Perhaps like the rest of you, I read with mixed emotions that the U.S. Mint has issued a final order. For those blank sheets of the metallic alloy of zinc (97.5%) and copper coating (2.5%) that is used in the production of our most granular unit of legal tender – the penny. Once these are stamped in to discs with Abe on one side and his memorial on the other, no more pennies will be produced. Like, ever.

On balance, I’m OK with this. Because – let’s face it — pennies are a pain in the ass. When at my home away from home – Dunkin’ Donuts — I prefer to leave them in the tip jar. With respect to those “take a penny, leave a penny” trays at bodegas, you can invariably place me with the latter contingent.

Pennies, nonetheless, continue to accumulate for me. And I don’t know what to do with them. And don’t suggest I toss them in jars, which, upon reaching capacity, I swap out for more usefully rendered currency. Because the thought depresses me.

Still and all, it’s hard to imagine a penniless world without feeling a bit of nostalgia for the blasted things. Once upon a time, they could at least buy you a gumball. You could stick them in college dorm room doors to hilariously lock the occupant in. You could place ‘em on a rail track and watch ‘em flatten.

Nonetheless, discontinuing them is probably the right move – particularly as associated published production costs for these diminutive, soon-to-be-discontinued metallic frisbees is $0.037. And swapping same for $0.01 is, I can assure you as a risk manager, a less-than-scalable investment strategy. Plus, it’s not like they’re disappearing anytime soon; there are ~114 billion of the little buggers in circulation.

And if all else fails, there’s always this guy:

For the uninitiated, the name of the character on the left is Pennywise – arch villain of the Stephen King horror novel “It”.

I haven’t read the book or seen any associated film adaptations, but apparently, this rather unpleasant fellow emerges every 27 years to prey on children and other innocents.

He was last portrayed in 1990 (by the fabulous Tim Curry), so his absence has now extended 8 solar cycles beyond his scheduled reappearance. However, we assume only at our hazard that Pennywise will never return.

But Pennywise or otherwise, from a production perspective, the penny is out. And one might ask, in perverse modification of our titular 17^th Century British idiom, is the pound(ing) in?

Signs of the latter are emerging ominously. Foreign students at the Holy H have been given the boot. This matter, of course, is now ensconced in the courts, but I wonder what the point of the whole exercise is. Newly minted Columbia grads, rather than tossing their Royal Blue caps in the air, are burning their costly diplomas. They’re killing mixed-religion Israeli couples at the Jewish Museum in Washington.

Gwynnie is getting pounded (perhaps in more ways than one) for a highly enterprising project, under which, for the nominal fee of $75, one can purchase a candle that will fill the room with hints of her most feminine, fetching and intimate bouquet. The Who – in advance of what is being billed as a Farewell Tour (and this time they might really mean it) – fired longtime drummer Zak Starkey (yes, son of you-know- who). Twice. And got pounded each time.

I just read the most recent in a seemingly never-ending stream of post-mortems on the 2024 election. This one — from CNN’s Jake Tapper and some dude from Axios, focuses exclusively on Biden’s cognitive decline. The ironies here are rich indeed, as Tap was at the center of a journalistic cabal determined to convince the electorate against believing its lying eyes — as Joe mumbled, stumbled and bumbled his way to his premature if unavoidable exit. I give these guys credit. They told the story with fair authenticity. But the pounding – from those outside the Progressive Orthodoxy – focusing on the hypocrisy of it all, was as delicious as it was inevitable.

And, of course, the Administration pounds away in every direction. This week featured them busting out their oldest Greatest Hit – the policy equivalent of The Who’s “Can’t Explain” — by upping the tariff pressure on key elements of the International Trade complex – most notably the European Union and the Apple Corporation of Cupertino, CA. The Pounder in Chief is demanding that more products issuing from these organizations be made in America. Or else.

To me, the specious nature of the approach moves continuously to crescendo, like the pounding of the waves on an ocean beach before a storm. Better trade deals, yes. But with some consistency of approach, if you please. And maybe some adherence to published deadlines. Just over this past week, Trump thundered away with his plans to hit the EU with 50% tariffs. Immediately. Only to push back their imposition to July 9^th. My head is pounding.

And to the extent that the of the production of key goods and services is the goal, I feel that it is a misguided objective. Because we’ve got the game rigged in our favor as is, and I don’t believe the meeting of our demands will be an improvement.

To wit, Apple, a company that designs and distributes (but does not manufacture) Consumer Electronics, does so at a 30-40% profit margin. Assemblers such as Foxconn? 3-4%. Whoever makes the parts that Foxconn assembles probably does even worse. And this is to say nothing of the reality that even these skinny returns would be impossible absent their ability/willingness to source Labor at below-subsistence- level pay scales and under work environments designed for anything but employee satisfaction.

Another example comes from one of my distribution networks –ZeroHedge, illustrating the economic breakdown of a t-shirt manufactured in Bangladesh and sold in the European Union:

So, I ask, who do you wanna be in this cycle? The Brand Manager copping >20% profit for the sale? The factory whose take is single-digit? Certainly not the worker, receiving > 1%

Well, I’m here to tell you that right now, we’re the Brand Manager, bearing the minimal load of marketing and selling, but copping the lion’s share of the profit. Pretty good, right?

But Trump wants these sucky jobs, offered by struggling companies, repatriated to these here shores? Why? I don’t think Americans want those gigs, unless at MUCH higher wage levels/improved working conditions. Domestic Labor Forces will demand and receive these concessions, the costs of these products will increase accordingly, and profit margins will decline.

Nay, my friends, our ends are much better served through our current practice of outsourcing the scut work and associated unsightly implications for social justice – even if it means operating at a trade deficit.

Those my age and older may remember that most of their toys, electronics and small sundries carried as stamp that said “Made in Japan” – so much so that it became a running joke.

But this ended a long time ago. Nothing, at present, is made in Japan. Why? Because the Japanese wised up. Realized that there were better uses of their human and financial resources than sending workers into factories to earn a pittance in companies struggling to make a skinny profit. So, now, all them tchotchkes is now made in places like Vietnam, Malaysia, and (yes) China. This suits the Japanese just fine, and we should take the lesson from them.

Thus, unless we are willing to consume less, pay more, work harder for reduced wages that generate for our bosses a lower profit, I say viva la trade deficit!

The other force embedded here is our irrational, insatiable consumption addictions. We want what we want. And we get it.

Phones, game station consoles, meds, designer shoe brands, etc. They are rendered affordable because countries without this feasting ethic are willing to supply them to us at a price we are willing to pay.

So, we buy more from them than we sell to them, or, in other words, run a trade deficit.

I’m willing to concede the possibility that we can extract better deals from our trading partners, from which premise I can discern the contours of a strategy that relies chiefly on negotiating acumen.

Perhaps, even, we emerge from this whacky cycle in a stronger position than that we held when we entered it.

But the unpredictability of it all is killing us – particularly in the markets. Investors simply don’t know what to expect next.

And again, this applies not only to those who allocate capital in the liquid securities markets, but more broadly to everyone responsible for primary deployment of resources into the real economy. If, as a CEO of a product or service enterprise, one is reluctant to move forward with new initiatives (or to proceed with existing ones), well, one comes by such reluctance honestly.

But we’re here to focus on the liquid securities markets, which are once again wobbling. It hasn’t been a disaster in the Equity Complex (yet), but other asset classes are showing material trauma. Consider, as Exhibit A, the USD, which, for the 2^nd time since “liberation day” has broken the key threshold of 100:

Perhaps more problematic is the carnage evident at the long end of Global Treasury Curves, with 30 year yields around the world experiencing extremely tepid auction action, and throwing off yields not seen since before the Global Financial Crisis:

Not gonna lie: this second one troubles me, as it can only be taken as a sign that investors are beyond nervous about the impact of the current machinations on the trajectory of the global economy.

But an absolute pounding is not yet a foregone conclusion. The House has passed a critical budget bill, and, if the Senate manages not to bitch it up in Reconciliation, we at any rate can move forward without the prospect of a reversion to the crippling tax rates in place before a holier version of Big Orange put his hand on the bible for the first time.

We can also joyfully anticipate the long-awaited NVDA earnings drop. The stock is noticeably perkier lately, and a strong presentation will go a long way towards reinvigorating this yoyo of a market.

So, perhaps the poundings will cease. Like pennies. But as the latter are indeed departing, let’s take, in conclusion, another stroll down Penny Lane, where barbers show photographs, bankers carry hourglasses, and gearhead firemen’s pockets contain portraits of the Queen.

Where pretty nurses carry poppies on trays.

If you’re like me, it’s in your ears and in your eyes.

And, from all of this, perhaps we can agree that it’s all…

…very strange.

TIMSHEL

We take our title, in modified form, from a 1967 book called “You Can’t Steal First Base”. It was co- authored by baseball lifer Jimmy Dykes, who played and managed for > 40 years, and someone named Charles O. Dexter, a vicarious baseball junkie whose main claim to fame is apparently to have authored 73 books on America’s (erstewhile) National Pastime.

I do not know what angle Jim and Chucky O. took here, can’t recommend the book because I never read it and don’t intend to.

Quite frankly, baseball bores the daylights out of me.

But the title makes a good point. According to the rules of baseball at any rate, you can’t steal first. And I got to thinking about this upon reading that the guys at the Head Office, in their measured benevolence, have re-instated Shoeless Joe Jackson and Pete Rose. As both are dead, the sole motivation for this action is to pave the way for their long overdue induction into the Hall of Fame.

Until last week, both were banned — for engaging in behavior deemed to have been detrimental to the, er, integrity of the game: Jackson (on scant proof) for allegedly throwing the 1919 World Series, Rose for betting on games in which he had a vested interest. FWIW, the former, in a ban-shortened career of 12 years, maintained a batting average that remains in the All Time Top 5. It also bears mention that in the fall classic episode in question, he had a Major League Record 12 hits – including a home run in the series finale which has the distinction of being the first round tripper ever recorded in a World Series.

As to Rose, his threshold of 4,256 hits is one of those records which may never be broken (the leader among active players – Freddie Freeman — has, over 17 seasons, amassed just over half this total). He played on 3 championship teams, during which he switch hit, and played 1^st Base, 2^nd Base, 3^rd Base, and both of the flanking outfield positions.

That he wasn’t a great guy is a point conceded (for instance, he ruined the career of a pretty good catcher named Ray Fosse — by pulling a Jack Tatum on him during an All Star game), and maybe neither was Jackson. But if off the field qualities/character were truly a pre-requisite: a) the Hall of Fame might be pretty windy and cavernous; and b) I’m not sure any franchise could even put a team on the field.

Moreover, the league may wish to consider it’s own sketchy history. In 1994, for instance, a labor dispute between owners and players (both of whom, of course, care about nothing other than the fans) that negated the season, costing the organizations ome goodwill and cash for the next couple of seasons. But towards the end of that decade, something truly magical happened. Balls began sailing out of stadiums at a previously unimaginable clip. In 1998 alone, not one but two players shattered the all-time-single- season home run record, held by Roger Maris for 34 years — between 1927 and 1961, when he somewhat blasphemously eclipsed the 60-mark set by The Babe. Nobody then topped Roger till ’98.

Maris got 61 in ’61 (albeit over a season by which then was 7 games longer). In the many decades between Babe and him, only a dozen guys went yard more than 50 times. None did so again until ’97, when Mark McGwire took 58 trips downtown. McGwire set the record the following year with 70, shattering the previous thresholds by nearly 20%. Sammy Sosa cranked out 69 in that same campaign. And, in the fateful year of 2001, Barry Bonds topped them all — with 73. At present the top 6 slots on this list are held by Bonds, McGwire and Sosa (who holds, in different seasons, the 3^rd, 5^th and 6^th slots).

As a statistician, I can assure you that the probabilities associated with half a dozen guys slamming > 60 dingers — after 7 decades during which there are only 15 instances of > 50, are so minute that they render the purchase of a winning Powerball ticket, by comparison, a sure bet.

Even at the tine I knew the fix was in, and wouldn’t you know it? A few years later, the steroid scandal broke open. Lots of guys were on the juice, but the headliners were Bonds, McGwire and Sosa.

So, I say let’s allot Cooperstown slots on the basis of merit alone, and welcome in both Pete and Joe. No, they couldn’t steal 1^st, but may they at long last find their way into the shrine to which admittance they are justifiably entitled. And maybe, MLB should do a little moral housekeeping of its own.

It is closer to our main subjects of interests – the markets – where we find perhaps the exception to our titular truism. Due to a longstanding antitrust exemption, owners of professional sports teams are entitled to write off their entire investments – effectively cutting the costs of their venture outlays in half.

This, to my way of thinking, is as close to stealing first base as any protocol under heaven. However, in Washington, where settling on a viable tax strategy is vital to all our interests, there’s talk of cutting this gift in half — or eliminating it altogether. I’m sorta neutral on this one. But I won’t cry any tears for them fat cats if they get whacked here. And I don’t expect that much of the public will either.

And there’s not a great deal to celebrate from the broader fields of such public policy. The latest news trickle suggests that the tax deal is stuck in committee, and, on Friday, we received word that the Moody’s Rating Agency has, at long last, cut the credit rating of our sovereign paper below the heretofore pristine level of Aaa. We are now down to Aa1, perhaps enough to cop us a spiffy contract, but insufficient credentials for Cooperstown.

Moody’s main competitor: Standard and Poors, had dinged us long ago, in the (for me) tragic year of 2011 and catalyzing, in my opinion perhaps the biggest Inside Trade in modern market history. The date was August 5^th. A Friday. I smelled a rate from the “play ball” outset, as both equities and Treasuries were in free fall from open to close. We later learned that the brain trust at Standard and Poors, having decided to downgrade our govies, queried the major banks as to, if they theoretically wanted to make the change, when would be the best time to do it. All the banking heads agreed that the ideal approach was a Clintonian Friday afternoon news dump,, and then immediately instructed to their trading desks to sell everything.

Aside from the afore-mentioned antitrust exemption, this is about as close as one can get to stealing 1^st base in the liquid markets.

More broadly, the United States has been stealing first for 80 years, since exiting WWII as the world’s only viable global economic jurisdiction. Among other bennies this has brung is our status as the Reserve Currency and a virtually unlimited demand for our national paper. The associated advantages we have gained are almost incalculable.

Smart folks have been warning of the demise of this regime since I’ve been in this business. Which is a long time. And, fact is, I truly don’t understand how we retain it. But retain it we do. Maybe the Moodys canary is lying sideways in our coal mine, but we’ve thought and said that before.

The markets have attempted a first base theft from January on, and have come up empty. Only this past week have they regained the ground yielded by fears caused by the Trumpian scorched earth approach to economic policy. No, we haven’t toughed out a walk, and to say we got a hit is perhaps a stretch as well. As of now, though, we’re at any rate back in the Batter’s Box, which is a good thing.

Especially seeing as how we’re now in the back half of Q2, with other than (yet again) NVDA on the docket, there’s little of economic import in the upcoming data flows. Meantime, nobody can complain too much about what was reported in the earnings cycle, but guidance? Another matter entirely:

I’m not sure how anyone could’ve expected anything different. The trade policy alone offered an irresistible temptation to temper expectation, and, of course, CEOs like nothing better than to beat their earlier estimates, so as to exceed them during the portion of the calendar where they get paid.

Many, if not most, took the opportunity, and thus far by and large with impunity insofar as the associated impact upon stock prices is considered.

Particularly for those interested in the pipe dream of rate cuts, last week was a good inning. Inflation numbers – especially PPI – came in light. U Mich Consumer Sentiment was second lowest on record. Advanced indication on home sales is rather ominous. We’ll know more next week.

So, with Inflation on the down, Q1 GDP a modest negative, pressure on the housing market and such, calls for a mid-year rate cut are likely to grow louder.

Won’t happen. The last thing Chair Pow likely to do is to award a base to a President that has shown nothing but disdain for him. And, unless the latter plans to steal first by co-opting our Central Bank, there’s not much he can do about it.

This won’t sit well with the big guy, accustomed as he is to stealing first. In addition to wielding arguably extra-constitutional powers, his crew is operating 5 publicly traded companies, 2 cryptocurrency units, his own for-profit media outlet, and, of course, a brand new, tricked out 747-8 – courtesy of the Qataris. He’s over there in the Middle East on a trade and diplomatic mission, but he has managed to find the time to cut a few hotel development deals along the way.

Quite a feat for the Leader of the Free World, but perhaps somewhat short of the standards set by Madison, Hamilton and Jay, as set forth in the Federalist Papers.

For now at any rate, the markets couldn’t seem to give a care.

Yes, it’s tough out there. But nobody said it would be easy. The Bambino had to go up against Walter Johnson; Maris against Warren Spahn. Pete Rose battled Koufax and Gibson (among others).Our above- mentioned PED-filled trio went to bat in an era that featured Randy Johnson, Greg Maddux and Roger Clemens. We know for certain that at least one of these guys was on the juice. But none of them. Not one. Ever stole first base. Not one time. Because it can’t be done.

Nope, we’re gonna have to earn what we get, and here’s hoping it’s worth it. Currently, there is both opportunity and hazard. Only judgment, prudence and discipline will carry us through. We can do this, and that’s the good news.

Let’s just hope we won’t need, like Jackson and Rose, to have been planted in the ground ere we receive our reward.

TIMSHEL

Global affairs arguably reached a new height of hysteria this past week. The Indians and Pakis are now at war. Or not. All Europe has imposed a ceasefire ultimatum on Vlad the Invader – set to expire tomorrow. We have a new Bishop of Rome – about which I have little to contribute other than a brief anecdote shared below.

Newark Airport is now designated the most dangerous spot on the planet. But it doesn’t matter much, because the State of New Jersey failed so signally to prepare to process those swell new Real IDs we all need to board the plane, no one there can fly anyway.

We cut a trade deal with the U.K. – one down and > eight dozen left to go.

But just as we held out hope that – for now at any rate – matters could not be rendered more bizarre – comes the German Election. Which failed to yield a consensus outcome but which, after a couple of ballots, produced a coalition government headed by an individual who, in Germany, operates under the handle of Friedrich Merz.

He is fooling no one. Not that he did much to hide it, but we all can see through the ruse and discern that he is none other than the well-known American Fred Mertz: husband of Ethel, friend/landlord of Lucy and Rickey, and, most importantly, still the world’s record holder for highest waste band on a human torso. For the uninitiated, he broke his own unmatched threshold here on October 17, 1953, when the uppermost portion of his pants rose above his nipples.

Fred has lain low for quite awhile, but as is proven by the following photos, he is back:

Perhaps he has, in the ensuing decades, huffed a bit of Ozempic. The shirt looks new, and the jacket and tie are nice touches. But again, he’s not fooling anyone. Welcome back Fred. And good luck.

Because now he must ‘splain – to his country and the world – how he plans to manage the affairs of The Fatherland, with its diminished economic might, immigration problems of its own, and that pain-in-the- ass AfD party – many of them unapologetic Nazis – breathing down his neck.

I’d be less concerned if he was the only one out there with ‘splainin obligations. After all, Germany is still sooooo 1945. Which was 80 years ago.

Our guy, for instance, might want to ‘splain why renamed last Thursday (May 8^th) “Victory Day” – in celebration of ALL our WWII successes. In doing so, he reminded the world that the United States alone won that bloodiest of all conflicts.

He may, for instance, wish to address the reality that the Japanese didn’t surrender until August 15^th of that year. Or, for that matter, that > 80% of the fighting done by the ultimately conquered Nazis was against the Soviets.

But ‘splainin does not appear to be prominent in the Trumpian toolkit. To the best of my knowledge, he has yet to enlighten us as to what his International Trade strategy actually entails, or why it features ruinous ingress levies for foreign ships entering our ports. Published reports indicate that for the first time since the lockdowns, there are exactly zero ships en route from China – to the ports of Los Angeles, San Francisco or even Long Beach.

Perhaps it doesn’t matter, because maybe we just didn’t need any of the stuff they were sending our way anyway.

The Earnings cycle – ‘cept for the always tardy NVDA – is in the books, and, on balance, a gratifying interval. Adding to the pleasant vibe was the amusing dance executed by big corporate chieftains – splainin how they, on a going-forward basis, are planning to deal with matters such as tariffs and the caprices of Artificial Intelligence.

In Washington, the contours of the BBBB (Big Beautiful Budget Bill) are becoming ever so slightly discernible. Its sponsors may want to ‘splain, though, such improbably Easter Eggs as the absence of entitlement reform and proposed taxes on high earners.

And meantime, there are all those trade deals to negotiate. The Administration is self-reporting magnificent progress with the Chinese, so, maybe there’s good news from those realms. I suspect, though, that we must deal with other nations first, and, this past week, Big Orange sat down with new Canadian Prime Minister Carney to ‘splain to the latter, yet again: a) why his enormous country (the third largest jurisdictional land mass on the planet, after Russia and – I bet you didn’t know this – Antarctica) should dissolve itself into another star on our flag; and that b) whether he likes it or not, said dissolution is coming.

I find this highly annoying, believing that while each side whines incessantly, ourpartnership with our neighbors to the North has been one of the great blessings of our system, which cannot be improved upon by an all-out merger. The livelihoods of hundreds of thousands if not millions are at stake, so, while I believe a little harmless taunting, ala the following is OK:

The rest is decidedly unhelpful.

On the other side of the political spectrum, we witness the re-gathering of a party still feeling the reverberations of having been – for now – vanquished by their opposite numbers — as led by their absolute nemesis. Leading their attempted resurgence are a fat billionaire trustafarian currently running the most poorly managed state of the 50 (whose sister is the latest in a string of misanthropic souls attempting to guide the country’s oldest and heretofore most prestigious institute of higher learning out of its seemingly unending PR nightmare), a multimillionaire octogenarian socialist, and a fetching young Latina Congressperson who has neglected to visit her district in months.

The Private Jet airmiles travelled by this trio would make even the Davos crowd blush.

The consensus, even among the faithful is that they have failed to ‘splain their gameplan for leading us out of our darkness and back into snowflake Nirvana.

In the markets, as we enter the back half of Q2, scheduled data flows slow to a trickle, but the action should continue to be vigorous, as the fate of the International Trade Complex and the nation’s Budget and Tax profile resolve into clarity.

My sense is that there is a greater likelihood for some visible vibing than there is for buzzkill. Which, of course, is welcome – among other reasons than because happy outcomes require considerably less splainin than gloomy ones.

And, working towards my conclusion, I revert to some splainin of my own. I’m not Catholic, but I always get a little goose from that smoky conclave in Vatican City. Perhaps this is because – on my immortal soul – I had premonition of the death of John Paul I, — not the fabulous, prematurely canonized John Paul II, but his immediate predecessor, who held the seat of St. Peter for all of 33 days before turning toes up.

As a non-believer, this was rather unsettling.

There are, to this day, unresolved theories that poor JPI was taken out by some insiders with close ties to the Chicago Outfit, which, at the time, was certainly awfully cozy with the finance guys at the Vatican HQ.

Well, now we got a Chicago guy running the whole show. So, what could go wrong?

Overall, I am thus optimistic. As I write this, it’s Mother’s Day. And, even as I miss my own moms – departed now for 8.5 years – I can only take my leave by noting the following. There’s mothers and then there’s mothers.

And one mother, kind, sweet, beautiful and brilliant, is the love of my life. I wish her nothing but all she deserves – today and all days to come.

I don’t feel that this requires any additional splainin.

So, I reckon I’ll leave it at that.

TIMSHEL

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