I offer this week’s note in tribute to my one-time professor: the late, great, Nobel Laureate George J. Stigler. To whom I owe multiple debts of gratitude, because in addition to reviewing and approving my (somewhat mediocre) Master’s Thesis, he was actually the speaker at my entirely anticlimactic MBA commencement ceremony. My parents didn’t come, and I myself almost didn’t attend, but I’m glad I showed up, mostly because of Stigler’s talk. Which was all about uncertainty: an unambiguously bittersweet topic, but one that, as the fates would have it, formed the basis of my entire career.

Stigler is best known (but inadequately appreciated) for something called The Economic Theory of Regulation, which holds that Regulatory Services are simply another sector of the economy, much like Health Care or Industrials. If one accepts this premise, it follows that the purveyors of this product sell their wares (as well as, it can be argued, themselves) to the highest bidder (don’t we all?). As a result, according to the theory, because the regulated are always more organized and incentivized, and therefore willing to pay a higher price for these services than are their customers, throughout history, it is in fact the enterprises subject to regulation that always call the net beneficiaries in the regulatory game.

Stigler backed up his theories with empirical data across a wide swath of regulated industries, including Air Travel, Logistics and Financial Services. In each case, he was able to demonstrate that regulatory schemes unilaterally worked to the benefit of those subject to the rule-making, invariably at the expense of the rest of us. Through such devices as creating impenetrable barriers to entry, establishing minimum pricing, etc., regulation arguably exists for little else but the purpose of aiding the great ships of industry to traverse their waters — unimpeded by stowaways and riff raff that might be dilutive to their agendas.

Stigler published his seminal work on this topic in the ‘60s and ‘70s, and, for the better part of the next generation, the world largely ignored it. But one person who was paying attention was Ronald Reagan, and, when he took over the helm at 1600 Penn Ave, he put this theory into practice, deregulating a large number of industries, including those named above. The corporate fats cat howled with outrage, but the result was four decades of largely unimpeded growth and prosperity. For example, when Reagan deregulated the formerly rigid, rigged and overpriced universe of stock market commissions, the chieftains of America’s brokerages descended, en masse upon Washington to issue dire warnings that the move would crush the equity market. It now trades at twenty times the levels that prevailed when they first laid out their big bitch. AT&T prognosticated frightful consequences if – god forbid – it lost its monopoly on long distance telephone calls. Anyone looking to travel round trip from JFK to LAX in 1975 would be hard pressed to do so for less than $1,500. Now? Smart shoppers can ride for about $200.

I’d encourage my readers to bear this in mind – in the modern world where in certain jurisdictions, due to the dynamics that Stigler identified, a woman wishing to become a manicurist must spend thousands of dollars and wait up to 18 months to gain certifications to engage in the potentially hazardous act of painting someone’s nails. Her would-be competitors unilaterally benefit. Her customers? Not so much.

But on that hot summer day of celebration in 1987, Stigler didn’t come to speak about regulation. Instead, he encouraged his robed audience and their well-wishers to understand, indeed to embrace, the ambiguities of the world in which we live. The one line that stuck with me from his speech didn’t even come from him; it actually is a phenomenon called Segal’s Law: “A man with one watch always knows what time it is. A man with two watches is never sure”. And boy oh boy is that ever true. Case and point: no one even knows who this Segal character is. Or was. Apparently, he was a jeweler of sorts, and the original quote was first published in 1930. In the “San Diego” Union of all forums.

But his point: that taking a double measure of anything pertaining to human affairs virtually ensures a diminished confidence in the associated accuracy, is resonant through the ages. And I’ve been feeling this in acute fashion my entire life. Take, for instance, metrics of options sensitivity, such as deltas. I have often been fond of telling the following joke: “Options deltas are like snowflakes – no two are exactly alike”. And, despite it’s being stone cold hilarious, almost no one ever gets it.

And right now, as I take stock of my professional world, it feels as though I have more than two watches. In fact, I have at least six; maybe as many as eight. So, as long as I’ve wasted this much of your time anyway, let’s review them, shall we?

I have, for instance, two political watches. One of them tells me that we’ve got a rogue, would-be dictator in the White House, who must be removed at all costs before he goes full Stalin on us. He’s shredded the Constitution; he’s put us on the brink of Armageddon, he cannot take a single breath without committing a heinous crime. If he does not belong in the slammer, it’s only because his appropriate destination is at the end of a rope. My other political watch sees a guy who has been attacked by a mob since he first descended that golden escalator in his own building to announce his run for president. He’s boorish beyond measure, and unambiguously narcissistic. But, despite an onslaught of assault (mostly ad-hominem, or, if you want to go the whole homonym route, ad-homonym) on his character, persona and policies, he has presided over an interlude of relative peace, prosperity and (under certain paths), visible hope for its continuation. As I type these words, he’s being impeached, and, while one of my watches says that this is necessary, the other tells me that the, er, high crimes and misdemeanors of which he is accused are nothing more than Standard White House Operating Procedure. Anyone who doesn’t think that presidents always muscle other foreign leaders in a manner consistent with their political agendas is just being naïve. Heck, I have it on good authority that even George Washington used to dial up guys like Louis XVI all the time, and he left office a century before the invention of the telephone.

I also have two economic watches. One shows a remarkably resilient environment, a recovery improbably humming along into its second decade. The country is at full employment. Inflation is nowhere to be found. Financing costs are at multi-millennial lows. Overwrought fears to the contrary notwithstanding, the threat of recession does not appear to be on the visible horizon. The other watch sees a world awash in record levels of debt, which is accelerating, and living on the sugar high of cheap financing. Both the military and the overall Federal budget are set to expire this week, but no one is talking about that. Above-mentioned political strife – on both a domestic and global basis – practically guarantees against any sound government action. Watch 1 sees a strong holiday season and the possibility of glad tidings in 2020. Timepiece 2 says that the entire planet will be smoldering cauldron in little more than a decade, and that even if we don’t manage burn the entire planet to the ground, all of its riches will be owned by about a half dozen nasty folks who must be garroted by pitchforks immediately.

And for what it’s worth, the now-casters at the Atlanta Fed appear, at the end of the week, to have lost Watch 1, and to be relying entirely on Watch 2.

I may need to take a trip down there soon to see time it is. I was only there once. Visiting Emery, where I was accepted. But they wait-listed both of my kids, and I’ve not since forgiven them for doing so.

But if they are right on GDP, Watch 2 will have us in a full-scale depression before the Snoopy float blows its way down Central Park West on Thanksgiving Day.

Lastly, and perhaps most importantly (after all, this is an investment blog), I have two market watches. On one wrist, I see our various indices registering one all-time high after another, and showing no signs of reversing course anytime soon. Further investigation of these dials indicates that we have endured, nay, prevailed, through most of the potential buzz-killing news for Q4, and that if the happy talk in the trade negotiations turns into happy action, we could be in for higher elevations. It also informs me that the years following >20% gains in the Gallant 500 (currently up, year-to-date, a spiffy 24.5%) are almost always “up” sequences; the last time we had a down year following such a cycle was 1937, you know, the year that FDR tried to pack the Supreme Court.

Market Watch 2 wonders what all of the buyers out there are smoking. I would’ve been down with a recovery to earlier year highs, at 3,000 and change on the SPX, but I stand in wondrous awe of the last 100 handles or so. Late Friday, Vixen VIX breached into the 11 handle from above, before some at-the-close weekend hedging pushed her up to a still-strumpet-like 12.05. Then there’s all of that debt, Impeachment, the largest political party in the free world espousing full-on redistributive socialism, and big, bad Myles Garret taking a swing at a diminutive-by-comparison Mason Rudolph, using the latter’s helmet as the bludgeon.

Market Watch 1, to summarize, says load the boat here; Market Watch 2 is completely bewildered by all the monetized optimism.

So, does anybody really know what time it is?

Does anybody care (Sorry. I couldn’t resist)?

I think, on balance, the answer is no. We don’t, none of us, know what time it is. Because the truth is that we are, all of us, just dealing with too many watches. As a result, what Jeweler Segal first observed, and what Professor Stigler described as useful perspective, has simply overwhelmed us.

So what do we do now? Well, for the moment, I’d say not much. We shouldn’t, for instance, Uber home alone after a major surgery. If the spirit moves us, we should absolutely order the best cookery we can afford for our new kitchen, but we should probably make sure we’ve contacted Con Edison and had the gas turned on so we can actually use these utensils.

And we should by all means wait and see what transpires in front of us before we make any sudden investment moves. Because things are changing too rapidly for much upfront planning. It certainly makes sense to synchronize our watches, but I should, before taking my leave, admit that I don’t even own such a device, to fit either pocket or wrist. Haven’t for years. And I really haven’t missed it much. Because everywhere I cast my eye, multiple GPS devices are in perfect accord in terms of what time it is.

So times have changed from Segal’s day, and even from that of Stigler. But the latter was still right about so many things. Regulation is still a game rigged to benefit the regulated. And as for my Master’s Thesis, while barely remember the subject matter, I do recall the Professor giving me a grade of B minus, minus on it, and calling it a superficial literature review. That was his only comment. But it was enough. Because I knew he was right.

Like so many others glorified in this space, he’s gone. And while it will be a long day before we witness his like again, his work lives on. At least we should all hope it does. His protests to the contrary notwithstanding, I think he had as clear a sense of what time it is as anyone I’ve ever encountered.

TIMSHEL

Another week; another confession. On Wednesday night, I succumbed to the illusive allure of my local Chinese Takeout joint. One of them, anyway. Fact is, as my apartment is located between Amsterdam and Indigenous Peoples’ (formerly Columbus) Avenues on the Upper West Side, I have an embarrassment of rich choices in this regard.

Usually, I resist this temptation, and even on Wednesday, my spirit had the will to win, but oh, the flesh was weak. So I rocked out on General Chao’s Chicken, some brown rice and (as is de rigueur on these occasions) an egg roll.

Looking back, it all seems like a daydream that I was already in, but, as is so often the case when spending a portion of one’s evening General Chao and his subordinate side orders and condiments (particularly the hot mustard), it didn’t take long for me to be overcome with shame. And heartburn.

I have been encouraged by those who love me (after, of course, a well-deserved scolding), to embrace this transgression, and I know of no better way of doing so than baring my sins in this forum.

So let’s talk a little bit more about Chinese Take-Out, shall we? First, I’m happy to report that the whole saga set me back little more than $20 (including a generous tip), so I’m pretty sure that whatever tariffs that may have previously been levied on these sorts of transactions, they had been lifted in the intervening years between my preceding visit to the joint on Amsterdam, and the one that I am (with shame) describing in these pages. I checked the newswires just to make sure, and it appears that there is indeed progress on the U.S.-Sino trade front.

From that perspective, perhaps my timing was impeccable. And so, for that matter, might be Trump’s, but we’ll get to that below.

Certainly investors seem to be of that mindset, as they chose, all week long, to consume risky delectables, at levels sufficient to take our indices into record territory. All week. All over the world. Much to my chagrin, they appear to have financed much of this shopping spree through the sale of global bonds, which (my aggressive embracing of the latter notwithstanding) had about their worst week in quite a spell. The U.S. 10-Year Note is knocking on the door of 2%, and the poor Swiss are now forced into the indignity of accepting an annual rate of less that 50 bp for their borrowings. It could be worse, though. The Swiss could be the Germans (probably they ARE the Germans), who only collect a beggarly 26.5 bp/year from their borrowers. The USD shot up like a rocket. As did a number of commodities.

But that critical ingredient to the purveyors of my culinary odyssey: soy beans, did not participate:

Soy It Ain’t So: Beans Flat for November:

The good news here, I suppose, is that the soy sauce all up and down Amsterdam Avenue can still be had free of charges, and, therefore, of tariffs.

On the other hand, I don’t use soy sauce on my General Chao’s Chicken. Or my egg roll. And I hope that you don’t either. Because I feel that to do so in either case would be something of a crime against humanity. Hot Mustard? Yes. Soy sauce? A Hard No.

I spent the rest of Wednesday evening (as I had most of the week), trying to figure out what on earth has investors so gosh darn giddy — on a tape that looks to me to be somewhat toppy. It could be the case that Trump’s trade strategy is working like Elway against the Browns in the ’98 AFC Final. Interim deal during Impeachment; final one, say, right before Super Tuesday. I’m not saying that this is how it will play out, but if it does, you’d have to give the Big Guy mad props for political timing, right?

I do think that (yawn) presidential politics are driving some perverse valuation dynamics.. Perhaps the best news of the week, at least from an investor perspective, was the release of the financial details of Warren-Care. The plan cost $20T over the next decade (approximately one year’s GDP), but hey, that number is probably overstated, because Senator Warren, like all other politicians, always injects a dose of conservatism into these types of projections, just so she doesn’t give anyone sticker shock down the road. Private Insurance disappears. Doctors and hospitals are to be given fixed revenue rations, calculated at levels of precision that only Harvard-educated social engineers can muster. Corporations are to be taxed at higher levels. Wealth is to be taxed. Businesses are to be taxed. Best of all (if inevitable), Wall Street is to be taxed.

For everyone else? Free Fortune Cookies.

One cannot help but wonder, on balance, though, how well this will all work out in real life. Pondering these matters (as I always like to do while digesting the ornithological culinary delights of General Chao), it looks like the release of this plan could be the biggest political blunder of a generation. This, too, is no certainty, but it sure seems like a possibility. And, stone-cold feminist that I am, the timing seems like kind of a shame to me. The plan was announced on the proximate date of the 100-year anniversary of the passage of the 19th Amendment, which bestowed the suffrage on women that our Founding Fathers somehow, in their zeal to create a free and equal society, neglected, when forming the nation, to include.

But the program itself does not look politically appealing to me, and neither Senator Warren nor her party will be able to walk it back. About their only alternative is to go bigger and embrace Bernie’s plan, which will cost twice as much. And anyone who the Dems nominate will have to go out on the road next summer and sell this pile of bird feathers to an electorate that: a) is doing pretty well right now; b) worries about higher taxes; and c) probably has a tough time envisioning better health care outcomes when all associated decisions are made not by individuals, but rather by the government.

Of course, with Impeachment (which now makes better sense given the wretched policy/candidate choice offered up by the Dems in what should be for them the most winnable election since, well, since 2016), trade uncertainty, an upward trajectory for interest rates, and myriad other problems that plague us, pretty much anything could happen. But under certain scenarios, I see the whole Warren-care thing not only giftwrapping 2020 to Trump, but toe-tagging the Democrats for at least another couple of election cycles.

What is visible to me, in the meanwhile, is as follows. The Dems need some new blood, and, while I hate to do this sort of thing, I need to remind everyone that I’ve been writing about Mayor Mike laying in the weeds for several months. Welcome in MM; and know I’ll be rooting for you. At least in the Primary Election. I’ll happily accept your rather school-marmish attitudes about super-sized sodas and the like, if you’ll simply let me keep some of my hard earned pay, and allow me to manage my own health decisions – up to a point where my fast-approaching dotage renders me non-decisional.

The other trend that I believe I can observe is some glee among the investor class at how thoroughly the progressives are b!tching things up. I would go so far as to hypothesize that the Warren-care finance plan was sufficiently outlandish and nonsensical to gin up some buying just in its own right.

So here we are, less than seven improbable weeks before the conclusion of this most improbable year. Our equity markets are sitting at records, trade wars, tepid economic conditions and the like notwithstanding. Q3 Earnings are now in the bag, and, while (as was always likely) better than expected, they still aggregate to a third consecutive quarter of negative growth. At 12.07, the VIX is residing at about an 18-month low.

Given all of this, and in light of the saga described immediately above, I feel it entirely fitting and proper to issue an MSG warning. Now, here, I beg you to consider the source. Chinese food is slathered in Monosodium Glutamate, and no dish has a bigger dose of MSG than does General Chao Chicken. But there are other forms of MSG that worry me more — ones that apply to the financial markets. The more benign of these is something I call Mostly Speculative Guesses, which, when taken to the extreme, adopt their more wretched construct: Massively Stupid (Portfolio) Gyrations. Let’s avoid both forms, shall we?

Because, believe it or not, there are less than 35 trading days left in the year, and we can throw out about a quarter of them due to holiday distraction and associated lack of liquidity. Most every known bit of data is already in the books, and most of what’s unknown shades to the negative. It reminds me a little bit of what Woody Hayes used to say about passing the football: there are 3 outcomes, and 2 of them are bad.

A lot of good stuff, one would have to argue, is already priced into current valuations, and, on balance, I think that this looks like a Woody Hayes passing market. Could we continue our current improbable rocket ride? Of course we could. On the other hand, Trump and Xi could say mean things, hurtful things, to one another. The drip-drip-drip of impeachment could finally cause the ceiling of the political economy to cave in. Those crazy, nutty, zany Ayatollahs could decide to lob one over to Tel Aviv.

The world as you see it could turn out to be a very different place from the world as you find it.

And, particularly at these valuations, how much more good news can you, or for that matter, anyone around you, stand?

So, because I see very little edge out there for the remainder of the year. I’m inclined to suggest we all play a little D here, and this particularly applies to those who, thus far in 2019, have enjoyed a good run. Yes, you owe one to the Fed, but our gains are hard-won, nonetheless, my darlings, and I’d hate to see you blow them in the few short weeks left to us before the ball drops.

No, I’m not suggesting that you shut it down completely on this here Veterans Day; just that you, at least for the rest of the month and next, avoid Speculative Guesses, and even more so, Stupid Gyrations.

And remember, you are not alone. I am here in every way that I can be for you. And the more joy you can take out of each moment, the happier I myself will be.

But right now, I must take my leave. I hear the doorbell ringing, and most of you know who it is. Yes, I have fully succumbed to the force of will exerted on me by one General Chao. And if there’s any endeavor that puts one in greater MSG danger than Chinese Take Out, it’s Chinese Delivery.

But for me, the ship has sailed; the bell has rung. And all I can do is offer my full support to you in your efforts to avoid the kind of mistakes that have driven me to this humiliating pass.

What, they forgot the hot mustard? Must be a message from above. So I’ll just send the guy packing, fry me up some kale, and try, in the future, to set a better example for my minions.

TIMSHEL

It’s astounding, Time is fleeting, Madness takes its toll,

But listen closely… (Not for very much longer), I’ve got to keep control

I remember doing the Time Warp, Drinking those moments when

The blackness would hit me, And the void would be calling

Let’s do the Time Warp again, Let’s do the Time Warp again

— Riff Raff (Rocky Horror Picture Show)

I struggled mightily to identify this week’s motif. As hard as I have for many a spin around the sun. Maybe I’m just getting too old to spend every weekend spitting out this bit of glib excess that passes itself of as market commentary. But I knew I had to forge ahead. Because you’re counting on me.

Leitmotifs, on the other hand, presented themselves in embarrassing abundance. Careful readers and close associates recognize, for instance, that tomorrow marks a rather important personal milestone. But it’s one that has mixed implications, and, beyond this, I just can’t descend to the rhetorical depths of featuring it, for no other purpose than the launching my weekly musings.

Other potential themes presented themselves, for instance, the whole above-represented Time Warp riff from Rocky Horror. We did, after all, just celebrate Halloween, did we not? And Rocky Horror is one of my all-time faves. But it occurs to me that Halloween is perhaps the holiday that most abruptly ends when the calendar flips, when the clock strikes 12, and All Hallows Eve becomes All Saints Day. At that moment, we’re all sick of it. Sick of the candy. Sick of the costumes. Sick of the B-Movies that run 24/7 on TCM, all month long. We’re ready to move on. And we have. Moved on, that is.

I also noted (and considered featuring) the recently announced, final toe-tagging of iconic retailer Barney’s, and thought about calling this week’s piece Barney’s Rubble. But I passed, for a number of reasons. First, it seemed to be entirely too “New York Posty” of a title. There’s also the reality that I’ve never set foot inside any of their stores, and therefore can’t authentically lament Ol’ Barn gathering to the dust of his forebears. Finally, the whole Barney Rubble thing is somewhat triggering for me, as, about a generation ago, it hit me that I was older that Fred Flintstone and his lovable sidekick. I figure them each to be, now and forever, around 35. If you grew up watching them, they always seemed so aged. And by the mid-90s, it became undeniable that I myself was older than either of them. It was a kick in the head, and, a full generation later, as my 60th birthday beckons, my temples still ache at the thought of it.

Then, on Saturday morning, in time honored tradition, I flipped through Barron’s, and (though it shames me to have drawn my main theme from such a ubiquitous source) there I found my answer. In reviewing the astonishing rage of recently reinvigorated bovine market conditions, the publication pointed out how top heavy the rally is. In particular, it chronicled the amazing fact that four companies Microsoft, Apple, Google and Amazon: a) now sport an aggregate market capitalization in excess of $4 Trillion; which: b) exceeds the valuation of the entire Russell 2000 Index.

So welcome to the MAGA market, brought to you by Bill Gates, Tim Cook, Serge/Larry and, of course, the biggest dog in the yard, former D.E. Shaw employee Jeff Bezos.

But you really didn’t think that you’d escape my double entendre obligation to endure my devolving into the murky realm of politics, now did you? You didn’t, because, from a certain perspective, this is also a “Make America Great Again” MAGA market.

Somewhat split personality macroeconomics bear this out. While everyone bitched a bit about the 1.9% first print on Q3 GDP, those bellyachers were completely silenced with the drop of Friday’s Jobs Report. Its contents had 45 crowing like a blackbird at dawn on an Iowa farm telephone line. It also zipped the lips of all of the windy Wendy Whiners out there in the punditry. This, of course, came on the heels of yet another Fed rate cut, and on an earnings tape that has, on balance, exceeded what were (it must be admitted) muted expectations.

So the Gallant 500, Captain Naz, (my fellow geriatric) General Dow, and even the above-maligned upstart Ensign Russ surged ahead into previously uncharted territory.

In doing so, this joint operation ignored many forces of nefarious risk, including the continued threat of trade wars, the Brexit Soap Opera, the California Infernos, and other sundry specters hovering out there to plague our peace of mind. And why the hell not? This here decade-plus recovery is chugging along better than anyone could’ve reasonably expected for such an old codger. We’ve got full employment, historically benign financing costs, no meaningful inflation, and, on balance, very little cause for economic complaint. In fairness, some form of MAGA prevails in the capital economy.

Indisputably, all of the above explains, at least in part, why investors also have turned away, with a derisive yawn, from the Impeachment Saga. Because, in case you missed it, over the next few days, the House of Representatives will approve Articles of Impeachment against the President of the United States. The latter will then of course be compelled to endure a trial of sorts. As will the rest of us.

Now, old-timer that I will formally be as of tomorrow, I must nonetheless inform you that I don’t recall much about similar proceedings against Andy Johnson. I was only a tyke back then, after all. I do remember my parents speaking about it, but I kind of shrugged my shoulders and then went out to fetch wood, as my daddy had instructed me to do. But I do have vivid recollections of both the Nixon removal and the Clinton psychodrama. And what comes to mind, by comparison, is as follows.

In both 1974 and 1998, these episodes virtually stopped time. With Nixon, the narrative unfolded over a couple of short months that summer. In Clinton’s case, the whole process – beginning to end – ensued over about three weeks. But in each of these cases, we were all fixated on every twist and turn. And even investors had sufficient respect for the dignity of the proceedings to make a show of selling down some of their holdings – albeit temporarily.

But in the present state of affairs, unless you are spending your time unwisely immersed in Cable News or the musings of the New York Times/Washington Post, you’d barely know that any of this is going on. And as for investors? A quick look at any index chart will tell you all you need to know about their level of concern in this regard. In a word, they just don’t give a sh!t.

MAGA market? Whether it’s MSFT/AAPL/GOOG/AMZN or Trump, I’d call it a Hard Yes.

Impeachment, therefore, looks like a losing political strategy to me, but please consider the source. I actually thought that Trump was gonna lose to Hillary back in ’16. Moreover, and to my way of thinking, the Dems are doubling, throupling down on all of this. And I don’t think it bodes well for their 2020 presidential prospects. The current field of potential nominees (now that my boy Beto has exited, Stage Left) is winnowed down to an aged, privileged, compromised white man who can barely string together a coherent sentence, a Che’ Guevara Millionaire Socialist, and a dour female professor who claims to be a capitalist, but wants government to take over at least two of the 13 economic sectors (Health Care and Energy), which compromise more than 25% of the country’s Gross Domestic Product.

And I’d be remiss if I didn’t give a shout out to my two highest profile former Chieftains: Paul Tudor Jones and Steve Cohen, who, at a Robin Hood Investor Conference this past week, both independently prognosticated that if either Bernie or Liz takes the prize, for equity investors (as Steve likes to say) it’s “Katie, bar the door”. Of course, as loyal readers are aware, I’ve been committing these same comments to writing for the better part of a year. Just saying….

So the Dems are going to spend the next few weeks impeaching the President, and are likely to fail in their objective of removing him from office. By the time they’re through, the Iowa Caucuses will be hard upon us, and their high-tax, high-regulation, full-on-redistribution platform will be etched in stone. I find all of the contestants to be signally unlikeable, and my gut tells me that a yet-to-be-identified horse will not only enter the race, but actually take the prize (the nomination that is; not the general election). We all are aware of the names being whispered about, but I don’t think it matters much. Because no one can win the nomination without carrying the yoke of a policy agenda that should land like a thud with the general populace, come next November.

It all looks like a Circular Firing Squad to me:

And if I’m right on that score, then the sponsors already are ahead of themselves, because we can spot them The Squad to lead the proceedings. All that is wanted is The Circular. And The Firing. And how hard should these be to source in this Information Age?

I reckon all of this could change in a heartbeat. For example, maybe Trump’s own son could find himself with a lucrative seat on the board of a shady Ukrainian Oil Company, his utter lack of credentials for the post notwithstanding. Maybe the Big Guy will be caught bragging on tape about reneging on the $1B he will bring along with him if the Ukes fail to do his personal bidding. If so, the game changes. Pretty quickly.

But in the meantime, gosh almighty, is it just me, or are the progs doing everything they can to gift another term to a man that they detest with every cell of their body?

And, for the record, the current office-holder gives me a raging headache. He’s a blowhard who strikes the fear of God into anyone who listens to him for five minutes. Count me among those that would really like to see just about anybody beat him. Except, that is, those that are actually running against him.

I reckon we should stop worrying, and embrace the MAGA market for what it is. Even at these lofty elevations, you have my blessing to by a few shares of MSFT, AMZN, etc. And if I see you in a red cap, I’ll not think the worse of you for wearing it. But as for me, I’m clearly in a Time Warp again: first a jump to the left, and then a step to the right. I stop there though; no pelvic thrusts possible at this age…

But I must take my leave now. Those that love me are ready to shower me with their singular affection, of which I am sorely in need at the present moment. I’m advised that there are even a few surprises in store. Some things I need (grooming products); some I don’t (a puppy). I thank them, one way or another, for not only putting up with me, but for, even at my advanced age, loving me as they do.

Truly, in this Time Warped, Barney Rubbled, MAGA world, I just can’t live without it.

TIMSHEL

I’m warning you. For the second to last time. It’s my pen-ultimatum.

So just don’t do it. Because this warning, is, by definition, a prelude to my final admonition, which will be my last one.

Or not.

I’m ambivalent as to what I’m warning you against, because (let’s face it), there’s an embarrassment of rich choices in this regard. But I’ll reckon we’ll get to all of that.

Mostly, I just like the way that the mashed-up term: pen-ultimatum, trips of my tongue. And keyboard. Also, I would be remiss in any failure to mention that this past week marked the penultimate 7-day cycle of by 5th decade of cooling my heels on this here planet. I really can’t express this in any other manner. It’s simply too depressing.

On the other hand, I figure that a pen-ultimatum, issued at the end of the penultimate week of my fifties, may actually lift my spirits a bit. So that’s what I’m gonna do. Issue a pen-ultimatum.

At least I’m going out with a bang (or not). Because it was quite a week. Global equity indices soared throughout, with the Gallant 500 actually (albeit temporarily) breaching new terrain mid-day Friday, before retrenching to encampments adjacent to these boundaries. The same was true in other jurisdictions. Heck, even the UK’s FTSE 100 surged by > 200 bp, and this in advance of important Brexit decisions about which even the experts have no idea as to the outcome.

Madam X (the U.S. 10-Year Note) retained her ambiguous, alluring indifference, but her strumpet-like protégé: Vixen VIX, demonstrated her oft-manifested easy virtue, yielding further ground across the cycle. At 12.65, she now resides in as supine of a position as hasn’t been witnessed since late April, when the partying start of 2019, was (unbeknownst to the rest of us) about to come to an abrupt halt.

About the only financial buzz kill I could identify all week was the following floater in the punchbowl. As illustrated in the following chart, the anti-oxymoronic upper end of the Hamptons Real Estate Market, is newly awash in inventory:

Read ‘Em and Weep: Hard Times for H Sellers

Now, what is bad news for the sellers is of course good news is of course good news of buyers. But let’s face it: we ain’t buyers in those hoods. And, on a more encouraging note, about three years ago, I did manage to liquidate a property — not in the range contemplated in this chart, but in a proximate zip code.

And I’m glad that I got out. And part of my pen-ultimatum is that you avoid the temptation to dive into these fabulous realms – at least at this pass.

But I reckon I should let go of my Alzheimer’s-enabled ramblings and revert to my main point: I’m convinced there’s more risk in this here market than the tape (or, for that matter, your latest suite of risk reports) are suggesting. In terms of the latter, us purveyors of risk analytics are steeped in the notion that the recent past is somehow a sound predictor of the future. Sometimes this is true; sometimes not. However, while there’s been a lot of idiosyncratic price action over the last few weeks, the factor dynamics that drive these metrics have been benign, and project out a more stable market configuration than I believe they can sustain as the year winds down.

To wit:

We’re nearly half-way through Q3 earnings, and though they be mixed at best, investors are at present untroubled by associated tidings. Probably, this pattern will ensue through the remainder of the cycle, including next week, when a whole passel of leaders (Apple, Alphabet, Facebook) and a greater number of laggards (Falling Stars Sears, General Electric; a boatload of others) report. Pen-ultimatum pricing patterns suggest that while, as always, it’s woe-betide to disappointers: 1) it may be best for CEOs not to overstuff their messaging with too much glee (left-hand chart); and 2) if they care about their current valuations, the more said CEOs have pleased 45 and kept their home fires burning (i.e. done most of their biz in the U S of A), the better off they are:

Forgive me for offering a blinding glimpse of the obvious, but the graph on the right sort of suggests that all of this trade agita just might be actually hitting the real capital economy. And near as I can tell: a) there’s no more clarity at this moment than there has been at any point in the saga in terms of any resolution with China; b) the Xi/Trump vibe could absolutely turn negative at any moment; and c) if b) happens, equities have a lot of room to fall.

The FOMC issues its next policy drop on Wednesday, and another short-term rate cut appears to be fully on the cards. Friday morning (when the All Saints’ Day Sun is high in the Eastern sky), we receive our first glimpse of Q3 GDP, and boy, ought that be interesting. The conflating of these events by the punditry suggests that: 1) the Fed may rest a spell at that point; and 2) the favors of Madam X, having been delivered at increasingly discounted yields since roughly the point when I turned the big 3-0, are about to become dearer.

Well, OK; but I’m still taking the under on what is yielded by Madam X. Maybe we are at the pen-ultimatum moment on low rates, but I’ve heard that warning so many times that I am benumbed and incredulous on that particular issue.

The markets also seem to be entirely serene about domestic politics, which, to these aging eyes at any rate, appear to be devolving to a transgenerational lack of decorum. The President is certain to be impeached. That bell has rung. Extra-constitutional hearings that set this up are occurring on a round the clock basis. Lots of unknowns here, kids. The Iowa Caucuses are just over three months away, and as to the leading candidates that embody the only alternatives to a second term for the Big Guy? They feature a dude that actually committed the transgressions for which the Big Guy will be impeached, and a few who are outflanking one another in hysteria in terms of which of them can tax the most, regulate the most and redistribute the most of the hard earned funds of the productive class of the economy.

I would add a brief word about my home state of California. Where I was born. Six decades ago. A couple of years back, the State experienced historic flooding that could do nothing to eradicate a drought in its precious Central Valley farmlands. Now, it’s facing the prospect of a blackout for three million souls that is intended to prevent wildfires that are nonetheless raging as I type these words out. When you have droughts during flooding, and wildfires during blackouts, well, something ain’t right.

Is this an environment where it is wise to load the boat on risky securities issued by private enterprise? Investors seem to think the answer is yes. And they may be right. For a time. But I may have to warn them against this in the near future. And then warn them again. Somewhere down the road. So call this my pen-pen-ultimatum on stocks.

One way or another, I think there’s a volatility pressure cooker that cannot be kept in check across the nine short weeks that remain to this crazy year. There’s likely to be some pretty wild, two-way action coming our way during that interval. I just don’t know when the lid pops off, so this is likely not the last warning I’ll issue. In this respect, it, too, is a pen-ultimatum.

I’d urge extreme care as we navigate the final weeks of this rapidly expiring year. What doesn’t look too risky now could turn hazardous in the extreme – in the manner of a blink of an eye.

However, because this is a pen-ultimatum, I don’t want to go overboard in terms of issuing dire warnings. You can, indeed, relax in a certain manner. If you find that dream dwelling you’ve always wanted, as long as it’s not in the High End of the Hamptons, you have my blessing to secure it. Heck, I may even be willing to spot you the application fee, and maybe you’ll let me accompany you on your final walk-through. Fair warning, though. I intend to visit you there. Often.

Feeling, as I do, somewhat wistful as this mixed-blessing anniversary of my birth inexorably approaches, I feel an obligation to remind everyone that we signed up for a multitude of mixed blessings when we came down the shoot in the first instance. All of us will experience a combination of gratification and frustration. Of joys and sorrows. Of certainty and confusion. Our best hope lies in the path of treading carefully, and capturing what is there for us, without doing harm anyone else. Sometimes, what we reach for is within our grasp; sometimes not. Sometimes, we don’t know the answer, because it resides in the future, which is unknowable.

But I’m advising you to tread carefully across these seas of uncertainties. And to my friend Michael (who is wonderful) I’m here to tell you that it may require everything you’ve got inside you to row your boat ashore. Whatever that means.

These are my warnings to you, my loves. And the odds on likelihood is that I’ll have to issue at least one more warning of this nature before we’re through.

But given that this is a pen-ultimatum, it is entirely fitting and proper that I do so.

TIMSHEL

To hedge, or not to hedge, that is the question:

Whether ’tis nobler in the mind to suffer

The slings and arrows of outrageous drawdown,

Or to take arms against a sea of volatility

And by opposing end them, to hedge….

— With Apologies to William Shakespeare

I could have carried on with this re-lyric of one of the most famous passages in the history of the written word, but even I have trouble improving on Willie Shake. So I reckon I’ll leave it where it is.

Besides, I think we’ve hit the crux of the issue: “to hedge or not to hedge?”. That is indeed the question upon which I wish to focus this week’s visit. It has been an important one for about as long as I can remember, and the matter is particularly prominent at this current pass in our affairs.

I must admit that I’ve had an historic, philosophical bias against hedging, but then again, Shakespeare/Hamlet himself stated that “there are more things in heaven and earth, Horatio, than are dreamt of in your philosophy”. (Act 1, Scene 5 167-8). And though I never actually knew Horatio, I suppose that what applies to the H boys also applies to the rest of us.

Now, that the hedge has many alluring attributes (ones that we need not inventory in our limited little space), there is little doubt. But applying them to your net advantage is a tricky and nuanced exercise. When first considered (e.g. in times of market unrest), it has a siren-like appeal. But that, of course, is when the hedge is at its most expensive. Moreover, while putting hedges on is often an intuitive exercise, disposing of them is another matter entirely. They often suffer from benign neglect, and (especially when they take the form of limited life derivatives), they end up, on balance, costing us. In retrospect, we wonder why we bothered with them in the first instance. And we swear ourselves off of them, only to return to their warm embrace the next time our portfolios show any signs of the squick.

My main problem with them is two-fold. First, as one of my core tenets of risk management, I have always felt that if one wishes to undertake risk reduction, one is better off removing line items from one’s portfolio than adding to them. However, perhaps more germane to our current conundrum our tendency to fixate on the hedge at the wrong times. It is only when the market goes all wobbly, and hedging becomes our obsessive focus, that we tend to act. We pay up for doing so. And we pay the price.

Conversely, when the investment markets are calm, and the hedge can be had, on a relative basis, for a song, we are inclined to ignore it. More generally, my main frustration with hedging, as I’ve expressed many times before, is that when it comes to the hedge, everything our mamas and papas (who, don’t you know we’re driving insane?) taught us about buying low and selling high goes out the window. Instead, we tend to overpay for the hedge (whatever form it assumes), rid ourselves of it at bargain basement prices (if indeed we rid ourselves of it at all), and ignore it entirely when it is on sale.

And it may just now be the case that the hedge is indeed on sale, at least on a relative basis. Consider, if you will, the recent pricing activity of the VIX, that benchmark of options volatility that is the widely accepted proxy for how investors (through the options markets) are pricing in risk. With little notice, it went into free fall over the last few sessions:

Careful observers may wish to note that at 14 ¼, it resides within realms witnessed during surges to all-time highs on the Gallant 500, as well as that period of relative innocence we experienced in late April, before the Trump Tweet Trade War began to rage in earnest. It also down ~40% from its >24 peak in early August, when a bunch of other bad sh!t was going down.

Now, I ask you: is the world really 40% less risky than it was 8 weeks ago? Please, if so, explain to me how. The China trade psychodrama continues to play out in ambiguous fashion, and shows no signs that an end similar to the close of Hamlet, Act V is not a real possibility.

The Washingtonian escapades appear to be, if anything, escalating. And if, for the time being, investors are taking on a “not my monkeys; not my circus” vibe to this, it doesn’t mean they’re right to do so. Earnings are still looking pretty dismal (though we’ll be much better informed on that score a week hence, after such luminaries as Amazon and Microsoft report). China just printed its worst GDP quarter in a generation, and our own economy is hardly showing much chest-bumping mojo.

So anyone who might be worried enough about these goings on to pursue the hedge would arguably be justified in these latent thoughts – at a point when the price, at least in options space, of putting it on is actually on the decline. I doubt many of you will take this step, though, and this is the type of thing that drives me (along with your momma and papas) insane. Last Christmas, when the VIX, at >36, was more than 2.5 times as expensive as it is now, my yuletide phone was ringing off the hook with requests for my assistance how best to secure these here hedges. It was, by contrast, radio-silent during the subsequent, Fed-induced rally. Lots of calls in the horrific month of September ’19; almost none coming my way at the moment.

So I’m here to tell you that if the hedge is your jam, in options space, now might be a good time to take a little looksee at how to rock one. And all of this, of course, is to say nothing of my own current hedge obsession: the one involving the purchase of Madame X (US 10 year) to offset exposure to the equity markets. I haven’t looked like a hero with my call of a couple of weeks back that associated rates were going to zero. Quite to the contrary; I’ve looked like The Monkey in My Circus. At 1.75% and change, we’re looking at multi-week highs on yields/lows on price. And it’s not just longer-dated U.S. paper that has sold off/manifested higher yields. It’s my sad duty to report that it’s a global phenomenon. If you doubt this, just take a gander at the rate action in Denmark, which happens to be Hamlet’s home turf:

Something’s Rotten In the State of Denmark: Danish Rates Soar to -0.36%

Had everyone not died at the end, Hamlet would have been king, even some 400 years later, he might have been less of a Gloomy Gus knowing that he was able to 36 basis points to any of his good subjects for the honor of lending him money.

On the other hand, he might have eschewed debt altogether, especially if he followed the advice that one of his victims (Polonius) gave to another recipient of his capricious blade (son Laertes): “neither a borrower nor a lender be”.

But no one is listening to these dead guys now. Everyone is borrowing, and will continue to do so. But I don’t choose to view that as being in any way dilutive to my hypothesis that rates – particularly in the United States are — gonna sink like a stone some of these days. And whether by cause or effect, this will transpire contemporaneous to a decline in the U.S. equity markets.

And again if you think there’s any framework for embracing a hedge of this nature at all, now might be a good time to take the plunge. It’s priced attractively, the pending slew of data (earnings, GDP, Fed decision, etc.) all provide hopeful catalysts, and I just don’t see how you can do better, hedge-wise.

It may also be the case that the FX markets are telegraphing such an expectation. The USD had a largely unremarked but nonetheless noteworthy slide these past few days:

We should also bear in mind that the British Pound, Willie Shake’s home currency, is prominently featured in this basket. It shot up 7 rocket-like handles in the wake of an announced Brexit deal that may not happen and in fact probably won’t. More likely, old school financial economic assumptions suggest the FX market is anticipating lower equity prices/yields on these here shores. And I’m here to tell you that like the Chairman once sang about Love and Marriage: you can’t have one without the other.

So: to hedge or not to hedge? At the end of the day, I can’t make that call for you, but rather can only opine that there would be worse times to contemplate such a move than right at present. Further, I should remind you that no matter what you do, the hedge may not serve you. It won’t for instance, be of much use if you hit a pedestrian a rainy rush hour afternoon on 34th Street. It does nonetheless have some merit, and, in the final analysis, I’d rate current hedging conditions a solid 8 ½.

At the end of the day, you’re going to have to make your own judgments in this regard. I am happy to weigh in, but it’s your call, and it’s a matter of personal disposition as much as it is one of appropriate portfolio management. You could, however, do worse than adding that other bit of insight Polonius gave to his boy Laertes on the occasion of their final encounter. “To thine own self be true”.

Hedge or no hedge, this sure seems like good advice to me.

TIMSHEL

Well I don’t pass buildings with lights on, if I said that I did than I lied,

Because what looks like a Chinese restaurant may have a Chinese New Year inside,

And son all my life I’ve been searching, the bars I’ve been in I forget,

The light outside ever brighter, the light inside? Not yet

And son, this is Rule 1…

— Paul Heaton

I shouldn’t even be having to write this, because y’all should know by now. Don’t take the Jailbait. It’s Rule 1. And if you don’t know what Jailbait is (at least in the vernacular sense of the term), well, I’m not gonna tell you. Because this is 2019, and such triggering terms are not even acceptable among us newly sensitive souls particularly in what is (need I remind you?), first and foremost, a family publication.

Well, OK; I probably should, for framing purposes, offer a bit of contextualization regarding JB. Specifically, it references the dangerous allure of desire, directed at whatever has not reached the full flower of maturity. This has been a conundrum for society since time immemorial, but it has its analogues — in the investment universe that is, after all, the exclusive concern of this forum. Examples abound.

Crypto/Blockchain Finance? A disruptive technology that is certain to disintermediate commercial banks, the financial/legal system and even central banks. It will usher in a new financial Eden, within which economic agents can interact directly, absent the meddling of middle men (and women), in utter secrecy and with full security. I myself believe in this, but the concept, for the moment, is most certainly jailbait. It wants more time and development before we can wallow in its warm embrace. Heck, this past week, even Facebook’s crypto offering (for my money a sure winner on paper) suffered the wholesale bailout of heretofore energetic suitors such as Visa and Master Card. But Libra will continue to bud out, and my guess is that the credit card Lotharios will be back when it does (if not before).

Cannabis? Another beautiful, blossoming monetization opportunity whose interval of full blush appears to be somewhat further down the road. Its main byproduct (trust me, I know) yields a gentle, inoffensive buzz. Other extracts are said to cure every disease under heaven. But with (among other issues) this vaping problem having emerged, well, need I elaborate? Yes, I suppose I must. It’s investment jailbait.

Initial Public Offerings (IPOs)? As one of the oldest dudes in the market, I do indeed remember a time when: they were pursued with Cyrano de Bergerac ardor, evoking images of unspeakably lovely treasures unearthed in little Parisian jewelry shops in the Paris of the 1920s, where Hemmingway, T.S Eliot, Ezra Pond, Dorothy Parker and Gertrude Stein roamed and wrote the words that shaped the modern world.

And investors became accustomed to making money on them. But that was so last century. Paris still has unspeakably lovely treasures to offer, and those who seek them will find them. But Notre Dame is in ashes. And all those writers are not only dead, but almost no one reads them anymore.

And as for IPOs? For the time being, they are clearly not worth chasing after — in life or death fashion. As indicated below in the chart on the right, numbers are down in terms of both deals and proceeds. And, as illustrated on the left, the many of these darlings have done nothing other than broken our hearts:

Yup, they’re investment jailbait in every sense of the term. All are intriguing companies; embracing them may yet pay off for the patient, but in their adolescent IPO stage, they are clearly best kept at arm’s length.

The China trade deal announced on Friday? More jailbait. It does appear promising, but on the other hand, it has only just been announced, and may not even come off. It is described as a first stage of something that will ultimately be yuuuuge, but I reckon only time will tell. The markets failed to resist its youthful charms in Friday’s session, with the Gallant 500 pushing, after several weeks of setbacks, within 1% of that magical 3,000 spot.

But to me, it’s the pricing equivalent of a high school sophomore reaching second base. It’s nice and all, but we’ve been there before, and it won’t by itself, bring about the satisfaction we so desperately seek.

More broadly speaking, I think the entire 4th Quarter remains, at present and from an investment perspective, in jailbait mode. She’s off to a rather ambiguous start. She doesn’t know what she wants to be when she grows up. Which is only natural, because she is a late bloomer. By this point in her life cycle, her forebears had ripened in visible forms, such as the banks having reported, and meaningful economic data having been released. But the bulge bracket earnings don’t come until next week, and the recently released employment and inflation numbers offer, at best, confusing signals as to what will set her heart aflutter in the coming weeks.

Let’s allow her the girlish adolescence to which every woman justifiably feels entitled, shall we? And let’s face it: she’s gonna act according to her whims whether we like it or not. As one illustration, take a look at her fickleness with respect to what she might tell us in a couple of weeks about her predecessor’s (i.e. Q3’s) GDP performance:

She loves us; she loves us not. Truth is, she herself doesn’t know. Because she’s too young to decide. And anything we do to try to force her to become that which she is not ready to become, is likely to end in tears – for her and for us.

It’s my guess that she will continue to waltz capriciously about, but only for a finite period of time. She (i.e. the Q4 capital economy) will reach the full force of maturity soon, and she could turn angelic or diabolical. She likely cannot be both, and we need, for the moment, to be patient as we can be with her.

If we take her bait now, investment return jail awaits.

Yes, I think that Q4 is going to be a wild ride, and, if in these tender, early days, making to fast a move looks like it buys a trip to the slammer, there are other opportunities to capture the hearts of the loveliest of the market gods’ creatures, who have dwelled among us for a bit longer, and who have rarely, if ever, let us down. At times, they can look very much like jailbait, but from my subjective positioning, they are decidedly not. Jailbait, that is. They are mature and lovely. And they need to be treated with the deference and respect that is their due.

Discerning readers will probably have guessed that I’m referring to the US Treasury Complex; and specifically the long-tooth end of the curve. Note that I got jail-baited by these instruments, in rather rude fashion, over the past week. Shortly after boldly predicting negative yields on the 10-year (which from here on out we will call Madame X), she decided to give me a hard smack in the face:

To be sure, I deserved this b!tch slapping, because I was arguably treating the 10-year like jailbait, and whatever else it may be, it is not that. It has been around since the days of Hamilton, and has been giving investors all its love for the last 30 years. But I asked for it all, and in rather rude fashion at that. This was not the way to play it with Madame X, and I am deeply sorry for my trespasses with her dignity.

But I’m gonna press ahead with her anyway, albeit in more respectful fashion. I still think yields are going to come careening down, cross the zero bound, and stay there for quite a spell. Slowing global growth, political incentives, aggressive/global/incremental monetary easing will all help me in my quest here.

As an experienced, stone cold playa, my gut tells me that Madame X wants to go where I have predicted she will travel. But she’s going to do it in her own way. In her own time.

It’s the lord’s will that she does so. Because she’s not jailbait. And as should be clear by now, not taking the jailbait is Rule 1. Let’s deem not to treat Madam X or any other more mature-but-nonetheless-alluring creatures like they themselves are jailbait. They may look and act like young innocents, and they can be won over. But only by treating them with respect and deference. I will designate this as Rule 1a.

There is also a Rule 2, the details of which I’d like nothing better than to describe to you. But it has not yet reached the full flower of its maturity.

Therefore, to debut it prematurely would be a clear violation of Rule 1. So it will have to wait for another day.

TIMSHEL

Another week; another iconic rocker turned tits up. And this one hits bone. Ginger Baker, Cream’s iconic drummer, has now ascended to the double bass/double high hat heavens. The wonder is that he lived so long. Back in his band’s brief but magnificent salad days, he was such a stone cold junkie that the audience would routinely yell up at the stage “are you gonna die tonight, Ginger?”. But he didn’t. He went on to celebrate his 80th birthday this past August. But it’s now October, and he’s gone. Here’s hoping that in the afterworld, he operates on better terms with Jack Bruce, with whom his on-stage fights were the stuff of legend – so much so that Clapton had to break the ensemble up in disgust.

For me, Ginger’s passing was the culmination of a fairly wild week. In addition to several highly memorable experiences that I am not at liberty to share, I had occasion, for the first time in a couple of decades, to have a go at the New York Times’ crossword puzzle. As devotees of the forum are well-aware, the puzzles become more perplexing as a week unfolds. You can feel a boss on a Monday, or even Tuesday. But by Saturday, spit ballers like me will often look like fools.

This particular puzzle was in Thursday’s edition, typically a hard slog for proles like me, but perhaps manageable. Not this time. Maybe it’s because I’m out of practice, but the hard fact is that I couldn’t populate a single clue.

I did have some help, and my partner crushed it. The key to unlocking the quagmire was to recognize that the verbal matrix contained numerous responses where the correct answer featured three letters in a single sub-frame. I protest. It’s unholy. And yes, THE DUDE MINDS. This aggression shall, not stand, man. Over recent years, I’ve formed a pretty consistent hostility to the NYT, which has now turned into abject hatred. They’ve lost me now, forever. On the other hand, it’s been years since they had me.

I had been laboring under what to me was a justifiable assumption that the whole premise involved one letter per box, And I had held on to this rule of engagement for dear life. But when you shove three consonants into a space designed for no more than one, you’re bound to shatter the equilibrium of a sensitive soul such as myself. And I got to thinking about what a dangerous precedent this establishes. What if they tried this stunt in, say, tic-tac-toe? I’ll tell you what: the game would be over before it began. And I don’t even want to think about how disruptive such a move would be on Wheel of Fortune.

But then I said to myself: “self, this is just the kind of world we live in right now”. And, in dubious transition to investment affairs, I offer, as Exhibit A, the surreal condition of negative interest rates that somehow persist across this (cue up the Moody Blues) cold-hearted orb.

And now I’m going to make a bold prediction, one at which I’ve hinted, but have not had the stones to proclaim outright.

The U.S. 10-year note will soon be in extended, negative rate configuration, offering buyers of these instruments the opportunity to collect an amount less than their original investment, when they come to claim their principal, 10 years down the road. It’s coming, and we should be prepared.

I reckon I am obliged to defend this outrageous proclamation, which, if rendered at any point prior to this recent interval of financial madness, would have certainly caused one or more well-meaning souls to send the guys with the butterfly nets to take me a way. And they would’ve been entirely justified in removing me. And I would have been compelled to thank them for so doing.

But that was then. As of now, the butterfly net guys might be keeping a close eye on me for making such a dubious claim, but they’d probably hold their fire. The first corroborating signs that I might not be completely bat-sh!t about this came precisely ½ hour into the official trading sequence of Q4, when the ISM Manufacturing numbers dropped:

And when I say they dropped, it is indeed a double-entendre. Not only were they released, but, as depicted to my immediate left, they fell victim to a beyond-Newtonian gravitational force.

This here move garnered a lot of ink. And rightfully so. Just back from our Rosh Hashanah festivities, us Sabbatarian market participants reacted in Pavlovian fashion. We circumcised the Gallant 500 — to the tune of 50 handles that Tuesday, the carnage continued into Wednesday. And it wasn’t until I was just getting over my three-letter box shame — on Thursday morning — that our favorite index began to regain some of its mojo.

And as for 10-year note yields? Well, they continued to decline across the remainder of the week. Given Friday’s closing 1.52% print, they currently reside five skinny basis points above the lows that clocked in immediately after the post Labor Day action commenced, and 0.15% above the all-time bottom, registered in the middle of 2016.

And on Friday, even after a September Jobs print that featured few items for complaint (record low unemployment, upward revisions to the last two months, etc.) the 10 year rallied – albeit by just a titch.

We’re going higher in price here, kids, and lower on yields. The domestic and global economies are slowing. Central Banks are in about as expansionary a mood as they have evidenced since, well, since the election of 2012, which was presaged by the astonishingly aggressive monetary stunt known as QE3.

The main trend I am noticing is that every time either equities or any component of the global capital markets evidence any form of agita, the subsequent bond bid takes on quantum proportions. And in case anyone was in doubt about the prospects, there’s plenty out there on the horizon to catalyze such agita. Next week marks the beginning of the Q3 earnings dance, and current projections are for a negative growth rate in excess of 4%. If they come in anywhere near these estimates, then, after three consecutive quarters of decline, the hypothesis of an earnings recession becomes a proven theory.

I’m told we are (yawn) again on the verge of papering some sort of deal with China, and if this happens, I am fully prepared for yields to back up a bit. But know this: it will be a note-buying opportunity that readers would be ill-advised to miss. Plus, if the deal falls apart (and let’s face it: there’s at least a miniscule chance that this could happen), we’re looking at another $250B package of tariffs to hit the trade markets on October 15th. At that point, the 10-year will become a moon rocket.

Meanwhile, the whole perplexing “Impeach 45” saga continues unabated, with neither of the opposing squads particularly showing themselves at their most elegant. It does seem, though, for better or for worse, that the House will move forward, as retreat after what has transpired over the last couple of weeks would be tantamount to ignominious defeat. So they’ll press ahead in formal fashion. The lawyers and the electronic news media will have cause for celebration, and as for the rest of us? We’ll just have to suffer through what promises to be a very sorry spectacle.

And what will happen when Congress brings charges? The 10-year will rally. And what will transpire if they look like they have a chance to force the Big Guy to send his belongings, prematurely, from the White House to Mar-a-Lago? They will rally even more.

All of which brings us to the expanding pig circus of the 2020 election. With Bernie’s dubious ticker and Biden clearly being sacrificed on the altar of this Ukrainian Hail Mary, all political roads are pointing towards Senator Warren being a lock for the nomination. What will happen if these trends are confirmed? Yields will plummet even further.

And what will happen if she is actually elected? More of the same. In spades.

And as for the rest of the world, as is often the case, it could only wish it had our problems. Europe is feeble, can only weaken from here, and will print money in response. The Chinese? Same deal.

If we start heading toward a bona fide recession, the 10-year note bid will blow away even any of the amazing such displays that we’ve witnessed during this remarkable interlude of monetary intervention.

So I say, come what may, you have my blessing to own the 10-year note here, in any size you can muster. I particularly believe that such an action offers a perfect hedge against long oriented equity portfolios, because under any paradigm involving their broad-based selloff, the 10-year note will rally and then rally again.

I do believe all of this puts a floor on equity valuations, because one consequence of an unending government bond bid (here and abroad) is the manifestation of cheaper financing costs, which will ease the path of financing the purchase of equities for the privileged class, while rendering their ownership all the more attractive by comparison.

And I do extrapolate to a condition where the U.S. joins its former Axis enemies of Germany and Japan, as well as always-neutral Switzerland, in a seemingly-permanent negative borrowing benchmark configuration. The dynamic will be difficult to impede, much less reverse, but that, my friends, is a problem for another day.

Because right now, the 10-year note bird is pining for higher heights. We may think we have her in a cage, but even if we do, we have left the door open. She is therefore free to fly. One strategy is to walk away, and let her do what she will. It’s entirely possible that she will flutter off, but then come back to us, perhaps in the dead of night. This is a rarity, but I’ve borne witness to it happening, and it has been breathtaking.

I’m not sure it’s the best strategy from a risk management perspective, however. The note bird is a mysterious creature, kind of like a crossword puzzle where they expect you to shove three letters into a single square. My best advice is to give her the freedom to spread her wings, and to do what you can to fly with her.

Because if you do, even the most improbable of your dreams might come true.

TIMSHEL

“In another time’s, forgotten space, your eyes looked, at your mother’s face,

Wildflower seed, through sand and stone, May The Four Winds take you safely home”

— Franklin’s Tower: Lyrics by Robert Hunter (Music by Jerry Garcia)

Well, we’re now a full 3/4ths of the way through this crazy year, and the obvious question is as follow: are we having fun yet?

My best guess is that for most of us, we won’t know the answer until the end, until yet another of those endless series of ball drops in Times Square is hard upon us. It is, after all, only at that point that we will understand, with the divine benefit of retrospect, whether or not the rewards we will have reaped across 2019 will have justified the madness we have endured.

In turn, this implies that the tidings wrought by Q4 will be crucial to the overall narrative. And in this edition, we will attempt to take a measure of what’s on tap. For what it’s worth, matters appear very opaque to me at the moment, but when did that ever stop me from offering confidently-rendered opinion?

However, before we get to all of that, we must first pause to pay tribute to the recently departed Robert Hunter: the elusive-yet-somehow-ubiquitous lyricist for the Grateful Dead. At the point of his passing, his life and times evoke images of a gentile, heterosexual version of Alan Ginsberg. Like Ginsberg, Hunter was everywhere, but always, it would seem, hovering in the background, commanding little attention and seeking even less.

And it should surprise to no one that I have a measure of frustration with Hunter. And it’s not his fault. To be sure, he wrote some solid lyrics in his time. Think Uncle John’s Band. China Cat Sunflower. Sugar Magnolia. I could go on, but why?

But I will admit to tiring of all of those cowboy figures, all of the bootleg whiskey references, of lighting off to Chino, babe, trailed by 20 hounds, of boxes of rain, and of watchmen shot right outside fences.

And mostly this. I always wondered why Jerry never wrote any of his own lyrics. I mean, it’s not like he wasn’t enormously articulate, like he had nothing to say. Heck, his was the face and voice that shaped the consciousness of an entire generation, myself included. Moreover, being something of a hack songwriter myself, I have always felt that the real challenge, the elusive prize, is the writing of a good hook. Chords and melody. They need to grab the listener, and when they do, all is right in this godforsaken world.

And he (or she) who writes the tunes, has, in my judgment, won the right to pen the lyric. Say what you want, oh sublime hook-writer, as this is the sweet payoff for creating something that is musically valuable and sharing it with us. You’ve earned our obligation to listen to what you have to say. And I, for one, would’ve loved to hear what was on Jerry’s mind, which I’m sure it would have been fascinating.

But he subcontracted this privilege to Hunter, and it would be unfair to state that Hunter let him down. He didn’t. But Bob Dylan (with whom he in later years collaborated) he most certainly was not. Hunter, has now left us, though, presumably for that Happy Hunting Ground in the sky. And as we honor his efforts, at a point when the Q4 hunt for investment returns is about to begin in earnest, I am reminded of one of his better lyrics: the lines purloined for this modest tribute, which I believe merit our attention.

Because, among other matters, hunters of every stripe must be guided by these winds, The Four Winds, and perhaps, for those who seek investment outperformance as their prey, the glide path of The Four Winds might be as important as they’ve been for quite a while.

Will The Four Winds blow you safely home? Truth is, I don’t know for certain, but perhaps we can review them for the insights they may portend.

The First Wind is Domestic Politics, a topic of which I’d rather dispense sooner than later because they are now in depressing crescendo. They were already a chart topper before House Leadership chose “Now” over “Never” in terms of their Impeach 45 obsession, and at present, there’s no turning back. Now, I don’t know anything more than anyone else about this latest episode, and therefore will seek to keep my musings somewhat balanced. There appears to be solid momentum building at the moment, but the strategy risks backfire in spectacular fashion. Because in the words of Ralph Waldo Emerson: if you strike at a king, you must kill him. Do the current allegations rise to the level of 67 Senators voting Trump’s fat ass out of office? Well, maybe; maybe not. In the meantime, Team Pelosi is gonna have to hustle. They need 218 votes, and (again unless there’s more here than meets the eye), they must all come from the left side of the aisle. Simple math suggests that at least 20 of them need to be sourced from House Members representing districts that Trump won in 2016; maybe more.

The preparations for trial will kneecap the entire Progressive Agenda, probably up until the election. And the trial will be a Pig Circus. In the meantime, Pelosi herself has already yielded once and for all her podium and gavel to those cheerful ladies otherwise known as The Squad. Moreover, the episode virtually ensures that Biden is toast. Trump’s intervention into a foreign investigation was about a company on whose behalf Biden himself intervened in similar fashion, to the great benefit of his own son. And Biden is out of office, so he can’t be impeached. But his campaign can be fish-gutted in the higher cause of bagging the progressive hunters’ bigger game: The Big Guy himself. Somewhere in Minnesota, Al Franken must be enjoying a good chuckle over this. But the rest of us have scant cause for mirth.

Thus far, the market has chosen to by and large ignore the preliminaries. Unless there’s more, this trend will probably continue. But I reckon we’ll have to wait and see.

Wind Number 2 is a familiar one to this readership: the extraordinarily accommodative monetary policy (delivered to us (no doubt) from heaven — through the earthly devices of Central Banks), and the likelihood that it will continue on for the foreseeable future. This is an enormous tailwind for market participants, of such great force that, I’d be continue to designate it Wind Number 1, had it not been upstaged in spectacular fashion by the latest Washingtonian shenanigans.

I think that the continued assertive monetary policy support across the globe will, at minimum, provide support to financial valuations, and am therefore encouraging my clients to retain sufficient bovine sensibility to the dips. And I’ll throw another one in here, just out of love. Owning longer-dated US Treasuries offers, at the moment, one heck of a hedge against other longs, because if “riskier” assets start to fall out of favor, the incremental bid on domestic govies should be something spectacular to witness. But I suggest you do more than witness. I think you should participate.

The Third Wind, a big, yawning, impenetrable gust, is our trade negotiations with China. But we’re not going to waste much space on this squall. Because that’s just what it would be: wasted space. Nobody knows anything about anything about this really. And I will only add a couple of minor additional points here. First, the markets are likely to continue to be whipsawed by every associated (mis)information blip about that comes its way. And they wouldn’t mean anything if not for my second and final minor point on China trade: The Impeachment Wind at the top of our charts probably greatly increases the likelihood of the world’s two superpowers striking some sort of deal – perhaps even before year end.

The Final Wind (Number 4 if you’re keeping score) is the inevitable, inexorable flow of data that we must endure in the first half of each quarter; Q4 included. In normal times, #4 would also be higher on our Hit Parade, but as should have been made clear in preceding paragraphs, it also has been rudely upstaged.

But trust me on this: these data flows are coming, and from our current temporal points of observation, they offer a mixed bag of tricks and treats. Macro numbers are yawningly tepid, likely, in the month leading up to All Hollow’s Eve, to offer up neither fright nor delight. Our first insights will come our way on Friday, with a September Jobs Report which, if the prognosticators’ prognostications hold true, will offer no insight at all. Steady but uninspiring jobs growth, high employment levels. Very modest and on balance insufficient wage inflation.

Adhering to the macro side of the equation, the GDP estimates of the federales are perking up – to an acceptable >2%. But we won’t get our first glimpse of these estimates till the last part of October.

Before that, of course, the earnings season will be in full swing, and the signals we’ve received this far don’t offer much cause for jubilation. Q3 earnings are expected to feature the third straight quarterly cycle of negative profit growth. There have been an exceptional number of pre-announcements; most of them to the downside. To wit, Factset indicates that out of 113 tech companies who saw fit to leak their performance ahead of schedule, a record 82 have telegraphed incremental bad news.

But I’d encourage my hunters not to lose heart. At least not yet. For one thing, Q3 is typically the Kitchen Sink Quarter, where CEOs ram all the negative news they can into their messaging — in the hopes of looking like conquering heroes — at year end, when, just as a matter of coincidence, their compensation levels are determined. I further have a hunch that some of these tech darlings will exceed the low bars they have unilaterally fixed, when their turns at the podium come upon them.

And I encourage you to look, at least for an instant, at the bright side. Winds 1, 3 and 4 tell us we’re facing a domestic constitutional crisis, are on the brink of an all-out, crippling trade war, and in the midst of a pretty nasty earnings recession. But financial instrument valuations are at or near all-time highs. Of course, if you ask me, we have little else but Wind 2 to than for this largesse.

Will The Second Wind blow us safely home? Perhaps, but asking the man who gave us these lines is no longer an option. Robert Hunter has by now entered his happy hunting ground, while the rest of us must seek our prey across this more wretched veil of tears. I myself remain optimistic that we won’t return to our caves empty-handed, because hunting under difficult conditions is our forte.

And let me tell you, it beats trying to generate returns by planting yourself at the MGM Grand in Las Vegas: a place where you can walk out a winner, but only if you can spit madder game than you probably got. Most don’t, and should thus proceed with caution. So, rather than chasing Q4, let’s allow it to wander into our traps. Meantime, we can cool our heels in the comfortable realms of Franklin’s Tower.

It ought to be a pretty wild ride, one way or another. So don’t try to laugh your past away, but do try to make it, just one more day. By watching the wildflower seeds, through sand and wind, The Four Winds just might blow you home again. And with that I can only add the coda:

Roll away the dew.

TIMSHEL

“We’re all Keynesians now”

— Milton Friedman, quoted out of context, in a line incorrectly attributed to Richard M. Nixon.

I recognize that the entire world has worked itself up into a frenzy of debate over the whole Keynesian Liquidity Trap kerfuffle, but before we get to that, I have something on my mind that I wish to share.

Isn’t it time that water beds made a comeback?

I mean, water beds were pretty cool. At one point, Joe Namath-in-the-Hollywood Hills-circa-1974 cool. But not long after Joe ended his always-celebrated-but-eternally stylish career (and before he creepily tried to kiss that on-air reporter on the lips), they disappeared off the face of the earth. Water beds that is.

And I’m guessing that some of you don’t even know where they are.

I’m not going to waste much time schooling that younger, less erudite portion of my readership on the topic. Think of a water bed as a somnolent onomatopoeia: a thing that sounds like it is. A bed made of water, or more, specifically a mattress made of water. But the truth is that I never had enough bling to own one. Or even sleep in one. My brother had a water bed when we lived together in the ‘80s, and for the briefest interval, this was a sign that he was spitting madder game than me. But all of that changed. He ditched his liquid lounger, and now, I’ll match my game against his any day of the week.

Being the diligent, game-rich guy that I am, I did some research here, and have found in addition to the fact that they fell out of fashion around the same time as did big hair and acid-washed jeans, the contraptions were something of a headache to deal with. As one can only imagine, they are heavy as sh!t, require constant maintenance, and suck up a lot of resources — the utilization of which the woke world of 2019 won’t tolerate. No, the gaseous issuances from bovine backsides do not enter into the equation, nor, as far as I am aware, is much fossil fuel consumption required.

But these virtues notwithstanding (and though I have no direct knowledge one way or another), I think it’s a fair bet that neither Bernie nor AOC owns one in any of their multiple dwellings.

Biden, on the other hand, may have an H20 recliner stashed in his one of secret Delaware batch pads, and Bill Clinton must still own at least a half-dozen of these bad boys. And as for 45, well who’s to say? Probably not, because if a single water bed existed in the Trump portfolio, it’s a near-certainty that evidence of same would’ve made its way into the Steele Dossier, leaked to the media, and perhaps even merited a third section of the Mueller Report.

But one way or another, I think that the time for une couch de l’eau renassiance has arrived. The good news is that there are indications that this dynamic is indeed emerging. Nowhere is this more evident than in the recent surge in the valuations of utility companies, which just this week hit all-time highs.

I won’t lie: I didn’t see this coming. In a capital markets universe dominated by technology, biotech, cannabis and crypto, who knew that the sleepy likes of Consolidated Edison and New Jersey Power could surge to the heavens, valuation-wise? But I’m here to show you that the unthinkable has indeed become the actual:

Thus, and particularly adhering to the lower portion of the graphic, it seems to be the case that investors would have fared better these last three years by owning Grandma’s favorite preferred stock names than they would have holding (Insert favorite social media darling).

And I can only deduce one possible explanation here: the markets are anticipating one whale of a redux of the whole water bed thing. Bear in mind, here, that unless you are plan is to either freeze or sleep on the under-frame, the use of a water bed is going to require a significant amount of electric heat, and, well, water. And these, my loves, are the stock and trade of our new darlings in the Utility Complex.

It’s all starting to come together, right? Investors know that the water bed craze is on the verge of re-emergence, and, given the reality that (to the best of my knowledge at any rate) there are no publicly traded water bed concerns, they (investors) are reverting to the part of the playbook that involves owning companies that produce input components.

So we’re clear on the whole water bed thing now, right? At least I hope so. And my transient obsession with the topic has caused me to focus on a more germane element of fluidity: market liquidity. As was widely reported, the Repo market, the lion’s share of which involves overnight, interbank loans of cash, as collateralized by Treasury Securities, seized up earlier this week. Their associated yields jumped five-fold, and might’ve stayed there had not our Fabulous Fed stepped in with divine normalization relief. It’s still a bit wobbly, and the Fed has not yet exited the scene. The technical cause was a drain on reserves held at the Central Bank, which elicited a cash funding shortage in the overnight markets. But no one (I’ve talked to some really smart folks about it) can tell me why this drain occurred. Or what caused it.

But I’m not going to let a technical glitch knock me off my pillar of obsession with water beds, because if I did, you’d be disappointed in me, and rightfully so. However, with all of these fluids flowing through my cranium, it was perhaps inevitable that my focus would turn to liquidity traps. Most specifically Keynesian Liquidity traps. And here the mind races.

Like the weather (as attributed to Twain collaborator Charles Dudley Warner), everyone is talking about Keynesian Liquidity Traps, but no one is doing anything about them. Maybe this is owing to the reality that the entire premise has been inverted in grotesque fashion. As even my two-year-old grandson knows, the classic KLT features a conundrum under which a Central Bank is unable to lower longer term rates, no matter how much liquidity (i.e. funding) it injects into the system. This was a sound concern for most of the history of the global capital economy, but the problem has now turned itself right on its head.

Because for the time being, albeit with the same inputs, a similarly vexing monetary quagmire emerges. Specifically, now, no matter how much liquidity the CBs create, it seems that there’s nothing they can do to lift rates at the long end of the curve. And as a result, the U.S. yield curve remains depressingly inverted. As everyone is aware, Powell did come through with yet another short-end rate cut this past week, and, if we hold all other points constant, the logical outcome of this would be that the current, unpleasant pattern of inversion would disappear.

But It is my sad duty to report scant progress in this respect. The US Treasury Curve remains inverted out to points beyond 15 year maturities:

All of this is as unsettling to us economists as those first images of Joe Namath in panty hose back in the mid-70s. But there’s not much we can do about it. I am on aggressive record as being a perpetual bond bull, and the enticement of all the water beds in the world isn’t going to change my viewpoint.

We’ve been over this before, but the hard facts are as follows. The weakening global capital economy simply cannot abide higher longer-term rates. These securities are the beneficiaries of a perpetual, galactic bid, and the quantitative easing engines of major economies are just now revving up.

Even the estimable Chairman Powell blandly suggested that his outfit might yet again be expanding its still-gargantuan balance sheet again ere long, and we know what his peers at least in Europe have teed up.

I can’t help but wonder what good old JMK, who presumably never slept in a water bed (the reality that they first emerged about a thousand years BC notwithstanding), would make of all of this. It seems that instead of, as he prophesied, conditions where no amount of liquidity could lower longer term rates, it now seems that nothing of that nature can serve to raise them.

All of this speaks in my mind to a duality I’ve written about before. The value of financial assets, due to scarcity, is immense and rising, while the relative price of real economy components continues to fall. Anyone who doubts the veracity of the latter condition should consult with my friends in commodity land, or review a few of the charts over which they obsess. Heck, last week, when some Iranian drones took out major portions of the Saudi Oil Fields, Crude spiked, but couldn’t even hold its lordly position for more than a handful of sessions. West Texas Intermediate, after soaring to the heights of over $63/bbl, now resides at a docile 58 and change.

So the signals are clear. On balance, the 21st Century analogue to the Keynesian Liquidity Trap will continue to increase financial security scarcity, and calls for investors to hoover up financial securities at every strategic opportunity to do so. And this remains the case even if the signs of pending recession begin to emerge in sharper contours. If GDP continues to slip, if the mighty consumer begins to amp up despair and close its wallets, it will only serve to push financing costs lower, induce more buying of financial assets, and the rendering the scarcity of the latter that much more acute.

But I don’t think the consumer is ready to roll. Yet. And if I’m right about the water bed resurgence, that right there would be a welcome boost to this most critical component of the domestic economy. Consider, in closing, the multiplier effects. The future purchasers of acquatic sleeping devices must also treat themselves to new bedding. And please, whatever you do, don’t skimp here. Because the bedding is critical. For your water bed to be all you wish it to be, you must accessorize it with the best sheets, blankies, pillows and pillow cases you can find. Don’t go all tacky here (nothing made of silk), but pure cotton sheets, for instance, are a must. Otherwise, you ruin the whole experience.

In the interest of full disclosure, I myself won’t be buying a water bed. I feel I own too many beds as it is, and, having survived nearly six decades of less soggy, I think I can muddle through my remaining allotment of days without one. I am told that for the right price, though, the Pierre Hotel on 5th Avenue will set you up with a sweet one. And that, my friends, is a temptation I’ll be hard-pressed to resist.

TIMSHEL

Apologies in advance but we’re not going to waste much space on the passing of Eddie Money. Or time. I personally won’t be sitting Shiva, because my calendar won’t allow for allotting seven days to the ritual. I won’t even be saying a mass, as, among other excuses I might offer, I’m not authorized to do so. Heck, I’m not even not baptized.

Beyond this, I’m not a big fan; never was. I don’t wish to be over harsh here. I did like the Geico commercial where he played a travel agent, creeping out his customers by incessantly singing, in sotto voce, his smarmy, ubiquitous hit: “Two Tickets to Paradise”, as I feel it demonstrated self-awareness that is becoming an increasingly rare commodity in this world of accelerating self-involvement.

But the hard fact is that his music annoyed me, and, to be fair, this wasn’t entirely his fault. The songs weren’t that bad, but his emergence in the latter half of the ‘70s (along with the likes of such mediocrities as Huey Lewis) offered stark confirmation of the biggest fear of those of my ilk. That a Golden Age of music was indeed over, that what would follow would be of unilaterally inferior quality, and that we’d never (in contemporaneous time at any rate) recapture the magic of what had just ended. In other words, I blame him (and others) for not living up to the impossibly high standards established by his musical forebears. And if that is the worst that can be said of him, perhaps we owe him some small debt of gratitude after all.

So we will bid a casual farewell to E. Money, and move to the more timely, relevant topic of ∉ Money, or more specifically, Euros. This past week, as was widely expected, ECB Chairman Mario Draghi used the occasion of his penultimate turn at the podium to throw some stone cold ∉-Love at his constituents. Cut the deposit rate. Announced a new round of Quantitative Easing — to the tune of ∉20B per month. Pulled a few other obtuse rabbits out of his hat – including a further sojourn into negative overnight rates, the tiering of same, and an expansion of the hideously acronymed LTLRO: a concept that no one under heaven, including anyone at the ECB, can explain or even understands.

But who cares, right? Suffice to know that all of this was intended to prime the Continental Monetary Pump, and early returns suggest that it worked. Global equities rallied unilaterally. Bond yields backed up in fairly dramatic fashion (more about this below). And for my, er, Money, this is all prelude to the main event, when Madame Lagarde takes over the helm and gets the ∉QE action rolling in earnest.

So I reckon ∉ Money will be on the charts with a bullet for a good while into the future. Probably, there’s no choice here, but one has to wonder about the need to turn up the volume dials on money printing, a full decade into the improbable recovery of the global capital economy. My own strong belief is that (the reality that all economic text books would deem the whole escapade a rather unholy action notwithstanding) the doubling down on inhaling monetary helium is probably the only alternative to bearing witness to this whole decade-long rager of a party coming to an abrupt and unpleasant end.

But no one should deceive themselves. This is not an offer of a Ticket to Paradise – much less two of these vouchers. The global capital economy is under significant pressure, world-wide indebtedness, as we have covered extensively in this space, is at all-time highs and growing rapidly, and, given the fragile political conditions, both domestically and abroad, now is certainly not the time to sober up – at least in a monetary sense of the term.

Super Mario said the right things at his presser. Begged for some fiscal relief. Admonished the custodians of the European financial system to get their sh!t together. But as he knows perhaps better than anyone, these were empty words, uttered to a constituency that will nod in agreement and do nothing of the kind. And I don’t mind stating that I’m gonna miss Mario. He did what he had to, under near-impossible conditions, and did so with a certain savior faire.

But to reinforce just what a strange, Felliniesque turn of events this is, consider the above-mentioned fact that in the wake of an announcement that the world’s second largest/most important Central Bank is about to purchase a pant-load of member debt, the targeted bonds actually sold off (implying higher yields). And the selling spilled, in dramatic fashion, onto these shores:

US 10 Year Note Yields:

You have to go pretty far back in time (and I’m not gonna do it for you) to find a half month where these here benchmarks manifested a 40 basis point increase in rates. But perhaps more importantly, the ECB announcement: a) came in the midst of this yield upswing already in full swing; and b) did nothing to slow its momentum.

So, let me get this straight. Our notes are selling off hard just when the big monetary dogs in Europe are announcing that they are bulk-buying their own jurisdictional equivalents? At the risk of committing, yet again, the horrible transgression of mixing metaphors, this indeed is tantamount to the tail wagging the dog

But I’m going to retain my bullish stance on govies nonetheless. Yes, they are on offer, and the offer might sustain itself for a spell. But it says here that any economic headwinds, any selloff in the equity markets, and those yields will come careening down – across the globe.

Anyone among you believe that these headwinds are improbable? Well, I’ll take the over on that one. And I’m going to go y’all one further and predict that we haven’t seen the peak of pricing or trough of yields – in any major jurisdiction in the world.

All eyes will now turn to next week’s FOMC meeting, where nothing unexpected will happen. The Fed will cut the overnight rate by 25 bp. Further, any deviation therefrom will catalyze a redux of what transpired last week in Brussels: if the Fed cuts by more than 25, yields at the long end of the curve will accelerate their heavenward ascent. If they adopt a more hawkish stance, said yields will come careening down.

It’s just that kind of world we live in at the moment.

It’s been more of a mixed picture in Equity-land, as, earlier in the week, the hand-wringing from a rather annoying shift of risk flows out of Momentum names and into Value plays caused my phone to blow up more than once. In response, I have tried to reassure my minions that it’s all just so much noise. We are now in the last innings of a very complex and non-intuitive quarter. But at this point in the three-month cycle, information flow is at a low ebb. So why did that capital shift away from our darling tech companies and into such wallflowers as Proctor and Johnny John? Well, probably because it could.

And I will not hesitate to blame the algos, because I love to blame the algos. Everyone loves to blame the algos. So as far as I’m concerned, it’s case closed. It was those damned algos. My hypothesis is that they were just stirring the pot, perhaps out of sheer boredom.

They do that from time-to-time, you know.

So I’m advising anyone who asks/will listen, as follows. I don’t, from a fundamental perspective, presume to opine on what you should own, but if you like names that have a strong Momentum motif, you should not sell them down here. In fact, if they dip again (late in the week, they recovered some of their equanimity), and you have the wallet, you should probably buy more.

And yes, rates are coming down, if not over the next several sessions, then soon thereafter, so you have not only my permission to buy bonds, you have my full sanction.

Because this here rager rally will continue to sustain itself on monetary helium – at least for the foreseeable future. I’m not sure how much higher this lifts our balloons, but it should, at minimum, keep them aloft at current elevations. If they dip, I say buy ‘em. And that construct is almost certainly more in play in the bond market than it is in equities.

To repeat my oft-documented soothsaying, none of this will end well. Eventually, the party will wind down, and you don’t want to be the last guy partially snoring on the couch as your hostess (or host) frustratingly lifts your legs off of the coffee table to run the vacuum. Believe me, because I’ve been that guy. It’s not pleasant, and the reputational after-effects are often lingering. Among other consequences, you may find your invitations dwindling, or disappearing altogether.

Yes, all parties must, by definition, come to an end. I’m just here to tell you that this one has a little bit of juice left in it. Any increase in risk or financial/economic impairment will push down rates, which, in turn, will provide the catalysts to resume the equity soiree.

Thus, in closing, I’ll give a shout out to E. Money’s other passable mega-hit and just say to you “Baby Hold On”. There may be justifiable reasons for you to bail on your names, but macro risk is not for the moment among them. So baby hold on to them.

But Poor E. has left us, as they all do, now with depressingly accelerating frequency. Others will take his place, because that’s the way of the world. Hopefully, they will pump out better hooks than he did.

In the meantime, we can look forward to a whole passel of new ∉s floating down from the European heavens, and onward we go.

Paradise, it ain’t. In truth, it isn’t even a ticket to the Promised Land. But wasn’t there (to borrow from Thackeray) a serpent in Paradise itself? Instead, it’s the real world, and we must comport ourselves to it’s idiosyncracies.

So my advice is to keep your wits about you. Don’t drive past your own house. Don’t get on the wrong subway train. We’re all distracted, but focus is what’s needed most. Otherwise, we’ll either miss the last, joyous strains of this seemingly endless party, or overstay our welcomes.

And, for the life of me, I am unsure at the moment as to which would be the more unpardonable sin.

TIMSHEL