By: Ken(neth Louis) Grant

Just don’t do it! I shouldn’t have to keep reminding you of this, but, in the name of sacred duty, I find that I must continue the thread. And, this time, y’all best listen up. Because the stakes have never been higher.

So, for the umpteenth time: The Electric Fence is a barrier that is chockful of dangerous current, for which your “whiz” (which emanates from your anatomy) is a powerful conductor. So, bad things happen when you whiz on the Electric Fence,

But you guys keep doing it. And fellas, trust me, it’s a bad move on your part.

And as for the ladies? Well, never mind. But, then again, on balance, ladies tend to have a more sensible approach to Electric Fence-whizzing (and other matters) than do their male counterparts.

In any event, I find myself annoyingly compelled, in this week’s note, to yet again lecture you on this topic. Because (as you know) I am watching you, and my observation is that your Electric Fence whizzing activities are running rampant.

However, beyond this, there are a number of reasons why the topic is timely.

Most specifically, it originates from the magnificent animated, Nick at Nite series “Ren and Stimpy”, which blew the minds of Viacom viewers (including yours truly) in the early ‘90s. Viacom (owner of N@N) was the brainchild of Sumner Redstone, who died this week, at the age of 97. There is a new documentary about the making of “Ren and Stimpy” that dropped into streaming-land a couple of days ago, and one of the 2nd tier cable networks (forget which) just announced an R/S reboot, to be released later this year.

But let’s talk about the episode in question for a bit (why? My blog/my rules). The plotline involves a visit of Ren’s cousin Sven, from an unnamed Scandinavian country; probably Sweden. Sven is a lot more like Stimpy than Ren. While Ren is lean, jumpy and perpetually irritable, Sven is fat, lethargic, affable and patently stupid.

Much to Ren’s rage, Sven and Stimpy form an immediate and profound “bromance”.

In one memorable scene, Stimpy tilts his head and out pops a pink globule about the size of a marble.

“What’s that?” asks Sven.

“Oh it’s just my brain” responds Stimpy, as he stuffs it back into the space between his ears.

“So big?” Sven inquires back.

He then, by way of comparison, pulls out a pair of tweezers, sticks it into his cranial cavity and removes his own grey matter, which turns out to be smaller than a single pellet of birdseed.

But the moment of pure magic arrives when they both realize that they share a favorite board game — you guessed it – DWotEF. And one can’t hardly blame them for their enthusiasm.

Just look at the box (along with the accompanying image of Sven and Stimpy), and tell me it doesn’t give you the urge to belt out a robust chorus of that Stinky Weezleteats classic: “Happy, Happy, Joy, Joy”:

Yup, it’s all fun and games. Until somebody whizzes on the Electric Fence.

And yet we’re all doing it, the ample mass, volume and functionality of our brains notwithstanding.

I suppose I’m gonna have to cite a few examples. Well, how about the Gallant 500’s Electric Fence whizzing charge to within 10 handles of an all-time high? It’s up over 3% halfway through this happygo- lucky month of August, and 4.2% across all the magic, fence-whizzing madness of 2020.

Let me ask you: does this feel like sound safety or hygiene?

From my point of observation, though nothing untoward has yet transpired, it does strike me that buyers up here are, at minimum, running considerable risk of having their bits burned by electric juice.

But of course, in terms of fence-whizzing, the G5 is entirely eclipsed by Captain Naz, whizzing his way to an approximate 40% year-to-date gain. His liquid waste has yet, by all appearance, to have even come close to an interaction with electric current. But perhaps that’s because he’s a tech whiz who knows his way around circuitry of all kinds.

But a quick look at the leader board reveals that our own Federal Reserve is the entity most poised to take top fence-whizzing honors. It has dumped trillions of liquidity volts into the financial power grid, and has indicated that, if necessary and as appropriate, there’s more of the oozy yellow/green stuff available for the asking. I reckon that we can take comfort that it is the Fed that controls the on/off switch, the diverters, capacitors – all of the critical components of the Electric Fence.

Thus far, they have avoided unfortunate accidents, in fact, have managed the uber enhanced grid with great aplomb, for more than a decade.

Here’s hoping they stay on their game, because: a) where would we be without their engineering wizardry? and b) one false move on their part, and…

But navigating the board may become significantly more challenging in the days to come, for reasons over which they had no explicit role.

In recent years, us Yanks have been swilling our bellies and filling our bladders with beer, sending selfies on our smartphones, and generally laying the groundwork for an Electric Fence whiz of epic proportions.

Contemporaneously, our opposite numbers in China were cranking up their production control of much of what makes life worth living in these parts. They manufacture over 90% of the world’s computers/smart phones, and control 95% of the rare earth minerals that are essential inputs into these wondrous machines.

Heck, they even produce >80% of its frigging air conditioners.

The list goes on. They pump out over 90% of our medicines, an even greater share of our antibiotics, and an unknown but certainly significant majority of our opioids. In this sense, even setting aside our hurt feelings over covid, they’ve got our delicate parts in a pretty precarious position. Should they choose to switch on the electricity in the fencing around these vital areas of manufacturing (located, I’m told, somewhere near the Great Wall), well, we’re gonna feel the jolt, starting from in our Johnsons, and extending out to our other extremities and vital organs.

And meanwhile, all I want to do is be with you. All the time. It’s all I can think of.

But when I look at the nexus between our enabling, monetary road to immediate, Happy, Happy, Joy, Joy gratification, and their extended, more somber, empowering journey to manufacturing hegemony, it looks to me like American whiz is on a collision course with Sino AC/DC-charged trellis.

Thus, if I was running the show (I thank God every day that I’m not), my path towards fixing a crippled domestic economy would involve a fiscal stimulus focused upon repurchasing rare earth minerals, and repatriating vital parts of critical technology and biotech supply chains. If this required further juice from the Fed, so be it. But we gotta get most of this sh!t produced back home. Particularly the opioids. Because it is the opioids that get many of us through these often-miserable hours, and, one day, China may simply cut off our supply.

My plan might even create some good jobs along the way, and lord knows we can use them.

But all of that would cost a great deal of money, for all of us. Our medicines and handhelds, occupying, as they do, such a disproportionate share of our daily existences, would undoubtedly be rendered more expensive by repatriation. And this is to say nothing of the looming higher prices on the way for such concepts food, travel, leisure and hospitality. The term of art for all of this, my loves, is inflation. Which is one thing we probably don’t need right now.

However, as the observers of Stimpy and Sven might observe: “play stupid games, win stupid prizes”.

And I’d like to be the very first on the planet to point out that our leaders have done nothing to address these problems, but I have a hunch someone beat me to the punch. It’s election season, an overwrought one at that, and, somehow, the topic barely comes up. Instead, virtually all that passes for current political debate amounts to little more than a big fat whizzing contest. Meanwhile, that buzzing fence looms ever closer on the horizon….

But I don’t want to accuse everyone of setting up permanent camp at the DWotEF game table. The historically heroic American consumer has actually acted with an encouraging show of intelligence and rationality of late. Savings rates have surged since Corona, and, last month, statistics show that borrowers paid down an historic >$100B of credit card debt. Good on all of you. But as I’ve stated in the past, shame on that subset of the population that is fixated on day trading, while carrying crippling credit card balances (and yes, I’m pointing at YOU: Robin Hooders).

As a risk manager I am able to state with certainty that the 27% after-tax rates you are paying imply the need for a >50% annualized return in the markets to achieve the same economic results as would derive from simply paying down your Visa balances and cutting that $@^% card into bits and pieces.

So if you’re gonna trade your own money, please pay down your credit balances before you do. And if you can do this right, the timing might be advantageous, at least insofar as in terms of visible short-term market risks, I don’t see a whole lot that vexes me. The data flows slow to a crawl in the back half of August, and I suspect that not much of high significance will come our way in the sessions leading up to Labor Day. Before which so many out there should both chill and gird their loins for what is almost certain to be a tense and rocky last trimester of 2020.

You’ve all earned some down time, and, as always, I suggest you use it wisely. Maybe check out the Manhattan apartment listings. Rents are dropping and there are now some lovely places we might actually be able to afford. Or take a walk along the river.

Say prayers of honor and remembrance to those that have left us too soon, and then look joyfully at the possibilities, which, if we can just somehow manage through the hardships that confront us, beckon us on the other side.

But in the name of all that’s holy, don’t whiz on the %$!!&# Electric Fence! And though I hate to do it, I now must leave you with a Spoiler Alert. SPOILER: in the R/S episode referenced above, Ren returns from a hard day at the office, finds Sven and Stimpy immersed in a game of DWotEF, and flies into a cycle of his trademark, blinding fury.

So, what does he do? Well of course he whips out his member and micturates on the Electric Fence.

Whereupon the screen explodes, and the episode concludes.

I’m here to inform you, in taking my leave, that, with commitment, diligence, sobriety and judgment, a better fate awaits you and me.

We’ve only to keep our trousers up, and take the righteous path, to get there.

TIMSHEL

By: Ken(neth Louis) Grant

There were days, and there were days,

And there were days between,

Summer flies and August dies,

The world grows dark and mean….

….The singing man is at his song,

The holy on their knees,

The reckless are out wrecking,

The timid plea their pleas

— “The Days Between” Jerry Garcia (and Robert Hunter)

Can’t believe he’s been gone 25 years. But he has. This one goes out to you, Jerry, on the 25th anniversary of your passing.

Say what you will about him, but this much is certain: he traveled his own road. Must’ve been lonely at times, being after all on a path with nobody to guide him if he stood, and knowing that if he fell, he would most certainly fall alone.

He took up the mantle of the great American songbook, and not only extended and improved upon it, but transformed it. Turned folk, country, R&B, etc. idioms in to extended, wondrous instrumental journeys. No one had been there before. Probably, it scared him, summoned out his internal demons, which, in the end, proved to be to many for him (as, ultimately, they are for all of us).

He turned 53 just a week before his death, and in a way it’s remarkable that he made it to that far. He was, after all, a Type 1 Diabetic who perpetually travelled the world, chain-smoked, maintained a horrible diet, and, yes, was a full-on junkie. OD’d many times. Probably died for a while — more than once. Tried, repeatedly, to kick the habit, and was in fact in rehab, when, on August 9, 1995, he gathered for a final time to the dust of the ages.

There are those out there that obsess about him (I am not one of them; my obsessions are fixed upon YOU – and Bob Dylan) – so much so that we are just completing what passes for a religious holiday for Dead Heads – the ~weeklong period between his Aug 1 birth and his Aug 9 death. To the faithful, these are called The Days Between.

Of course, the festival’s nomenclature derives from a Garcia song title – one of the few where (in my opinion) Hunter’s lyrics (purloined above) excel Jerry’s hooks. Give it a listen anyway. After all, it’s Aug 9th: the end of the Days Between.

As I am fond of stating, it’ll do you no harm.

But I wonder what Jerry would’ve thought about all of this (latter) Days Between moonshine. My guess is that he would’ve neither understood nor approved. He was a musician, a minstrel, and yes, he changed the world. But I strongly believe that the ritualizing of those two points on the calendar would have unilaterally creeped him out. I further suspect that he might advise those immersed in this foolishness to expand their horizons. For what it’s worth, I’m with him on this one. I’d even go so far as to state that this sort of thing acts more to diminish than enhance the astonishing contribution he did make.

But, hey, that’s just me.

I also sort of wonder what he’d make of the current scene. About all I can come up with is that he’d think if there was ever a period that could aptly be described as The Days Between, we’re in it. Right. Now.

All of which begs the question: between what and what?

Well, it is August 9th: the 75th anniversary of the dropping of Fat Man on Nagasaki, 72 hours after the blast on Hiroshima. Jerry (who was a fat man himself) died exactly 50 years after this event, which occurred 3 days beyond when Little Boy destroyed Hiroshima. Those indeed were Days Between.

And, at the moment, it sure feels like, we’re between something. But what? A rock and a hard place? Maybe. However, I sort of prefer a reference that I copped from Kurt Vonnegut, as the first chapter title of his best book: “The Sirens of Titan”. Which you should read (oh that’s right, you already have, and at my suggestion). The titular phrase is: “Between Timbuktu and Timid”, a hook that derives from the fact that the only word in Noah Webster’s Arc (dictionary) between these two is Time.

Which is what we’re between. Between Timbuktu and Timid. Between Time. I think.

Summer is flying and August will soon be dying. The world has changed more than we care to notice or discuss. This is true for all of us. It hit me in a unique way this week, when, on a magically nostalgic trip back to what once was New York City, I passed by B.B. King’s music club, at 42nd and 8th, where I witnessed many a great show (including B.B. himself a couple of times). Not only is it shuttered, the frigging building looks like it’s about to collapse. Someday, it may again become something. And if so, it is resting in rat-invested repose, on days between its glory as a premier NYC music venue, and whatever the future holds. I know it will be better than it is, but I doubt it will surpass what it was.

Last Tuesday, on my grandson James’s 5th birthday, a tornado hit in Ridgefield, CT – 5 miles from my house. I checked the records and the last documented event of this kind transpired in 1799. Stated another way, there were more than 80,000 days between twister touchdowns in this quaint corner of Fairfield County. We were without power/connectivity until Friday. When the lights finally came on, my neighbors set off fireworks, proving indisputably that there are many ways to celebrate the days between.

Meanwhile the Grateful 500 lurches upward and is on the threshold of reaching its previous apex of valuation glory. Captain (Trips) Naz continues its climb to the heavens. Government and Corporate Bonds, Precious Metals, EUR, JPY, GBP, heck, even the long-forsaken cryptocurrency complex — are all ascendant, inviting you to join them beside the rising tide.

And this is why what I want to talk about if you come with me there. I see a common thread in the form of a loss of economic power attributable to the U.S. dollar, which, over the days between the big viral outbreak and the point of this correspondence, is incrementally less effective as a unit of exchange against virtually anything for which one might wish to swap it. This sort of thing ebbs and flows routinely, and I don’t think it’s the end of dollar days by any means. Moreover, I will admit this: I have a more difficult time unpacking FX markets than I do even tying my shoes (which I rarely do).

But as a unifying theme for this multifront assault on our heretofore-much-sought-after unit of account, I see two patterns emerge:

• Despite the galactic amount that is already out there, the market is anticipating incremental oversupply of the Dead Prez.

• All of this monetary pumping has re-energized my long-held belief that there is an acute and growing shortage of supply of investible securities.

So, everything that’s not a dollar is getting hoovered up with abandon, even as the former is being shunned and ghosted at levels that no one can fail to notice.

I think this all continues for a spell. From a data flows perspective, we’re about to enter one of the quietest periods of the year. Earnings are substantially in the books. As are introductory Q2 GDP estimates. The July Jobs Report dropped on Friday, and it was, on balance, encouraging. There’s lots of political nitpicking in these realms, and we are light years away from what, in days gone by, passed for a fully functional economy. But 1.8M new gigs and a ~1% drop in the base rate are tidings for which, though not dead, I am nonetheless grateful.

And I suspect that risk assets will retain a fairly robust bid for, say, the rest of dying August. So, come with me or go alone; there’s nothing I see to stop the rising tide.

However, I strongly suspect that the markets will alter themselves dramatically by Labor Day and beyond. I don’t know what form they assume; too many unknowable path dependencies (Public Health Conditions, Domestic Politics, our simmering throw-down with China, etc.) block the view. So, I ain’t gonna make a call one way or the other.

I will, however, freely characterize the current moment as being The Days Between. And I hope we can all make the best of them. Some in my acquaintance will wallow in Jerry-land, and you have my permission to pay whatever homage to him that you see fit.

Just don’t overdo it is all. Maybe try someone else. You could, for instance, dial up a little Adele, and, who knows? She may surprise you. Go to NYC and show it some love. Avoid B.B. King’s; maybe instead have dinner on a rooftop overlooking the riverside with someone you really dig. We’ve got some things to talk about.

But as is my responsibility, I will ask, whether you come with me or go alone, to proceed with caution.

Because there are days, and there are days, and there are days between.

And these, unmistakably, are them.

Let’s use all of them wisely, shall we?

TIMSHEL

By: Ken(neth Louis) Grant

Turning and turning in the widening gyre, the falcon cannot hear the falconer;

Things fall apart; the centre cannot hold;

Mere anarchy is loosed upon the world,

The blood-dimmed tide is loosed, and everywhere

The ceremony of innocence is drowned;

The best lack all conviction, while the worst are full of passionate intensity.

— “The Second Coming” William Butler Yeats

Please join me in offering a shout out to my man W.B. Yeats, for writing maybe the best damned poem in the history of the English language. It’s a dystopian vision of a New Nativity which (one must allow) captures certain aspects of the current ambiance with eerie precision. And I don’t want to freak y’all out, but the hundredth anniversary of the piece’s original publication transpires early this November. A point at which we will obtain actionable evidence as to whether indeed the center cannot hold, the presence/absence of conviction of the best, and the level of passionate intensity exhibited by the worst.

And believe it or not, these concepts will be tested beyond the mammoth event of the 2020 election. The weather will have turned by then, bringing with it a likely a new resurgence of the force of those viral cells everyone loves to hate. It’s not like they haven’t been partying all summer, and, if the infectious disease specialists can be trusted at all, this means that matters, on that front, are likely to turn incrementally problematic within a matter of a dozen or so weeks.

And surely this will breed more socioeconomic problems, as if we didn’t have enough of those with which to contend even now. The hard fact is that in all probability, our already treacherous economic slope is likely to steepen, challenging each and every one of us — whether or not we decide, through the election, to wallow in redistribution, re-regulation and retribution.

But we’ll get to all that. Beforehand, I have a number of notions to lay upon you regarding this week’s poem of choice, the first of which is that if you haven’t read it, you should. Clocking in at 23 lines, it will tax neither your time nor your bandwidth, particularly as compared to, say, Edmund Spenser’s “The Faerie Queene” (~35,000 lines) or even “Don Juan” by Lord Byron (15,920).

If you have encountered it, read it again. Brothers and Sisters, it will do you know harm.

Our title derives from its last line. It offers a great heading on its own (which is why I’m using it). But here, I am late to the party. The fabulous Joan Didion rode it to titular glory in a book of short stories about Haight/Ashbury in the height of its magical Mid-Sixties madness.

And, in thieving it from her, I should mention that it’s one of three book titles that have driven me, as an author, to mad jealousy.

The others? Well, first, there’s “Atlas Shrugged” by Ayn Rand: a flawed book which nonetheless also captures a terrifyingly identifiable portion of the current ethos.

Then there’s William Faulkner’s “The Sound and the Fury”. I had always thought the title was a bit over the top, until I got the joke. It derives from Macbeth’s speech in Act V, Scene 5, wherein he describes life as a “tale told by an idiot, full of sound and fury, signifying nothing”.

And the first quarter of “S&F” is narrated from the perspective of the mentally disabled adult son of the family tracked in the story.

Get it? For what it’s worth, I really liked the book, which, by all accounts won Faulkner the 1949 Lit Nobel. But (trust me on this one), it falls short of the magnificence of its “prequel”: Absalom, Absalom!” which (like Harper Lee’s “To Kill a Mockingbird and the posthumously released “Go Set a Watchman”) was written afterwards.

Anyway, these are the titles I envy.

And meanwhile, to me, the early returns corroborate Yeats’ admonition, at least insofar as: 1) the center is not likely to hold; 2) the best are indeed conviction-bereft; while: 3) the worst? Well you get my drift.

It’s true in a lot of realms, right? I’m going to do my best here to avoid the obvious political parallels; let’s instead focus on the markets.

Where, at the moment the center cannot hold. In any corner of the investment universe. The dollar is in free fall. As are global rates. Commodities, particularly precious metals, are being bid to the heavens.

Much of what has transpired over the last several sessions is framed by two critical data streams: U.S. (- 33%)/Euro GDP (-40%), and Q2 Earnings. The latter of course have had pockets of sheer delight, particularly the FAAGs (Facebook, Apple, Amazon and Google), whose CEOs faced a Capitol Hill Star Chamber Inquisition on Wednesday, only to, each of them, report blowout earnings on Thursday.

All of which has kept our stalwart equity indices on the march to higher ground. And I personally believe that the fix is in for the Gallant 500 to, at minimum, test, if not shatter, all-time high valuations.

Well, OK, but don’t you find it all just a little bit odd?

However, know this my lovelies. There’s a baller of a bid out there for financial assets of every stripe, as indisputably catalyzed by all of that funny money we’ve been printing over the last decade, and particularly this year. We’ve spent a great deal of it; of that there’s little doubt. But there’s more in the till, and it will get hoovered up. Consider, if you will, that the move to record low yields on the 10 year is transpiring at a point when the Treasury Funding Gap (measuring the need to float paper to meet anticipated obligations) has exploded:

Ten Year Yields:

Treasury Funding Gap:

This chasm will close, serenely, by new issuance, which inventory-starved investors will greedily gobble. And if they don’t the Fed will belly up, because it will have no other choice.

So, what to do? Maybe what we’re supposed to channel the rest of W.B. Yeats’ masterwork:

Surely some revelation is at hand;

Surely the Second Coming is at hand.

The Second Coming! Hardly are those words out

When a vast image out of Spiritus Mundi

Troubles my sight: somewhere in sands of the desert

A shape with lion body and the head of a man,

A gaze blank and pitiless as the sun,

Is moving its slow thighs, while all about it

Reel shadows of the indignant desert birds.

The darkness drops again; but now I know

That twenty centuries of stony sleep

Were vexed to nightmare by a rocking cradle,

And what rough beast, its hour come round at last,

Slouches towards Bethlehem to be born?

I do indeed wonder about the nature of the beast currently slouching towards Bethlehem, and can conjure up any number of hideous creatures, literal and figurative, that could fit the bill.

But I’m not overly fired up to either inventory or describe them.

Just know this: from a market risk perspective, they are out there. In force. My guess is that they will impact the markets in unforeseeable ways, in the not-to-distant future.

So be forewarned. And if (when) you see the shadow of indignant desert birds, my I advise you not to ignore them.

But in these dog days of summer, I further suggest that you not to over-exert yourselves in search of the Bethlehem Beast. We’re not likely to have advance warning of his arrival, because as falcons turning in a widening gyre, we are genetically rendered unable to observe the falconer.

But when he gets here, we will certainly feel his presence.

And so, maybe, just maybe, instead of Yeats, we should focus on Didion’s version of Slouching Towards Bethlehem. There are lovely, petite, hard copy versions of this short-story compilation. I know this because I recently acquired one. Alternatively, you could listen to the audio version, through your earbuds. You know, the ones that are in the new container you now carry on your keychain?

One way or another, and particularly in your new PJs, and accompanied by your best friend, it’s an experience I can highly recommend.

And as for the rest? Well, Slouching Beasts come (and go) as they will. And there ain’t much we can do about them, except mind our business and hold on tight.

TIMSHEL

By: Ken(neth Louis) Grant

Spot Check Billy got down on his hands and knees,

He said: “Hey Mama Hey, let me check your oil, alright?”

She said “No, no, honey, not tonight,

But if you come back Monday, come back Tuesday, yeah, and then I might”

— Lowell George/Little Feat

Yeah; there’s a fat man. In the bathtub. With the blues.

Do you hear him moan? If not, maybe you should check your ears. Because he’s moaning like a motherf@cker.

In fact, many fat men. Literal and metaphorical. All with the blues. All moaning.

I would gladly count myself among them, but the truth is I’m not, or at least am no longer, a fat man. Down like > 60 big ones from my high a couple of years ago. You should see me now; you really should. But under the circumstances, I reckon it’s not possible.

I moan nonetheless. In part for all of the moaning fat men. In all of the tubs. Across the entire world.

In extending out from last week’s theme, it should be noted that the world’s second ever militarized nuclear weapon, dropped on the moaning Japanese city of Nagasaki, was also named Fat Man. But the 75th anniversary of that shindig isn’t until August 9th. So, perhaps we’ll revert to the subject in a couple of weeks; perhaps not.

Meantime, midweek, at least to me, the Gallant 500 looked like nothing so much as a bunch of fat men, not moaning, but bellowing, with bodacious bluster. And why not? They had waddled their way to positive territory for the year, and within a skinny 100 handles of all-time-peak valuation. Fattened their fat @sses through Thursday’s open, but then, presumably, fatigue set in. Which will happen to fat men.

Those that bought in around the Thursday mid-morning high of 3280 took something of a bath.

One has to feel sorry for fat men these days, because in addition to the shade they routinely throw across the sunlight, mad shade is being thrown at them, from every direction. And all they can do is take it. And, maybe, jump into the tub, apply some Mr. Bubble, and start bellowing out the blues.

And I suppose that now is as good a time as any to say a sad farewell to one Peter (Greenbaum) Green, Founding Member of Fleetwood Mac, and a leader in the long line of great Jew Blues guitarists. Actually, there aren’t a great deal of them, but the cupboard is, on the other hand, far from empty. There’s the great Mike Bloomfield, for instance (also dead). And I think that you can justifiably throw Mark Knopfler on the list, not to mention Mountain’s Leslie West, and of course, my all-time fave: Jorma Kaukonen, of Jefferson Airplane/Hot Tuna fame. As probably the biggest JA/HT fan you’ll ever meet, I’m here to tell you that you should check Jorma out. But you probably won’t. And as us Tuna-heads are fond of saying: “if you don’t know Jorma, you don’t know Jack”. There’s a pun in there, but you’ll have to discover it yourself.

Back to Peter Green, though, for a second, who shed his mortal coil on Saturday. First, most of you probably don’t know what he looked like, which is this:

Kind of Christ-like, no?

I was pleasantly surprised at the notices his demise received on the wires. He was, after all, the forgotten Macster. Split before all of that Buckingham/Nicks Hollywood BS catapulted their latter-day, smarmy pop to fame and fortune. Green spent those years in relative anonymity. But never disappeared altogether. He made his mark.

And, for the purposes of this publication, it should be noted that while could belt out the blues with his throat and axe like few other Jews alive, he wasn’t a fat man. In fact, in perhaps his best-known piece, a blues tune called “Oh Well” that you should definitely check out, he admits as much himself:

“Don’t know about the shape I’m in, I can’t sing, I ain’t pretty and my legs are thin.. Don’t ask me what I think of you, I might not give the answer that you want me to”

But now he’s gone, and it devolves to the rest of us to attend to the myriad problems that plague us.

As for me, I think we’re in a bubble. I’m not suggesting that it’s going to burst immediately. But eventually it will, as it must. The physics of the situation pretty much dictate that bubbles explode at their maximum achievable point of expansion, and we may not be there yet. But this bubble is filling up with a range of menacing, terrifying, gaseous risks that cannot expand it much further and still allow it to remain intact. And, as I did when this whole mess began (an unthinkable trimester ago), I am taking the liberty of summarizing them in the following table (note: all observations are intended to reflect market impacts; not the views and opinions of the recently unmasked author of this publication).

A Read ‘Em and Weep Inventory of Prevailing Risks

I could go on, but presumably you get the idea. The squeaky-clean fat man is moaning up a storm, and something in the markets has gotta give, right?

On the other hand, there’s trillions of dollars of under-deployed cash – at Treasury, the Fed, and yes, even in those institutional investment accounts and (astonishingly) personal savings accounts. Piles and piles of paper bearing the images of American fat men from days gone by. And if that’s not enough, as indicated above, borrowing is so cheap, that they’re almost begging you to do it. As one example, thirty-year mortgage rates hit an all-time low this past week:

Please Ignore the Wording in The Upper Left and Note the Path of 30-Year Mortgages:

Between this and the delicious goodies sure to come next week in the form of Stimulus 3 (in which episode Congressional members seek to outflank one another in an hysterical effort to deliver to tastiest package they can to the electorate, before exiting – stage left – to their districts, for a wheezy, tepid, victory lap) there’s cause for optimism. I’m pretty sure that the market’s gonna be happy with the bill, because, after all, what fat man worth his cellulite doesn’t like free candy?

Still and all, investing at these levels reminds me of nothing so much as taking plunges for small change, and, like Lowell George tells us in this week’s song: “don’t want nobody who won’t dive for dimes”. And I don’t. Want nobody who won’t dive for dimes, that is.

And dimes, insofar as 10 of them equate to a single unit of our fat, flabby unit of account are moaning as well. The Dollar Index, in case you hadn’t noticed, is absolutely getting bitch-slapped this last while:

DXY: Fat Benjaminz Taking the Plunge:

And it’s not just against other bloated, misogynist currencies that it is being bested. Commodities of virtually every stripe – Grains, Oils, Energy, Softs, Precious Metals, Industrial Metals, and the like, are all regaining some long-lost mojo.

Heck, even our portly, porcine pets – Live Hogs — have managed to gin up something of a bid in the last few sessions. Perhaps this is due to the new rules being put in place in certain urban jurisdictions, demanding that specific forms of food be served to every thirsty tavern patron within city limits. Chicken  wings didn’t make the cut, but it’s a fair bet that hog jowls did.

So, let’s dime-dive, shall we? It’s a little bit like day drinking. It’s not the sort of thing of which you perhaps should make a habit. But on the right day, with the right company, it can be pure magic. Let’s just make sure we contemporaneously fill our bellies with government sanctioned sustenance.

And, by Thursday morning, we may be famished anyway, as, at 8:30 Eastern, the Commerce Department is scheduled to offer up its first morsel of information on Q2 GDP. Current consensus estimates are for a drop of 35%, which I gotta guess is a significant record plunge. Better fill our bloated belies and our body basins while we still can.

I’m filling the tub right now, and ask you to please jump on in with me. The water’s a bit hot, but we’ll get used to it, and my oh my, won’t we be cozy in it together?

If you’re answer is no, I hope it is followed by a hopeful, thematic: come back Monday, come back Tuesday, yeah, and then I might. In fact, I’d like to lock down Tuesday.

Beyond this, a good deal of the dive diming this coming week will likely be driven by earnings. It ought to be interesting, given that this week’s roster of fat men at the podium include the fattest of the fat: AMZN, GOOOOOOOG, FB, AAPL, which, along with MSFT (which reported this past week), command an astonishing 22% of the heft of the Gallant 500. A single set of software, hardware, social media, e-commerce and internet search engine companies hoover up all but 78% of what comprises our benchmark index.

That’s a lot of flabby virility in the bathtub, my loves, leaving < 80% to be split across the rest of the private economy. You know? The part that feeds, shelters, heals, transports and clothes us? They’re all in wet, tight quarters.

So, if the fat men are moaning, they come to do so honestly.

Like I stated above, I’m moaning myself. And you know the reason why. Eventually, we’ll all have to get out of this damned tub, dry ourselves off, and get to where we have to go.

Though it is wrought with peril, I remain determined, and particularly look forward to walking my thin legs to our divine, final destination.

And in conclusion, as Peter Green(baum) might say about all of this: “Oh Well”

TIMSHEL

By: Ken(neth Louis) Grant

“Now we’re all sons of bitches”

— Kenneth Bainbridge (Test Director, Manhattan Project)

Yeah; I figure I’ll roll with this whole modified byline thing. At least for now.

Meantime, 75 years ago this past Thursday (7/16), Robert Oppenheimer and a team of physicists from the military and academia successfully detonated the world’s first atomic bomb. The location was tower in a forlorn, godforsaken spot in the New Mexico desert. At 5:29 a.m., Oppenheimer pressed the button. The tower vaporized in tremendous explosion. When the dust settled, all that was left was (no lie) fine green glass. Bainbridge uttered his famous phrase. Yes, we were all, from then on, sons of bitches.

And the world was changed forever that day. Less that 3 weeks later, Truman dropped “Little Boy” and “Fat Man”, respectively, on Hiroshima and Nagasaki. Eleven days after that, Japan surrendered to the Allies. And, son-of-a-bitch: World War II was over.

As I’ve written many times, for the next 75 years (1945 – 2020), the West – particularly America – enjoyed an historically unprecedented era of peace and prosperity. Yes, there were problems aplenty. Korea. Vietnam. Watergate. The Energy Crisis. AIDS. 9/11. The Crash. And, of course, that misguided film production of Sgt. Pepper’s Lonely-Hearts Club Band, starring Peter Frampton and the Bee Gees.

But compare this experience to the preceding three generations (1870 –1945). Two World Wars and a Great Depression. The emergence of communist dictatorship in Russia and China. The Spanish Civil War. Other stuff. Or the 75 years before that (1795 – 1870). The American Civil War. The French Reign of Terror. I could go on. Or further back. But must I?

So, I hold it as resolved that virtually all of us within the ranges of these pages have lived in sweet times. And long before this newly emerging interval of (at least on a relative basis) uber buzz kill, I’d wondered if it was sustainable. History would suggest not. History suggests that we’ve been playing with house money for longer than we had a right to expect.

Have our house chips now run out? We don’t know for sure, but it’s a reasonable bet that they have. That we’re in for a much tougher slog from here on in. I’m not saying we are, but man oh man, don’t the air feel heavy in our lungs lately?

And if our fabulous innings in the sun were only meant to span 75 years, if we are indeed re-normalizing the human experience back to its long-standing protocols of folly (which we never lost), disease, disaster and the like, then the ironies of comparison between the end of our golden era and our re-entry into grim, historical reality, are notable The Manhattan Project was the “writ large” manifestation of the tremendous impact of the universe of particles and sub-particles, interacting with one another, in close proximity. Then, as now, they can, and beneath our eyes, wreak unspeakable havoc on the masses. And as it goes with atomic (and subatomic) particles, so it goes with viral cells. In 2020, as in 1945, the core of the destruction cannot be seen by the naked eye. Perhaps it was ever thus, as, to lift a quote from one of my heroes: William Makepeace Thackeray “when sojourning among savages (who are out in force of late), man fears the mosquito more than the lion”.

Kind of has a ring of authenticity to the present day, now, don’t it?

But I reckon we have no choice other than to gather ourselves – perhaps under the titular banner of a New Manhattan Project. And if we do, we may just want to consider starting with Manhattan itself, which (along with the other four boros) is a hot mess at the moment. Worth a try? Well, remember, the original MP ushered in 75 years of conditions, for which, at the moment, we can only pine.

The markets carry on, seemingly untroubled by it all, and this renders me concerned that we lack the conditions needed to jumpstart New Manhattan. Consider, if you will, that the original project emerged as a desperate race against Hitler to develop nuclear weapons. He was close, you know, and does anyone really doubt that: a) he might’ve won; and b) had a) transpired, he would’ve lost even a moment in lobbing his own Fat Boy (Fetter Junge) over New York, London and Moscow?

But so long as the markets carry on as they have, largely untroubled by the declining economic conditions unfolding before us, said urgency is in short supply. And they have. Carried on serenely that is. This past week, the Gallant 500 waltzed briefly into positive territory for the year, before getting winded and settling at a still astonishing -0.19% year-to-date. Its dance partner, the lovely Vixen VIX, met its every step in the opposite direction, with Ginger Rogers aplomb, registering its lowest levels since late February, when everyone thought covid would play out as little more than a pesky but minor annoyance.

And this pair was hardly the most joyous at the ball. Record issuance and credit problems to beat the band notwithstanding, Investment Grade Debt baskets now trade at all-time records, and are annualizing at fat double digits for 2020:

But (of course) all of these hoofers have been forced to yield the floor to Captain Naz, which preens and prances from one record high to the next and is annualizing at 25% in what we might at some point characterize as the investment equivalent to the Grand Ballroom on the Titanic.

And all of it brings to my mind nothing so much as images of a financial particle collider/atom smasher, just being rolled out for testing purposes, like those original MP prototypes developed under the football field at the University of Chicago’s Amos Alonzo Stagg Stadium in the early ‘40s. On one side of the machine, we’ve got decades high unemployment, record debt, no visible way out of the Public Health Crisis for, at best, several months, and (likely) years ahead of economic impairment. On the other, we have, to date, $6 Trillion of stimulus.

Note that the latter is all additional debt of one form or another. Thee $3 Trillion CARES Act is financed by incremental Treasury issuance. The other $3T of Fed Balance Sheet expansion is funded by the creation of new fiat currency, which is nothing more than a promise by our government as to its validity to meet any and all future obligations. If you doubt this, just bust out your wallet and look at the fine print that accompanies the images of those recently criminalized icons of our past: Washington, Lincoln, Hamilton (?), Jackson and Grant. Take a look. It’s there on the left.

So, what I observe is a policy approach under which, to address the increasing fundamental insolvency we face, we just borrow more. And why not? It’s been tried before – not just by governments but also by businesses and individuals. And once in a blue moon, it’s actually worked.

But know this: these mega particles are certain to both expand, and, ultimately, to collide. There will be vaporizations, and maybe even some green glass. And we just don’t know what else, but it will be fascinating to observe in its unfolding. Particularly if, as a nation, we choose this (dubious) moment to correct nearly 2.5 centuries of perceived social injustice, aggressively redistribute our (dwindling) resources and wealth, rewrite our history so as to throw mad shade on our forbearers, limit the words we say and the stories we tell for fear of offending someone, etcetera, etcetera, etcetera.

I want you to know that I recognize my critical role in guiding us through this once-in-a-lifetime change in conditions. I know you are there with me, and this is what gives me strength. Though we are small compared to those stars we gaze up at in the Northern Skies, together, we will be too many for them. We just gotta get through it is all. For better or worse. For richer or poorer. In sickness and in health. Till death do us part.

But we gotta tread lightly, fearing the mosquito more than the lion. As was the case 75 years ago this week, we’re all sons of bitches now. But it’s not like we ever shed this designation. Maybe every 75 years ushers in a new era, and if so, then maybe this one has just begun.

I think there are worse concepts with which to commence than a New Manhattan Project.

And if this notion does take hold, all I ask is that you remember where you first encountered it.

TIMSHEL

By: Ken(neth Louis) Grant

Like the pine trees linin’ the windin’ road, I’ve got a name, I’ve got a name

Like the singin’ bird and the croakin’ toad, I’ve got a name, I’ve got a name

And I carry it with me like my daddy did, But I’m living the dream, that he kept hid,

Movin’ me down the highway….

— Jim Croce

I figure that the time has come for me to formally introduce myself. I’ve been posting these here notes on a number of forums without a byline for quite a while. But that’s over. At least for now.

So, like lining pine trees and singing birds, I got a name. It’s Ken. Ken Grant. KG. Kenny G if you must. My given name is Kenneth; my middle name is Louis. After my great grandfather Louis (Louie) Goldstein, born in the UK to Lithuanian immigrants. Genetically, he was 100% Litvak, but actually spent the first few years London. Eventually, he and his family bounced to Chicago. Made some dough, though (alas) in magnitudes generationally in sufficient to pass to me.

But Litvak Louie never forgot is British roots, and is not remembered, over the last forty years of his life, to have been ever seen without his top-hat, spats and cane.

Crazy motherf^cker, that Louie Goldstein. I wish I had actually had the chance to meet him.

But he was my mama’s mama’s daddy, so I’ll carry my name like my great granddaddy did. More than this, I can honor him by channeling him. And I do. So much so that I have recently contemplated my own pretentious affectation. Specifically, rather than calling myself Ken, or KG or Ken Grant or even Kenny G, I’ve been thinking of embracing my full-on handle of Kenneth Louis Grant.

Kind of trips off the tongue elegantly, right? Has a certain savior faire, no? Plus, I’d be following in a proud tradition of tri-nomenclature guys. Think John Maynard Keynes. Or Edgar Alan Poe (disregard Lee Harvey Oswald and Kim Jung Un). Or maybe even David Lee Roth, who (I recall reading and for reasons that I hardly need to explain) has recently felt compelled to drop the Lee.

I am able to offset Diamond Dave by featuring my own middle name, but I can’t do this alone, so I put it to you, my readership, as to whether I can pull it off. Fair warning, though: I’m not sure that even if I receive overwhelming support for the concept, that I make this move. Because. (maybe). I. Just. Can’t.

I will, however, carry forward with my manic market commentary, come what may. It was a modestly but pleasingly “up” week for the Gallant 500, but you know who’s really balling out? Captain Naz, gaining another 4% to yet another (yawn) all-time record.

Other than this, markets are by and large quiet; (everybody say it with me) too quiet.

But if you’re looking for some action (and let’s face it, who isn’t?) it may be worth examining a couple of linked financial instruments, because they be ballin’ too:

Copper and Tesla: Can’t Have One without the Other:

I’m gonna do y’all a favor and skate by the assertion that the rusty colored commodity, up nearly 50% since the covid invasion, is having a MUCH better year than the beleaguered public servants that share its appellation. But even the stuff that they use to stamp out those economically obsolete coins that feature the image of that once-in-a-century hero who, in the current cycle of madness, has somehow been demonized as a racist/war criminal, is sucking wind in a comparative sense. Particularly relative to that ubiquitous electronic vehicle company, which has registered more than a three bagger in this funky year.

You probably know this, but it actually takes a massive amount of copper to roll out a Tesla – approximately 20 kilograms (had to go metric here, because the shorthand for kilos is – KG). Clearly, Team Musk is on the bid side, but who in heaven’s name is buying the rest of the stuff?

And, for that matter, who is buying anything these days, particularly for risk assumption purposes? Because this KG says that there is a galactic amount of risk in the market at the present moment.

I’m not trying to argue that we’re about to crash, because I don’t think we are. But the world, our lives, do not seem to reflect the arguably grim. realities of the economies we face. And I am pretty certain that it’s all gonna change fairly dramatically, and soon. I hope for the better. But getting there will take some work on our part. In all likelihood, we gonna have to suck it up for a spell.

And I look around in disbelief at the calm before the impending storm. Hundreds of thousands of businesses are functionally insolvent with little or no remedy in sight. Millions of jobs have been lost and many more millions more are at risk. 25% of NYC renters have been squatting since March. Brooks Brothers just filed. The latest trends suggest, at best, a Mexican Standoff with Corona Corona. If schools don’t open this fall (and they may not), my God; I don’t even want to think about it.

Alas, I fear I must go on. This past week the frigging Supreme Court effectively handed half of the State of Oklahoma (including the great city of Tulsa) to the descendants of a slave-owning, Confederacyaligned tribe of Native Americans. Ought to be interesting to see what they do with that gift. My guess is that they will expand their reach and go after the Hamptons, upon which the tribes have an arguably stronger claim. I suspect, though, that the woke and powerful will exert greater and more effective pushback on that landgrab. Because, let’s face it: who that matters really cares about Oklahoma? But the East End of Long Island? Jurisdictions such as Sagaponack? That, my darlings, is sacred ground.

And though lord knows I hate to point this out, sh!t is getting more real by the day in the realm of political risk. Biden put out his economic platform this past week, and, while there were few surprises, its content nonetheless bears reviewing through a market lens. Of course, he plans to top off taxes, restore the corporate income rate back to 28%, and capital gains to a big fat 40. If you’re me (Kenneth Louis Grant), you wonder how this will play out in restoring an economy that’s looking at extended period double-digit employment. As well as massive insolvencies, which won’t shrink with higher taxation.

The ratio of American debt (public and private) to GDP is currently on pace to top 350% in 2020. And the Feds (who can print their own money) are only about a third of this. The rest is owed by states, cities, corporations and individuals. Even now, there’s no bread to pay more than a small portion of it, and, if the election goes the way of the blaring consensus, government entities will grab a much greater share of it: as much, in fact, as they can. They will justify doing so, in purely rhetorical fashion, as a means of exerting fiscal responsibility, and of course, of helping the less fortunate. But if history is any guide, these funds will most likely disappear into a black hole. Then they will ask for more.

Of course, Biden’s program goes on from there. This week, in an interview with Yahoo News, he made the following observation: “It’s way past time we put an end to the era of shareholder capitalism”. He’s now formally endorsing Universal Health Care and the Green New Deal. Combined price tag should run to about five years of current GDP or more. But that’s current GDP; before the dilutive impacts of Biden’s restrictive, redistributionist policy. So, if he wins, GDP drops. Hard. Case and Point: the two sectors ear-marked for political obsolescence (Health Care and Energy) account for more than 20% of it.

With the guy now being a nearly 2:1 betting favorite to take the prize, one wonders, as an investor, what could possibly go wrong? At least he has not (yet) pledged in writing to dismantle the western notion of the nuclear family. But interest group that holds the greatest sway in this fair land, whose logo the Mayor of New York took time out of his impossibly busy schedule to paint onto the street below the President’s primary urban residence, has identified this as a core objective of theirs. It makes me scared. And sad.

And a bit crazy. So much so that in the last week, I actually broke the stems off of two pair of glasses that I actually use to see where I’m going. There are those that prefer me without them, and god bless them for the sentiment. But I promise you that as a risk manager, the world is a safer place when I am able to wear them. Let’s not add my bumping in to walls and running over pedestrians to our list of worries; OK?

Meantime, a brighter light on the investment horizon (at least insofar as I can make it out in the distance) is the continued (so far effective) cycle of monetization of all risk instruments by Central Banks. Yes, my loves, the cash from the magic money printing machines continues to flow serenely across the globe. And a lot of it has yet to be deployed. And I see no other feasible outcome than a continued bloating of fiat currency, with proceeds applied to burnish the investment viability of financial instruments

Thus, the Irresistible Force of infinite borrowing will at some point, maybe soon, meet the Immovable Object of equally unlimited money supply. It will be like nothing that has transpired in about three thousand years of money-based economics. And we don’t know how it will play out. Not in the least.

And all we can do is move ourselves down the highway. Carrying our names, like our daddies did, like Jim Croce did till his plane went down. Like my great grand-daddy, Louie Goldstein did, with spats and cane. So, I reckon it’s time for me to roll (my spat-less, hat-less, cane-less) carcass down the road.

What name I carry with me is, again, for you to decide.

TIMSHEL

You who choose, to lead must follow,

But if you fall, you fall alone,

If you should stand, then whose to guide you?

If I knew the way, I would take you home

— Jerry Garcia and Robert Hunter

Why, for the umpteenth time, did Jerry subcontract the lyrics out to Hunter? It’s the one question I would ask. Plainly, he had a bunch to say for himself, and magnificent melodies for the conveyance of such expression. But in terms of the verbal message, he let Hunter speak for him.

I wonder why.

I reckon, now, we’ll never know.

It’s not that Hunter wasn’t a good lyricist; he did indeed write some timeless verses, and “Ripple” certainly stands out among his finest.

And I figure that on this here holiday weekend, busting them out is about as good as anything I got.

We’re now halfway through the agonizing slog that forms the 2020 narrative, with much, absent a dramatic reversal of fortunes, to vex us in the six months that remain.

But, returning to Hunter’s “Ripple”, halfway through the year, I have the following question: Is your cup full or empty?

And at this point I ask, nay, demand, that you who choose, to lead must, if not follow, then at least show your faces. Masked or otherwise. Because I honestly can’t see them at all. Not in the White House. Not on Capitol Hill. Not in any basement in Delaware. Not on Wall Street. Not on Main Street. Not in Hollywood. Not on the coasts. Not in “flyover country”.

I’m pretty sure you’re out there you but choose to keep hidden. I suspect you have your reasons for doing so. And one of them may very well be that, contrary to Hunter’s prognoses, if you fall, you have no intention of falling alone. Nay, I have a hunch that you intend to take the rest of us down with you.

You may very well succeed.

But since you remain hidden from sight, it devolves to the rest of us (mere mortals) to determine whether our cups are full or empty.

The markets, as always, give clues. But they are, at best, ambiguous ones.

At the turn to the second half, the Gallant 500 has yielded abo is up double digits and, as of Thursday, has yet again captured new high ground. Treasury Yields reside at a little over 1/3rd of where they were when the ball dropped in Times Square. For the last time? Whose to say? In terms of this year’s Times Square festival, I’ll take The Under.

And, for what it’s worth, I’ll also still take The Under on the forward path of Treasury yields.

Lean Hogs are trading at half of what they fetched when we slaughtered them, stuck apples into their mouths, and roasted them, last Christmas.

As Othello said of an encounter with his falsely accused wife “t’was strange; t’was passing strange”.

And, one wonders, how did we get here?

Well, to begin with, the worst Public Health crisis in a century snuck up on us – I’d like to say unawares but the truth is we had a measure of warning. It idled >30 Million workers and >25% of the economy. Whole industries were crippled (c-rippled?) and some may never fully recover.

And it ain’t over yet.

The paymaster/string pullers in Washington responded, with nearly $10 Trillion in relief: fiscal, monetary and credit based. The markets (except for the Hog buyers) liked this very much.

Then, just when we thought that maybe, just maybe, we could sneak by as a nation, a heinous murder in Minneapolis sent us into full-on emotional tailspin. Call it a national nervous breakdown. Cars, buildings, entire neighborhoods went up in flames. The politicians, in perhaps justifiable fear of the angry masses, by and large looked the other way. Police forces across the country are being disrespected and, in some cases dismantled outright. What could possibly go wrong?

As July 4^th comes and goes, Mount Frigging Rushmore is under attack, as is the owner of its least prominent visage (Teddy), the guy he lost to when he tried to recapture the White House in 1912 (Woodrow), and (among others) that long-maligned voyager (Christopher) who sailed in the wrong direction and stumbled on the Americas, opening them up to those evil, well-established European empires that spawned this country.

The custodians of Ohio’s capital city, now the nation’s 13^th largest with a population greater than Cleveland and Cincinnati combined, is moving towards a name change. Popular consensus points towards Flavortown – in homage to the jurisdiction’s status as the pre-eminent location for consumer product testing. You know, those new creations of criminal, exploitative capitalist enterprises, which, if they pass muster in what is still Columbus, are rolled out to the greedy delight of the nationwide masses?

Back to Othello: “T’was pitiful; t’was wonderous pitiful”.

And as for Mount Rushmore, it is now a symbol of our felonious imperialism, resting, as it does, on indigenous ground. And I ask: indigenous to whom? Was it not fought over for centuries among native factions, before we even arrived? Answer: It was. So, who do we give it back to after we explode Wash, Linc, Jeff and Roos off its façade? More importantly, who gets to decide?

And, in general on this holiday weekend, the noisy consensus is that we should feel, not pride, but shame, in this country’s history and heritage. More than this, anyone who suggests otherwise risks outright ostracism (or worse) in many quarters.

Make of it what you will; the din of words, to my ears, fail to glow with the cold of sunshine, but rather resonate like those tunes played on Hunter’s harp, unstrung.

However, all things considered one would have to concede that under the circumstances, markets are holding up pretty well. Equity and credit securities are enjoying a sustained bid; companies are raising capital of all forms– in record amounts, and investors are greedily hoovering all this paper up. We’re still in a form of virus hell, but the markets seem to neither know nor care.

So, at mid-year, is the cup empty, full, or somewhere in between?

Well, in my judgment, this is one of those situations where the answer will only be visible in the rearview mirror. My highest conviction clairvoyance (such that it is) suggests that the landscape will, impossibly, alter as much in the second half of 2020 as it did in the first six months. Come New Year’s Eve, an empty Times Square may be the least of the noticeable changes with which we will have been compelled to contend.

And, given this, what in heaven’s name, is a risk manager to do about any of it?

If I knew the way, I would take you home. But I don’t, and my best advice is to view your exposures as myopically as you are able. Every month, every week, looks different than the last, and this inertia of opacity is, in my judgment, likely to sustain itself. Get ready to move your books around, and to do so in a hurry, because, more than once, more than twice, it may become necessary.

And it won’t be easy. Any more than moving houses is. Or saying a stern, final, goodbye to someone close. But we must look to the future and the promise it holds. I know you can do it. Again, and again.

I will help you any way I can. And I won’t be alone.  As I’ve stated repeatedly in recent weeks, the Fed has taken ownership of this market, has plenty of dry powder, and cannot, politically or rhetorically, allow it to collapse.  Their tools are vast but finite, and, while they can alleviate the symptoms, they cannot cure what ails us. But they can and will help us feel better, and maybe even capture some incremental return – for a time. We should seek to do so.

I do believe that we’re near the top of the range – in terms of equity and credit – and that the risks, for the moment, tilt to the downside. But there is so much cash waiting to pounce – even without further Fed largesse — I don’t think markets will fall far on any downdraft. For now.

It will be easy, though, to get carved up pretty good in these riptides.

So, let’s instead, though, call them ripples. The waters are not still, and while no pebbles are being tossed, there are boulders aplenty. And the wind is blowing up gales.

And, in conclusion, I encourage you, like Hunter, to reach out your hand, if your cup be empty. More than this, I hope that if your cup was full that it may be again.

But therein lies the problem. I have no idea, at this strange mid-year, what the cup holds, or, indeed, if it holds anything at all.

And with that, I take my leave, offering, as always, my heartfelt wishes for…

TIMSHEL

I hear some people, tryin’ to talk me down, bring up my name, pass it ‘round,

They don’t mention, the happy times, they do their thing, I do mine…

Oooh baby that’s hard to change, I can’t tell them how to feel,

Some get strong, some get strange, Sooner or later it all gets real,

Walk on……

— Neil

This week’s note is not, per se, about Neil. And not at all about Bob.

But I got so much love from the teeming millions that comprise my readership for last week’s tribute, we’re on such a Neil roll, that I figure we may as well pick up where we left off.

The lyrics supplied above are from a song that served as Neil’s salvo — in a gentlemanly, rock and roll throwdown between him and that flaming, gone-but-not-forgotten ensemble: Lynyrd Skynyrd.

Neil started it, albeit in a very non-ad hominem way, by throwing shade at denizens of the South. He did so, twice, in fact, via “Southern Man” on “After the Goldrush” and “Alabama” on “Harvest”. In each case, he did not, could not have, intended any offense to Skynyrd itself, because, at the time, the band had yet to be formed. But Skynyrd came back at him bigly, with their first massive hit: “Sweet Home Alabama”, which admonishes Mr. Young to remember that southern man don’t need him around anyhow.

So, Neil responded, in a pseudo-apologetic manner, with “Walk On”. And it all seems to me like nothing more than good fun. From a simpler, civiler time.

But this note isn’t about that. Instead, it references the soul-crushing announcement, released earlier this week, that on July 15th, Chinese manufacturer Ninebot will discontinue the production of that ubiquitous, essential, iconic mode of transport: the Segway. Our cold war with China just went nuclear.

If you’re like me, it’s hard to remember what life was like before that two wheeled-locution machine arrived on the scene, and equally difficult to imagine how our existences will be transformed once the last of them bad boys rolls of the Assembly Line, on Bastille Day +1. How did we, how will we manage to get from Point A to Point B? I reckon we will be compelled to rely upon our ever-fallible memories, and, if mine serves, it seemed as though most of us traversed short distances by pushing off one leg after the other, in unidirectional sequence – a concept which is referred to by us rustic rubes as walking.

Well, America, what goes ‘round comes ‘round; what’s old is what’s new. And yes, it’s time to walk on.

And, using, perhaps for the last time, my Segway as a segue, markets will also need to get their walk on.

Only lately, they’ve been walking backwards. And not just some, but in fact most, of them. Last week, the Gallant 500 yielded an ignominious 3% of territory in the wrong direction, as did its comrade indices. The Fed Balance Sheet contracted — to the real-money tune of nearly $100B. 10-Year yields plunged across the globe. The Slovakians and the Swedes (yes, the Swedes) are again paying their governments for the privilege of funding fiscal operations (i.e. negative yields). And as for rates in the U.S.?

They are in fact at three-month lows, down an astonishing 27 bp from where they traded during those more hopeful times earlier this month; positioned a skinny 0.08% above where the depths to which they plunged during those terrifying days around the Ides of March.

I myself had in recent days walked back my call for negative rates here, mostly because I had been wrong. Right at this moment, though, I’m thinking it may be time to walk back my walk back.

Live Hogs? Well, you didn’t ask, but as I have shown the poor taste to bring them up, I regret to state that even after last week’s loving tribute, the commodity dropped another 10%.

Now, as everyone knows from the two decades that we spent rolling our Segways, if one wanted to retreat, all that was required was to lean backwards. Walking backwards, it strikes me, will requires some serious retraining.

But one might legitimately inquire: why should the markets be doing it at all? Walking backward, that is. Published reports point to a resurgence of the covid buggers, and, likely, this is indeed among the causes. But: 1) the spikes were always inevitable as attendant to more testing and re-openings; 2) the loci of the surges feature relatively low denominators; and 3) there is undoubtedly a great deal of political manipulation of the trends (Cuomo quarantining visitors from Texas and Arizona is a particularly rich example; all Cuomo-quarantine target states combined have lower case/death rates than NY).

So, I think other factors may be at play, and perhaps as good a place as any to begin is in the earnings dynamic. It’s all quiet on that front, but shortly after the 4th, when >320M patriots set off legal fireworks to celebrate the true greatness of this country, the silence will move to crescendo. And the trends, from a guidance perspective, are far from encouraging. A record number of companies have begged off on these projections, and those with the stones to actually offer their thoughts overwhelmingly shade negative:

However, this information is not incremental from, say a week ago, at which point valuation trends suggested that investors were in a generous, mulligan-granting mood with respect to Q2 earnings, and, perhaps, for those of the entirety of 2020.

Thus, while I hate to set foot in these realms, my gut tells me that investors may well be starting to prepare for the possibility of an election outcome, which, whatever one’s views may be, and whatever righteous benefits it may bring, will be devastating for the capital economy.

Again, I truly hate to do this, but my pledge to you, my readers, is to call ‘em like I read ‘em. And I think these fears are more than justified.

Because under certain voting outcomes, we’re looking at an all-out market rout.

The “reasonably reliable” betting markets now project out not only a Biden victory, but also a recapture of the Senate majority by a Democratic Party that is increasingly co-opted by a progressive movement bent on reshaping affairs in a manner that is not likely to be accretive to most portfolios. Some of what they wish to do will be highly unpopular (more about this below). They know this, and therefore will act very quickly – putting in irreversible measures at a frenzied pace, to ensure that the (under normal protocols, likely) rout they will face in 2022 cannot undo the changes they contemplate.

Their first move will be to kill the Senate filibuster, bestowing upon themselves a super-majority by virtue of as little as a one-vote margin in the Upper Chamber. Anyone who doubts that this is on their minds should read recent comments from (historically) moderate Senator Chris Coons (D, DE), who now seems eager to lead this assault on this 240-year construct of checks and balances.

Once this action is complete, it’s pretty much open season for the progs, and already there are strong foreshadows of the contours of their strategic plans. Just this past week, Democrats in Congress passed a bill granting statehood (and two new Senate seats) to the District of Columbia. The Bill, of course, is DOA in the current Senate, but if the Dems sweep and eliminate the filibuster, it will be a turkey shoot.

There are few jurisdictions anywhere in the galaxy whose constituents are more over-represented than D.C. They pretty much get anything they want from the Federal Government, much of which is denied to the rest of us. The two Senate seats are not, per se, for their benefit, but rather intended to buttress a permanent majority that their (politically aligned) paymasters are targeting. Puerto Rico may be next.

Imagine, then, next spring, a political environment where the Presidency, the House, and the Senate (as enhanced by 4 newly created seats controlled entirely by one party and the removal of the filibuster) are all in the hands of the Dems, who then can enact any and all elements of their P/L-dilutive agenda.

Their next move may very well be to pack the Supreme Court. Add, say, six seats, which will eliminate that most important check and balance: Separation of Powers. Grant immediate citizenship and franchise to millions of beholden immigrants. Expand entitlements, so millions more voters are incrementally reliant and obliged to their (taxpayer-funded) largesse. Enact a wealth tax? Sure. Reparations? Slam dunk. Wall Street Transaction Tax? Oh boy, when do we start and how much can we ding them for? Expand regulations broadly? Natch. Kill the Energy Sector? Socialize Health Care? Done and done.

If this plan (which may or may not work but is certainly out there) goes into effect, then the U.S. will be no more of a two-party country than California is as a state. Or New York is as a city. And, if all goes according to script, there’s nothing – in 2022, or 2024, that the rest of us will be able to do about it.

And markets will crash – perhaps permanently – in the wake of this. I’m not gonna lie: these contingencies worry the stuffing out of me. Yes, I’m paid to fret, and to make sure that everyone else (at least occasionally) does the same. I’m just asking my readers to consider my view that that this scenario is both realistic and concerning.

Because trust me on this: if anything along these lines transpires, you’re not going to want to own stocks. Or bonds. Or Real Estate. Not with the country and the world in a massive debt bubble, contending with a cryptic and stubborn pandemic that has shown few signs of having run its course, and which has already taken a huge bite out of the global capital economy. Overlay higher taxes, redistribution, punitive regulation, etc. and you should get the picture.

To top it off, we won’t have our Segways to motor us away from the mess.

And I suspect that some of this agita may be working its way into the markets, in the form of elevated risk premiums. Moreover, if I’m right on that score, then market conditions will surely get riskier ere they becalm themselves.

But I reckon all of that is in the hands of the Good Lord, who acts in mysterious ways. Skynyrd never did respond back to Neil, but perhaps that’s because half of the band died in a plane crash not long after “Walk On” was released. I don’t think that there were many hard feelings anyway. If you google images of Ronnie Van Zandt, you will often see him wearing a Neil Young “Tonight’s the Night” T-Shirt.

When that plane went down, it was on its way to a show in Baton Rouge that I had reservations to attend (no lie). Everyone said to save the unused ticket, as it would be worth a lot of money someday, but I didn’t, and I was wrong not to. Because in 2008, the surviving members of the band held a show on the LSU campus — to commemorate the 30th anniversary of the crash, and in doing so, chose to honor those original 1978 billets. I otherwise occupied at the time, anyway, attending to (among other matters) the fallout from the last market crash.

The original owner/designer of the Segway, Jimi Heselden, drove one of his machines off a cliff and to his own death, nearly ten years ago.

But all may not be lost. At least not yet. On a brighter note, while the Fed has indeed contracted its balance sheet, what shrinks can certainly grow back, in even larger proportions, as needed. There’s a boatload of cash on the sidelines, a growing shortage of investible securities, and (who knows?) come November, the election outcomes might at minimum yield a measure of balance.

And balance is what we’re gonna need, because sometime later this summer/fall, we will all be compelled to learn to walk again. And I’m gonna insist on walking with you. Maybe we can start with a stroll on Greenwich Avenue. But we won’t stop there. Someday, we’ll learn how to walk together – and for life.

But in recapturing our stride, we must learn to step carefully. There are an uncountable number of potholes and other nasties to avoid, and they are ever-increasing in magnitude and severity. We will need to focus our attentions on navigating this terrain. But come what may, we will, we must, walk on.

Ooh baby, that’s hard to change. I can’t tell them how to feel. Some get strong; some get strange. Sooner or later it all gets real.

Which is nothing more than stating, in a different language, our time-tested blessing of farewell:

TIMSHEL

This one goes out to Bob. And Neil. With gratitude and admiration.

So alike; so different. But both stand at the pantheon of much of what makes life worth living these days.

The songs. Yes. The songs. Where would we (I) be without them? What, for instance, would I play you?

Miraculously, both dropped albums of original music this past week, and oh boy did we/I need that.

First, Bob. “Rough and Rowdy Ways”. His 39th LP release. Routine readers know my boundless admiration for him, and I cannot extend a better review than to state my belief that somehow, impossibly, it lives up to his sublime standard. The material on this album is also all new. So there’s that.

But I’ve written too much about Bob, so let’s move on to Neil, shall we? This week, after a wait of 45 years, he put out a record called “Homegrown”, fulfilling an urban legend that takes me back to my boyhood. I was then, as now, obsessed with Neil (and Bob), but back in them days, us unhinged fans of what is now (not then) referred to as “Classic Rock” were starved for information. Which stands in sharp contrast to now, when we are overwhelmed by it. Today, if one chose to (and who’s to say this would be unwise?), one could spend all waking hours studying a guy like Neil, and still not get through it all.

But back then? Not so much. So, we hung on to every little tidbit. And one of the juicier morsels involved published reports that Neil’s BEST material remained locked in a vault, not intended to be released during his lifetime. The mind raced. Didn’t think this was even humanly possible. Better than “After the Goldrush” (my personal fave)? Better than “Harvest”? Well, now “Homegrown” has been released, and while Neil is still with us. As I’m typing these words, I’m giving it my first listen.

When I’m done, I’ll let you know what I think.

But let’s revert to “Harvest”, from whence I derive this week’s theme. Another urban legend about Neil (there are many, but this one is confirmed) is that after he finished making the record, he invited Graham Nash over for an early listen. Being Neil, this did not involve the then-ritualistic sitting on the sofa, sparking one up, and popping the disc on a killer sound system. Instead, they rowed into the middle of a lake on his ranch (“Broken Arrow” in Redwood City, CA). At Neil’s signal, the album resounded off the water, as emanating from two enormous speaker sets: one inside his house and one inside his barn. Shortly into the first strains of “Old Man” (the record’s sublime opening track), Neil gave the signal to switch it off. He then shouted the following words to his landlubber engineer:

“More barn!!”

And on this Summer Solstice/Father’s Day, transpiring, as it is, in one of the strangest years in living memory, I’m suspecting that Neil had been right all along: we do indeed need more barn. Not just in music, but in life. Not just in life, but in the markets.

For the latter, “more barn” implies a greater focus on the grittier elements of our capital economy. Not those quantum-quick semiconductors, not that slick, righteous social media. Instead, the stuff with the pungent smell, that gets under our fingernails.

So, with the increasingly fancy pants Gallant 500 and other equity debt benchmarks doing, in my judgement, just fine, I thought I’d take a look in the barn, and, as I suspected, its extra gamy in there:

I started with those kings of the barnyard: Live Hogs (where else?):

Hogs: Rolling in the Mud

I love this market; always have. But I have a confession: it historically took a backseat in my heart to its sister commodity: Pork Bellies, traded mostly by my kosher-keeping co-religionists, during the entirely civilized hours of 10:30 – 2:00 (Eastern). But Pork Bellies were delisted a couple of years ago (a pox on whoever made this call, the fact that he is one of my best friends being irrelevant. FWIW, I forgive you).

And this left me with no alternative but to transfer my porcine amorous attentions to what I will call the pre-belly/not-yet-frozen pigs.

They’ve barely been able to catch a bid in what seems like forever, and in fact, at ~$52.6 per 40,000 lb. unit, are trading at their lowest level in at least five years. And to the best of my knowledge, they are not even covid super-spreaders. If you’re looking for what ails us, this may be a sound spot to start.

The other edible commodities markets are doing a better job of holding their own, but could also, in my judgment, use some incremental barn love.

But I don’t really expect any of you to assist me here. So, let’s turn our attention to those entirely more elegant equity markets. Following is a breakdown of the rolling one-year SPX performance by sector:

It doesn’t take much close examination to determine that anything that zings or blings (IT, Communications, Consumer Discretionary) is vastly outperforming those elements of the economy that produce products you can touch, taste, and yes, smell.

I reckon this will continue on for a spell, and maybe that’s what the Good Lord intended.

But I can’t help myself; I pine for “more barn” in our return profiles.

Meantime, as I expected, risk assets picked up some ground previously yielded this past week. Bond spreads came in or held their ground, $1T of new issuance notwithstanding. Perhaps this is owing to Chair Pow (as expected) backing up his FOMC rhetoric and buying some corporates. Our equity indices, while fading towards the end, had a reasonably strong week of action, and I am delighted to report that Captain Naz, after alarmingly yielding the 10,000 ground, has recaptured this critical foothold.

I’m not sure how much upside there is in any of this, but I repeat my warnings about being short. There are tons of private cash on the sidelines, and this is laying aside the Fed and other Central Banks, who have created for themselves, like magic, the biggest checkbook in history. By all accounts, they have their pens loaded and ready to sign at the first indication of trouble.

So I expect the good times to keep rolling (at least after a fashion) –due to, as I wrote a few weeks back, the miracle of Modern Monetary Theory, which posits that a baller central bank like our own Fed can print as much money as it wants, lend it to whomever it pleases, and, by doing so, suffer few consequences. MMT is being tested before our very eyes, and so far, so good. The economy has ample access to cash, banks are lending, borrowers are borrowing, mortgage applications are soaring, as are metrics like Retail Sales.

True, our monuments are toppling, and our cities are burning. Even George Washington, the FATHER of our country, finds versions of himself facedown and full of flames, (among other places) in the historic city of Charleston, SC – just a couple of days before Father’s Day, for chrissakes!

And anecdotal reports suggest that city life is just getting too difficult for a lot of urban dwellers. I even heard a report that if you want to move your stuff from San Francisco to El Paso, your U-Haul charge is $2,500. By contrast, if, somehow, you’re headed in the opposite direction, the cost is $500. Because who in their right mind would move from a fly place like El Paso to a cow-town like SF? So, trucks are scarce in NoCal, while reposing in unloaded abundance in West Texas.

Still and all, barnyard creature that I purport to be, I nonetheless pine for the City. I can think of nothing better than taking a stroll with you on the Upper West Side, grabbing a slice, and sitting on some shady bench to eat it. Together. Hell, I’ll even buy. And we’ll make plans.

So maybe it’s not ALL barn that we need, but I’m still gonna put in my claim for MORE barn. Jesus was born in one of these, you know.

But he hasn’t been around for >2,000 years. We still have Bob and Neil, though. Which is about as close as I reckon we’re going to get in these troubled times. And we should all take a moment to appreciate their continued presence/output. Because they won’t be around forever. And when they go, we will be sad. Because who on earth will to replace them?

And as for “Homegrown”, after first listen, I give it about an 8. “After the Goldrush” it ain’t. Or “Harvest”. I’d also rank it below a few others, including “Tonight’s the Night”. It has a sublime ‘70s feel to it, but then again, that’s when it was actually recorded. By contrast, “Rough and Rowdy” is all new.

But it was only one listen, through my I-phone earbuds. I think doing Neil’s “barn” thing would help.

First things first. In order to get to “more barn”, we’ve got to have at least some barn to work with. Right now, we have none. And, like I stated above, maybe that’s the first problem we need to address.

TIMSHEL

Yossarian: Sweden?

Arfy: Orr

Yossarian: Orr?

Arfy: Sweden

OK so I lied. Not only are we back to this Catch 22 riff, but we’re with Orr. In Sweden.

Stockholm to be precise.

But don’t you fret now, because there are worse places to be than Sweden. Like, for instance, Central Greenland – a locale that has always terrified the living daylights out of me. Don’t ever wanna go there; don’t even like flying over it on the way back from London.

So, let’s revert to Sweden, shall we? First, if you weren’t aware of this, it’s a Kingdom (just checked Wikipedia). It has a King. Moreover, in addition to its status as the host country for the Nobel Prize, it is itself the birthplace of seven Nobel Laureates of Literature that aren’t, unfortunately, named Bob Dylan.

It is also the home of Abba, but please don’t make me write about Abba. I don’t actually dislike them (love, for instance, “Take a Chance on Me”). But. I. Just. Can’t.

And I reckon that’s all I have to say about Sweden.

Except for this. Sweden also features its own Syndrome, and how many countries can make that claim (China and maybe a few others)? It’s an important Syndrome, but The Kingdom is so fly that its Syndrome is named not even for the entire country, but only for its Capital City of Stockholm.

And that is where this week’s theme comes in: Stockholm Syndrome, or, as I have rebranded it (with rhetorical flourish, natch), Stock Holm Syndrome.

For the uninitiated, Stockholm Syndrome is defined as a condition where imprisoned individuals come to sympathize with, empathize with, and ultimately passionately embrace, their captors.

And where is such a dynamic more at play than in today’s stock market? Let’s face it: when it comes to stocks, we’ve all got a case of Stockholm Syndrome. It captivates us; we cannot escape it. We sometimes hate it. But in the end, we are sympathetic/empathetic to it, and, ultimately, passionately embracing of it.

I believe that this form of the Syndrome plagues no one more than Chairman Jerome Powell and his crew on the Federal Open Market Committee. Some of y’all may have been too distracted to notice, but the FOMC held its regular meeting/presser this past week, and the market reaction was, in my judgment, wild, wooly and arguably Stockholmian.

Powell was not, per se, the bearer of glad tidings. He used terms like “not out of the woods yet”, and “considerable risks over the immediate future”. But on a happier note, he came bearing gifts. Set a floor on Fed asset purchases — to the dainty tune of $120B/month. Announced his expectation that overnight rates, currently fixed at 0.00%, would remain there, or lower, for the next several quarters.

Now, believe it or not, $120B is a lot of paper to cop every month, using newly born fiat currency. By way of perspective, consider that the record shattering QE3, announced at the 2012 Jackson Hole yukfest (to the astonishment of monetary theorists across the globe) topped out at $85B for each lunar cycle.

But since those little Covid buggers arrived on the scene, the Fed has managed to up its game a lot, pumping out $3T in the space of little more than a quarter. The chart is a thing of beauty to behold:

Stock Holm Jerome Buys $3T of Govies:

This translates into a QE pace of approximately $1T/month, so one could argue that Powell is not now pumping, but rather jamming pretty hard on the brakes. But on the other hand, the action in April was sold to us as Electroshock Therapy.

So, it took everyone a bit by surprise when Chair Pow took to the podium to announce his intention to top off his work – at an annualized rate of at least $2.5T.

The markets did not like it; not even a little bit. From the point of the presser (around 2pm EDT Wed) through Thursday’s close, our gallant indices dropped about 8%. I myself was less than pleased with this development, as it added to the dismal score of my 2020 market clairvoyance – particularly insofar as it transpired after my having finally (like Kubric’s “Strangelove”) stopped worrying and embraced the rally.

But now I’m doubling down on my prediction that the rally is not over – first and foremost because of Powell’s acute case of Stock Holm Syndrome (as well as my own). Ride with me here for a bit and I’ll explain. Consider, first, the glide path of the Gallant 500 over the past 6 or so quarters:

Recall, if you will (or can), that brutal selloff that culminated in the ~2370 low on Christmas Eve, 2018. At the time, it was pretty clear that a significant amount of the agita was owing to some tough talk on Powell’s part in the weeks leading up to the holiday. It was time to raise rates, or so he informed the New York Economic Club in December ‘18. Thus, as I made ready for Santa’s visit, it was my conviction that: a) the economy was not in a position to accommodate a hawkish assault on interest rates; and b) since Powell was on record as being committed to a), we had not likely seen the worst of the selloff.

It seemed at the time that Powell hated the equity markets, but then the calendar turned, and, remarkably, his Stock Holm Syndrome kicked in. Specifically, on January 4, 2019, Stock Holm Jerome walked back everything he said the preceding fall. Pushed all his chips into the middle of the stock (holm) table. The markets swooned with delight and remained smitten all year – resulting in a fairly astounding >30% gain for that magical interval of 2019.

Gosh oh mighty, I wish it was still 2019. Don’t you? It was all so life changing for me, and in the best of ways. And I made a commitment in 2020 to build upon its miracles.

But as I wrote about across the entire period, Powell had at that time adopted a “you broke it, you bought it” attitude towards stocks, and the market made sure that he was as good as his word. He was by all accounts terrified of a selloff, and investors kept their side of the bargain. He must’ve still sometimes hated stocks, but passionately embraced them anyway. This, my friends, is Stock Holm Syndrome in its most magnificent glory.

And as for Powell, his condition carried over acutely into this (entirely more problematic) year. Not that it showed much — until, that is, those annoying little viral cells traversed the mighty oceans. According to the charts presented above, right at the point that the markets went into Covid Collapse, Powell pumped $3 Trillion of new money into the economy.

At least in a Stock Holmian sense, it worked, so much so that somehow, earlier last week, the NDX actually reached an all-time high. But then came Wednesday’s presser, and it all came tumbling down.

But as a guy who has learned to wear his own case of Stock Holm Syndrome with pride, I still think we’re going up. And here’s a few reasons why.

Wednesday’s FOMC comments were, to my ears, eerily reminiscent of that fabulous moment in January 2019. It’s “you broke it, you bought it” time again. Now, if I’m correct on that score, with any sustained selloff, as a matter of near certainty, the Fed will be compelled to step in with a passel of money printing and securities buying.

There’s already another $3T of this paper sloshing around, and much of it has yet to be deployed.

I further suspect that the next string of important economic data, most notably Jobs and GDP, will follow on in the same motifs of May’s upside employment surprise. The pent-up demand is anecdotally palpable, and I think it will manifest in greater force in June than even in May.

Investors are looking past currently stretched valuations and are likely to continue to do so for at least a spell into the summer. In fact, nearly every element of the investment universe showing signs of chronic Stock Holm Syndrome. One of the most improbable, stranger than fiction, examples of this is as follows. As has widely reported, the Hertz Corporation, which filed for bankruptcy earlier this month, thought it might be a good idea this week to seek to raise capital through the issuance of a tidy $1B of equity securities. Even more improbably, the Bankruptcy Judge approved the request. And finally (as was perhaps inevitable all things considered), Hertz’s stock rallied >30% on the news.

I’m at wits end explaining this, but when a public company files for bankruptcy protection, it’s because it cannot pay its bills. And if it cannot pay its bills, its equity is essentially worthless. How in the name of Benjamin Graham can it then issue stock and actually, by doing so, manifest a gain in its valuation?

If your answer is Stock Holm Syndrome, then, like Crap Game told Fischer in “Kelly’s Heroes”: “you win a cookie.

So, to summarize, we’re looking at a galactic amount of cash yet to be deployed, with potentially more on the way (as needed), in an economy that should at least optically continue to revive, on a very forgiving tape, with the Fed and other Central Banks all in to support the fun and games.

I’d also point out that it is my experience that when the Fed goes “hard dove”, the first reaction in the markets is often to cry out: “holy sh!t, the Fed’s worried, we’d better sell”. Which is usually followed by a moment of “holy sh!t, the Fed is giving away money, we’d better buy”.

We saw some of this on Friday.

But all of this, admittedly, is likely my Stock Holm Syndrome brain taking over.

What could go wrong? Well, as it happens, any number of things. First, if the virus regathers itself and gets its mojo fully on, then all bets are off. I don’t see this yet and think increases in the states that have reported them are to a large extent inevitable. But if the Covid Count turns ugly in jurisdictions such as New York, New Jersey, Florida or California, it’s another story.

And I won’t lie: I’m also worried about domestic politics. A leftward sweep in November, no matter how righteous it may be, will NOT be good for the markets.

I’m not expecting much in the way of a happy ending to any of this, no matter what. And it’s likely to be a bumpy ride come what may. But this, mes amis, is what we signed up for.

And in the meanwhile, I will live the truth of my Stock Holm Syndrome. Just like Powell. Just like Orr.

Though he’s nearly 100 now and no longer flies, I am told that Orr is still living large in Stockholm. Occasionally (or so I am informed), he logs into his Fidelity account and spitballs a few stock trades. He is in fact rumored to be among those who bid up Hertz stock on Friday.

I’m thinking of joining him. But maybe I already have.

Stock Holm Syndrome is, after all, a tough cat to kill.

TIMSHEL