Ana, CA, just across the plaza from the local Olive Garden.

I was unable to identify the location of its manufacturing center, other than to have confirmed it is not in this country. Rendering it a certainty that those wishing to join me in this patriotic purchase will be compelled to pay an unfortunate extra levy for the privilege.

Because yes, my loves, the tariffs have arrived, a circumstance about which I have been bleating for many weeks. But – NGL – they have hit more impactfully, more bigly than ever I imagined.

At present, the topic is more ubiquitous than the virus was five years ago, but, wearying though it is, I must devote more pixels to it. So, here goes.

I believe the primary cause of the alarming market selloff is policy unpredictability. The new, restrictive trade regime was coming. We all knew that, and there was, back in those golden days of a few weeks ago, plausible arguments that what was envisioned was priced in, that the attendant market damage was substantially over. This is not what happened. Instead, rather than a surgical attempt to improve our trade standing with some key business partner jurisdictions, T- Bone walloped everybody. Simply put, as the new sheriff in town, he laid down his new set of laws, peppering in helpful phrases about not caring if consumers must pay more for vital items, and insistences that under no circumstances would he change his policy stances.

It also bears mention that the edicts came down, with trademark legal dubiousness, under the 1921 Emergency Tariff Act, signed by the Warren G. (frickin) Harding, precisely 18 months after the unsatisfying conclusion of the War to End All Wars, with a decimated Europe still reeling from the carnage. I don’t think that the same framework prevails now, but Trump does, and that, for now at any rate, is all that matters.

Rational minds must thus question what other tricks, imposed by diktat, he has up his sleeve. And, given this uncertainty, these same minds react by doing what they can to reduce their exposure to the whole system. Moreover, and as I have repeatedly pointed out, this applies not only to the financial markets but to the economic activity which underlies them. Any read of current events would naturally impel economic agents to spend less, to invest less, and to generally pull back on their activity. And this, my friends, ain’t good.

The whole sequence looks more like power play than policy. A more ham-fisted approach to international relations – this side of Germany circa 1939-1945, it would be difficult to identify. There are reasonable arguments that the U.S. was entitled to better terms than it currently receives from its trading partners, but this isn’t the way to achieve them. There were no negotiations with any country. No discussions with Congress or other empowered domestic entities. The highly touted Cabinet has been reduced to clownish sycophants. My boy Bessent, something of a backbencher as the news broke, came out swinging on Sunday, but I suspect he is secretly appalled. Nobody on Capitol Hill with any stake in the matter is raising a beef.

When one considers the dramatic shift in the protocols of global trade effected by one individual – within in this context of relative silence, I feel that the intended (and received) message is that the President is seeking to impose his singular will on not only the country, but the world.

What could possibly go wrong?

The main risks – including to the markets – are political. The game plan, insofar as I understand it, is to take some economic pain here, bring our competitors to heel and emerge stronger in result. We’ll just reshore everything. Create new businesses, cities, empires.

But I believe that neither the economic nor the prevailing political calculus, renders this outcome very likely. Particularly in the wake of the inevitable tariff counterattacks that have taken place, hundreds of thousands of businesses, millions in the workforce (and very few among them rolling in the chips at present) are at enormous hazard. Unless this goes perfectly, companies will disappear, jobs will be lost, and prices will go higher.

I am convinced that the political pressure on a swath of Trump-aligned members of the House is palpable and will soon be untenable. And this against a backdrop of not only a razor-thin 4-seat Republican majority, but also the pressing need, if nothing else, to extend the 2017 tax cuts.

This coalition could splinter at any moment, and if it does, we’re looking at a construct under which not only will these incremental tariffs translate into a gargantuan tax increase (much of it going to non-U.S. jurisdictions), but the 2017 tax cuts will expire, taking, among other things, the corporate rate from its current (still elevated) 21% up to 35%.

Meantime, the markets get slaughtered, so they better at least get that tax deal done.

So, we’re already looking at the Naz in Bear Market configuration with the Gallant 500 hot on its heels. Investors are scared, as evidenced not only by the valuation slaughter but also by Vixen VIX raising her lovely if capricious heels to elevations not witnessed since it looked like covid would kill us all.

And it all seems to me like such an avoidable shame, coming as it did against the backdrop of a financial economy poised to explode. We entered the year with huge tailwinds, with promise of further market stoking based upon decreased taxes, diminished regulation, the unchaining of the Energy Sector, technology-driven productivity windfalls, the unleashing of a deal calendar with an immense backlog, and other bennies I won’t mention.

But now the investment world is awash in uncertainty, captive to the idiosyncrasies of a single individual who is showing increasing signs of detachment from the realities that plague the rest of us.

And yes, I have a few risk management suggestions I’m willing to share:

• Though we may be close, it’s not wise to act as though we’ve seen the lows.

•  With the globe awash in all that new liquidity about which I’ve been complaining, it’s likely that large, solvent capital pools will soon find that in a world where there are insufficient quantities of investible assets to own, the prices available at present – or anything lower – are too compelling to pass up.

• The result might be that a couple of hundred bloated investment enterprises gain full control of the markets. But who cares? The prospect of grabbing a few of their crumbs is beyond tantalizing.

• This buying will NOT, however create anything that resembles a V-Bottom. Assuming nothing worse happens, no sustained rally can in my judgment take place until the volatility comes out of the market.

• Therefore, while there’s likely to be some form of a melt up within the next few sessions, I take this as more of a sign that the rout has NOT run its course, and that further downside price movement can be anticipated.

• So, unless you’re an authentic fat cat, I’d avoid chasing the next upticks. Much better to buy on a low vol recovery – even if it means failing to catch the bottom.

• The short side of the market – always orders of magnitude riskier than its opposite number – is particularly treacherous at present. Hedge if you must, but don’t risk speculating on further contraction.

• It is imperative to protect the flower of your portfolios. Sell everything else, but hold on to those names (unless, of course, additional analysis convinces you that tariffs have toe-tagged them). If this provides insufficient levels of liquidity/capital preservation, then trim (but don’t dump) the good stuff. And know this: nothing kills an institutional investment platform more dead than selling out its best positions at their lows.

I have written this piece in anger about the nonsense embedded in this topic. That anger is now abating. A bit. Of course, we must remain calm. And should.

Perhaps most encouragingly, we can count on the politicians to save themselves. Because they always do. In the wake of the tariffs, Congress is accelerating the passage of the above-mentioned tax bill. I’m sure they feel the heat already. As does, I believe, the Trumpster his-self. More likely than not, he’ll roll over a few countries like he did Vietnam, declare victory and continue with his crusades – many of them less dangerous than the stunts he’s pulled in this young month.

Because, while he is not MARGO, he created MARGO, albeit with infinitely less elegance than the Miss Davis. The latter told us it would be a bumpy night, and, 75 years later, her prophesy came true.

It ended up OK for her. And for her bestie (Celeste Holm). And for the wooden statues that passed for the male characters in the film.

That bitch Eve got what she wanted, too. But (without laying a complete spoiler on y’all) as she did her victory dance, she heard footsteps on the exact same path that she travelled to the top.

And as for Warren Gamaliel Harding, his scandal plagued Presidency only lasted for 2.5 years. Then he got sick and died. A little over a half decade later, we were hit with a market crash and then the Great Depression.

Such are the wages of reckless behavior. Those who bear witness to these episodes are well-advised to keep their heads down, and carry on quietly, hoping and expecting better times as the moon sets on these bumpy Eves that still haunt our existence.

TIMSHEL

A couple of weeks ago, I was the target of an aggressive financial hack. Which almost worked. Somebody who identified themselves as a representative of my bank called to say that she was checking on what were clearly fraudulent transactions. I confirmed that they were and asked her to review other line items for the day. Which she recounted with precision. Including the Uber ride I had taken to my office a couple of hours earlier.

So, they were in my account prior to the call. After an hour or two of shenanigans, I reached out to my bank, which confirmed that a) this was a fraud, and b) my balances were intact. I put some extra protections on my banked assets. But I wasn’t done there. Next morning, I got a text from my brokerage firm asking me to authorize a cash transfer about which I knew nothing. I told them that this was to be denied, whereupon they connected me to someone who claimed to be from the Federal Trade Commission, who proceeded to inform me: 1) there was global fraudulent activity taking place in my name, which: b) would place me civilly and criminally liable unless I did everything, they told me to do.

I got a clue into my thick head when he informed me that he was about to disconnect me to my 6.5- decade old social security number, and issue me a new one. Because most of the people with whom I deal, as well as I personally, would like very much to put some distance between ourselves and our SSNs.

I was compelled into some inconvenience. Debit cards re-issued, multiple auto-pays re-established. I bought LifeLock premium, which set me back about one large. I was aggravated and embarrassed – particularly, as being someone who holds himself out to be a credentialed risk manager, I ought to have known better.

But, ending up not incrementally worse for the wear, it did occur to me that these are first world problems. I am not digging in the dirt for grubs to fill my belly. I have very little to fear from police and other enforcement agencies.

On the other hand, my brackets are in shambles. My new PRS guitar has faulty switches, making it clear to me that the company’s manufacturing standards have declined relative to those used on that flawless one I bought over 20 years ago (and still play). I also need some new harmonicas.

On April 15^th, I owe a shit ton of taxes. Which I don’t feel like paying. My accountant is strongly encouraging me to overcome this aversion, and I am considering taking his advice.

First world problems.

I make my living in the realms of investment, which also is the victim of problems that apply exclusively to the privileged. Our equity indices are in the throes a big digger. Cornel Naz – deeply at risk of being busted down to the ranks – is down double digits. Bonds – Govies and Corporates – are flat for the year.

Both are riding a multi-decade rally.

BTC is down about 15% from its January highs but is still a 3.5 bagger over the last ten quarters. Chances are, it will rise (and fall) again.

Our Atlanta GDP modelers whacked us this week, dropping their Q1 forecast back down to -2.8%. But on the other hand, GDP has been in a sweet spot every quarter for the last two years:

Our National Debt is soaring to ~$37T – approximately 7x what it was as the Great Financial Crisis unfolded and ~1.3x our GDP. From an actuarial perspective, we cannot hope to pay this back and must monetize it. However, we continue to balloon our obligations with perceived impunity because, as custodians of the world’s Reserve Currency, we can simply print as much as we want and shove it down the throats of all known economic agents. For now.

Nobody on Wall Street is making much money in 2025, but ‘24 compensation – at Investment Banks, Hedge Funds and associated enterprises reached significant all-time highs.

So, I submit that our vexations, aggravations and anxieties have an authentic First-World feel to them. But this begs the question as to whether, in this here country, we can even retain our First World status.

I got to thinking about this when reviewing the following graphic:

Notice anything here? Like we didn’t even make the list? To be sure, nobody in the Lower 48 compelled to rely upon these systems should be surprised that we failed to crush it, we didn’t even merit a Participation Trophy!

Not for the BART, which my SF friends never tire to rave about. Nor for the Washington Metro, which my late, lamented uncle – Albert Sidney Grant – designed.

And it seems to me that if you’re a First World country, one of your cities ought to crack the Public Transport Top 20.

One plausible explanation for this is the settled reality that Americans rely much more on their wheels than do most other First World countries. Which brings us to another threat to our Primary Earth status. On Wednesday, anyone taking a notion to purchase a foreign car will be compelled to pay an additional 25% for the privilege. To the best of my understanding, one of the goals here is to use government economic coercion to impel the incremental purchase of American vehicles. Given this unearned price advantage, there is a perverse form of logic is at play here. Greater demand for jalopies manufactured right here under the spacious skies/amber grain waves is just ‘round the corner for us.

My advance economic training, with great nuance, suggests that higher demand catalyzes higher prices. But the geniuses who came up with this plan have us covered, as published reports inform us that the Administration has, presumably without much subtlety, indicated to domestic auto manufacturers that, as they won’t take kindly to associated price increases, they would recommend against taking this step.

It perhaps bears mention that the domestic auto system cannot instantaneously add production capacity to meet a demand surge. So, we’re looking at a potential shortage, which, in addition to the problems it presents for sourcing a new ride, will also impact the availability of used and rental cars.

Something of this nature transpired during the lockdowns. I had problems replacing my leased vehicle in 2020, as did, I’m sure, others in my First World position.

But how is this different from what was transpiring in, say, the food industry during the height of the covid rage? I distinctly remember government-issued warnings to all those fat cat grocers not to raise prices on their diminished inventory. But in a way, it’s worse, because back then, the shortages were neither self-imposed nor avoidable. At the time, tut-tutting conservative economists (including yours truly) were quick to point out that these actions could only lead to empty shelves. I don’t, however, hear much, in the same theme these days, about empty dealership lots.

And it all seems a bit Banana Republicish to me. And I suppose this is to be expected. Our current boss (same as the old boss) re-emerged from political purgatory after having been dispatched, indicted, convicted and shot at, to retake his old office. He’s made it clear that he hasn’t forgotten all that, and has, perhaps with some justification, come to town with a mission that envisions evening some scores.

But isn’t this the type of narrative that one might expect to emerge, not from the Land of the Free, etc., but rather from Central or South America?

So, as the quarter ends, I find myself concerned as to where we’re steering this here boat – a depressing concept to me as the pilots derive from the team for which I usually root. I don’t think the other side has better answers either. In fact: a) they may be worse; and b) given the ham-fisted way this is unfolding, the current Administration may blow it, giving us every opportunity to find out.

The month of April will be very instructive from this perspective. We’ve got those tariffs to joyfully anticipate this week, followed by Jobs Reports, Inflation estimates, and, of course, the ritualistic earnings calendar.

Investors are justifiably nervous, bracing themselves for additional economic and financial volatility. They are reluctant to load in – even at the discounts now available relative to valuations prevalent when the quarter began. I applaud this reticence, but feel that at least for now, most of the visible fears are priced into the market.

Because, at present we remain a First World country. With First World problems. The markets may go lower but will bounce back shortly.

And as for me, I will continue to check my financial statements for suspicious activity and am preparing to write that big fat check to our governmental overseers. Because in Worlds 1 through 10, it us unwise to upset the powers that be. You can’t make money that way, and, if not careful, might find that your assets have been absconded with.

TIMSHEL

Felonius my old friend, Step on in and let me shake your hand
So glad that you’re here again
For one more time let your madness run with mine
Streets still unseen we’ll find somehow. No time is better than now

Fagan/Becker

It’s the customary period for me to remind my readers that the origin of ubiquitous epithet “March Madness” is the Illinois High School basketball tournament. Back when I was tickling the twines/riding the pines for my school, 16 teams from each of two divisions would, on successive weekends, motor down to Assembly Hall in Urbana to compete in games held on Friday/Saturday. For several decades, the winning squad was thus the one that copped 4 victories over two days. March Madness indeed.

The term has, of course, since been co-opted nationally, and this year I had my brackets nearly perfect. The only exception being my decision – largely as a nod to my Catholic friends during this Lenten season — to call forth the vestal vessels of Sacred Heart to upset first the hated (by me) Minnesota-Duluth Bulldogs, and then issue a swift beatdown to Cornell, thereby making it to the Semis in Minneapolis, where I had them losing in the Finals to my skating Lady Badgers.

An article by Jason Gay in this week’s Wall Street Journal proclaimed the University of Wisconsin’s Women’s Hockey Team to be among the greatest college squads of any kind ever assembled. Gay – God bless him – is a bit of a homer though, having graduated from Wiscy a decade after I peaced. I think that the GOAT argument, however, is a stretch. The Penn State Wrestling team has won 12 out of the last 13 titles. Nobody could cop a game against the UCLA Basketball Bruins back in the late 60s and early 70s. Or the UConn women about a decade ago.

But the Badger hockey squad is certainly interesting, among other reasons because of Mark Johnson, who has coached the team since 2002. He is best known for having netted the puck twice against the Soviets in that magnificent Miracle on Lake Placid (1980). But after that, in my senior year, he led the Wisconsin men’s team – a crew coached by his father: Badger Bob Johnson – to the Frozen Four title.

Back then hockey, as us Geritol chuggers are fond of saying, was hockey. Wisconsin was in a perpetual pitched battle with the Minnesota Golden Gophers and the North Dakota Fighting Sioux. With respect to the latter, the rivalry was so intense that the Madtown boys would skate into Ralph Engelstead Arena (aka “The Ralph”) in Grand Forks always to encounter an honest-to-goodness dead badger on the ice:

Wisco men’s hockey has levelled off since then, but then there’s the women to pick up the legacy. And, to retire the question before it is asked, to the best of my knowledge, no one born without ovaries has ever donned the Female Frozen 4 Cardinal and White.

Beyond the world of lady puck shooters and puck stoppers, March passes through. And madness indeed abounds. The men’s hoops tourney is underway, but I can’t work up much enthusiasm for it. The glory days of Magic, Bird, Isaiah, Quinn Buckner, David (Skywalker) Thompson, MJ, Worthy, Ewing, and even the much-derided Christian Laettner have long since passed us by – leaving a string of one and doners to carry on, however vapidly, in this hallowed tradition.

Washingtonian Madness also abides, with this week featuring the shakedown of Ivies and white shoe law firms, and the nominal revocation of presidential pardons. I take the under on the latter, believing that the latter-day Felonius (Hunter?) will remain at liberty to find streets unseen, unencumbered by the legal system.

He also withdrew the security clearances for a former president, a former vice president two former secretaries of state and several free-thinking members of the House of Representatives.

T & M continue to suck the oxygen out of the room, and for the latter it was a mixed-to-negative week. On the downside, his flagship corporation – one TSLA – having lost half its value since Christmas, has now sunk to a piddling $800B of market cap. And this amid repeated episodes of its core product (and dealerships selling same) being torched to ashes.

To the good, one of his companies did lead a successful effort to rescue those poor souls who were stranded for nine months in that space station, and anyone who doesn’t applaud, isn’t impressed with this may want to do some additional soul searching.

The Fed held steady and suggested that they might do something – if and when something is needed. Or they might not.

The markets, in what can only be described as a grinding configuration, responded for an hour or two with some tepid buying.

And now, with one week left in this wit-wandering month, we, as investors are left with more questions than answers. Including one coined by the immortal Joe Strummer, which ushers in that singular banger “Clampdown”.

“What are you gonna do now?”

Answer: you’re gonna wait. But not for long. I don’t expect much meaningful action next week. Maybe somebody still cares about the couple/few PMIs which drop this week. There has been a spate of earnings pre-announcements (mostly negative) and these may continue. Moreover, in an elapsing quarter, which, at the moment, leaves all our equity indices improbably down for the year, there is the possibility of some tape painting. Overall, however, I anticipate a quiet week.

But then March ends and one wonders whether the madness will continue into April.

It looks to me that it will continue. Wednesday week – April 2^nd – which has been proclaimed by Trump to be American Liberation Day ushers in that proclaimed-to-be-glorious era of new tariffs. Unless it doesn’t Because it might not – particularly if 47 gets nervous and finds a way to declare a big fat orange victory in these here trade hostilities. Already he’s backing off on whacking certain (presumably politically important) sectors.

While I can’t speak for everyone, I will state that should the new trade policy come to pass, I will feel anything but liberated by the prospect of paying an incremental levy on all the shit that I buy from Mexico, Canada and China.

The latent madness only intensifies from there. Monthly and quarterly macro data begins to roll off the tape. And recent trends – from Employment to Retail Sales — are somewhat troubling.

The news is not all bad. Existing Home Sales perked up. The Atlanta GDP monitor has ticked up to a robust -1.8%. And, in terms of upticks, that’s about it.

Earnings releases get a late start and will certainly be instructive. The banks report a fortnight after Liberation Day, and I will be paying particularly close attention to how “liberated” auto makers, technology companies and other enterprises feel by the prospect of paying an additional 25% for parts that are critical to their operations.

In addition, we will be on the receiving end of Inflation, Employment and ACTUAL GDP statistics. And weren’t that enough, sometime presumably in the next couple/few weeks, the Big, Beautiful Budget Reconciliation process will unfold in earnest.

It’s a lot for even the most efficiently functioning minds to deconstruct.

I think the most likely outcome is that earnings and macro data, while perhaps lukewarm, will not be disastrous enough to extend the poor showing of the markets thus far in 25. That the budget resolutions will pass, if tweaked in ways great and small but in such a way as to please no one and aggravate nearly everyone.

But we will avoid a tax increase, which, however justified from a fiscal perspective, would be pure poison to the Capital Markets. What I see in the market supports these sentiments. Absent further tape bombs, we’re probably at the lower end of the valuation range.

Still and all, the over-riding question remains: will April feature a continuation of recent madness or will the clouds part, ushering in a much needed Liberation Month?

All that remains to be seen, and we won’t begin two know for an agonizing couple of weeks. More calming to the nerves is the results of the Women’s Frozen 4, with the caveat that while my unfortunate Sacred Heart pick ruined my chances of copping that enormous cash pot, I’ve no regrets – particularly given the final outcome:

But Badger Mark must repeat this feat for each of the next 12 years in order to excel the exploits of those Mount Nittany grapplers (more if they keep winning). At which point he will be pushing 80.

So, let the madness continue, I say. A couple of decades ago, the Illinois High School Athletic Association expanded the number of divisions from two to four. And mercifully extended the calendar of contests over a full week.

The risk management lesson here is that madness eventually runs its course. What replaces it is not for us to know. And whether it be a. continuation of irrationality or the dawn of liberation, we can and will contend with it.

So, lets embrace our current condition, with as much equanimity as we can muster. We’ll know soon enough what follows in its wake, and I reckon the trick is to avoid descent into irretrievable depths of full- on insanity in the meanwhile.

TIMSHEL

Forgive me for indulging in a bit of nostalgia here. I reckon I was born that way, and I find, further, that such tendencies do not tend to abate with time.

One thousand eight hundred and twenty-nine days ago (five trips around the sun – two of which were leap years plus two extra days), they sent us home. Told us it would take two weeks to stop the spread.

They lied, of course. Or maybe they truly didn’t know.

But every now and then, I look back wistfully at those early lockdown innings, when we went nowhere but to the grocery store, and there in a hazmat suit, and, upon return, sprayed down the takings from this risky operation, and baked them in the sun. My daughter, pregnant with her third at that time, became our designated Lockdown Czarina, and she ruled her domains with an iron hand. But all good. My namesake was born healthy on Cinco di Mayo of that year. I suspect that he and all those born during that period will share a lifelong bond as Covid Babies.

Meantime, two weeks has morphed into > 5 years. Have we succeeded? In stopping the spread and with respect to other holy objectives? In some ways yes. In others, perhaps not so much.

Five years later, we can observe a few things. There’s a new boss, but he’s the same as the old boss. The virus has all but disappeared, as have those odious masks and (even worse) gators. And most of the rules embedded in the following set of lockdown protocols are no longer applicable:

We can perhaps all agree that a couple of these diktats transcend the test of time, and, unfortunately, they are the ones that display the least staying power.

No one, for instance and to the best of my observation will shut the F up. Few among us are drinking responsibly. I am indifferent to the fate of legal tender that individuals choose to carry in their socks but will cop to being pleased at the re-emergence of the divine ritual of titty money.

“You cough, you die” was always a little harsh from my perspective – even for the times.

In general, a half-decade later, we have recaptured most of our freedom of speech, assembly and movement, but, I believe, considerable after-effects linger.

Many of us still don’t leave the house. There are fewer parties (or maybe it’s just that I don’t get invited to any), fewer weddings. fewer Happy Hours. We avoid the office like the plague. In short, we shelter in place –not due to government decree, but rather of our volition

We undertake most of our interactions through digital forums and even those must be scheduled. Truly, I never anticipated living within a business/social construct under which one must first reach out to arrange a friggin telephone call, which, even then, must be scheduled a week or more in advance.

Politically – and here we have none to blame but ourselves – we are no longer treated as adults, but rather as little tykes that need specialized parental supervision. There’s the Mama Bear Construct, under which we assured that the bad guys who are out to hurt us will be disappeared and punished, that our boo boos will be kissed away, that we are wonderful, that we have a divine right to do anything we wish with impunity, and that our problems are the fault of others, who will be dispatched with quickness. Then there’s Papa Bear, who can be forgiven for lacking patience for any of this, because all he cares about is to secure and expand his own authority.

Both options are, shall we say, sub-optimal.

And our inertial loss of mojo seems to me to have infected the investment universe.

We still invest, in fact energetically. But only on near sure things. The Gallant 500 is indeed up ~200% over the past 1,829 days, but could this possibly have happened without the printing and distributing of untold trillions of newly minted Benjies? Hardly.

But the Fed ain’t printing now or buying Treasuries. In fact, quite the opposite.

On the other hand, as was the case back then, we have impeded trade flows. In ’20, it was transport restrictions. Now, it’s punitive tariffs. Each is dilutive to earnings and economic health. The cost of goods and services increase. Economic agents spend less. Corporate profits drop.

And always prescient prognosticators are noticing. Here, I’ll must bust out yet again those GDP models, but just to mix things up, I’ll post Q1 earnings projections by its side:

I don’t have much faith in these figures and would hasten to point out that the Street Consensus for GDP (depicted by the blue line in the graph on the left) is stable at 2% and if anything, rising.

I would certainly not be surprised if earnings are a tad dinged up when reporting begins (not until April 11), but, given the pullback which I am sure most have observed and experienced, much of this may already be priced into the markets, What worries me more is guidance, as, at present, it is difficult to envision a preponderance of CEOs stepping to the podium to joyfully foretell of business surges they anticipate across the remainder of the year. And God help any who attempt to do so, only to find, down the road, that their articulated expectations to have been overly optimistic.

It’s clear that some ominous factors are driving these Gloomy Gus metrics, and, if one casts about, it’s not difficult to imagine what forms they might take. With diminished mojo as an embedded motif, the specter of enhanced risk aversion in an increasingly risky economy is difficult to ignore. Short term, tariffs and DOGE are likely to diminish economic activity. Which will take a bite out of earnings. Which, in turn, will take a bite out of equity valuations.

Meantime, I fail to see much of a framework for platitudinous Middle America to recapture the economic fortitude they have lost these last 5 years. Is there anything on the horizon that will ease their burdens at the grocery store? In the cost of air travel (when even the iconic Southwest Airlines has caved with respect to baggage charges)?

And, unlike 2020, it is highly unlikely that the Fed will be there to bail us out. I’d in fact be shocked if they do. 5 years ago, they felt they had no choice. But our Central Bank, contrary to long-embraced narrative, is a political organism. Powell has always hated Trump. And the feeling is mutual. The former’s term ends next year, and his chance for re-appointment is about equal to that of Mike Pence landing back in his VP slot.

So, if matters do deteriorate (and I’m not saying they will) as described above, I think the political winds shift back leftward – just as they did in 2020

And if this happens, all this Washingtonian bluster is going to get old fast. I believe, even now, that dozens of Republican Congress members are freaking out, begging the administration to chill out a bit. Because they see that they are at greater political risk than the current narrative would suggest. If negative contingencies manifest, the begging will stop, and the pitchforks will come out. I shudder to contemplate what the markets, and the broader environment will look like if the 2026 election is a 2018 redux.

And this is why I think the environment is so risky and urge my minions to act accordingly.

But I revert to my introductory query: 1,829 days later, have we stopped the spread? Well, one measure of this is the relative performance of the Gallant 500 (SPX) vs. that same army equal weighted, implying no chain of command (SPW). I keep reading that this spread has narrowed, but I don’t see it in the graph:

It looks to me like the new spread is the same as the old spread – if not wider. So maybe it’s time to embrace it. The spread, that is. Yes, it’s taken new forms, but – God bless us – it’s still there.

I will strive to live with it – under one condition.

That titty money remains a valid unit of transfer everywhere business is transacted. Because, while so much of our world is transient, titty money is eternal, and I, for one, will thank Got that it be so.

TIMSHEL

I’m Moe Green. I made my bones when you were still going out with cheerleaders.

GF1

It is often said that life imitates The Godfather. OK, maybe nobody ever said this. But they ought to have. And now, more than ever, it’s true.

The Don is firmly in control, having worked his way to domination through the hotel/casino business. He has rudely, and with finality, dispatched virtually all his enemies, and nearly the all the threats to his empire, which he now seeks to expand to even greater proportions. Most everyone he encounters is afeared to fuck with him, and those that are foolish enough to try are known to pay a terrible price.

Consider, for example, the case of Volodymyr Zelenskyy, who plays the role of Moe Green to such perfection that he gave me the idea in the first instance.

Anyone not living under a rock this last 50+ years is aware that when The Don told Moe he was taking over, he responded, with petulance, in the following manner:

“I talked to Barzini. I can make a deal with him and still keep my hotel”.

More recently, VZ has been dancing with the European Barzinis — as a potential hedge against Trump being, well, Trump. And, after that Oval Office meeting – reminiscent of nothing so much as the GF1 Vegas encounter, off to Europe he went. Matters have evolved since then, and one way or another, we can bid him Godspeed with respect to his Continental diplomacy.

But that there trade didn’t work out so well for Moe. Or, for that matter, for Barzini. And it won’t for Z either, who I say will be gone one way or another after his White House tirade. If he fails to cut a deal with the U.S., his own peeps will take him out. On the other side, I bet it all that any such deal will include his removal as a pre-condition. Because you don’t fuck with The Don.

But let’s move on. Casting about for a suitable role in which to insert the ubiquitous Mr. Musk, I feel we have two choices. There’s the inarticulate Luca Brasi: the muscle of the Family. Alternatively, we have Tom Hagan – the outsider who can never be made, the advisor/fixer — seeking to guide strategy, and failing badly when The Don was laid up with several bullet wounds.

I think we must shade towards the latter.

Sonny? J.D. Vance. Hands down. The hot-headed heir-apparent, who, even in these early days, has shown a disturbing tendency to “talk when he should be listening”.

With a little creative thinking, we can easily assign the part of Fredo — to Hunter Biden. Yes, he plays for the other team, but beyond that, he’s perfect. A weak-minded mediocrity, resentful of his second fiddle status in The Family, but only too happy to live on its reputation and largesse. He is best suited for carrying suitcases of cash, delivering them to shady associates, and of course (and in the words of Moe Green) for “banging cocktail waitresses two at a time”.

Rather than shoehorn other players into supporting characters, I turn to a more important question. We know that 47 is The Don, but which is he – Don Vito or Don Michael? On the campaign trail, he exuded a discernible Vito vibe – playing justice-for-all, loving Elder Statesman. Heck, he even got himself shot and survived – just like Brando’s character did.

But since taking office, he’s been pure Michael, never able to forget a slight, placing retribution against those who have crossed him at the top of his priority list – often at the expense of more pressing business.

Did Michael, for instance, really need to kill Fredo? An ineffectual loser who, in the end, posed absolutely no threat to him? No more so than Trump insisting, without negotiation, to slap punitive tariffs on our northern and southern neighbors.

But it’s all disruptive, and, I believe, we are paying a price in the markets.

Our equity indices just concluded their worst week in six months. Taking us all the way back to September when Kamala (aka Phillip Tataglia) was surging in the polls, hoovering up (and as it proved later, blowing) cash at record levels.

Absent Friday’s low-energy, late afternoon rally, it would’ve been worse. Still and all, Col. Naz remains within a hair’s breadth of entering correction territory. All of which runs against the narrative of the great economic prosperity awaiting us that we all embraced in the earliest parts of the year.

It was (is) a slow data period, with about the only information drop of note being a somewhat tepid February Jobs Report. Investors viewed this as a modest positive. As well they might’ve — because the it offered additional vague justification for rate cuts that did not appear to be on the cards as recently as a month ago. The winds are likely to continue to blow ill in employment-land though, what, with The Don and his Consigliere firing government workers by the thousands, with trade wars escalating to a boil…

But Exhibit A for this is the “can’t-look-away” GDP Now estimate:

All of which creates some unpleasant contingencies to contemplate. For example, one under which the Georgia boys are proved to be near right, the trade wars worsen, and inflation (CPI and PPI drop this week) fails to abate – in significant part due to tariffs that jack up the price of autos, auto parts, the virtually infinite amount of lumber we import from Canada, and the meds we buy from China to keep us (or at any rate, me) from going completely batshit.

And as such, the Fed deems it wise to hold the line.

It’d be a tough slog for investors, but let’s be clear: this is not the scenario I envision. However, it is becoming more plausible by the day. And surely some, if not all, of these contingencies are likely to become reality.

Well, then, it’s no wonder that investors are becoming increasingly gun shy.

And it’s not just those carpal tunnel-plagued wretches that buy and sell securities. I sense a further uneasiness in the productive components of the economy. Where companies are formed, where R&D grinds away, where workers are hired, go forth and consume, etc.

I suspect that on the margin, these agents are reluctant to operate with assertiveness – due in large part to the uncertainties attendant to the domestic and geopolitical situation. One can hardly blame them. But I suspect that unless and until they obtain a more thorough handle on the risks of action that are beyond their control, they will continue to believe they are operating with a weak hand and act accordingly.

Of all the relevant exposures, it strikes me that tariffs against our neighbors is the most acute. And like the Corleones before us, these moves can cripple our purported rivals, but only at a non-insignificant cost to ourselves:

I think there’s a better way. I like the Mexicans and Canadians and wonder if this we shouldn’t instead train our fire on our real adversaries – including Hyman Roth (China?), Rosato Brothers (Russia?) or even the perfidious Frankie Five Fingers (France?). But no one asked me. I’m neither made nor connected. Not Italian, Catholic or even Christian.

Nope, like most of you, I’m on the outside looking in. I will indeed hope for the best and in fact believe that the markets will settle down — and given all that vig-absent cash floating around, even rally.

Meantime, I will seek to avoid crossing The Don. He’s in large and in charge. For now. And I don’t wanna end up like Moe, who, during a massage, was the recipient of a bullet through his eyeglasses.

Yup, it’s best to lay low, which, for now is the best risk management advice I can offer. The Godfather usually wins. Until he doesn’t.

But in order to avoid the fate of Moe, Paulie, the heads of the other 4 families, or even Sonny, Fredo and Luca, taking a reactive approach often wins the day. And though that day may never come, should he knock on my door, he will find me at home.

TIMSHEL

You never give me your money, You only give me your funny paper
And in the middle of negotiations, You break down

I never give you my number, I only give you my situation
And in the middle of investigation, I break down

Lennon/McCartney

So, David has left us. I cannot claim to be surprised that it happened so quickly. Because I am not. I have already related my undying admiration for him and won’t seek to add to these sentiments. We’ll just have to carry that weight without him.

******

God Oh Mighty, has it come to this? Have I descended to such depths that I am forced to bust out overtly accessible quotes from my magnificent heroes John and (more specifically) Paul?

Apparently, yes.

Mostly because of the weight that we, as investors, must carry.

A weight to the tape. Whether or not to be carried for a long time remains to be seen.

However, as it is against longstanding protocols for me to let you off the hook and dive straight in on this theme, I am compelled instead to enter through a side door.

Our introductory lyrical passage is one that opens the Abbey Road Medley, which many, with some justification, view to be the Beatles’ finest work. Less in dispute is that it is the last piece of music that the band ever committed from Master Tape to vinyl.

Cogent analysis suggests that the subject of this quote is the Allen Klein, a shady operator that the Rolling Stones pawned off on the rest of the lads, who did not want to hand their financial affairs over to Paul’s father-in-law John Eastman. Whereupon the former proceeded to rob them blind.

But the medley remains, migrating from “You Never Give Me Your Money” to “Sun King” to the more pedestrian sequence of “Mean Mr. Mustard”/”Polythene Pam”/“She Came in Through the Bathroom Window” — to the haunting “Golden Slumbers”/”Carry That Weight”, back to “YNGMYM”, a Carry That Weight reprise, and concluding, naturally, with “The End”.

The “carry that weight” sequence is first as introduced by “Slumbers” and then, in magnificent crescendo – re-emerges after a third verse of YNGMYM magically materializes.

So, we must “carry that weight” not once, but twice. Which seems appropriate for the current times.

There’s no easy way to say this: risk assets are on the down – if not quite as inexorably as Newton’s apple, then at least observably so. And the carnage is widespread.

As we must start somewhere, we may as well begin with our equity indices. Cornel Naz and Ensign Russ are down on the year, as was the Gallant 500 — prior to an improbable rally late Friday afternoon. The battle-tested General Dow has held the line, but the same cannot be said of all of 6 of the Mag 7 (the lone exception being META), and as headlined by TSLA, which has shed >40% of its lofty valuation since those now-seemingly-ancient days of post-election euphoria.

Following along in touching solidarity with the TSLA/DOGE Honcho – his Chieftain’s publicly traded messaging outlet – Trump Media — is down > 2/3rds over the same period.

Worse, though, are affairs in cryptoland, with the market taking Big Bytes out of the hides of leaders including BTC and ETH, but with carnage much more acute at levels below these lofty realms.

Bringing up the rear are the sketchy $TRUMP (about which we have written before) and the elegantly rendered/nomenclatured FARTCOIN (-~90%).

But in the unkindest cut of all, we find, coming in dead last is the lovely, fetching Melania Coin (-~95%) – a risk asset that requires no further description.

Root causes for this weightiness abound.

A great deal was riding on NVDA results, but they came in at (depending upon one’s perspective) as either barely acceptable or not quite good enough. Which is fair, given the Company’s lofty valuation, but it sure sounded to me like they have a good deal of happiness with which to look forward.

More problematic is the macro landscape.

While it was a light week for economic releases, the absolute train wreck otherwise known as Existing Home Sales is worth a glance:

Yup, you read this right. It’s the worst showing for previously occupied crib transfers this century, and all in advance of the historical peak season for such transactions.

Worse than during the Great Financial Crisis. Worse than during the lockdowns.

But as this has been transpiring, long term rates, in 10-year equivalents, are down ~60 bp. And, as high mortgage rates have evoked a curse on both buying and selling agents, perhaps there’s some hope in these quarters.

But then there’s this little nugget issuing from our friends at the Atlanta Fed:

‘Scuse me? Those Georgia models, which, as recently as a month ago, were predicting a +~4% Q1 result are now clocking in at -1.5%? Somehow, that don’t seem right to me, and I believe that the Atlanta Fedsters have some splainin to do. But if their prognostications prove accurate, it certainly will cause a rethink of whither this here economy is headed.

One way or another, 2/3rds of the way through this tri-lunar cycle, what promised to be an economic renaissance has proved to be anything but. And I must ask: was this what we signed up for when we voted in the new posse? At this point, and laying aside the welcome disappearance of all that moralizing, we might as well have stuck with the other guys.

Scratch that. It would’ve been worse.

But meantime, further evidence of Macca’s prognosticative powers materialized on Friday, when, in the middle of what should have been a follow-the-script Presser, a negotiation broke out, in the middle of which, all parties, indeed, broke down. I don’t have much to add to the riches of erudition available with respect to this episode. Suffice to state that: a) it wasn’t a good look for any of the parties involved: a) it offers additional evidence that all of us are gonna carry that weight a long time.

The good news is that I believe we can do it. Carry that weight, that is. For the moment, I’ll roll with the conservative consensus and predict that it was the Ukes that made the critical error on Friday and will have no alternative other than not only to revert to the deal, but to do so under less favorable terms than were available to them prior to the monkey circus we all witnessed a few days ago.

Beyond that, it’s a new month, and we can joyfully anticipate a new cycle of economic data. My sense is that investors are itching to pull the trigger. And, though this may be convoluted logic, I take one sign of same to be the bid that sustained and then accelerated in the wake of a breakdown of mission-critical peace negotiations and the announcement of pant loads of tariffs to be implemented this very day. Take a look at other episodes in recent history where global relations (including trade-based) have so thoroughly broken down. Usually, the market sells off hard. Not this time. Because investors want, and will obtain, the finite supply of investible assets available in this cash-bloated world..

Yes, it’s all tiring and my inclination is to take a nap. No, I never give you my pillow, but I do send you my invitation. And I’m not overly worried about you breaking down in the middle of the celebration, because there’s little about which to celebrate.

For now is a time not for rejoicing but for weight carrying. So, let’s get to it. I bid you good fortune in these endeavors, and…

TIMSHEL