He was someone, who to know was to drink with, and to drink with, was, unfortunately, to pay for.

Thomas Hardy

If we’re so happy, why do I flinch, if our feet should accidently touch?
And why, when we undress, do I blush?
If we’re so happy, why are we drinking so much?

Dave Rotheray — Homespun

Well, why the hell not? Drink so much, that is. And, for what it’s worth, the same answer applies when we’re not happy. Which we’re not.

And why the hell aren’t we? Happy that is.

Well, why the hell not?

Doesn’t much matter, but I got to thinking about liquor as the cure to our dour condition when reviewing an article in Friday’s WSJ – about the joys and hardships associated with the bending of the elbow.

First, the good news: wine is now more a more potent potable than ever before. Bordeaux grapes, after hovering for eons at ~12%, are now > 13% alcohol content.

But now the bad. Apparently, as indicated in the following chart, booze not good for us:

So, according to the American College of Cardiology, I should have died 18 years ago. Thanks, guys. For nothing. A piddling 50 drinks a week – by my booze-impaired math a mere 7 drinks a day, and you’re half again as likely to turn tits up?

Somebody should’ve told me about this around, say, 1982.

Timelier tidings are also of concern. Recent housing data indicates a continued downturn — not just in existing home sales, but now even in home construction. And, while Big Paulie’s pad remains on the market, a hedge fund whale has announced the construction of a residential compound for which he has budgeted a big fat $1B (that’s $1B with a B). As this guy is something of a protégé’ of mine, being: a) a few years younger than me; and b) another Kenny G, I advised him that for an equivalent sum, he could purchase the equivalent of more than 40 of Big Paulie’s White Houses (maybe including the one on Pennsylvania Ave), or, like 700 of Don Carlo’s digs. But youth must be served; he will have his own way.

He and his ilk, when not gorging themselves on Real Estate and professional sports franchises, are busy cutting off funding to the endowments of the universities that launched them. Including The University of Pennsylvania, founded by Benjamin Franklin, and whose alma mater: “Drink a Highball at Nightfall” may be the greatest musical composition this side of Bach’s Brandenburg Concertos.

And the market is having none of it. The equity tape stays quite weighty. Madame X (Ten-year Treasuries) is knocking, ever so demurely, on the door of 5% and her wilding younger sister – Vixen VIX – is apparently throwing ‘em back like it’s Purim or something:

Energy traders appear to have finally gotten the memo about the potential impact of recent geopolitical events on the price of their flagship products and have bid them up energetically. The other commodity significantly on the rise, perhaps due to its well-understood benefits in relieving the after-effects of our excess imbibing, is Coffee:

Not gonna lie: I could use a cup right now.

Meantime, we’re more than a fortnight since the 10/7 attacks, but the elite (as well as the unhinged) of this nation are divided as to who they should direct their ire against. Angry protests about Israeli reprisals began many days before any such action even transpired. I don’t seem to recall any such outrage associated with the Russia/Ukrainian dustup – the civilian casualty totals of about 20x those in the Gaza throwdown notwithstanding.

And what does the world – the market in particular – expect Israel to do? Roll over and get stiffed? Though they have taken their sweet time, they will go into Gaza. Hard. And then there will be a retaliatory strike. The West might even gather the liquid courage to go after Iran’s second biggest cash cow (behind, of course, U.S. monetary giveaways) – their flow of Crude Oil exports. Yet Crude continues to trade at levels below where it resided a month ago, around the time when Netanyahu assured the U.N. General Assembly that all was quiet on the Gaza Front.

And, if this here thing spins out of control, which it very well might, what’s gonna happen to Madame X? The Russian invasion offer a clue. Traders, at that time, bid down yields by ~30 bp. Now, in the wake of these attacks, yields are up by an equivalent amount.

So, I kinda reckon that Madame X is more of a long than a short at this moment.

We should at any rate hope that I’m right. Recent publish reports suggest that the amount of junk debt that is scheduled to roll over the next couple of years now exceeds 2007 levels and stands at a gaudy 19%. These outfits, due to their impaired financial state, were compelled to borrow at junk rates when the benchmark (none other than Madame X herself) was fixed at much lower yields than today. When they approach their bankers, hats in hand for another round, it will thus presumably be priced, if at all, at much higher rates. Some may fail to complete the trade; bankers may get scared away altogether.

I don’t even want to think about it.

The slim-majority-holding Republican Congressional Caucus is no closer, is indeed further, from electing a leader than it was when a few Jumoke’s decided to shitcan their last Speaker. The third attempt to put Jim Jordan in the top job received fewer votes than the second round, which received fewer votes than the first.

Nice job, guys and gals. It’s a great time for an intraparty squabble, what, with the debt ceiling deadline looming, a burgeoning, escalating war, and a presidential election just a year away. As I type this out, Minority Leader Jefferies is the top vote-getter, which tells you all you need to know about the GOP Caucus.

And unless something changes across the political landscape, we’ll have ample cause to drown our sorrows come January of 2025. The only three visible feasible outcomes are: 1) Biden beats Trump one on one – with the Dems gaining seats and retaking the House in the process; 2) Trump takes Biden down, mano a mano, and God help us then; or 3) Trump loses the nomination but runs as a Third-Party Candidate, utterly gutting the Republican Party in the process.

Not a lot to give hope in terms of an investor-friendly policy environment.

But hey, the market keeps trading, the bartenders keep pouring, and we stumble on. This coming week, we can anticipate with brain-impaired glee, the first Q3 GDP estimates, and the beginning of the big kid earnings cycle, as ushered in by Meta and Amazon.

Meantime, the war in the Middle East will continue to boil. There is chaos in Washington. I don’t believe a crash is imminent, but I cannot fathom a justification for any sustained rally.

I’d retire to an adjacent watering hole, but truth is, contrary to what’s written above, I don’t drink. At all. I am so bereft of alcohol intake that I fail to capture even the below zero dip, in the above-supplied graph, associated with a pissant 3 drinks a week.

I kinda wish I did drink, because it often seems like I’m missing the party. But my body simply doesn’t take to the hair of the dog.

It’s not that I’m happy, and often wonder if excessive sobriety is to blame. Meantime, I can only rephrase our titular rhetorical question and ask why, if I’m so unhappy, I’m NOT drinking at all.

Maybe it’s because I don’t know you. Because if I did, it would mean drinking together.

Which doesn’t sound like a bad idea.

So long as you pick up the tab.

TIMSHEL

Somewhat counterintuitively and despite all that bruhaha broiling in other realms, this much is true: If you wanna know what’s really going down, keep your eyes on The House. Or, more precisely, The Houses. As was widely reported for instance (in this space and elsewhere), the Brady Shrine trading flat a few weeks ago, which I interpret as falling short of a unilaterally encouraging sign.

But now, an even bigger test emerges, as 177 Benedict Road, Staten Island, NY – offered by Connie Profaci Realty, at the sacrificial price of $16.8M, hits the market:

https://www.zillow.com/homedetails/177-Benedict-Rd-Staten-Island-NY-10304/32294383_zpid/

But the sales history, location, comps, amenities, etc., fail to tell the whole story on this here piece of The Rock — as: a) the listing agent is none other than Connie Profaci, daughter-in-law of the late founder of what is now known as the Columbo Crime Family; and b) it was constructed as the palatial residence of the successor to Carlo Gambino himself – Paul (Big Paulie) Castellano. It’s a round trip for Connie, who brokered the last sale of the property – for ~$3M, in 2000.

When Big Paulie took over for his brother-in-law Don Carlo, a lot changed, and not much of it for the better. For one thing, Carlo lived most of his adult life in a modest track house in Brooklyn, a home that stands in dignified contrast to the inappropriately showy digs constructed by Big Paulie:

And by all accounts, Carlo was the better Don. Ran his eponymous outfit like a Special Forces Unit. Maintained an improbable but uber-effective low profile. Served as capo di tutti capi to the 5-family Commission for more than two decades – until his death (of natural causes) in 1976.

Because of Omerta I am not at liberty to mention too much about his reign; suffice to say it was a marvelous time to be a made guy, or even just a connected guy, and that it ended all too soon.

He probably committed his only major error of judgment at the very end of his life, as he prepared for that Big Sit-Down in the Sky, when he failed to appoint his successor from the ranks of the meritorious. Instead, he plucked, from the relative obscurity of the semi-legit meat business his wife’s brother: one Constantino Paul Castellano, and elevated him to the top spot.

History shows that it all unraveled quickly after that. Paulie hired the entirely unreliable Westies as his enforcers, began shaking down his capos in highly indecorous fashion, built himself the above-pictured garish palace, allowed his home/HQ to be bugged by the Feds, engaged in an affair with his Filipino housekeeper, got himself RICO’d, and was facing a few centuries in the can.

Then, just before Christmas in 1985, he took that meeting at Sparks Steakhouse in Midtown, but never made it to the front door.

The guy that did him landed, unsurprisingly, in his seat, and nuance was not his strong suit. Wars ensued. Guys ratted. Most notably his underboss, dropping the dimes on everyone, including Don Carlo’s own son, who left us last week at the advanced age of 94. The Dapper Don eventually landed in jail, where he died, his legend fully intact. But the Gambino Family, and indeed the entire Commission structure, crumbled, and is now a shell of its former formidability.

And the fellow who sits in the White House a few hundred kilometers south of Big Paulie’s manse somehow reminds me of Big Paulie himself.

He was nobody’s choice for the job, and only succeeded because enough of the crew believed the alternatives (basically either DJT or Bernie) were worse. Won the post by staying in his basement and letting his handlers deal with the dirty business of electing him. He blusters and prevaricates. Listens to the wrong people. Quite often makes the wrong decision for the wrong reasons. Demands excessive vig from the ranks – most of which lands in the pockets of his family, cronies, and rent-seeking supporters. In the process, gives comfort to his enemies and ours. All like Big Paulie.

And, in result, though he is rattling his octogenarian bones manfully to retain his spot, he stands every chance of being taken out by perhaps the most thuggish Don in the Lower 48 (who, like Castellano’s brutish replacement, was born in Queens) – blowhard 45. If Biden wins, I believe, it will only be due to our collective fear of turning 45 into 47.

Plus, like Big Paulie, it’s not like 46 doesn’t have legal problems of his own. All that cash flowing into the hands of family members, and nothing for The Big Guy in the White House? Please.

There is barely concealed discontentment among his capos and front-line crew, and, meantime, he’s physically fading in front of our very eyes. His underboss is disliked. To top it all off, given the events of the last fortnight, he faces more pressure to go to the mattresses than at any point during his reign. And, like Big Paulie, he hates going to the mattresses. Doesn’t mind putting guys to bed one at a time, but hates the mattresses, because cannot conceivably benefit from any attendant outcome.

He can perhaps take his greatest comfort from the disfunction emanating from rival crews, most notably the Republican House, which is leaderless, and, as such, takes its instructions from Mitch (The Chin) McConnell, who reminds me of Vincent Gigante – albeit with a better wardrobe.

But for the rest of us, the mattresses beckon. My gut tells me that what we have witnessed in the Middle East is more prelude than afterword. You don’t send a squad into a dozen cities and villages to murder civilians, completely ensuring, among other things, disproportionate retaliation – simply because the terrible return blow will make your enemies look worse than you. And certainly not without having worked out a second strike. Most likely, and as is the consensus, sending your Lebanese goons down south for another massacre of the innocents.

It appears to me that the mullahs are indeed calling the shots here, with the primary objective of creating a full-on conflict with the Western powers. I suspect that if I’m right on that score, they are likely to achieve this goal. I doubt they will derive much benefit, but then again, they didn’t ask me.

However, in terms of the markets, it all feels like suspended animation. The world’s calculus may have changed, but none of the key risk factors I track have migrated out of their current ranges. Not Equities. Not Treasuries.

And not Crude Oil, still trading at levels below where they hovered a week before the attacks. I sense this is all due to comprehensive, well-earned confusion on the part of risk takers.

Thus far, the West has done nearly nothing to counteract the Iranian threat. They continue to export as if nothing has happened. No bank accounts have been frozen. Will this continue? And, importantly, what will the Saudis do? Clearly, the Hamas attack has, at minimum, side-tracked their deal with Israel. But if the war escalates, they will not have the option of remaining silent and passive. Will they fill the Oil production/distribution gap manifested by the Iranian adventure? The market seems to be indicating a belief that either they will, or that the ayatollahs will continue to pump and dump — unimpeded by recent events.

Meantime, we have another house to watch. The House of Representatives, which lacks a Godfather, and which (among other things) cannot possibly pass a budget deal next month.

Inflation ticked up in September and could go into rocket booster configuration if geopolitics incrementally disrupt the energy markets. Q3 GDP drops this Friday and continues to look boffo.

The earnings calendar heats up. No disasters thus far. The Banks came in fine, with the only caveat being that their leadership is scared spitless about the geopolitical situation. This may be a strong earnings quarter, but nothing is likely to repair the current dysfunctionality emanating out of DC.

I am thus advising my clients that other than for the clairvoyant, there is no edge of any kind for incremental risk-taking. Perhaps Staten Island Real Estate is the best bet after all. For < $17M, you can own Big Paulie’s White House, and, while it will cost you $113K/mo to meet mortgage, taxes and maintenance, you should bear in mind that it is > a five bagger since its last sale price in 2000.

Plus, it will keep the world’s most menacing Don out of one White House, while much of the country strives mightily to block his re-entry into the other one.

A couple of words to the wise, though. Don’t even think about stiffing Connie Pro on her commission, as she is likely to take it personally. And do something about it. Which she can.

And, most importantly, if one of your crew invites you for a holiday dinner at Sparks this December, it may be just as well for you to send along your regrets.

TIMSHEL

I wouldn’t ever set out to hurt anyone deliberately unless it was, you know, important – like a league game or something.

Dick Butkus

Last, week, in yet another of our endless tributes to Jim Morrison, we paid homage to dead cats and rats. Now, we turn from the dearly departed feline/murine to the expired ursine (dead Bear), offering what props we are able — to the one and only Dick Butkus.

No, he never scored a Billboard 100 single, nor, to the best of my knowledge, even a major label recording deal.

But let’s not mistake ourselves, Butkus was a rocker.

His presence was ubiquitous in my youth. From sideline to sideline. From the backfield into the deep secondary. On bad teams and worse ones. Like the ’69 squad, which featured him at Middle Linebacker and Gale Sayers (rehabbed from a crippling knee injury but still managing to be the only ball carrier to tally 1,000 yards that season) at tailback.

They went 1-13, defeating only the then-woeful Pittsburgh Steelers, who, in consolation, were able to use their well-earned top pick to draft Terry Bradshaw. Butkus made All-Pro that year, as he did five times in his 11-season career. He never, however, reached the playoffs, and, indeed, played on only one winning team – in his rookie year of 1965, his entire career.

Yet he is the consensus choice for greatest Middle Linebacker of all time.

But to understand his singular essence, a bit more context is required. He was the youngest of eight children – the first to be born in a hospital — on Chicago’s rough and tumble west side. Throughout his youth, he was thus compelled to carry the burden of perhaps the most derision-inducing name a boy could have; phonetically: Dick. Butt. Kiss.

But his peers presumably learned early on not to mess with this or any other element of his persona. He starred at Chicago Vocational High School. Played Center/Middle Linebacker for the University of Illinois. Then there was his time with the Bears, which only ended when he could barely walk.

He left football, but it never left him. I remember him as the Bears’ radio announcer. During games (where he always seemed a little oiled up), whenever there was a fumble, he could be heard screaming “ball, ball, BALL”. And one could clearly envision the entire crew needing to restrain him from leaping out of the press box to recover the thing himself.

And now he’s dead. But I envy him, nonetheless. He’ was what we should all aspire to be. But, like so many essential men that have come and gone, we must now find a way to carry on without him. Presumably, this will be easy for most of you, but for me it is an authentic hardship.

Perhaps it’s fitting that he left us when he did; I can only wonder if he didn’t occasionally feel that the modern world had passed him by. Because we live in an entirely anti-Butkus construct, where kicking ass and taking names has fallen away, where there’s always somebody else to blame for the hardship, and even minor annoyance, we are compelled to endure.

Back in his glory days, they’d tape up a busted knee, apply aspirin to a concussion, and send the guy back in. Butkus wouldn’t have had it any other way. Now, the grazing of one helmet against another is a 15-yard penalty; two such transgressions will get you bounced from a game.

We bail out banks that gorge themselves on dubious enterprise, close down entire education systems and economies for sicknesses that we don’t understand. Then, we quadruple the money supply – the economic equivalent of chugging a gallon off cough medicine — as a means of applying a cure for all our ills:

Investors make a bundle, as do homeowners. Consumers binge. We throw up Hail Marys, and the refs, such as they are, award us with ticky tacky pass interference calls. The reckoning awaits, and, for all I know, may be hard upon us. But there are few signs that it is imminent. Friday’s Jobs number was a blowout (even if the quality of the newly created gigs is a bit on the lean side). Q3 GDP estimates suggest a boffo quarter. But we won’t know for nearly another month. In the meanwhile, we’ve got inflation numbers this week, and they are projected to be benign.

But those inclined to fuss and fret have plenty of fodder. Consider, first of all, those pesky oil markets, surging menacingly until early last week, then putting in a V-top that was reminiscent of Fran Tarkington running for his life to escape the clutches of Number 51:

And all of this BEFORE the weekend mess between Israel and Hamas. It all seems beyond tragic, and nobody knows how long it will last. But this much is certain: it will surely add to the confusion among those seeking to monetize by trading in the Oil Patch.

The House Republican Congress managed to bounce the seemingly reasonable fellow who was running the show, their razor-thin majority notwithstanding. This does not bode well for a range of contingencies, including the striking of a non-transitory budget deal, and, beyond this, the prospects for sober governance emanating from either side of the aisle.

Trial balloons are now afloat to put DJT into the Speaker’s Chair, and, prior to the ’22 election, I would’ve found the prospect at any rate amusing. Now, though, it would be a disaster. He don’t own a seat in the House for one thing, and the specter of a workaround involving another obliteration of legislative protocols to meet short-term political objectives gives me the shivers. Plus, he’s not gonna do this INSTEAD of running for Prez; he’ll do both. And is likely to raise such a ruckus as to render the World’s Second Greatest Deliberative Body unrecognizable.

I don’t know how much of a distraction these matters will be in the otherwise data rich content sequence that is now set to begin. There’s the above-mentioned Inflation reports dropping this week. And, of course, it’s earnings season.

Ah, earnings season. What unmixed joys await us there. I don’t have much of a read in terms of outcomes but suspect that the cycle will leave us as confused at its conclusion as it has at its commencement. Investors, as evidenced by their recent indecorous treatment of the Energy Complex, don’t seem to have a clue either.

Meantime, the Bear is dead. Maybe the greatest Bear of them all. Fittingly, on the day he died, his team broke a 14-game losing streak that extended nearly a full calendar year.

So, perhaps, somewhere up there, in that great scrimmage pileup in the sky, he’s smiling.

The markets have arguably been attempting to enter Bear configuration for months, alas, with minimal success.

The Investment Bear isn’t dead — but has perhaps been engaging in what best can be described as extended hibernation.

It wasn’t the way Butkus rolled; hibernation wasn’t his jam. But there’s only one of him. And now he’s gone.

So, somebody else must fasten the chin strap and face down the O-line. Maybe it’s you. Maybe it’s me.

Maybe it’s all of us.

So, let’s break the huddle and get after it.

It’s what 51 always did.

And what was good enough for him is sufficient for me.

TIMSHEL

Dead cats, dead rats, can’t you see what they were at, all right
Dead cat in a top hat, wow
Sucking on a young man’s blood, wishing he could come,
Sucking on the soldier’s brain, wishing it would be the same
Dead cat, dead rat, did you see what they were at?
Fat cat in a top hat, Thinks he’s an aristocrat
Thinks he can kill and slaughter, thinks he can shoot my daughter
Yeah right! Oh yeah!

Jim Morrison

This is nothing more than a protean rap, busted out by Jim Morrison towards the end of Side 3 of the Doors’ magnificent double disc “Absolutely Live”, recorded, for the most part, at the long gone and now much lamented Felt Forum, in New York City, in mid-January, 1970. For my tastes, if there is a better live album ever recorded, I don’t know it, maybe don’t want to know it. Maybe this is in part due to finding the band so fully in the pocket, their longstanding rep for erratic live performance (itself owing to Morrison’s fatal unreliability) notwithstanding.

Our theme offers an opportunity to transition glibly to the markets, whose participants often refer to a rally amid an extended selloff as a “dead cat bounce”.

But this piece has nothing to do with the counterintuitive upward migration of deceased felines (or, for that matter, rodents), whether encountered in the markets or in the wild. Rather, and as was the case when Jim, supported by John, Ray and Robbie laid this down, I prefer to now launch into “Break on Through (to the Other Side)”.

Which much of the market has tried, but failed, to accomplish.

As September ’23 is now in the books, we can certainly describe it to have lived up to that month’s reputation as the most gruesome of the year. And the carnage was everywhere. The Equity Complex got pounded, with the Gallant 500 shedding 4.6%, General Dow down 3, and Colonel Naz (now facing the threat of being busted down to the ranks) shedding a full 6%.

As did Treasuries, and this on a global basis, causing, among other annoyances, Mortgage rates hit levels last seen in the previous millennium.

Energy markets surged, but this is hardly good news for investors – particularly in a rising interest rate environment driven by policy makers obsessively battling against inflation.

USDJPY continues to flirt with the ominous 150 handle, but, like the song says, failed to break on through.

In the real world too, we continue to hit walls that we fail to breach. The UAW general strike, for instance, ensues in broadening configuration.

Our legislators careen towards yet another round of government shutdown brinksmanship, with the latest headlines indicating the passage of a six week can kick Continuing Resolution – devoid of incremental aid for the Ukies in their righteous battle against the Rooskies, and in spite of a Democratic Congressman (a former school principal) apparently undertaking the adolescent stunt of pulling the fire alarm to delay the vote.

This issue, I suspect, is likely to harsh our collective mellows for many months to come. For one thing, the extension only runs until mid-November, implying that the same headlines we’ve been perusing all week will re-emerge in about a month (when, presumably, the fire alarms will be guarded and secured). Moreover, and as less-than-widely understood, the government doesn’t shut down all at once. First, they stiff their vendors, then, perhaps furlough some of their staff – a hardship which we all can presumably endure. It takes months and months for anything essential to be threatened, the last and most menacing of which would be to disrupt the flow of payments on the $33 Tril we owe. Were this last eventuality to come to pass, we would truly have broken on through. But it’s not to be – particularly in an election year. They’ll come to an agreement, and name the public as the winners, if for no other reason than because nobody wants to hang a Treasury default on their resumes.

Meantime, the President continues his bumbling, confused pandering, taking a full 12 minutes out of his busy schedule to march with the down-trodden Detroit assembly line crew. His likely opponent in the ’24 election has taken to his own social media platform to demand the court martial and execution of the recently departed Chairman of the Joint Chiefs of Staff. In addition, he’s calling for the raiding of the offices of his political enemies and the removal of certain unfriendly media outlets.

Our oldest senator, one Dianne Feinstein, gathered to the dust of her forebears this past week, leaving her heirs to divide up a billion-dollar pittance between them. (Is it just me, or are these SF politicians exceedingly skilled at accumulating wealth? I mean like Joe Montana good. Jerry Rice good. Steph Curry good. The Pelosis are worth a quarter bill. Gov Newsome clocks in at >$50M. There must be something particularly lucrative about running the Bay area into the ground in the name of social and economic justice).

We thus enter Q4 full of dead cats, dead rats, and yes, even dead aristocrats, but having failed to break on through.

None of which is conducive to investors springing out of bed, on this, the first day of quarter, with anything resembling a bounce in their step.

It’s not all bad I reckon. Q3 GDP estimates, not to be released for more than a fortnight, are nothing short of gaudy. The gears of the great American job creation engine create continue to hum along serenely, with the next indication coming this very Friday. Plus, there’s so much cash floating around that it’s hard to envision anything akin to a crash unfolding.

But risks abound. First and foremost, in my judgment is the trajectory of the Energy Complex, with alarmists suggesting that WTI could rise as high as $150/bbl. And it’s hard to argue their logic, what, with a policy mix designed to cripple domestic production, with the Strategic Petroleum Reserve depleted to 40-year lows, and with geopolitical tensions across the global oil patch that are, shall we say, less than accretive to global production/distribution.

But pricing dynamics say otherwise, placing WTI in dramatic backwardation, indicating a clear expectation of declining crude oil prices in the months and quarters to come:

Here’s hoping they’re right. Because if the $150 crowd prevails, well, I don’t want to think about it.

Naturally, all this has profound implications for Interest Rates, which will be highly correlated with energy prices. And with equity valuations. Particularly in the already beleaguered Naz-land.

We’ll now have monthly/quarterly data, and, of course, earnings, to consume, and I suspect that when the dust settles, we will still have failed to break on through.

Because, while change happens all the time, with day destroying night and night dividing day, breakon- throughs take eons.

Consider, if you will, the history of the Felt Forum, maybe the best-named music venue of all time. But much to my chagrin, I find, in researching this here piece, that its nomenclature is not derived as a funky, modern tribute to the meeting place of ancient Roman Senators, but rather as an alliterative nod to the president of the adjacent Madison Square Garden: Irving Felt. It went through many appellations in the ensuing decades (based, of course, on compensated naming rights): The Paramount Theater, The Theater at Madison Square Garden, The WaMu Theater (in honor of the debacle-creating depository institution Washington Mutual, which went tits up in The Crash), and the Hulu Theater.

In ’23, it reverted to the bland Theater at Madison Square Garden. But to me, it will always be the Felt Forum. Where so many of the greats played. The Velvets. Jimi. Janis. Cream. The Kinks. Zappa. The Dead.

And the Doors. If you put on Side 3 of Absolutely Live, you can hear Jim’s Dead Cat rhymes pounding off ts felt walls. Approximately 6 months later, Jim was gone, and, to this day, no one knows exactly what happened.

Yes, he got to the other side, but as your risk manager, you’ll just have to trust me when I tell you that there are better ways to break on through.

TIMSHEL

L. Cassius ille, quem populus Romanus verissimum et sapientissimum iudicem putabat, identidem in causis quaerere solebat, cui bono?

—Cicero: Pro Roscio Amerino, §§ 84, 86

God Oh Mighty. I must be getting old. For one thing, I’ve resorted to (ostentatiously) busting out my Latin chops. And, if that weren’t shameful enough, to retreading on old thematic ground.

Oh well, at least I was able to shout a holler to my ol’ pal Marcus Cicero — always a plus.

And besides, the whole cui bono (in English “who benefits?) thing is everywhere one cares to cast one’s eyeand I have long found the answer to this question to be quite handy in determining root causes and likely outcomes of any number of issues. It is so today, as applied to the full range of challenges we face. Thus, cui bono, abides.

It came up, for instance, just the other day at work, in a pre-FOMC discussion about Wednesday’s pending rate announcement.

Perhaps out of sheer boredom, the crew was engaged the old “what are they gonna do?” chatter, even though we all knew they was gonna stand pat and talk tough. One of our newer members, however (who can perhaps be forgiven for having attended the Kennedy School of Management at Harvard University), looked at me, surest on the point and asked “why?”

“Because it is in their interest to do so” I responded. However, as this was an insufficient explanation, I went on to offer by belief that the other options were sub-optimal to the Fed’s agenda. Surely, amid the other two choices, a rate cut was off the table, and, as for another hike, well, to me it was abundantly plain that the associated juice wasn’t worth the squeeze.

Sure, if it subsequently came to pass that Inflation surged, they’d look like geniuses, but, on the other hand: a) this is a low-probability outcome; and b) they’d be annoying everyone by doing so in the meanwhile.

And, as it turned out, we were right. They held. And talked tough. So, what happens now? The over/under centers around one more rate hike this year, which sounds about right to me. Why? As a political enterprise, I believe they’d like to take rates as high as they can without crippling the economy, thus enabling them to be as generous as possible/necessary with their cuts in the election year of 2024. This, of course, pre-supposes that their sympathies lie with the current administration, but I simply fail to see how that point can possibly be up for dispute.

To whatever extent this cui bono line of argument is valid, our Central Bank is receiving a massive assist from that unstoppable juggernaut otherwise known as the United States economy. Its Atlanta Division is forecasting an astonishing 5% growth rate for Q3.

And even the curmudgeons that gin out such prognostications for the Banks and Brokerages that track these matters have taken their estimates up to 3%:

Economists, who Nobel Laureate Paul Samuelson once famously said have predicted nine of the last five recessions, are calling for a major slowdown in Q4. As they have all year. Cui bono suggests that they don’t want to be tardy or absent for the next decline in economic activity.

Major headwinds include, for one, the potential for a government shutdown, and I am unable to resist the temptation of pointing out that the correct answer is omne beneficium – all benefit. A big part of me wishes they’d close up shop forever, and, as to those lingering questions – Besos can deliver the mail and Musk can defend the shores.

Convince me that we’d be worse off in any way, and significantly better off from any number of perspectives. Go ahead. I’m waiting.

But I reckon we’re stuck, not only with a government, but one that takes a notion to shut down every other lunar cycle.

That the government itself would be a loser if it were to peace permanently, we will take as a given. It remains, though, to wonder who benefits, from a showdown that both sides know they will ultimately abandon. Mostly, and especially this time, it seems that what is really at play is the battle between factions both within and across the two political parties. Certainly, this is visible on the Republican side, with the hardcore segment wishing to push the hard line as its forever policy stance.

On the Dem side, there appears to be more harmony, as the entire caucus agrees that the more we spend, the more we tax, the better of we, or at any rate, they, are.

Given the way the cui bono chips are stacked, I anticipate a more rather than less annoying cycle, which, when it is finally resolved, will find both sides claiming victory in the name of public good.

Will the markets care? History says no, but I think we gotta keep an eye on this thing nonetheless.

Energy prices are rising, benefitting the Russians, the Arabs, and few others, but threatening our current serene domestic state. If the trend continues, then there’s no possible way to win the next inflation battle, so I’d keep an eye on those markets as well.

And, while we’ve checked in at the commodity store, we may want to take a sticker shock glimpse at Live Cattle and Chicken – getting more expensive in their pens with every moo, every cluck:

The USD is at multi-year highs, but nobody seems to want this.

Given all the above, it strikes me that we are in a cycle of nullus beneficia – nobody benefits. From anything.

But I hate to lay that kind of buzz kill on y’all, in the last week of what the Atlanta Fed projects to be a quarter of 5% GDP growth.

So, maybe we should count our blessings. And that means you, my whiny traders. The Naz is, after all, still up 26% this year, and if you can quit complaining and gather yourselves, maybe we can end the year like we began it.

And please don’t come to me with that cui bono bullsh!t – especially in a raging bull cattle market.

Cui bono? Omne bono.

And with that, you know what to do….

TIMSHEL

Raise your hand, if, like me, until this week, you never heard of Stellantis.

Forgive the redundancy for those with fingers folded in their laps, but Stellantis is apparently the current corporate moniker of what was once Chrysler, along with, eons ago, the American Motors Corporation. Not sure what the “Stell” implies, but the Alantis portion probably, almost certainly, is a nod to its cross-oceanic presence in thirty counties. Its signature products are Italian Fiats. Rams and Jeeps, the last two of which are old-school Detroit specials. Somehow, though, its headquarters is in canal-filled Amsterdam.

Which tells you all you need to know about the modern auto industry.

In any event, Stellantis has the dubious honor of being one leg of the triple target against which the just-announced United Auto Workers strike is trained. The others are General Motors and Ford, neither of which, presumably, needs any introduction.

In solidarity with the trauma no doubt being felt on both sides of the dispute, and exclusively for the purposes of this note, I will refer to the conglomerate as St(rik)elantis.

The objectives of the job action are consistent with the normal protocols attendant to such affairs – albeit at impressive magnitudes. The demands include a 40% pay raise, a 32-hour work week, health care coverage that lasts until that inevitable, “tits up” moment (hopefully not for many years) and an assortment of other goodies.

Somewhat incongruently, I fully endorse their right to strike. Management negotiates as a single agent, and the organization of workers into a solo bargaining unit seems to me to be only fair game (tit for tat?). So, I say, man the pickets, onward to the negotiating table, and may the best economic outfit win. I’m not even terribly put out by the reality that it’s three against one – in a game wherein the smaller number has the competitive advantage. The UAW speaks in a single voice, renders its decisions collectively, whereas the three companies on the other side are deadly competitors, meaning any one of them may cave for the simple joy of sticking it to a hated rival.

But I am hacked off about the whole thing, nonetheless. Those UAW jobs are good gigs, featuring solid wages, extraordinary job security and a juicy package of bennies. Again, I stand by their right to undertake a walkout, but let no one mistake this group as being anything close to an exploited workforce.

Published estimates suggest that the fully loaded union-endorsed package would cause the labor component of domestic auto manufacturing cost to roughly double, and one wonders if, even under the premise of victory, the juice will have been worth the squeeze. It’s bound to take a bite out of demand for the products they manufacture, rendering them less affordable, and adding to allure of buying one of those sexy foreign jobs. We Americans import nearly half of our rides as it is. And a sequence of idled plants leading to higher costs that can only be passed on to consumers, could push the plurality to the Japanese, Korean, German, and Italian jalopies already widely preferred by such a large segment of our car-buying populace.

As was true 50 years ago (the last time the UAW chose to act out in such a manner, and how did that work out?), the implied lower sales will translate into a diminished supply of primo jobs, which can hardly be on the agenda of the United Auto Workers of America.

As I watched this unfold over the last several weeks, I was pretty certain that the Union would strike no matter what. And, to keep me honest, I will further prognosticate that a walkout now isolated to a few plants will quickly morph into a General Strike – with ALL manufacturing facilities idled. I base this on a hunch that what this is really all about is not small-ball worker economics but rather largescale politics. The Labor Movement, moribund for two generations (and especially since global trade reduced the leverage associated with domestic work efforts) is dying to exert itself, to show the world – once and for all – who’s boss in these here parts. They either believe that now is the time, or, at minimum, that their long pined for window is about to close.

Anyone who doubts this, however, should refer to the following chart, which plainly indicates a worker proclivity to point feet out the door:

I am not, however, not terribly optimistic on their behalf. They’ve won a couple of tactical victories of late – the UPS cave job comes to mind – but on balance have lost most of the showdowns they have forced this decade. The Teachers Unions used the lockdowns to demand not only control of education systems but large elements of social and political policy. In doing so, they accomplished very little, eroded large portions of their (finite) goodwill, and put the students which they serve through innumerable months of (irretrievably) lost time and excess agony.

Near as I can tell, nobody east of The 10 cares much about the Hollywood walkout.

But the more important lesson, particularly from a risk management perspective, is that if one is planning on undertaking an aggressive stance in a conflict resolution setting, one is best served to have a firm grasp on the leverage one brings to bear into the throwdown. And to act in accordance.

My guess is that other than the legion of politicians they carry in their pockets, the UAW has a deficiency of this vital negotiating asset. Yes, the Big Three needs workers to turn the screws on the assembly lines, but can find them anywhere on the globe – including, most notably, jurisdictions beyond the Union’s reach. Consumers can simply choose products that don’t feature the hoped for, UAW-extracted premium built into the sticker price.

Perhaps it is these conditions that caused Big Three stock prices to rise in the wake of the announced Job Action:

It is further unfortunate that the negotiations have broken down just at the point when Inflation has taken a nasty upturn.

With Crude Oil prices (you know, the stuff they put in car engines) on the threshold of one-year highs:

With the USD has surging – rendering the price to import an American car that much higher:

But I reckon when you are trying to make the world safe again from the cruelties and caprices of greedy corporations, none of this matters.

******

Come what may, the markets will trade on. After all, even if the UAW manages to remove every car from the road, we can always hop online. We survived, albeit in somewhat battered condition, a rather gruesome Rosh Hashana trading day, and won’t face the even more historically menacing Yom Kippur atonement session till Tuesday week.

Aside for a few interesting but ultimately back benching PMIs, all eyes will be on the FOMC. But my sense is that it will be anticlimactic session. Rate hikes are not on the cards, and we can project with confidence rhetoric featuring the need for continued vigilance, etc.

Yawn.

We are also staring in the face of another potential government shutdown, this time with the battle lines perhaps more acutely drawn. But I can’t bring myself to work up much agita on that score.

Maybe, instead, I’ll go car shopping – before, you know, the prices go up. I’d like to buy American; it is, after all, the patriotic thing to do.

But if I go another route, I don’t wanna hear nothing from my union buddies about stabbing them in the back. They don’t appear to be particularly concerned about my problems, so I’ll leave them to solve their own.

So, I reckon I’ll at least test drive a Fiat, in the hope that it will at least partially assuage the hurt feelings that surely pervade across the transoceanic realms of St(rik)elantis.

TIMSHEL

London calling, yes, I was there, too
And you know what they said? Well, some of it was true
London calling at the top of the dial
And after all this, won’t you give me a smile?

Joe Strummer

Yes, my loves, the sad anniversary is yet again upon us. It thus devolves on me to give a shout out to those gone but not yet completely forgotten. To Goldflam. To Crotty. To Fitzy. And, of course, to Morty and Zep (the latter of which was disputing a trade with us when his phone line went dead).

I will resist the temptation to add to the galaxy of faux profundity as to the meaning of it all. Save this. For most under the age of senility, 9/11 is when it all began. By which I mean our insecurities, our lack of confidence in our surroundings. In our ability, with the tools at our disposal, to meet the challenges which forever plague us.

Oh, sure, we’d moved with wary step in earlier eras. The interval after the Kennedy Assassination/Vietnam/Watergate/Iranian Hostage Crisis was a weak one. But as the ‘80s unfolded into the ‘90s, it seemed we could hardly do wrong.

Then those planes hit the towers, and we have scarcely had the ability to move assertively forward since. We fought a couple of pointless, futile wars. The markets crashed. We lived off helicopter money until a powerful but hardly historically menacing virus sent us down a rabbit hole. We hoovered up the funny money again, and it worked for a while. But we overdid it by any standard. The amount of cash now in circulation is now 10 times what it was before the crash and more than quadruple its level prior to the lockdowns:

But we also face another sad anniversary. On September 10, 1983 – forty years ago Sunday, Joe Strummer fired Mick Jones from The Clash – which called itself as “the only band that matters”. And, at least in the post Beatles/Woodstock era, it nearly lived up to this billing. This wasn’t quite as ballsy as Mike Love handing Brian Wilson his walking papers. But it was close.

A few months earlier, Joe had fired drummer Topper Headon, but at least he had an excuse, as old Top was mainlining heroin. Jones, on the other hand, was released due to his increasing infatuation with such techniques as looping and sampling. Please understand, I agree with Joe that these things are better left to the posers. But (FFS!) Jones wrote most of the band’s most magnificent licks. And he deserved better.

A little over two years later – in fact on my 26th birthday – the reconstituted Clash released its final studio album – ironically named Cut the Crap — because the material was positively scatological compared with its earlier output.

And that’s where I believe we are now in the markets. It’s our Cut the Crap moment.

After an impressive year-to-date run that extended, more or less, until Labor Day, the tape has since felt decidedly weighty. Much of the burden has been born by the TMT complex, which ended the summer season in less than heroic fashion. The much-dreaded (celebrated?) AI takeover of all human endeavor appears less imminent. Our arch chipmaking enemy Huawei – banned from these shores since 2020 – has made some breakthroughs. Contemporaneously, those meanies that run the CCP have prohibited the use of foreign electronics products, including those supplied by that mighty orb Apple.

Other markets are feeling the impacts as well. Small caps are under enormous pressure. Crude Oil is at 18-month highs. The Saudis appear to be dug in on an extension of their production cuts, which project out to ~2M barrel/day shortfall in Q4:

The USD is up an astonishing (for the typically somnolent FX market) 5% in the last two months.

For all the above, it feels like market factors are fixin’ to make their move over the next little while.

So, are they gonna cut the crap? Well, it’s hard to say.

I reckon will get minor glimpses into our future this week, what, with the CPI/PPI numbers dropping and all. Probably nothing on the order of revelation is on the menu, but, particularly with energy prices again on the rise, an upside Inflation surprise might be – shall we say – unpleasant. The United Auto Workers is fixing to vote on the first industry-wide strike in two generations, and if they go, it just might exceed the galactic impact of that Hollywood job action.

The Fed weighs in about a fortnight from now, and we can probably expect them to cut all this rateraising crap. But what of it?

At some point we’re going to have to figure out where we are, whether we’re in the sewer and need to swim our way out, or whether, the hint of noxious gasses notwithstanding, our surroundings are, if not Eden-like, then at minimum endurable.

I’m leaning toward the latter, though it goes against every codger-like cell in my body. I am, after all, a child of the Strummer era, where, to the accompaniment of raging guitars, angry young men exhorted us to, well, to cut the crap.

It worked back then. Is it necessary now, and, if so, will it work a second time? I’m not sure. But I’m old now, so there’s that.

But business profits have been amazingly stalwart, the consumer shockingly resilient. Despite everyone from Beijing to Pyongyang to Tehran to Moscow to Washington seeking to take us down, we remain substantially upright.

Heck, even them little covid buggers are gathering themselves for a counteroffensive, but my guess is that unless they reach such force as to cause folks to drop on the street, they will not keep us at home.

On the other hand, this much is true. The WSJ published a college ranking that placed University of Chicago at a putrid 37. Less dramatically, Birmingham – not the greatest city in Alabam but the second largest town in the United Kingdom – declared itself insolvent last week – in part, so the reports tell us, because it owes its female civil servants some bonuses they missed out on a few years back, and it ain’t got the scratch to pay for it.

Birmingham, however, is not London, so I wasn’t there (too). But The Clash were, and for a brief period, burned the place down.

Strummer has been dead these 20 years, almost as long as my boys Morty and Zep.

Mick Jones is still around, and, when asked, expresses nothing but love and admiration for Joe Strum.

He never Cut the Crap. But then neither, thus far, have the rest of us. Whether we do so — now or in the future — remains to be seen.

Again, I’m on the fence about this. And, moreover, whether we do or not, we will presumably abide.

I remain on the optimistic side, at least in the short term, but less so than I once might have been, as has been the case for nearly all of us since September 11, 2001.

Thus, in conclusion, and on this sad day of remembrance, it only remains to ask:

After all this, won’t you give me a smile?

TIMSHEL

Welcome to the rest of the year, y’all. I hope you’re ready. Because it promises to be a wild ride.

Or not.

Certainly, it’s been a paradoxic, oxymoronic journey thus far, and, in keeping with the inexorable principals of Newton’s Second Law of Motion, I feel this trajectory is likely to continue.

Except, of course, that even Newton’s rules have their limits; the whole system breaks down — within the sub-atomic universe, in black holes, and in other realms beyond rational comprehension.

I nonetheless expect the oxymorons to ensue unabated (in deference to the Newtonian nature of most whats in our field of vision, so I extend thematics from last week’s note, which, as at least some of you may recall, was the oxymoronic notion of pre-virginal acquaintance.

What, after all, is more oxymoronic than that? You can’t know someone – even Doris Day – before she was a virgin — because it violates the relationship between time and space that is the basis of everything Newton taught us. Even if dudes like Einstein proved to us that he was less than universally correct.

I got to thinking about oxymorons which, along with palindromes, hold a sacred place in my psyche (Side question – shouldn’t the folks that created the English language have used a palindrome to describe a verbal sequence that is spelled the same forward as backwards – maybe something like wordrow? This itself is an oxymoron.), when reviewing the earnings report of the last remaining Swiss Banking titan – The Union Bank of Switzerland.

UBS reported the largest earnings – some $29B (Î26.6b) – banking history. It’s stock – un-oxymoronically, rallied to all-time highs.

According to published analysis, the lion’s share of this profit bonanza derives from a concept called Negative Goodwill – an oxymoronic notion if ever there was one. Moreover, it brings, at least to my perverse mind, the alternative paradigm of Positive Badwill, a stunt which, if no one has pulled it yet, someone should, and soon.

Meantime, why the recording of Negative Goodwill is worth tens of billions in profits remains a mystery, and one that I will leave to the accountants to unpack.

I am, however, given to understand that the opportunity presented itself by virtue of its sacrificial, patriotic, heroic takeover of its last remaining substantial domestic competitor – Credit Suisse, which it subsumed at zero cost, and, in fact, with considerable government subsidy.

We have had similar episodes Stateside, most notably JP Morgan’s hoovering of First Republic. JPM has a history of such ravenous consumption, having, over its history, having taken over such depository institutions as Chase, Chemical Bank, BankOne, First Chicago, National Bank of Detroit, and, in oxymoronic verisimilitude (Bear not being a bank), Bear Stearns. But at the point of this correspondence, it is trading below its late ’21 highs. Maybe the public is simply tired of Jamie pulling such maneuvers.

But the oxymorons don’t end there.

For example, by way of late breaking pre-holiday news comes word that Stanford University and the University of California Berkeley – highly proximate, world-class universities nestled at the base of the Pacific Ocean – have joined the Atlantic Coast Conference. One can hardly blame them. Given the recent “last-one-out-of-the-Pac-10-turn-out-the-lights” vibe, they had to do something. But let’s not mistake this as anything other than an oxymoronic cash grab by highly lucrative college athletic programs. Also joining the ACC is Southern Methodist University, which is not on an ocean of any kind, but is an easy 40 kilometers from Lake Ray Hubbard, named after a former Dallas Director of Parks and Recreation (1943 – 1972).

We lost Jimmy Buffet over the weekend and were it not for its relation to our theme, I’d have little to say about this. But Jimmy became a billionaire by espousing the virtues of slacking and loafing, less through his music than by the creation of an endless string of restaurants, resorts, and (for all I know) munitions factories, rendering his entire existence a tribute to the awesome powers of the oxymoron.

In the markets, it was an oxymoronic end to an oxymoronic August. There was a bid all week, and then, on 9/1, what appeared to be a relatively copasetic jobs report dropped. Deeper analysis suggests that it was a bit weaker than expected, with reasonably robust job creation, which was highly tilted toward part-time employment:

On balance, though, you gotta tip an oxymoronic cap to the jobs market, which remains unbowed against a passel of headwinds. Of course, the base rate ticked up a goodly amount, due in part to an increase in the Labor Force, and to the oxymoronic construct under which one government department computes job creation, while another is responsible for calculating the Unemployment Rate itself.

We are staring in the face of a Crude Oil market on the threshold of oxymoronic two-year highs, the end of the driving season notwithstanding. I am also keeping an eye on surging Sugar and Cotton prices and would say something about the impact on Cotton Candy consumption. But. Just. Can’t.

The Yield Curve remains grotesquely inverted, which is an oxymoron in and of itself. But I am past weary of this topic.

All of which leads back to the Equity Complex, which enter the last trimester in (all things considered) fine fettle. No one can justifiably complain much about profit margins, and if one is looking for oxymorons here, it may be just as well to look at declining Net Interest Costs in a rising Interest Rate environment:

Nominally, this can be explained by the perverse combination of corporations having locked in lowvig/ longer term debt in advance of rate hikes, while now enjoying fatter returns on their cash balances.

But I prefer to ascribe it to the Mighty Gods of the Oxymoron.

Again, I expect more oxies to come our way in the coming months, which, by their very definition, are impossible to anticipate. My best risk management advice is to embrace a reactive mindset. The last oxymoronic trimester will unfold in its own good time, and I suspect that matters will assume a different vibe by, say, Halloween, than is observable now.

But hey, it’s Labor Day, when us management types pay for those on our staff to celebrate the toil and tribulation they endure on our behalf the rest of the year. In their honor, I will try to relax. I’m off to Central Texas, to celebrate the festivities on the lake named after a State Bureaucrat who retired 50 years ago. I’ve got “Cheeseburger in Paradise” on the box and not a care in the world.

Care to join me? If not, this is a condition which those who know me will deem oxymoronic enough to conclude on that note.

TIMSHEL

Roses are red, violets are blue, I am a schizophrenic, and so am I

Oscar Levant

And so am I. But I reckon you knew that.

The source of our title quote is Oscar Levant – virtuoso pianist, clever comedian, Renaissance Man.

Its subject is the iconic Doris Day. Bubbling 20th Century actress, whose most pertinent (at any rate, for our purposes) achievement may have been to have believably played Rock Hudson’s Love Interest in the 1959 film Pillow Talk. Levant claims to have known, oxymoronically, before she attained the status of being biblically untouched, and, as he died 50 years ago, we can only take his word for it.

She had four husbands, and, for what it’s worth, she was an activist Republican.

Her persona, of course, was that of a wholesome siren. The type who wore coverups into the shower, and who would never allow wandering hands or other appendages to desecrate her lovely temple.

The truth, as implied by Levant, is, apparently a bit more complicated. But then again, it often is.

And that, at least for now, is all I have to say about that.

However, as we enter this last, bittersweet, portion of Summer, it does seem to me that once the sucky holiday of Labor Day is behind us, investors may yet again be entering virgin territory.

With General Dow roughly flat. With Col. Naz up nearly 30%. With Treasury Yields surging. With mortgage rates reaching, each day, alarming, generational highs:

Beyond the elevated levels, however, I think we must attend to the associated rate of change. Those with the foresight to have financed (or re-financed) a home in late ‘20/early ’21 could do so at the modest vig of +/- 3%. Lotsa houses got themselves sold at those rates. And, in result, prices went. So, now, purchasers are looking at not only higher listing values, but also at the prospect of paying > 2.5x in interest expense.

Outcome? Fewer trades. And fewer Ms. Days being carried across virginal thresholds into introductory, connubial, wedded bliss.

Those looking for relief in these realms were met with disappointment, when Chair Pow took to the podium on Friday, at the decidedly non-virginal setting of the J-Hole Economic Forum. He’s still looking to limpen up the stubbornly firm vigor of Inflation, and one can hardly blame him for so doing. At any rate, the markets took this in stride.

It was one of two signature economic events of the week, the other being the NVDA earnings drop. Which, in keeping with our somewhat salacious theme, was as an epic Doris Day cock tease. Results? Astonishingly strong. Guidance? Even stronger. Upgrades galore across the Street. So, there were the shares – expensive, yes, but fetching, winsome, and waiting to be taken.

But other than a few hot-blooded post-close investing adolescents, no one wanted them. So, no one took them. And, in result, the stock ended down for the week. As my most highly credentialed macro client put it, everyone who could plausibly own NVDA, already owns it.

The Equity Complex held in nicely, nonetheless, as, on balance did Treasuries. But somehow, the trampiest of asset classes, high yielding corporate credit – all the way down to the street walking Leveraged Loans and (even worse) Triple Hook(er)s (CCC paper) stole the show:

In any event, between now and Friday, it’s mostly sloppy seconds, as in, for instance, revised Q2 GDP estimates. There is a smattering of new biz with which to attend – some housing data, and (rudely if you ask me) an ill-timed, Friday, pre-holiday jobs report. In terms of the latter, I doubt many of us are hankering to parse out labor statistics on the last getaway day before the forlorn, ritualistic ending to the summer season. And even here, we’re in sloppy seconds territory, with the two-month revision taking on as much significance as the August number itself.

Assuming (as I do with confidence) that we survive this assault on our buzz, three days of barbeque, suntan oil, etc. await us, and then it will be time to pack the little kiddies off to school – a desolate exercise for me if ever there was one.

And it will be a clean slate for the markets. We will be virgins again.

Yes, in ytd ’23, we’ve been schtupped by a faux banking crisis, squealed in coital delight at the romantic stylings of AI chips, nearly bedded by a government shutdown.

We endured the orgiastic assault of the introduction of zero-day options (what could go wrong there?).

Though still in mourning, we survived that tragic, er, accident in which the head of the Wagner Group lost his life in a plane crash.

All of that is officially erased.

We enter the proceedings as pure as Doris Day.

But all the above is a fortnight away. In the meantime, we all may be well advised to take as full advantage of our pre-virginal status as is in our means to accomplish.

After that, we may wish to enter the interval, as my grandmother advised my sisters, with eyes open and legs closed. Our virginity, after all, is not likely to last long, and it is only in our power to partially control the venue, conditions, and collaborators in this sacrifice.

We cannot, by contrast, control the outcome. But we always knew this.

As did Doris, who, in her signature song, reminds us:

Que sera, sera,
Whatever will be, will be,
The future’s not ours to see,
Que sera, sera

I think she was on to something. After all, she lived to be 97, and if Oscar Levant can be believed, before she died, she became a virgin again.

TIMSHEL

Life had lost its fun
There was nothing to be done
But trade his house that he bought on the GI bill
For a flag-draped casket on a local hero’s hill

There’s a hole in daddy’s arm where all the money goes,
And Jesus Christ died for nothing I suppose,
Little pitchers have big ears,
Don’t stop to count the years,
And sweet songs never last too long on broken radios,

John Prine

Every now and then, it pays to apportion our world between its two primal forces – Pathos and Bathos. It’s been a few years since I done this, and the present day strikes me as being an appropriate point for updating the comparison.

I’m not gonna bother to define Pathos. It’s one of those things that you know when you see, and presumably, y’all have both observed and experienced significant doses of it across the coursings of your existence.

If one cares to look, it can be found everywhere. In them Maui fires for example. In crumbling urban landscapes. With the about-to-be-liberated Miami Zoo orca dying before ever swimming out to sea.

Truth is, should we so choose, we can always wallow in Pathos – both personal and general. It is part of the human condition, but, in these waning days of a summer, draining with pathetic celerity, I will neither enable nor empower this exercise.

So, let’s move on to Bathos, shall we? There are myriad definitions of the term, but for our purposes, we will designate it as situations within our actions or range of awareness, wherein superficially dramatic sequences devolve into the comic — due to irony, hubris, and/or any combination of unforced errors that litter the landscape of our experience.

I took a notion to devote space to this concept after reading about a recent Hollywood controversy, concerning a soon-to-be-released Leonard Bernstein biopic, in which Producer/Director/Lead Actor (and apparent scab) Bradley Cooper dons a prosthetic nose to achieve, er, a more Semite-like appearance, evoking criticisms of implied ethnic stereotyping.

Now, as I seek unadorned honesty in these pages, y’all should know that I have a connection to Cooper – namely, that once, out of sheer boredom, I took a Buzzfeed quiz to determine who would be my ideal Hollywood boyfriend, and got matched with Coop.

This, combined with me coming up as a Jan (instead of a Marcia) in a similar, Brady-based quiz, could cause you to draw certain erroneous conclusions about me. In reality, I am both cis and straight, but I won’t insult your collective intelligence by trying to convince you of same.

Besides, it would crowd out other essential examples of Bathos which obliterate the landscape. For example, with the recent admission of the Universities of Washington and Oregon to the Big 10, the membership tally now reaches 18 – nearly double its name-based allocation. Moreover, a conference once Midwestern to its core, confining its perimeter to the area stretching from Iowa City, IA to Columbus, OH, from St. Paul, MN to Bloomington, IN, now stretches from the Columbia Gorge to the Jersey Shore. Finally, there’s the small problem that the State of California, featuring newly minted Big 10 members UCLA and USC, is too moral to subsidize the patronage of anything residing in jurisdictions of iniquity such as Iowa and Nebraska – including their football stadiums and adjacent hotel facilities.

I’m sure they’ll figure that one out. And we should hope they do, because, as the university presidents hasten to remind us, these moves are all about enhancing and enriching the student athlete experience. We knew that, of course, but it’s nice to be reminded of it when they grab the cash.

While potentially bleeding back into Pathos, as of this past week, the former President/current frontrunner for the Republican nomination is now charged with a dainty, subtle, nuanced 91 felonies – – across 4 jurisdictions. One of these, designated, under the criminal code, as the Racketeering Influence and Corrupt Organization (RICO) statute, includes a co-defendant that is the original author of the law. This individual, once a 9/11 hero, is now a MAGA goat, but, as they say at (my alma mater) Wisconsin, that’s life in the Big 10.

The primary target is, of course, sporting a giant lead in the polls – of magnitude so galactic that he (never to be mistaken for a Shrinking Violet) is skipping this week’s debate – an event that promises to be uber-bathetic whether or not he yields to temptation and demands the podium at the last minute.

On the other side of the ledger, the Incumbent, unambiguously descending both mentally and physically, is at the center of an influence peddling investigation which his own Justice Department is either slow walking or ignoring, the testimony of witnesses under affidavit and the identification of at least $20M in surreptitious payments – to shell companies and various family members — notwithstanding.

These two are the odds-on likely combatants in the pending electoral equivalent of the Zuck/Musk cage match. And no one seems to want either of them.

I’d now turn my attention to market matters, and, ideally, to some thoughts on the wind-down of the earnings season. I am hampered here a bit, though, because a critical source of information for me – Factset – has taken most of August, you know, the key weeks in the Q2 reporting cycle, off.

Oh well, we’re down to the dregs of the season anyway. There’s almost nothing of import on the economic reporting docket, and, by next week at the latest, it will be time for the Labor Day get-outof- Dodge ritual.

There are, however, a couple of matters with which to attend. The first is the tardily scheduled NVDA earnings release, the most recent of which arguably catalyzed the whole summer rally. The shares are ~10% off their all-time highs, but still a respectable 3-bagger in ’23. I don’t know how this plays out after Wednesday’s close, but it is apparent to me that anything issuing forth either Pathetic or Pathetic spells major trouble for the markets.

Then, by Friday, we can turn our attentions to that fabulous Labor Day bash known as the Jackson Hole Economic Forum – sponsored, in time-honored fashion, by those fine folks at the Federal Reserve Bank of Kansas City (does the KC Fed do anything else?).

Historically, along with Davos, it is the most Bathetic event on the market calendar. But it nonetheless requires our attention. It was, after all, the venue wherein both QE2 and QE3 (the latter of which, in my judgement, giftwrapped the 2012 election for Barack Obama) were announced.

Is QE4 on the docket this year? I rather doubt it. Our snowboards are instead pointed in the opposite direction, up the Pathetic, Bathetic hill of Quantitative Tightening. Meantime, Treasury is issuing paper to beat the band, China is divesting, as, perhaps, is Japan.

Mortgage rates, in result and as has been widely reported, are at a 20-year high:

No matter, because who wants to buy a home now anyway? And even if you do, as far as I aware, there’s no GI Bill to speak of at the moment.

On a happier note, there are fewer holes in daddies’ arms these days. Because the smack of choice is now Fentanyl. Which no one save the patently suicidal would ever dream of injecting. There is a hole, however, in Jackson, WY, into which many an investor’s money has gone. So, take care.

For now, and as always, the world and the markets are both Pathetic and Bathetic. I don’t expect much, this side of a major surprise from NVDA, in the way of factor movement between now and Labor Day Tuesday.

The last trimester is bound to be wild and wooly; hopefully with a minimal dose of Pathos.

Meantime, if we so choose, we can embrace the Bathos all around us, letting it waft, serenely and ironically, on the breezes of this waning summer season.

TIMSHEL