Tis the threshold of Autumn, and as such, time to don the colors and cheer for Alma Mater. Given that the football season is underway, as are classes, it is perhaps natural that my mind turns towards leafy green quads and brick buildings graced by the names of ancient philosophers, but annoyingly bereft of anything that resembles carpeting.

What further focuses my attention is the release of a couple of academic ranking reports, an exercise, which, as is the case with mock NFL drafts, now seems to have extended into the infinite. Time was that these realms were dominated by “U.S. News and World Report” Magazine. But that era has long since passed. Now, everyone appears to have gotten into the act, and, if it might be fair to state that we are perhaps rendered no worse for this proliferation, we are most certainly none the better.

The one that really caught my eye was published, improbably, by the Wall Street Journal, whose ratings topped out, at 1 and 3, by perennials Princeton and Stanford, but which surprisingly sandwiched in tiny Babson College, nestled as it is in Wellesley, MA at number 2. I know a couple of Babson Beavers, to whom I extend my congratulations. Nice job, Beavs!

My issues, though, are fixated further down the trough. One must migrate to Page 4 to locate my University of Chicago Maroons, who clocked in at 75. My undergraduate alma mater can be found almost adjacently – at 77. These recipients of my hard-earned tuition dollars thus trail significantly behind such Academic Edens as Loyola Maryland (23), Towson College (40), and, for careful readers of this space, the Institution Formerly Known as Manhattan College (52).

I remind myself, by way of consolation, that Dartmouth College (which should be in the Top 15 simply for its having been the model for “Animal House”) rates by the Journal at 62.

All things considered, the other venerable ivies made a decent showing. Harvard ranks 7^th, and one can only envision their alums responding with condescending pity at this atrocious, uniformed, jealousy- driven judgmental folly. Columbia, their campus now an armed camp notwithstanding, is 14^th.

However, and as if to remind us that the world as we once knew it has not dissolved entirely, Harvard and Columbia continue to rank, according to the Foundation for Individual Rights and Expression (FIRE), at the bottom of the Free Speech tables. Harvard, to its infinite credit, received a rating of 0.0 – ironically equal to Flounder’s GPA in Animal House (to which Dean Wermer admonishes him: “fat, drunk and stupid is no way to go through life, son”).

But to add a little zip to the Columbia figures, its “sister” school Barnard College, across Broadway (and please take it from someone who knows – if one traverses to the west side of 116^th, it is best to keep a zipped lip there rather than risk offending any of the fair but perpetually triggered matriculating damsels, because them bitches will cut you), comes in 4^th from last.

The University of Chicago, perhaps the GOAT due to its instituting a free-speech manifesto called The Chicago Principals, has slipped a little, but still ranks at a spiffy 13^th from the top.

One can perhaps extrapolate the oddities in the longstanding college ranking protocol of the world’s leading financial industry daily to the confusions we are experiencing in the markets. Equity indices suffered their worst week in, well, in quite a while (OK; 18 months). And the punishment cruelly focused on some of my paying clients. I am not terribly sure what caused any of this, but the common pattern is one involving sated investors pushing away from the risk table. And one can hardly blame them on that score. Perhaps perversely, a putrid Friday session was catalyzed by an Employment report from the proven-to-be-perfidious Bureau of Labor Statistics, which not only missed on job creation estimates but also featured yet another downward revision to previous months.

And this in the near aftermath of the announcement of a rather alarming decrease in Jobs Openings:

As the labor picture weakens, there are further indications that the economy might indeed be rolling over. Crude Oil is in free fall, and speculative buyers are fleeing like rats from a sinking barge:

All of which is implies a pattern of diminished demand (as opposed to surging supply) which convinces me that when the FOMC meets Wednesday week, they will throw down a 50 bp cut, as catalyzed by the following motivations. They plainly wish to reduce rates, and apart from their no doubt laudable desire to do right by the economy, they have politics and their image to consider.

These factors induce them to go big. The totality of the data suggests that the economy would benefit from lower rates. If they wish to assist their political paymasters this November, .50 would provide significantly more succor than .25, and my read of the financial press suggests that their image now bears more risk to accusations of being too tardy, rather than too hasty, with the wielding of their axes. So, yes, I think they’ll lay down 4 bits, but it’s not in the bag. Yet. This week we must first endure, in addition to those annoying University of Michigan (22 on the WSJ Hit Parade) consumer surveys, and, of course, the latest Inflation data.

Upside surprises in these latter-mentioned realms could upset my whole hypothesis, but I don’t think it will. And anyway, even if Inflation ticks up, it can hardly hope to match that emanating from our institutions of higher learning, with respect to their time-honored currency of measuring the performance of their clients. The average GPA for a Harvard student, for instance, now stands at a gravity defying 3.8 – the result of decades of Grade Inflation. On the other hand, continued upside is mathematically challenging. They’ve already approached a ceiling here, because, unless they change the rules (which they very well might), this metric top ticks at 4.0.

I do believe that while the sober, somber timbre of the tape is somewhat justified, I also suspect that investors wish to offer the Fed the appearance of anemia, so as to further incentivize the latter to provide the full measure of rate relief which it is able to muster. Moreover, this dynamic traverses asset classes, as evidenced by the widely reported dis-inversion of the Treasury Curve, which, at maturities from 2 to 20 at any rate, has reverted to something recognizable by historical standards:

I never thought I’d live to a time when an upward sloping yield curve was not referred to as “normal”, but rather as “dis-inverted”, but that’s where we are. The Fed can help amend these perversities by further lowering overnight rates, and I them to give it the old college try. And this here note being about college, has, indeed, imbibed me with an extra dose of school spirit – so much so that I tried to follow the fortunes of the Babson (football) Beavers, only to learn that the school does not have a football team.

Neither for the years 1939 through 1968, did the University of Chicago. During which time it maintained a superior place in the U.S. News and World Report rankings – certainly many notches above Babson. In 2024, the WSJ has upset this order in dramatic fashion. It’s far too early to follow Babson and bail on football again – even if they did lose 24-0 to the Clairmont-Merced-Scripps Bobcats on Saturday. Next week, there’s another game; next year another WSJ rankings cycle, and, as ever, hope springs eternal.

TIMSHEL

The Summer of ‘24, as we live it, is now over. For me, its death throes begin each year when I see the little ones heading off to school. Which always makes me a bit blue. Not only for them, but also for us, I think, because it removes any pretext for intellectual relaxation — for man, woman, boyo, or girlie. There’s no excuse for not summoning our focus now. And harvesting it — for benefit or ill.

Due to the caprices of the calendar, the holiday marks beginning of the final trimester of this year, and it promises to be an interesting one. The whole global capital/political economy is in play. Moreover, what transpires and what we make of it might very well, like the devil, bear a long tail.

Unfortunately, we must devote disproportionate attention to politics, because, like it or not, there’s a depressingly important election immediately on our horizon.

And we enter it with what is in my judgment perhaps the deepest fallows in our two-party system – at least in my lifetime and maybe since the Civil War. Both parties have failed us in such signal fashion that we can no longer dismiss the shenanigans as merely the diverting pig circus that it is.

Let’s begin with the Dems — the party originated by Thomas Jefferson, which held the Presidency for the entire first generation of the 19^th Century. In his often-mean-spirited-but-spirited-nonetheless debate with lifelong frenemy John Adams (both died on the same day – the 50^th anniversary of the original 4^th of July) the latter often pointed out that while TJ was concerned with the tyranny of the individual, he himself was most worried about what he described as ‘the tyranny of the few” – an elite class that would: a) command absolute power; and b) likely (among other accomplishments) destroy themselves – French Revolution style.

That’s what I see when I look left. But a more modern analogy would be the Five Families, with tuti di capi tuti bearing names such as Pelosi, Schumer, Cortez, etc. Together, they form a Commission: the arbiters of all disputes, the bearers of the final say of all important matters. You wanna hit someone inside? You need a sit-down. Such as the one which so recently dispatched Joe (Moe Green) Biden.

And they nearly always get what they want. And so long as it aligns with their agenda, any pursuit is fair game. They sanction violent, destructive riots one week; lay down flimsy felony charges against political foes the next. Ballot harvesting and ballot removal efforts exist in a similar two-step. Throughout, they claim both the high intellectual and moral ground and deride you if you disagree.

They are a formidable host, and if they weren’t slathered with corruption and ineptness, they would win by Slaughter Rule. Because their opposite numbers insist on bringing knives to a gun fight. And I think I know why. So astounded were they at having pulled off that historic inside straight in 2016 (taking down Hill-dog and capturing both houses of Congress) that they have refused to abandon either the playbook or reign in its author, ever since. Having come from the outer political galaxies to the heights of governmental power, he has (as was the case with, say, Maximilien de Robespierre and John Gotti) too thoroughly relished his victories to be an effective wielder of political authority.

In result, the GOP got trounced in 2018, lost not only a winnable presidential race but also both legislative bodies in 2020, failed miserably to meet obtainable objectives in ’22, but has yet again handed all decision-making authority to the above-described three-time loser. While he smugly glided towards presumed victory over the barely warmed cadaver thought he was up against, the Dems pulled a fast one. Not only did they switch stalking horse ticket leaders, but they rebranded their selection into something (if she is anything at all), she clearly is not. Then they screened her from authentic scrutiny.

Thus far, it’s working beyond any reasonably gleeful expectations. The Republicans got caught entirely flatfooted, and, if they lose in November, it will all be on Trump.

Why should we care?

Because either outcome will be a disaster. Let’s start with Harris, who, as has been widely reported, has recently backed off the articulation of the core elements of her agenda. If elected and (more importantly) empowered, we’re looking at the policy of circular firing squad, featuring higher taxes (including suicidal levies on unrealized capital gains), the gutting of the Energy and Health Care sectors, the funding and enfranchisement of millions of immigrants beholden to them, the regulation of pricing, and other practically dubious but politically potent bennies. Again, in this over-branded sham of a campaign, she has disavowed much of this. But c’mon! Are we so shortsighted that we cannot remember 2020? When basement-bound Biden told us that, aw shucks, all he wants to do is to unite us in a harmonious spirt of compromise? And then proceeded to govern to the left of Castro?

They are recycling this pap, and about the only mitigant that I can envision is that they are no more likely to pull off their most nefarious agenda components than they have been for the last 4 years.

Conversely, if Trump wins, half of the country will go bat shit; the rest labelled as fascists. Cities will burn. He, in his arrogance will ignore it all, and we will pay a terrible price. Throughout, he’ll brag about what a great job he’s doing. And then the party will get crushed in ‘26, ‘28….

I will, however (if he loses), cop to looking forward to packing him off once and for all. For my money, he’s done enough damage.

The markets are either ignoring all this or adopting a laudable, if unwise, Zen. My guess is that this is owing to the collective wisdom of investors, who believe that whoever takes power will reliably bitch it all up. Again. I share this hope but will feel a whole lot better if there’s a split outcome from an election which, again due to the caprices of the calendar, falls one day after I turn 65.

But the election is still two months off, and, in the meanwhile, there’s still September to endure. And October. Both look like a bumpy ride. We will overanalyze the data flows, as well as the actions and rhetoric of the FOMC. If there is a debate, we’ll read too much into it. And I must again remind my readers that September ranks 12^th out of 12 in terms of risk asset returns.

Then there’s October. Which I don’t even want to think about.

There are some signs that certain investor groups anticipate aggravation and are taking actions to mitigate it. Take hedge fund for example (please?). Though I don’t see this trend in my reports, the primes are showing significant reductions in nets exposures:

Well, maybe, but on the other hand, it could simply reflect a temporary lightening of the load heading into the just-completed workers’ celebration.

I suspect, though, that generating returns will be a difficult task in the coming weeks. Not like the first two thirds of the year, when everyone made a king’s ransom by simply buying Colgate and selling Intel:

Tried and true though the toothpaste/semiconductor spread trade is, I’m not sure it has legs to carry us through to the end of the year.

Such are the nature of the trials we must endure every year, after we’ve retired our white belts and shoes. The final third of 2024 looks and feels more problematic than most, but it always does.

At this moment, I feel like the need to cleanse myself — by brushing my (remaining) teeth (again) and tossing my Dell desktop (Intel Inside) over the balcony. This, after all, has been the winning strategy in ’24, and who knows? It may continue to pay off. Our political parties adhere tightly to their old tricks, after all, and, whatever else transpires this much is certain:

One side or the other, unfortunately, is gonna win.

TIMSHEL

Well, we survived, that is, after a fashion. Four long days of over-produced self-congratulation in Chicago, and then a 72 hour economic coffee klatch in J-Hole, capped off, on Friday, by the only relevant aspect – Chair Pow’s “will-he-or-won’t-he-and-if-so-when” Policy Statement.

The answer to the latter was “not yet, but soon” – a stance for which I forgive his having denied me yet another stroke of prognosticative glory, by surprising everyone, as I predicted he might, with a big cut then and there.

But I anticipate myself. So, first things first. Our theme derives from “Duck Soup” – a fabulous film by the fabulous Marx Brothers, who are not everybody’s jam but are most decidedly mine. The punchline in question is so pithy that it is uttered twice in the script: once by Groucho and once by Chico.

And the rhetorical choice enunciated by the brothers continues to prevail across various realms of our existence. Case and point: against last week’s orgy of economic and political theater that swallowed up the news, came an announcement, issuing from the eastern bank of the Hudson River, that Manhattan College, formed in 1853 by 5 De La Salle Christian Friars, is, as of August 1st, Manhattan University.

The modified nomenclature is entirely appropriate, particularly insofar as, if you define a university as a college with graduate programs, the institution has long since met the criteria, and its new name simply reflects this longstanding reality.

However, its principal, indisputably visible deception remains – it is located not in Manhattan, but rather in the Bronx. Bronx University would thus always have been a more apt moniker than Manhattan College, but the former hardly trips of the tongue, and now they’ve corrected half of the problem.

But back to Powell, who was compelled to confront the me-or-your-lyin-eyes conundrum himself at J- Hole, as his speech transpired three days after the Bureau of Labor Statistics announced that it had overstated year-over-year job creation by an estimated 818,000 gigs.

Oopsies.

To make matters worse, a few banks had advanced knowledge of the tape bomb, and the best that can be said about this is that they weren’t tipped off. Instead, in their justifiable panic, the propellor heads at BLS first delayed the announcement by more than half an hour, offering, as consolation, a number to call for further inquiries. A few enterprising financial institutions took them up on this offer, and, so doing, got the news early. Good on them, says I. I hope they crushed the associated trades.

Meantime, the official numbers, while now in the books, beg a few questions.

It should come as a surprise to none of my readers that I smell a political rat, that the number crunchers had their fingers on the scales in hopes of creating Labor Market optics superior to associated reality.

But what puzzles me is the timing of the revisions. If whoever engineered this feint had a notion to push the correction beyond the November election, it would all make sense. But no, the adjustment came in August, annoying everyone, embarrassing its sponsors (to the extent that they are capable of feeling embarrassment), and creating, if anything, a political liability.

This is the sort of thing that calls into question the reliability of the entire economic reporting complex, a concept that I find particularly triggering, for the following reason. Occasionally, in my day job providing risk analytics to hedge funds, a client will spot an error in our reports, and, when this happens, they invariably question me as to the validity of every number my system has ever produced.

So, I empathize with the statistical bureaucrats, but only up to a point. For one thing, my livelihood depends on pumping out accurate digits, and I’m not sure that theirs does. In addition, on those rare occasions when a bona fide error does pop into one of my reports (much more frequent are instances of bad data sent to us or misinterpretation by the client), my company is excoriated for it. But while a few bond-trading Wendy Whiners might make some noise about misplacing >800K gigs, at the end of the day, the act caries no consequence for its perpetrators. Whatever its cause, they just shrug their shoulders, blame some unintended but not ill-intentioned glitch, and offer the following platitude:

“Who are you gonna believe? Me or your lyin’ eyes?”.

The markets took the whole thing in touching stride, focusing perhaps more directly on the potential contribution the downwardly adjusted numbers will have on the prospects for rate reduction. They rallied ‘em all week.

Except for Thursday, which featured what I would describe as a modest “don’t get any ideas, Powell” selloff, which was offset and then some on Friday. The Gallant 500 now resides a skinny 30 index points from its all-time highs.

And things ought to quiet down next week. Yes, there’s the NVDA earnings, and, as the stock has already largely recaptured the unseemly selloff manifested earlier this month, a surprise in either direction could indeed move the markets.

But then comes the big Labor Day exodus, which traditionally features the emptying of trading desks. And here, our lying eyes again impose upon us a veracity test. Because trading desks by and large are a thing of the past. Case and point: the trading floor at UBS American HQ in Stamford, CT.

A generation ago, it was the Taj Mahal of the trading industry, with world class workout facilities, a state-of-the art espresso bar, etc. It was the largest floor of its type anywhere in the world. I also remember that its opening was ushered in by the Bank’s purchase of ~25% of the area’s houses – at a fat premium, in order to supply dwellings for the legions of ex-pats designated for assignment.

But that was then. Technological advances in the science of trading, combined with the ubiquitous, and now seemingly permanent impacts of them damned lockdowns have rendered the facility obsolete.

And now, if one passes Exit 8 on I-95, in either direction, one finds that the facility is the global headquarters of the World Wrestling Entertainment enterprise:

There’s something entirely relevant to our theme in the conversion of a trading floor that once processed trillions of dollars a of financial transactions volume a month into an office whose main business is to produce scripted battles between bearded, jeweled behemoths, that all involved parties (participants, sponsors, audience) acknowledge to be not sport, but mere show.

Trading, across dispersed physical locales ensues, and here too, participants must choose between what is in their field of vision, and what the tape is telling them. Other than the political St. Vitus dance, the data flows should be finite. There’s the next Jobs/Inflation reports, which now, in addition to the implications of various outcomes, must be questioned from an accuracy perspective. The Big FOMC meeting, with its promise of rate cuts dancing in our heads, comes a couple of weeks down the road.

Though wrong about the J-Hole surprise, I continue to believe the Fed wishes to dazzle us. So, I’m guessing 50 bp is on the docket.

By all rights, this should goose the market, but I am obliged to urge caution, nonetheless. September is by a wide margin, the worst return month on the calendar, and the trend has been acute these past 4 years, which, try not to remember though we might, has produced G5 returns of -3.9%, -4.8%, -9.3%, and -4.9% respectively.

I am not overly worried about this. But then we’ll be in the home stretch of this fucked up election cycle, and probably, it will behoove us to pay attention. All candidates will ask us the question first put forward by Groucho and Chico. And it will be up to each of us to determine whether we can believe our own lying eyes, or, alternatively, the spiel of either of the dissembling consortiums seeking to sell us their bill of fare. But, FWIW, I will cop to having less faith in the the krew that continues to undertake undemocratic actions in the name of “saving democracy”, who fly their private jets into O’Hare to lecture us about carbon emissions, who cry crocodile tears about working families and the poor while the cameras roll, and then excuse themselves to Dom Perignon/caviar parties on Lake Shore Drive.

I’m left wondering what those 19^th Century La Salle friars would’ve thought of it all. They did establish their organization in lower Manhattan, and only migrated it to the Bronx a couple of generations later. Their leader was a guy named Jasper, and their teams still honor him in their nomenclature. In light of it all, the Manhattan University Jaspers will have my full support this coming basketball season. My lying eyes will ignore their Bronx locale, and celebrate their overdue elevation to university status.

TIMSHEL

So, the big event has arrived, and rather than using it as pretext for political diatribe, I’ll invite you on a journey through my past.

I was a little shaver when the convention came to town, and it came amidst a torrent of troubles. The party’s incumbent was floundering. There was deep political unrest that threatened to upend the whole shindig. A good bit of it was race related. A handful of months earlier, the country’s leading civil rights activist had met with a violent end. It was all a hot mess, with the only certainty being that one way or another, the country was going to inaugurate a new president the next year, as the prevailing office holder, though eligible, had decided not to run.

But memory dims, so, many of the doings in and around the Republican National Convention of 1860 resides in my brain’s geriatric haze. I do recall, though that while it took several ballots, the delegates eventually settled on an obscure Illinois favorite son named Abraham Lincoln.

One other fact prevails, which I will never tire of sharing with anyone willing to listen. That convention was catered by a company called David Berg, Inc. – primarily a purveyor of kosher hot dogs. A couple of generations later, Mr. Berg sold the enterprise to my maternal grandfather and his brothers, who held it, fought over it — until 1992, when their progeny sold it to the much larger and presumably more civilized Vienna Beef Products. My branch of the family had been swindled out of its share in the 1950s, so I had no (hot) dog in that fight.

Longtime local and family legend has it, though, that a) Abe himself sampled the fare; and b) it was during the convention that the longstanding, solemn rule that prohibits the application of ketchup as a hot dog condiment – at any rate in the Chicagoland area — was established.

(But I often confuse this affair with one held 20 years later, in the same venue, where they continued to serve Berg Dogs and debated Race and Reconstruction. Another incumbent was bailing, and my old commander/cousin Ulys was spoiling for a comeback. It was not to be. After 40 ballots, they selected an obscure congressman from Ohio, who became one of my heroes).

Sharp-eyed readers will have noticed that I tried to slip a fast one in there. The setup is, for the obtuse, intended to evoke images not of 1860, but rather of 1968. And the parallels are striking. Race was front and center both years. But the differences are illuminating as a point of contrast if nothing else. It was a Dem, rather than a GOP event. The murdered civil rights activist was not John Brown – but rather Martin Luther King, Jr. The nominating process was geared towards replacing not the inept James Buchanan, but rather that ol’ polecat Lyndon B. Johnson, who, like Buchanan and perhaps wisely, had determined that he’d had enough of the job.

And now, we wind the clock forward to 2024. And another political extravaganza in the Windy City. Here, too, comparisons are enlightening. The party’s incumbent/erstwhile presumptive nominee has again withdrawn from the proceedings – if not by choice at any rate in advance of the national gathering.

Its selection for a replacement, as was the case in 1860 (John C. Breckenridge) and 1968 (Hubert H. Humphrey), is the sitting vice president. Notably, in each previous instance, the Chosen One lost in the general election, and, in the case of Breckenridge, shortly thereafter renounced his citizenship, and accepted a post as a general in an army that soon declared war on his country of origin.

Now, I’m not here to suggest that should Kamala lose, she plans to take up arms against the United States, but she and her cohorts are certain to be beyond miffed at the tidings, and, likely, we will all bear the brunt of her/their womanly ire.

What we get if she wins is only now coming into focus. We’re gonna make food affordable by establishing price controls. We’re gonna pay people for having children, pay them not to have children, build them houses, and pay them to buy the new dwellings. And, of course, we will do it all by increasing taxes on those who won’t notice.

I’m sorry, my sweets, but this is simply bad economics. If the government further inserts itself into our affairs by fixing prices and profits, subsidizing both the construction and acquisition of residential dwellings, enters our reproductive bedrooms, hires and pays our babysitters for us – all on our own dime – we end up with both fewer options and fewer resources with which to attack our challenges.

It was ever thus. So sayeth this century-and-a-half convention goer/product of the Chicago School of economics.

The proposed capping of food industry profits is particularly galling. Not too many financial masters of the universe have issued from that quarter in ages. K wants to ensure this remains the case, by limiting their upside. Among other problems, though, I have with this is a lack of understanding as to her plans for the downside. What if their input costs rise, their selling prices drop, reducing both their output and their ability to retain the service of their workforces (hardly a herd of sheiks themselves)? She got any programs to ensure their continued viability? For faltering food companies and farms causing unemployment and empty store shelves? If so, I ain’t heard of them.

And if she loses, the White House will take over the Federal Reserve and, through tariffs, the purchase foreign-made goods will be rendered incrementally less affordable.

Here’s hoping that they at least carve out Chinese-produced pharmaceuticals, because without full access to reasonably priced Xanax and Ibuprofen, well, let’s just say you might not see or hear much from me.

But the markets don’t seem to give a care. Last week brought about a rally robust enough to bring tears to the eyes of all flesh-and-blood well-wishers. Each and all the Mag 7, as led of course, by our fearless, bloodless leader: the pre-earnings NVDA and extending to back benchers NFLX and TSLA regained the full measure of their vigor.

Outpacing them all is glittering Gold, which closed at an all-time high on Friday – as part of a move that came at the expense of the Almighty Dollar, which – NGL — has experienced better rolling months:

The general theme here is thus to shed dollars in favor of other assets with presumably more favorable fortunes. There are worse trends to endure, but the eschewing of the Dead Prez – including Lincoln but explicitly non-inclusive of Buchanan or Johnson, is not costless. Makes my huffing of Xanax/Ibuprofen a more expensive enterprise for one thing – and that’s before any new Orange Tariff regime comes into play.

Part of the dumping of the Benjaminz is owing to expectations of lower interest rates across the foreseeable horizon. This is probably a good bet.

If we somehow manage to survive the DNC, we may obtain incremental insight on Friday through the auspices of Jackson Hole. I retain my hunch that the Fed will make a big, dovish policy statement during those proceedings. However, those paid to make these prognostications believe that the fully priced-in rate cuts will commence a few weeks later – at the September FOMC summit.

Well, maybe they won’t cut rates at J-Hole, but they could, instead, do something at the long end of the curve. At the end of the day, it matters little. The Fed will almost surely lower rates ere the quarter ends, goosing the economy into the final stretch of the election season.

It all makes me rather serene about short-term market risks. But these here conventions are dangerous affairs. We all know what happened to Lincoln, and it was the same deal, in quicker fashion, for 1880 winner – the magnificent if forgotten James Garfield. In 1968, RFK got taken out before the first balloon had dropped inside the International Amphitheater. And one cannot help but note the verisimilitude associated with his son/namesake hovering outside the proceedings.

David Berg, though, is no more. It survived and thrived during World War shortages largely because my granddad played cards with the Swifts and the Armors. They didn’t have government-imposed caps on their profits back then and did pretty well. But they couldn’t endure the squabbles that carried forward into two subsequent generations of family infighting.

To my knowledge, Vienna is not catering this week’s festivities, as the host organization frowns on the consumption of their products. However, if you’re planning on attending and decide to choke down a dog, please, as a matter of basic risk management, hold the ketchup, because if you can’t do this, I fear I am unable to help you in any way.

TIMSHEL

Fifty years ago this past Thursday, Richard Nixon climbed up the steps of Marine One, issued an awkward, sweeping wave at nobody in particular, and helicoptered out of the world’s most important job. And into History’s Purgatory. I feel as if the anniversary merits some modern-day attention, if for no other reason than for the parallels it has evoked to our current trials and triumphs.

I spent the Summer of ’74, working at a record store in the Newtown neighborhood of Chicago. “Too Much Too Soon” by the New York Dolls and Mott the Hoople’s “The Hoople” had just dropped, drawing much of my energy and attention. Each, as matters unfolded, was to become the swansong for the bands in question.

While not slamming to these fine records as we unpacked seemingly endless crates of vinyl, we spent much of the summer debating the prospects for the bouncing of Tricky Dick. It was, to us youngbloods, a dream too to truly expect its manifestation.

Because Nixon exemplified everything we: a) disdained; and b) wished to avoid becoming. He was old and wrinkly, with a big nose and a set of jowls that are still unmatched in bio-history.

Nobody has ever accused me of being overly elegant – either sartorially or with respect to my movements. But I believe that even I could have managed to unbutton my suit coat prior to issuing my farewell gesture to the American public that had so rudely rid themselves of me.

It was all so culturally confusing. The hippie movement was ossifying, and we didn’t know what vibe with which we wished to replace it. But we knew what we didn’t want to become: Nixon. At all costs.

Two anecdotes come to mind to illustrate the point. I remember him, during the ultimately ill-fated 1972 election campaign, finding himself on the stage at the Reiman Theater/Grand Ole Opry. For reasons unknown, the great Roy Acuff handed him a yoyo, which he took in his hand and examined as though it was a Jupiter moon rock. He ultimately encountered the string, held it while letting go of the disc, and watched in amazement as it rolled down the twine and bounded up (not that it bounded far).

Now, never have I demanded or even expected the leader(s) of this great nation to possess the yoyo dexterity of masters such as Dale Oliver or Dennis McBride. But FFS (!), they should at least have gained enough awareness to understand the basic functionality of the plastic Duncan sphere.

The other, which I didn’t find out about until years later, was related, I believe, by Greg Norman. Apparently, he was part of a baller Nixonian foursome, and, during one round, the latter shanked one into an adjacent wooded area. Eschewing a penalty stroke and refusing accompaniment from his Secret Service detail, he strode to where the ball landed – in a thicket of trees, whereupon, and immediately thereafter, the other players observed the errant ball sailing majestically back onto the fairway.

Everybody knew, but nobody said anything. Suffice to state that no combination of Palmer, Nicklaus or Woods could’ve made that shot to save his life.

Shady and sus he surely was, and so, as the summer of ’74 unfolded, we was all hoping against hope that he would be gone. It looked iffy up until the last moment and what ultimately did him in was a visit by his party’s Elder Statesman – Barry Goldwater. Who told him, mob style, that it was time for him to, you know, to peace. And peace he did – in his own, singularly creepy way.

All of which is relevant for a couple of reasons. I’ve read some analysis lately offering plausible arguments that he was railroaded. His main transgression was using one government agency (in this instance the CIA) to impede some pain in the ass project undertaken by another (then the FBI). That sort of thing had been transpiring for thousands of years, but since Watergate, the mottled manufacture of inter-agency squabbles to mask bureaucratic naughtiness has become Standard Operating Procedure.

Perhaps more pertinently, it is now beyond all doubt that the Biden Bounce was orchestrated by his, er, allies in the Democratic Party. To be fair, it was them that shoehorned him into office in 2020. So, arguably, it was their call to make. It is also them who decided amongst themselves who his replacement would be, as well as, presumably, selected her running mate.

None of which is cause for overmuch complaint by the electorate. We get the governmental leadership we deserve. And — just as was the case before Ol’ Joe was disappeared, we are confronted with depressingly suboptimal choices – two candidates neither of which (or so it seems to me) would fall into the top 500,000 of ideal applicants for the job.

It all leaves a political muddle in its wake – at a rather inconvenient time. Perhaps in sympatico, the markets are muddled as well. Wicked selloffs followed by recoveries, which, while energetic, have thus far been insufficient to recover lost ground.

Early last week, somebody got to Vixen VIX. This much is clear. For a brief time on Monday, she had levitated above 60. By Friday’s close, she was back at a hardly demure but much more pristine 20.

On another obtuse note, the yield curve – as measured by 2s/10s, briefly recaptured its natural upward slope, but has since retreated yet again into inversion, with two-year rates now fixed at 4.055%, and ten-year yields declining to 3.941%.

And we won’t get through August without enduring a few more tiresome trials, the first of which, lord help us, is the Democratic National Convention. It promises to be high on glitter/hype, bereft of substance, and quite possibly subject to annoying disruption by thugs. It will be difficult to ignore. But as with the drunk’s relation to the proverbial lamppost, will serve more for support than illumination.

Immediately thereafter is the Jackson Hole Economic Policy Symposium, held high up in the Teton Mountains, and sponsored, in time-honored fashion, by the Federal Reserve Bank of Kansas City. I’m not sure what else the KC Fed does, so they tend to pull out all stops for J-Hole. And often, meaningful consequences ensue. It begins with a whole bunch of economic wonks droning on about God knows what, but all eyes will be on trained to the customary address by the Chairman of the Whole Damned Federal Reserve System. It’s his party after all, so we owe him our obeisance.

Plus, I have a hunch that J-Pow at J-Hole will be an address worth attending to, that he won’t leave us empty handed, as the timing is perfect from a political (if not economic) perspective to lay down a big ol’ bag of monetary easing tchotchkes on the masses.

Here, I am reminding my clients of the 2012 sequence, when Chair Bern used the occasion to announce QE3 – an intervention unparameterized in terms of duration and magnitude, rendering it large enough for me to have dubbed it QEoo. Though debatable, I believe it went a long way towards giftwrapping re- election to Obama, in a race that was closer than it appeared or that anyone remembers.

Then, ushering in the all-too-rapidly approaching Labor Day rituals, comes the earnings tidings of NVDA. I am not an equity analyst and have no formal opinion on the results for giant AI-job stealer. We do know that: a) it’s been the main driver of the extended rally; and b) it’s off 30% from its giddy mid-June highs. As such, the conveyance of its tidings may move the markets.

I don’t anticipate any of the above with much enthusiasm. I’m tired and it seems to me that everyone else is too. It all reminds me a bit of the Summer of ’74 – a time when the future looked opaque indeed.

There are other parallels. Inflation was stubbornly brewing up. The Middle East was a mess. We were justifiably terrified of Russia and China. An unpopular president was dispatched by insiders, not long after, for political reasons, having yielded to defeat in a foreign conflict (then ‘Nam; now Afghanistan).

The music was better back then, but this is not something within our control.

But somehow, we survived the departure of Nixon. Who was followed by the underappreciated Gerald Ford. Then came Carter, Reagan the two Bushes (two in the Bush?), Obama, Trump, Biden and now God only knows who.

The Gallant 500 is an approximate 80 bagger since then, so there’s no reason to lose heart.

Yes, my loves we have problems aplenty with which to contend. But I reiterate that on August 8, 1974, the G5 closed at 80.76. I just checked my charts and find that on Friday, it settled at 5344.16. If I had diverted what I spent that summer on glam rock records into the markets, it’d be worth like $5M.

In the last 50 years, we survived everything from disco to the twin towers to three impeachments to a global lockdown and other trials too gruesome (or at any rate too numerous) to inventory. Yet the rivers of equity valuation flow choppily but inexorably downstream – past every effort to gate them.

The above-mentioned waters are nothing if not troubled, but as I offer a heartfelt, jacket-buttoned farewell wave this week, I encourage y’all to remember that our boat has endured rougher seas these past two generations, and has, thus far, kept to its singular, God-given course. Invest accordingly.

TIMSHEL

Longtime followers of this space are aware that are few actions that draw my ire as fully as when somebody harshes my mellow.

My sentiments here are strong enough for me to have taken the extreme step of researching the origin of the phrase. But I came up empty. About as close as I can come is an exchange between Stoney and Dave in a film called “Encino Man”, which I’ve never seen.

But, just as Bogie never uttered the phrase “play it again Sam” to Dooley Wilson in Casablanca, I can find no evidence that Sean Astin, Brendan Fraser or the immortal Paulie Shore ever muttered our modified, titular command as part of the forgettable 1992 film in which they starred.

But I reckon all this is beside the point, because it’s not the harshing of my mellow that is currently at issue, but rather the mellowing of my harsh.

Because I’ve been in something of a harsh mood lately, and, when one is in a harsh mood, the last thing for which one bargains is somebody or something coming around to spoil one’s (presumably) well- earned snit, by mellowing it.

So, what caused my harsh? Glad you asked.

We can begin with the global/political/capital/commercial/socio economy, and, within this catch all category, what had risen to the top of a large inventory of indignities was the recent announcement that prosecutors at whatever passes for a military court in Gitmo had accepted a guilty plea from KSM and those other tower demolishing cockroaches, which spared their lives — 23 years after the largest and most astonishing criminal act since at least when he Nazis were goose-stepping about.

Apparently, Defense Secretary Lloyd Austin cancelled the deal, presumably, at least in part on political grounds (i.e. not wanting his team to lose any anti-9/11 votes). Good on him. But he did mellow my harsh.

What else? Well, we’re now 2.5 years into a war in Eastern Europe and have a major throwdown brewing in the Middle East, where the baller Israelis went into Iran itself to take out a major target.

The domestic political winds may be shifting towards the Left the last couple of weeks, and it is uncertain whither they will they migrate from here. Should they continue their current trajectory, though, into the cold months, they bode ill, in my judgment, for both the cessation of hostilities in and around the Holy Land/Fertile Crescent, and for the affordability of goods issuing from the domestic energy sector.

All of which is harshing me. But not the associated markets, which are beyond mellow about all the above. Crude is on the down, and Nat Gas, as we anticipate the inexorable winter winds, is at a generational low:

Also mellowing my harsh are tidings that the CrowdStrike problems experienced at The Sphere have been eradicated, enabling Dead and Company to proceed with its never-ending residency – during the interval comically designated as holy by Deadhead leaders as the “Days Between” – a period that runs from Jerry’s Birthday (8/1) to his yahrzeit (8/9).

On the monetary front, we encountered a latter-day, Central Bank version of the 1837 English fable “Goldilocks and the 3 Bears”, with the BOJ raising rates, the Fed standing pat and the BOE cutting. The markets reacted in nightmarish fashion across all three (hot, cold, and just right) paradigms, with USDJPY plunging in especially alarming fashion, taking nearly all the NK225 ytd gains with it:

Our Baby Bear/just right Fed held rates constant and murmured its time-honored platitudes about being alert and on its watch to step in at any signs of trouble. And, mid-week, investors were lapping it up like pleasingly warmed porridge. Ironically and contemporaneously, the National Debt passed the quaint $35T threshold. All of which was mere prelude to the wicked hissy fit they threw not long after the markets opened on Thursday, which extended all the way through Friday’s close. I didn’t do the math, but published reports suggests that our equity complex shed ~$3T in valuation over this sequence. Which is a pretty drastic diet. Even for a bear.

Root explanations feature a tepid July Jobs report, along with a Mag 7 (less the always tardy NVDA, which doesn’t weigh in until Wednesday, August 28^th – two days before the start of a Labor Day weekend celebrating the careers that the company’s products seek to destroy) cycle that is best described as “mixed”.

Mixed it may have been, but investors undeniably turned tail. And, in support, that fickle strumpet Vixen VIX, who has lain supine for longer than memory allows, has risen to her dainty legs and doubled in approximately one month:

Thus, in the equity complex at any rate, rather than having my harsh mellowed, the markets seem intent on harshing it. And it is not pleasant to experience the harshing of one’s harsh.

In fact, the episode is so annoying to me that I find myself with no alternative other than to mellow my own harsh. And perhaps yours as well.

So, I’m gonna step out here and suggest that all this agita is overblown, that I think risk assets are a buy here. I will try to be brief in my justifications, but headline inputs include the following.

The global capital economy is awash in cash. The Fed is now gonna probably cut aggressively. Not only energy prices, but the entire commodity complex is on the down, with grains bearing the brunt of the carnage. Even high-flying Copper is down > 20% this summer. While everyone has chosen this moment to yet again fret themselves about a recession, Q3 GDP estimates are >2%. For all the hand wringing about earnings, with 75% of precincts reporting, were looking at +11.5%.

We thus are staring at a capital economy that is remarkably, impossibly strong, mellowing out against many harsh headwinds. Valuations are now more rational, and I think the real market ballers will be doing some shopping ere long. It might be wise to follow their lead. But I’d wait till they get going to tag along, because if there’s truly a rally out there, it’s likely to ensue for a spell.

To close, while trying to mellow our harshes, I wonder if I’m getting too old for all this, and I dream of the day when I can spend my time mellowing my mellows. Even that thought though, does little but mellow my harsh. Which I reckon is my very point, throughout.

TIMSHEL

Wasted and wounded, t’aint what the moon did, I got what I paid for now,
See ya tomorrow, hey Frank, can I borrow, a couple of bucks from you?
To go waltzing Matilda, waltzing Matilda, you’ll go waltzing Matilda with me

Tom Waits

You may not get what you paid for, but you will pay for what you get.

Maya Angelou

A word, as we approach the mid-point of summer, about the wages of obtaining.

To assist, I’ve selected two passages, the first of which is the opening lines of “Tom Traubert’s Blues”, a catchy variation on the old Aussie folk song about waltzing with the lovely Matilda (whoever she is). I liked it (and the song) so much that I selected it as the quote that launched the intro to my first book, the now-immortalized “Trading Risk” (J. S. Wiley and Sons, 2004 ISBN 13: 978-0471650911).

Trading, after all is like a waltz – one in which you seek to get what you pay for (and, ideally, a little bit more). And as I was determined to take readers on a musical, 3/4 boogie through the markets, I thought it was a propos. Problem was (or so my inestimably helpful publishers told me) that Tom Waits: a) never allows the use of his material by others; and b) is notoriously litigious. We agreed that while TW was unlikely to ever even learn about the usage of his work in some obscure risk management book, it
simply wasn’t worth the hazard. I was thus forced to substitute in the original song, describing a swagman camped along a Billabong, seeking a partner named Matilda and asking her for a waltz.

I don’t even know what either a swagman or a Billabong is, but that song is “traditional”, part of the Public Domain, and, as such, immunized from the caprices of copyright law. And, as the book was about risk management, the decision, I feel, was the right one.

Our other quote is a non-published remark from the immortal Maya Angelou, whose resume is about as content laden as the Manhattan telephone booth. Of humble means, she worked as a cook, (unfortunate though true) sex worker, singer, actress, civil rights activist, diplomat, poet, and educator.

In terms of the last of these, she spent the final generation of her life as a chair-endowed Professor at Wake Forest University, and I had wondered more than once how she ended up there. In the heart of tobacco country, on a campus that was a converted tobacco farm, where her forebears, presumably, toiled in chained servitude for plantation owners. Seems a little odd to me, but no judgment intended.

Both speak of the prospects of getting what one pays for, and paying for what one gets. And both, in my judgment, contain an element of authenticity, as elaborated upon below.

As this is the political season, perhaps beginning in these realms is unavoidable.

The Big Donkey Money Machine switched itself off in the lead-up to the sandbagging of Old Joe. Having achieved this (rational) objective, they have opened wide their wallets in support of his anointed successor, who, as predicted in this space on multiple occasions, and instantaneously: a) achieved an alchemic level of credibility; and b) could actually grab the big prize.

Our betters, in other words, have gotten what they paid for. But for us mere mortals, it’s impossible to ignore the reality that the caucus who has urgently implored us that they alone can save a democracy which they believe to be hanging by a thread has selected its savior in back room deals, sought to manipulate ballot rules in both primary and general elections, and given various other demonstrations that, while they believe in nothing as much as rule by consent of the governed, if it’s all the same to us, they’d sorta like to take charge of things on their own – at least for now.

Again, I think Harris can win. I don’t think she will, but the outcome is now in doubt. And I anticipate a good deal of bad behavior – on both sides – between then and now. As one example of how far matters have devolved, the sorry spectacle of no one from the Dem leadership showing up to Bibi’s speech, AND one legislative representative of this great nation sitting in the audience and flashing, to the leader of its staunchest ally, signs with dainty phrases like “War Criminal”, comes to mind. This, it must be noted, is the side that claims a monopoly on righteousness.

But righteousness is in scarce supply everywhere. And – you read it here first – I think that Team Trump will pull all available invisible strings to ensure the maximum disruption of the Dem Convention. They have a great incentive to do so, the process will be easy as all they need to do is to incentivize a few extra nutbags already inclined to impair the proceedings to do their worst, and, one way or another, I DOUBT they will give the Democratic Party the chance to out-Woodstock their Milwaukee love fest.

Whoever wins will have paid a price, will have paid for what they got. Here’s hoping it was worth it.

In the markets, writ large at any rate, we’ve bought ourselves a rally that is more than a triple bagger
since those lockdowns knocked us on our asses.

Problem is, of, course, that we paid for it with newly minted fiat currency, backed by nothing more than the dubious promises of increasingly perfidious global administrative machines. It’s been a winner thus far. But I believe it would be fair to say that the jury is still out. Investors were in full-on rageful rampage for most of the week, before regaining their equanimity and ending the cycle with a gratifying rally.

My guess is that they’re not, on balance, done buying. And getting what they paid for.

On the obverse side of this – proving that sometimes you pay for what you not only don’t get, but actually shun, we learned on Friday that the Federales have indicted notorious short seller Andrew Left, for serial manipulation of selected securities. I truly don’t know the merits of the case, but have found, historically, that federal prosecutors, even in L.A., seldom bring charges against anyone they’re not pretty sure of convicting.

But my general experience is that consumers, at any rate, pays for what they get – if not sooner, then later, and this is one reason I was disturbed to read that both overall consumer debt AND credit card delinquencies have reached a generational high:

I dunno, Maya, it sure seems like SOMEBODY is getting something WITHOUT paying for it. Of course, it must be allowed that these somebodies is gonna need to pay The Man eventually. The only question is if they can, in this world, achieve this far-flung inevitability. If not, it may be, you know, problematic for us all.

The Central Banks print money. Politicians put thumbs on the scales. Short sellers get busted.

The rest of us are left to confront the carnage. Probably, it’s our mess to clean up, our job to pay the bill. Because, as Professor Angelou reminds us, payment will indeed be forthcoming.

It’s all melancholy enough to revert to “Tom Traubert’s Blues”:

Now the dogs they are barking, and the taxicab’s parking, A lot they can do for me,
I begged you to stab me, you tore my shirt open,
And I’m down on my knees tonight,
And Old Bushmills are staggered, you buried the dagger,
In your silhouette window light,

Well, at any rate, that’s Tom’s take. I’d offer something from Maya, but, shamefully, I have never consumed any of her content.

She’s ten years gone, and my guess is that she shed her mortal coil with a clean balance sheet.

The rest of us? Not so much. We’ll ultimately have to pay down our debts, including the couple a bucks we owe Frank. He’s waiting, after all, and when the music has stopped in our waltz with Matilda, he’ll have every reason to expect us to make good.

Be forewarned.

TIMSHEL

Oh, somewhere in this troubled land, screens are flashing bright,
At some far-distant airport, there’s no delay of flights,
Somewhere banks are doing deals, bootleggers brewing hooch,
But there was no joy at, CrowdStrike, when screwed it the pooch

With apologies to Ernest Lawrence Thayer – Casey at the Bat

OK; maybe stating that they screwed the pooch is a bit harsh, but whatever they were doing to Bowser, it messed up our browsers, inconveniencing many and annoying just about everyone.

And there was even authentic heartbreak, as exemplified by this tragic image from The Vegas Sphere:

If the sight of the ancient “blue screen of death” on America’s most hyped-up, tech-enabled playground
doesn’t move you, well, then, you’re probably a horrible person whom I don’t wish to know.

Miraculously, the outage took place during a break from the venue’s core attractions – residencies for dinosaur rock acts like U2, the Eagles, and, of course, Dead and Co. Currently, and for the rest of the month, they’re rolling with some sort of cheesy “Postcards from Earth” thing, replete with enormous AI- generated tripe. However, the Gratefaux Dead will be back at the beginning of August, for another round of its never-ending “fare-the-well” shows. Let us pray that the glitch will have been mended by then, because this time, they (the reconstituted Dead, that is) might really mean it.

The blame for the fiasco devolves upon baller cyber security firm CrowdStrike (CRWD), whose custodians, by published reports, have demonstrated delayed and perhaps insufficient contriteness.

Apparently, some cyber-security patch failed, impacting everyone not tied exclusively to Apple, so impacting no one. The episode puzzled me greatly, though, having taken place, according to published reports, on Friday morning. But nearly everyone with whom I deal was experiencing internet problems going all the way back to late Wednesday, so what gives?

And this isn’t the first time that CrowdStrike has dominated news feeds in less-than-flattering ways. Approximately eight years ago, they got mixed up in some of those shady shenanigans associated with the since-discredited claims of Russian interference into the 2016 election.

That was bad. This is probably worse.

And, ironically, it transpired amid what is shaping up to be an election season that may even surpass the
outsize expectations we’ve formed for associated psychodrama.

As we went to press, the mulish vultures were circling round Old Joe, while Trump, with a nicely accessorized bandage over his right ear, is back with his own singular form of self-regarding petulance. I will say this though: I think that bullet took something out of him, as well it might have. At Thursday
night’s coronation and ever since, he looks (to me) a bit tired, a bit spooked and a bit wobbly.

Wait… …my system just came back online (thank you CrowdStrike) and I’m told that Biden has bounced. So, the calculus has changed.

Call it inevitable. Joe would have never been there but as the only means to stop Bernie, who, prior to the former’s anointment, was a lock for the 2020 Dem nomination. He beat Bernie. And then Trump. And, ever since, he’s been expendable. As his always unruly wits began to wander uncontrollably, he became a liability. For his party, and, indeed, for the country as a whole, we can file this episode under the heading of Addition by Subtraction.

Still and all, I say Biden and Trump must debate again. Ideally at The Sphere. It’d been the best
entertainment in years.

Meantime, last week, with much of the Internet flat on its back, with a presidential contest entering its most important phase and featuring a doddering incumbent who (whatever else can be said of him) would not possibly have lased in office another 4 years — pitted against a gunshot victim who seems to have retained all his legendary narcissism, is it any wonder that the long-standing rally took a modest breather?

And it’s not like earnings to date have offered much uplift. The Big Tech Pooches, though, have yet to report, and, at least for myself, I promise to avoid the CrowdStrike transgression of screwing them.

Whether they return the accommodation by not screwing us remains to be seen.

On a happier note, with all this talk platitudinous talk about Unity (much coming from the Big Orange himself), Diversity and Inclusion, one cannot be other than pleased at the convergence of the Mag 7 with the rest of the run of the mill Gallant 500 pack:

Pleasing as this be, the convergence tilts towards the downside and it says here that we still need the leadership of the Big Tech Dogs to sustain this here rally. They had a bad week, to be sure, and a particularly bad day on Friday.

But I believe they will be back. For reasons I’ve articulated — ad infinitum, in the past. There’s still too much investible capital chasing too few investible assets, to pull this train off its rails.

So, I’m gonna go ahead and tell you that you don’t want to climb aboard any theoretical short locomotive, heading in the opposite direction, on the same track, at this stop. Lighten your load if you must; you’ll get no complaint from me. But don’t engage direct battle with this rally.

Assuming there’s connectivity and taking the leap of faith that we can episodically ignore the political saga playing out in front of our eyes, over the next couple of weeks, we can perhaps focus on the GDP drop, earnings, and the next ritualized meeting of the FOMC.

Please know that the CRWD crowd is working diligently, if somewhat manually, to restore your devices. Presumably, they’re starting with The Sphere. And here’s hoping that they don’t screw the pooch. Again.

Because none of Bobby/Mickey/Henley/Bono OR Trump is getting any younger. Or stronger.

Bowser, on the other hand, is doing fine, feeling a bit amorous, and looking for bitches in heat. His browser, if not already operative, will soon be restored. And as for CRWD, it’s two strikes against them, but they’re still at bat.

So, be forewarned.

TIMSHEL

Hypocrisy is the compliment vice pays to virtue.

François de La Rochefoucauld, 2nd Duke of La Rochefoucauld, Prince de Marcillac

Let’s divert our attention from Saturday night’s events, to attend to more mundane matters, shall we? I don’t know this de La Rochefoucauld dude, never met him. My research, though, indicates that: 1) he lived and died in 17^th Century France; 2) his name, if one can pronounce it, trips elegantly off the tongue; 3) he was both a Duke and a Prince; and 4) he took a nice portrait/lived in a swell castle:

To me, our purloined quote, attributed to our Ducal Prince, is both pithy and timeless. Perhaps we will revert to it in the denouement of this piece; we usually do.

Because, in a week where we also lost long-ignored icons Dr. Ruth Westheimer and Big Rich Simmons, I wanted to spare a word for Shelly Duvall. She had a rich and storied life. Dated Ringo AND Paul (even if it was Paul Simon). Played a prominent role in several outstanding films, including The Shining, Time Bandits and Nashville. But to me, she will always be remembered for the role she (like Donald Sutherland’s Oddball) was born to play: Olive Oyl — to Robin Williams’ eponymous Popeye:

There they are – a couple for the ages. Both, of course, are now gone, and I cannot but think that those of us that remain are rendered the worse for their absence.

So, I ask my readers to join me in wishing a bon voyage to Shelly, and, for that matter, to Robin as well. Here’s hoping they’re in a better place – where the spinach flows like waters from the River Jordan. Where the beastly but somehow vaguely attractive Bluto is banished, and where the long-unaddressed issue of Sweet Pea’s paternity is settled – once and for all — in Popeye’s favor.

Meantime, in the markets, there’s information aplenty flying off the wires, but as of now, nobody seems to know what to make of it (other than, of course, to buy everything in sight). Inflation came in with a dose of ambiguity. Powell uttered soothing words on Capitol Hill. The Republican National Convention begins today. In the great city of Milwaukee, with Big Orange at the helm – head bloodied but unbowed. On the other side, there appears to be an end game afoot. I won’t delve too deeply here, but my gut tells me that too many powerful people and institutions, unaccustomed to being rolled over and stiffed, have called for his head for him to survive their having turned on him.

Earnings are commencing to roll in, but not too much in the way of discernable trends just yet.

In time-honored fashion, the nation’s largest banks are among the early reporters (investors thus far have reacted with a resounding “meh”), and it is to them that I direct my most acute attention.

Because the Long Arm of Justice finally arrived this past week, for one Bill Hwang, late of an investment platform called Archegos (a term which translates into chief, leader or prince) — in the form of guilty verdicts handed down on 10 out of 11 counts with which he was charged.

His crime? Concealing outsize positions in names such as Verizon, using leverage that he obtained by lying about the size and concentration of his portfolio – to multiple counterparties. My hat is off to him.

Because it’s one thing to corner the market in fluky small cap securities, but to try to pull off this stunt with some of the best capitalized companies in the entire equity complex takes some serious stones. Each of the forlorn banks, at Hwang’s instance, thought they were holding the entire Archegos position, but when the lid lifted, there were about a half dozen institutions lending him mad Benjaminz to load his princely boat.

When, as was inevitable, these names hit a rough patch, each bank was shocked when he was unable to cover his losses. The estimated cost of his adventures has been reported to be as high as $100B, and the banks took the brunt of it. For one of them – the always misanthropic Credit Suisse (which had been ground zero for every banking scandal since the Polk Administration) – it was the last straw. The yodeling regulators in that historically neutral jurisdiction gifted the institution to rival UBS a few fortnights later.

And now, Prince Bill is going to jail – God knows for how long. But if I were him, I’d pack a toothbrush.

More to the point, there’s a risk management lesson in this saga: Don’t. Fuck. With. The. Banks. Case and point, the recently adjudicated judgment against him was his second brush with the law; the first being an insider trading rap from early last decade. But no banks were harmed in result, and that episode only cost him a 4-year ban from the securities industry.

Whereas you stiff the banks, you go to jail.

They win and you (we) lose. It was ever thus. Consider, if you will, that every single government intervention in the modern capital markets era has redounded to the benefit of uber financial institutions. I remember back in ’94 – before I even began drawing Social Security benefits, when the perfidious Mexicans pulled a surprise devaluation of the Peso. It backfired spectacularly, and after lots of bleating about the plight of the Guatemalan guitar players and such, the powers that be came up with a now-quaint but then galactic $50B bailout package.

I don’t think much of it made its way into the pockets of the run-of-the-mill Mexican citizen. But the banks made out like banditos.

The same narrative plays out in a review of government intervention into the banking system over the ensuing thirty years, with the most prominent example being the response to the near collapse in the wake of the Great Financial Crisis. The multitude of sins committed by financial institutions in the lead up to this is the stuff of legend. The leverage applied to dubious speculations alone was criminally astonishing and put Hwang’s stunt to shame. But, unlike Billy Boy, no one went to jail.

So, I worry very little about the banks. Particularly the big ones. UBS now owns the Alps. JPM scoops up every such asset that catches its fancy (recent acquisition of First Republic comes to mind) – often getting paid for the privilege. It is the rest of us who bear the brunt of the risks.

And the big exposures, approaching as inexorably as the galaxy Milky Way moves into a collision course with neighbor Andromeda, is a credit crisis. It may take a couple of billion years but it’s coming:

It does seem to me that a~365% Global Debt to GDP ratio is, you know, kinda problematic. Put in perspective, if the world dedicated every single centime it produces – from this moment onward – to debt reduction, it would be square with The Man by the Spring of 2028.

Just in time for Biden to either pull a Trump and try to recapture his lost position, or, to channel FDR and seek a third term, which, if he succeeds, will put him at a robust 90 at the end. At which point, he will have no alternative other than to go for Term Number 4.

But all that is further down the road, and I suspect that higher valuations will come our way ere the reckoning that awaits us arrives on our threshold. And I suggest we avail ourselves of this bounty. It may be hypocritical to do so, but as Prince/Duke dLR might advise us, we can deem it to be nothing more than the tribute owed by our ubiquitous vices to that elusive blessing of virtue.

And, at some point, we may pay for our sins with more than our hypocrisy. Hopefully not, though, to the extent of Bill H.

Because, speaking strictly for myself, I’d like to avoid the Gulag Archegos with all the energy I can muster. I suggest you do the same. And you can start by limiting your leverage, lest you incur the wrath of the banks, who lever and concentrate at their will and pay the wages of these transgressions through the receipt of bailouts. And, if purely as an experiment, you wish to try your luck at fraudulently seeking to engage in excessive borrowing from them, well, I don’t advise it, but let me know how you make out.

There’s a motif of hypocrisy in all this, of course, but I’ll let Prince Duke dLR have the last word on that score, and simply bid adieu.

TIMSHEL

A pox on FL Governor Ron DeSantis, for stealing the low hanging fruit surrounding the fallout from last month’s debate. His call to end what he describes as a “Weekend at Bernie’s” Presidency removed what may be the among the most accessible of themes that I have encountered in quite a while.

He thus forces me to operate in a more derived fashion. As in, which Bernie? Because there’s a lot of them from which to select, and the first that comes to my mind is this Shmendrik:

It seems like only yesterday that the image on the left was superimposed on virtually every e-picture on the interwebs. Careful observation confirms that this Bernie’s mask skews a little to his left, if anything, insufficiently so.

But the fact is that he had the Dem nomination snatched by party elders from his rightful hands, not once but twice. In 2016 AND 2020. And that had this NOT been the case, a “Weekend at Bernie’s” Presidency would have taken on a whole different meaning. Most likely taking place at his warm weather second home, which, as he has repeatedly pointed out, ALL good Vermont socialists own, and refer to as their “summer camp”.

There is, alternatively, Bernard P. Fife, whose political chops include a losing run for sheriff against Ange. Though known throughout the world as Barney, his fun girl side piece Skippy always (incorrectly) referred to him as Bernie:

There he is on the left, alongside his opposite number – Myrt (Hubcaps) Lesh, who unloaded a lemon on him — in part by claiming to be the widow of another Bernard, which pretty much sealed the deal.

Gomer ultimately discovers that the car needs plugs, points, bearings, valves, rings, starter switch, ignition wires, water pump, fuel pump, oil pump, clutch, clutch bearings, clutch plates, brake lining, brake shoes, brake drums, radiator hose, and radiator hose coupling.

“And I’d give ‘er a good wash, too” adds Gomer, but this is deemed unhelpful.

Gomer does find sawdust in the gears of Barn’s newly acquired jalopy though, and this springs the Mayberry crime fighting team into action. I don’t know about you, but I feel we could use some of that in Washington.

There are, in addition, other Bernie’s to consider. For instance, Bernie Leadon, who, before co-founding the Eagles, was in a band that featured the guys who were part of the Mayberry Darling (known outside of the small screen as the Dillards) krew. So, there’s that.

But the comment was unambiguously pointed towards Joe (Bernie) Biden, referencing the “WaB” storyline involving the feigned re-animation of an individual who had departed these realms for a better land. Everyone gets the joke, but this isn’t the movies, Biden, whatever else may be said of him, can still fog a mirror, and, beyond this, has exclusive access to the nuclear codes.

At the point of this correspondence, he and his closest confidants are “Jilling off” in what presumably is a frantic effort to resist the growing calls for him to bounce. I have no idea where they stand on this score. But all has the look and feel of the inevitable. As was the case with Nixon and so many others, though, until the decision is made to exit (stage left), the central figure in the saga adamantly denies he (or she) is going anywhere.

So let it be with Biden. He’s in till he’s out. And then he’s out.

And it seems, as the second half of ’24 begins to unfold, political drama is impossible to avoid. The French have all but dispatched the leftist Macron. Meantime, in the UK this past week, the Whigs trounced the Tories, ending the brief Prime Ministerial tenure of that hedge fund dude who replaced the bird who dwelled at 10 Downing Street for all of twelve days.

Thus, as the French veer right, the Brits lurch left. However, ironically, the markets fear both outcomes to be fiscally unsound and as dilutive to the associated sovereign debt of each nation.

On this side of the Atlantic, of course, the political games of ring around the rosie have yet to resolve themselves. Mercifully, though, we’ve some more adult level matters with which to, at minimum, distract ourselves. Chair Pow hikes up the Hill on Tuesday/Wednesday, carrying the hopes of a nation for rate cuts — after a Jobs Report showing that the only new gigs being created are those involving the pushing of government paper and the emptying of bed pans filled by the elderly/infirm, along with him.

His Atlanta Division, meanwhile, is projecting a rather ominous diminishing of Q2 GDP figures, relative to that which it published a scant fortnight or so ago:

We’ll also be treated to another round of CPI/PPI. And to the quarterly ritual of earnings and associated guidance. With respect to the latter, expectations run high, raising the prospect of risks tilting to the downside if certain corporate chieftains break our hearts.

But God Oh Mighty, and though I hate to lay this on y’all, it is difficult for me to form any opinion other than that outcomes in November will be the most important determinant of market trajectories in the quarters to come.

And, so long as I’m killing your buzz and harshing your mellow, I may as well offer my own spin on all this.

If I wasn’t a born and bred Conservative, I certainly morphed into one after attending the University of Chicago. I thus cannot claim objectivity.

But from a pure market risk perspective, please know that the capital economy is walking on a thin wire. It has been living on borrowed time (and borrowed money) for years, and even a minor disruption could push it into free fall. Our financial system collapsed in 2008 and recovered largely through historic injections of fiscal and monetary helium. It then received double doses of same in the wake of the lockdowns.

These tanks are nearly empty.

As such, we’re better off trying to fix what we broke, concentrate on productivity and innovation — as opposed to focusing on outflanking ourselves in righteous rhetoric.

These matters, of course, are for the public consensus to determine, but I fear that if the Progressives run the table, they will press their fat left thumbs even harder on the scales than they ever have. And pressing their fat left thumbs on the scales is core to their strategy.

I recognize that thumbs on scales is a specialty of both sides of the aisle. But as of right now, it is the left thumb that terrifies me, mostly because I fear it will be permanent. Let them run the table and they won’t fail to enfranchise beholden immigrants (and perhaps felons), pack the Supreme Court, grant statehood to Puerto Rico and D.C., expand entitlements, increase taxes, cripple the Energy Complex, or some combination thereof.

If one wants to envision the true end of Democracy, that’s what it looks like – to me, at any rate.

And woe to the markets if that happens.

So, my desired outcome is a split government, and I don’t care how it splits.

But can at least elect a non-Bernie to the top spot, and my vote would be for Bernie Fife – so long as he doesn’t choose Hubcaps Lesh as his running mate. Because there is enough sawdust in the gears of our economic engine, without her shady exploitation of the better angels of our nature, to go around.

TIMSHEL