And if you take my hand my son, all will be well when the day is done

Peter Yarrow

Reporter: How do you find America?
John Lennon: Turn Left at Greenland

I am finally getting around to writing about Greenland. As some of you may recall, my attention was turned away from this topic by the late-breaking news that the Morrison Hotel had burned down. I thought, of course, this was a one-off, but now the entire region is in flames. More about that below.

Also, before we turn our attentions to that big icy mass North and East of our natural borders, duty impels me to say a word about Peter Yarrow, left-most name in the eponymous trio of Peter, Paul and Mary, who left us, at the gratifying age of 86, last week.

I was never a huge PPM fan, believing that the best that can be said of them (apart from the Mary Travers smoke show) was that they were right in the middle of it – contributing little but indisputably joining in. If the American popular music scene of the 1960s used protocols established by the American Youth Soccer Association, the trio would’ve undoubtedly earned, and received, a Participation Trophy.

Mostly, they made hits out of other peoples’ songs. They did have a couple of nice original moments, including Noel (Paul) Stookey’s “The Wedding Song (There is Love)”. Also, of course, there’s “Puff the Magic Dragon”, a wistful ode to what we leave behind as childhood turns to maturity. This is required listening for everyone up to the age of ten, and is perhaps more timely now then ever, because, while Peter’s Puff frolicked in the autumn mist, his latter-day namesake spent his time in alleged serial sex abuse and is now cooling his heels in the New York City Metropolitan Detention Center, awaiting a trial that is likely to send him, not sadly into his cave, but into the State Penitentiary for life.

Then of course there’s our title song, which, indeed, is worth a listen. Or two.

We can also bid farewell to a couple of other names from the past: Anita Bryant, the Florida Orange Juice hawking homophobe/recording artist. Down the road in Coral Gables, Sam Moore, who with fellow Floridian Dave Prater formed the pleasing soul Duo Sam and Dave, similarly gathered to the dust of his forbears.

There’s not much to say about this other than the obvious reality that it was a tough week for geriatric crooners hailing from the Sunshine State.

And now let’s put on our cold weather gear and head to Greenland, where we begin with the above- supplied snippet from a John Lennon interview immortalized in the 1964 film “A Hard Day’s Night”. Yes, if one is departing Heathrow on one’s way to JFK, one’s jet heads due Northwest and then indeed turns left (Southwest) in the General vicinity of that big icy island.

I have always been a paranoid about Greenland. So big. So Cold. So Wild. A few folks living in primitive villages on the Southeast Coast and the rest of that enormous territory a wilderness, with the only creatures subsisting there being Darwinian marvels who can freeze and starve with biological impunity.

I am not proud of this, but I have a recurring dream of being stranded in the dead center of this gargantuan land mass.

I imagine I’d be hungry. And cold. Unable to call out for help because, from what I am told, the cell phone service there sucks.

And finally, it would make you cry to learn what passes for a bagel in them parts.

But Trump wants it. Along with Canada and the Canal. His left turns thus continue — from the Greenlandic (yes, Greenlandic) capital of Nuuk to Ottawa. And from there, he turns left again, due South, and traverses the 2,189 Nautical Miles — to the canal we financed, built, ran, and then gifted away under the regime of the (recently departed) Jimmy Carter.

I have read the arguments in favor of these moves (well, except the Canada one, which is flat out ridiculous). Greenland is full of Rare Earth Metals, of which we are in chronic short supply. From there, our armies can incrementally menace Russia, China, North Korea and maybe even Iran. It would, moreover, be a perfect opportunity to stick it to the Danes, which currently protect it. And, let me ask you: what have the Danes done for us lately? Or ever?

The Canal is obviously strategic, else why did we build it in the first place (other than to create perhaps the world’s most famous palindrome: a man a plan a canal panama)?

But, Oh My Heavens! Doesn’t the President Elect have more important matters with which to attend? He’s taking The Oath next week, and, meantime, his predecessor is doing all in his power to block and/or reverse his election-winning policy agenda. Borrowing costs are rising dramatically and presumably in direct contravention of the objectives associated with the full 1% reduction of bank overnight rates effected by the Fed in 2024. Two nasty wars continue to rage.

The November “Republican Sweep’ ushers in a government united across its two elected branches, but one that features a House Margin of (depending upon how you count it) 1 to 2 seats.

The Morrison Hotel is gone and much of the surrounding area continues to either burn or smolder.

It would seem, considering these and other annoyances, that there are better ways to spend the fortnight before one’s swearing in to the Highest Office in the Land than to pump out sideshow spiel of expansive geographic influence.

And nothing for nothing, but the markets are beginning to show their displeasure. As the ball dropped last week, all the ingredients were in place for a renewed, re-energized rally. Instead, after seven sessions, our indices are trading down on the year.

There was a strong Jobs Report, which investors, as they do from time to time, took this as a negative. The inferences they drew as to a more conservative Fed Policy are certainly well-founded. Though memory fades, I recall that All God’s Rate Predictin’ Children were prognosticating a number and timetable for reductions that was nothing short of fantasy based. They were wrong. Cuts came, but later and in smaller magnitude than was gleefully prophesied.

And while market economists are busy factoring higher rates into their models, I suspect that they are still shading towards the Pollyannish. The Fed may not cut at all this year, and, if Inflation perks up, may instead do some raising.

I’m with them on this one. As I’ve stated many times, I don’t endorse Fed rate relaxation as a means of tweaking the capital economy. Instead, I believe that the Central Bank should hack away, not when it can, but rather when it must. Because, when the latter contingency emerges (e.g. during a recession), it’s a stone-cold bummer if they’ve already blown their load.

And the above-mentioned Capital Economy simply does not need thos largesse. In addition to there being scant justification for the bestowal of these gifts, I must point out yet again that the most recent rounds of slashing have done nothing useful at the short end of the curve and have arguably catalyzed the higher yields observed at the long end (that is, where everybody actually borrows).

But this much I promise you – the prices one currently encounters for risk assets are entirely transitory; they will diverge materially ere, say, St. Patrick’s Day arrives. Maybe sooner. There’s a passel of economic data about to drop – including the two big Inflation measures and Retail Sales just this week alone. A lofty expectations earnings season will then commence. Trump will take office and there will be a full-court sprint to pass a budget (featuring an extension of the 2017 Tax Cuts AND a Debt Ceiling increase), through the slightly shady protocols of Reconciliation, immediately thereafter.

I suspect that Big Daddy will immediately seek a deal with his Opposite Number Putin, wherein the latter will cop some Ukrainian Real Estate, but, in consideration of same, will turn its tanks back to the homeland. I think he’ll make good on his threats to turn up the raging fires in the Middle East.

All of which WILL move markets. I continue to believe that the tailwinds are stronger than those blowing in our face, as demonstrated in SoCal, winds of any kind are dangerous, and nobody in a position to do something about it appears keen to make me look good respecting my recent bull prognostications .

Still and all, if I were you, I’d hold on to at least my core positions, with an expectation that doing so will be accretive to your early innings ’25 returns. An accretive set of pre-conditions are indeed in place, and, more likely than not, should take hold.

But, on the other hand, a good deal can go wrong. And I can’t think of any buzz killing scenario more likely than Papa Bear converting his current bluster into action. Cogent arguments are afloat that his rhetoric is merely a negotiating position. He is wielding the threat of heavy tariffs as a rhetorical tool to get the best deals he can.

But 100% levies on Denmark if they don’t cough up Greenland FFS? Denmark is not in the Top 20 U.S. exporters; their ~$11B of sales to us is about 2% of what we purchase from China and Mexico, and >0.1% of the aggregate amount of shit we buy from other countries.

Including Canada. From which we purchase $430B of said shit. Their entire GDP is a shade over $2T, an amount barely more than half of pre-fire California.

So, yes, we can saber rattle with all these countries. Greenland, Denmark, Panama, Canada, China, Mexico – even California. But where will that leave us when day is done?

I’d ask Peter Yarrow, but….

TIMSHEL

He who double crosses Tuco and leaves him alive understands nothing of Tuco

From “The Good, The Bad and The Ugly”

I have chosen, to kick off ’25, to dig deep into my bag of tricks – to perhaps the quintessential Spaghetti Western – Sergio Leone’s the 1966 classic: “The Good, The Bad and the Ugly”. It is a sprawling epic with a wandering plot, but in addition to Clint Eastwood’s career launching performance, it also features perhaps the coolest film score in a decade of great film scores, AND the irrepressible Eli Wallach – a Brooklyn-born Jew who absolutely crushes it as Tuco, the Mexican Bandito, who, among many other things, utters our titular phrase.

Tuco is indisputably The Ugly in the film, and he wears it well. “Blondie” Eastwood is The Good. Lee “Angel Eyes” Van Cleef The Bad. Wallach, arguably though, steals the show.

The universe is replete with essays that utilize the G/B/U motif, and I thus felt more comfortable diverging nominally from the construct. But it’s not as though there’s NO good going on out there, and I’d be remiss if I didn’t begin on this happier note.

To my way of thinking, the best thing that’s happened thus far this year transpired on Friday, when the razor-thin-majority House Republican Caucus, with only minimal petulance, managed to re-appoint Speaker Mike Johnson to this important post, the occupant of which, among other formal duties, stands next in line after Vancey Boy if 47 somehow turns tits up and a new White House occupant is required.

Not gonna lie – I really like this guy. He’s kinda nerdy looking, yes, but so articulate, and a demonstrated compromiser to boot. I was pretty certain that the wing nuts in his crew would block this — reminding us yet again of their inability to come together and actually govern. But they proved me wrong.

Market participants should view this as unmixed good news, as there’s much riding on, say, their ability to extend the 2017 tax cuts – a challenge the outcome of which would’ve been very much in doubt had they chosen to spend the next several weeks squabbling over who gonna sit over Papa Bear’s left shoulder this March, when he delivers his State of the Union Address.

I’m also pleased that the courts threw out that nonsensical Net Neutrality regulation, under which, as a matter of law, ALL users of ethereal bandwidth must pay the same rates. In time-honored fashion, this was nothing but a sop to favored constituents disguised as exactly the opposite – a righteous leveling of the playing field for the little guy. But as matters now stand, huge revenue generating enterprises – ranging from Netflix to the Crypto Bros to the AI pioneers are hoovering up all bandwidth (a finite resource) – to the detriment of us normal schmucks. And the only hope that exists for us is to remove price controls/government intervention and allow market forces to set pricing.

And even The Bad ain’t that bad. Two items come to mind. First, a pox on whoever took a surreptitious image of my liver and then cajoled The Surgeon General to demand the placement of cancer warnings on the nation’s strong waters. In fact, I’m pretty sure they used an MRI image of this organ in the accompanying press release; might force distillers to display my innards on the newly mandated warning labels. If so, my risk management advice is to look away, yes, but drink up.

I also read with some disappointment that the British Crown has removed the Royal Seal designation (first dispensed by Queen Victoria in 1854) from Cadbury Chocolates, which I love. Not sure how much it hurts the enterprise, but I have a cousin that used to work for its Parent Company, and I would always needle him to bring me a sample of the primo shit produced by his firm. His invariable response:

“Cadbury is our premium brand”. To which I would always reply “No, David, I’m talking about the stuff in the vault, that they serve at Board meetings and one bite makes you see God’.

I think all I did was to confuse him.

Indisputably Ugly are the rash of domestic terrorist attacks, the most prominent of which transpired on New Year’s Eve — in the French Quarter, FFS! The gnarly looking perp was taken out at the scene, and now, as ever, we look for answers.

But it was Ugly – so prominently Ugly that it removed that fetching devil Luigi right out of the headlines.

And, in terms of the markets, it’s been a mixed bag – some Cadbury, but also some of those horrible jelly- filled confections. We got a dose of the latter when the trading year commenced on Thursday but managed to gather ourselves and gin up some recapture by the close of the truncated week’s proceedings.

Funds are flowing, but thus far in indiscernible ways. Banks, perhaps aspiringly seeking more lucrative uses for this liquidity, put a huge dent in Fed Reserves:

Contemporaneously, investors withdrew lots of cash from these depository institutions and dumped it into Money Market Funds:

I don’t think we can read to much into any of this.

Meantime, investors, having turned ignominious tail since approximately mid-December, are entering this year’s proceedings with a healthy dose of reticence:

And I say good on them. There’s Good, Bad and Ugly, out there and in these early innings of the contest, we know not which will prevail.

Regular readers (at any rate those who consume the full measure of its content) are aware that I am encouraged by the landscape. There are trillions of dollars of cash to be deployed. Whatever one’s politics, the regime change should be an inexorable improvement for the prospects of the capital economy, relative to the status quo.

So, maybe Thursday’s close will prove to have been a near term bottom; maybe not. But I strongly believe that wherever we find said base, there is a significant climb from these depths that awaits us. After which, as is our fate, these hypotheses will yet again be tested.

Meantime, there’s gold in them thar hills. As there was in The Good, The Bad and The Ugly when the script finally migrates to its main plotline. It will take energy and wiles to find it, just as it did in the film. Without revealing too much, find it they do. But in doing so, Bad Angel Eyes is left dead, Good Blondie rides off with his half, and the final member of the trio – Ugly Tuco — finds himself with the shiny yellow stuff within his reach, but outside of his grasp.

He is double crossed and left alive, presumably with a major score to settle. And we can take two risk management lessons from this. First, as investors, that we may indeed find the filthy lucre but grabbing it and banking it is another matter.

Also, and as importantly, I caution you to beware of Tuco. He’s still out there, uglier than ever, and he has not forgotten.

TIMSHEL

There’s blood in the streets, it’s up to my ankles,
Blood in the streets, it’s up to my thighs

Jim Morrison

I had a different theme in mind for this last note of 2024: specifically, Greenland, which Trump (like Truman and Andrew Johnson unsuccessfully before him) is seeking to purchase from the Danes. I have always been a little hung up about Greenland, but I reckon this topic must wait for another day.

Because, scanning the wires on this ‘tween holiday weekend, I encountered some shocking news. The Morrison Hotel on South Hope Street in Downtown Los Angeles has burnt to the ground.

The establishment once gave title and inspiration to an eponymous album by The Doors, their penultimate effort, released to mixed reviews, in 1970. Its front window is featured on the cover, and now it’s in ashes, as illustrated with the following “before and after” imagery.

Looks like a total blowout, but you never know. The album, meantime, remains among the treasures of American musical cannon in general and of The Doors catalogue in particular. It’s not their best; that distinction belongs to the flawless L.A. Woman, released in’71 a couple of months before Jim’s death — as impeccable a final statement from an historic artistic genius as any of which I am aware. I remember, around 1980, trying to copy the vinyl version onto a cassette, and finding an insufficiency of capacity on the latter, giving up because I couldn’t bear to part with a single note.

In the intervening decades, history has been kinder to Morrison Hotel, and appropriately so. After dropping 3 or 4 mind-blowing records, the Band got a little weird with their next release – The Soft Parade – with its jazzy instrumentation and rambling titular score. Even this is a pretty good album, but not up to the standards of the legacy created by the group.

Morrison Hotel informed the world that The Doors were back. Spies in the house of love, lamenting up- to-the-ankles/thighs blood in the streets.

And we paid notice. Me and my boys were so taken by Jim’s mystique that upon seeing the following image on Morrison Hotel’s inside jacket, we all took to drinking Bud longnecks.

But after LA Woman, and little more than beyond the release of Morrison Hotel, the music was over. Jim died. The band tried to carry on, but to little avail.

The Morrison Hotel became a tourist attraction and then, over the last few years, as a home for undocumented foreign nationals. Perhaps it self-combusted, in solidarity with those who are in favor of the taxpayer-funded support of these unfortunates. Or in solidarity with those who are against this policy.

Meantime, another year has flown. And one would believe, from a market perspective at any rate, that we’d end the proceedings on a high note. But one would be wrong on that score. All God’s Children are shedding risk, selling stocks, Treasuries (Ten Year yields are at a proximate twenty year high, and Corporates are on full-on offer). Heck, even the magnificent BTC, rising a mere fortnight ago to a respectable 106 handle, is now resident at a shameful, undignified 94 and change.

And this with no FTX-type bankruptcy to contemplate.

Today and tomorrow’s sessions may bail out this buzz kill wind up, but I have my disappointed doubts. Risk taking, for the time at any rate, is on the wane. Perhaps this is due to all that uncertainty out there.

The new Congress takes hold on the unfortunate date of January 6^th; you know who arrives two weeks hence. The House is facing the near certainty of another farcical Speaker election. The Republicans hold a 1-2 seat majority, and I’d be shocked if the current occupant of that position can muster the votes on the early ballots to hold his place. I think this is a real shame, because he is certainly well-spoken, appears to be civilized and reasonable. But I think they’re gonna shoot him, as the first round of the same type of circular firing squad that claimed the hides of Paul Ryan and Kevin McCarthy.

The blogosphere, which can always be counted upon to manufacture outrageous content, has floated the improbable name of Elon Musk as a candidate, dismissing, in doing so, the inconvenient reality that by logic at any rate, the Speaker of the House should be a member of the House. I hope, for Elon’s sake, that this notion withers. I think, for all the soaring heights he’s reached, his assumption of this exalted position would render him regretful he ever rose to world domination, and maybe even sorry he was ever born.

Across town, the Fed rotates out four existing, and rotates in four new FOMC voting members, with the latter group featuring the perfidious Austin Goolsbee, erstwhile architect of the Obama economic program, but who, as a tenured professor at the University of Chicago, ought to have known better.

I don’t think it will matter much, though. The Fed is fairly easy to read these days, and when the consensus emerges, as it has, that it will slow its rate-cutting ways, I think it is to be counted upon. The economy ought, as referenced last week, to be able to sustain itself with these still relatively benign financial conditions.

All remains to be seen. I think we begin the year with risk tailwinds, but in time-honored fashion, I advise my clients to take it slow entering ’25. There is a school of thought, to which I don’t subscribe, that urges investors to think of calendar rollovers as mere human device; that nothing changes between, say, Dec 31^st and Jan 1^st other than that which is simply a biproduct of societal protocol. Under this mindset, nobody should change their investment thinking or strategy as this Tuesday fades into Wednesday.

I take the other side of this argument, believing that, come Wednesday, it’s a whole new ballgame. Investment fund performance becomes a matter of record, and the grueling process of the new track begins. Parameters for compensation across all forms of variable payout (including, importantly, corporate executive compensation) are etched in granite.

It becomes time to roll the rock up the hill again.

On a more touchy-feely level, I think each year tells its own story, and the early portion can be viewed largely as introductory chapters. Yes, they can and often do set the tone, but often with many unforeseen bumps in the road likely to emerge as the calendar unfolds.

This coming year should be no different. Lots of changes, as indicated above, are on the horizon. There are two wars to settle (or not). There are taxes to lower, regulations to crush, oil to pump and tariffs to impose. We may annex Canada, co-opt Panama and yes, purchase Greenland.

Markets may fall, but if so, they will rise again. Just like we anticipated when we over-interpreted the lyrics of L.A. Woman’s title song, particularly the Mr. Mojo Risin (an anagram for Jim Morrison) refrain.

We all hoped that one fine day we’d find him bouncing into town, and taking a look around him to see which way the wind was blowing. Perhaps he’d check into The Morrison Hotel and find cause to bark out some blues respecting his demise.

He never did return. And now The Morrison Hotel is a pile of rubble and ash.

The risk management message here, is clear. The landscape changes. In unexpected ways. At unanticipated times. It behooves us all to remain mindful of this, and to resist temptation to place full reliance on what we see before our eyes.

So, in closing, I wish everyone a Happy New Year, and urge y’all to keep your eyes on the road, and yes, your hands upon the wheel.

TIMSHEL

These are variants to the words written on Luigi’s shell casings, but I’m not here to write about Luigi. He is, like the assassins of Archduke Franz Ferdinand (an event which launched the First World War), simply a manifestation of a larger problem, which, if left unchecked, could turn into a catastrophe.

Meantime, approaching holiday notwithstanding, I’ve got some beefs with y’all that may require a sit down to settle. However, in deference to the season, and seeing as how it’s one of those rare instances where Christmas and Chanukah (the latter beginning at sundown on Wednesday) coincide (approximately once every 20 years), I figure I might as not begin with something more uplifting.

110 years ago, across the WW1 Battle Fields of Flanders, the minor miracle of a spontaneous Christmas Truce broke out. The “war to end all wars” was entering its 6^th month. All combatant nations (save the United States) were engaged, and a multi-year interval of trench warfare – under which the opposing armies were dug in at close range, lobbing missiles and mustard gas at one another, but with little or new ground ever gained or yielded, had begun.

But it was Christmas, and, seemingly without any premeditation, on those soon-to-be-blood-soaked fields, caroling broke out on both sides. Men on both sides converged to harmonize, share holiday provisions, and celebrate, together, the yuletide. Including, notably, in Ypres, which featured in subsequent years a total 5 battles, and several hundred thousand war-related casualties.

The bloody action was thus delayed. For 24 hours. By Boxing Day 1914, it was on again. Tens of millions would die in The Great War. Russia would quit, mid-game, to overthrow the tsar, which should’ve sealed the win for Germany, but that the was precise juncture when the Yanks entered the fray, with a seemingly unending supply of troops, weapons and munitions. This forced Germany into the singular position of suing for peace with the bulk of its armies still holding enemy territory. Very little having been settled. Twenty odd years later, the world felt compelled to do it all again. On a bigger scale. But at least that contest resolved matters – for a time.

Meantime, Christmas 1914 was, to the best of my knowledge, the only time in modern military history that enemy armies paused in their hostilities in homage to something larger, and this is worth remembering.

And there’s something about the current global vibe that is naggingly reminiscent of the unfolding of WW1. Everyone’s edgy. Random assassins and other menaces crop up without notice. The geopolitical construct is one under which an endlessly complicated set of alliances renders it difficult to determine which nations are allied and which are in opposition. A false step, I fear, could set the world ablaze. Just like it did in 1914.

But that’s not my beef; here’s my beef. What on earth was all this recent selling about? Our equity indices have been sucking ass for the last fortnight, only recovering modestly on Friday – ostensibly because an Inflation measure favored by the pointy-headed came in 0.1% below expectations of 2.4% (does anyone really care?). Prior to that, we had a very visible but not particularly pleasant correction under way.

The raw numbers fail to reflect either my disappointment or the performance carnage. Col. Naz (now in danger of being busted back down into the ranks) dropped 5%, but the Gallant 500 only yielded an amount about half of this previously captured ground.

But I have a problem here. First, because I told everyone that I didn’t see any signs of a year-end selloff and I don’t like being made a monkey of. But perhaps even more importantly, because y’all were supposed to be buying, locking in a year of > 25% gains and ensuring a fat payday for one and all.

And what more did you want to do what was asked of you? Inflation is parameterized. Q4 growth is projected at > 3%. There’s a new regime coming to town, bearing with them the promise of all sorts of bennies. Tax cuts. Liberation of the Energy Sector. A non-hostile SEC. A veritable orgy of deregulation. A Federal Trade Commission with an agenda other than killing every deal contemplated. Musk and that hedge fund dude riding into town to remove the snouts of the pigs from the fiscal trough.

OK, so there’s some UFOs flying over New Jersey, but if we’re gonna turn tail at every sketchy, shady development over ‘cross the river, we’re never gonna get anywhere.

The Headline news/designated catalyst for the puke was Wednesday’s FOMC meeting, wherein they followed through on their promise to cut 25, but also revealed a dot plot which foretold of (gasp) only two rate reductions next year:

I have a little difficulty reading this and therefore must rely upon the more erudite to translate it into a 2-cut prognostication.

But I reckon dots are gonna dot. And plot. What I can’t figure out is why this was considered sufficiently morose to catalyze a huge rout on Wednesday afternoon.

Yes, they tried to rally ‘em back on Thursday, but to little avail; the benchmarks closed flat that day. So, it took that whopper 0.1% Inflation beat to put sugar into investor tanks.

I will strive not to take this personally, but perhaps in vain. Because, I have this conceit that the Fed should avoid cutting rates unless conditions compel it to do so, as it dilutes the juice that the Central Bank can apply when such actions are truly warranted. I am thus wondering why even 2 more reductions are considered not only necessary, but insufficient.

And, as illustrated in the following chart of Fed rates, it is not as though, by historical standards in any event, monetary conditions are particularly tight:

It appears, from my vantage point, like we’re in a highly appropriate rate range here. The economy looks at worst stable and arguably strong. As indicated above, the promises made by the new President and Congress should create something of a tailwind heading into 2025.

And, throwing up my hands, I believe that if this economy cannot abide the current overnight rate of ~4.6%, and investors are baring their teeth at a move into the high 3s, then we have all misread the signals and must prepare for some economic hardships which I, quite frankly, do not see on the horizon.

The government avoided shutdown with another one of its infinite sequences of Continuing Resolutions, and the cynic inside me is tempted to proclaim the sustained funding of Washingtonian escapades to be a dilutive development. But admittedly, that would be mere bluster on my part. In particular, we should keep underwriting the Army, because we may need it sooner than we think.

For reasons that should thus be apparent, I have suggested to my clients that current valuation thresholds may very well be productive entry points. I’m not predicting a year-end recapture of all lost ground (we’ve only about 5 productive trading sessions remaining to us in this year), and we may even enter ‘25 proceedings a bit wobbly. But I’m fairly convinced that by Valentine’s Day at the latest, the markets will have ginned up a rally that it will have been a shame to have missed.

After that, who knows? I think the Capital Economy, as enabled and abetted by favorable Tax and Regulatory policies, a robust deal calendar, lower energy prices, etc. should be poised for incremental growth. And, for the bajillionth time, I remind my readers that the supply/demand conditions for investible assets point to a shortage that should further goose valuations.

Investors appear to be in denial about this, and it would be unwise to underestimate the ability of the knuckleheads in Washington, including those from the new (old) regime to bitch things up. Those machines hovering over Monmouth County, moreover, may be hostile operators, and wreak absolute havoc on us.

These risks, however, are no different from those we have faced since the first bi-peds began swapping rocks for women, land and other commodities.

And besides, it’s Christmas. And Chanukah. And I wish Peace and Prosperity to one and all. And, in closing, while undertaking whatever version of the seasonal rituals that best apply, I urge everyone to give one remembrance to those poor, brave souls in Western Belgium, circa 1914, who, first offering praise and thanks to their Creator and breaking bread with their enemies, gave up life, limb and treasure to establish a world order suitable to us all.

They failed, of course. And we will fail again. We always do. But then we get up.

And give it another shot.

Merry Christmas, Happy Chanukah, and, as always….

TIMSHEL

With all matters ’24 winding down and little of import scheduled on the tape (OK; we got FOMC this week, but I can’t work up much enthusiasm about it), I will attempt to school y’all as to what is really wrong with our Health Care System. This in the wake of that poor son of a bitch getting plugged during morning Midtown rush hour, and even more so the rise legions of misinformed souls who, with varying levels of irrationality, are applauding at least the intent, if not the consequence, of his action.

I take this whole thing somewhat personally for a couple of reasons. First, the murder happened on my turf. I have walked by that very spot thousands of times. I have occupied a half dozen offices – including my current one, within a couple of blocks of the crime scene. I park in the adjacent hotel garage regularly. For 10 years, I owned a Condo less than half a mile away.

The topic also touches me professionally, first because I have also spent many years working on projects, albeit with minimal success, designed to bring incremental rationality to health care costs. Moreover, I am, like > 50 million other Americans, a customer of United Health Care, paying for not only my own family’s coverage, but also that of my employees. They have been, upon occasion, maddening to deal with, and have outright pissed me off more than once.

But they are not the head of the dragon, nor, perhaps, even its tail.

But before I get to that, it is my pleasure to celebrate the following chart with you, which touches my soul almost as much as the image of the refurbished Notre Dame Cathedral I shared in last week’s note:

To what, for the uninitiated, I am referring is the essential end of a multi-year condition known as an Inverted Yield Curve, under which rates for shorter duration debt exceed those of longer maturities. And that ain’t natural. If you borrow a few bucks from a buddy and promise to pay him tomorrow, you’d expect to pay a lower vig than you would if your agreement called for you to cover this loan in, say, 2027.

The Economics books tell you that an Inverted Yield Curve is a recessionary indicator, but I don’t think this is what’s been at play here. I think that the Treasury Market has been, since lockdowns at least, distorted by both Monetary and Fiscal Policy, and that a return to normalcy is a boon to rational capital allocation.

But back to UNH. Their projected 2024 profit is ~$23B – hardly chump change. But measured against the above-mentioned 50 million system users, and considering they have business lines other than insurance, their profit per patient < $500/year. Moreover, with a market cap that hovered before this Luigi dude gunned down their CEO at ~$500B (it is by this measure the 16^th largest company in the world), the return to investors, owners of this business, is ~4.6% — again not chump change but less than the yield on 2-year Treasuries that prevailed before the Fed began cutting rates.

I sympathize with those who, having treatment coverage denied or delayed, have formed a rage against the insurance company itself, but their anger is misplaced. It is the system, not its custodians, that causes most of the problems.

Allow me to elaborate. First, and most broadly, the vital economic ecosystem known as Health Care is the most structurally distorted of any which I am aware. As an unavoidable reality, Supply AND Demand are set by the supplier. You don’t walk into a doctor’s office or a hospital and inform them of your preferences, they inform you of your needs. There’s nothing anybody can do about this. They also control the oversight mechanisms, but more about that below.

Further economic distortions emerged after WWII, when, facing a labor shortage, American Industry began to offer Health Care as part of compensation packages. Among other matters, there’s a tax arb here; for most of us, the dollars paid for health care coverage are worth as much as direct compensation –are perhaps even more valuable because they are received without a tax liability. Employers cover these costs and deduct the payments from their taxable income. In this way, trillions of dollars transferred across the economy escape the avaricious clutches of the tax man.

These two elements of Health Care economics have created incentives for overconsumption, as we all tend to gorge ourselves on any product or service for which somebody else is footing the bill. It is also at this point when Health Insurance became a misnomer. In other forms of insurance, we pay a premium to cover the adverse impacts of an unfortunate contingency. But with Health Insurance, nearly all economic burdens are underwritten by the insurer.

There are also misapprehensions as to who is covering these costs. Large corporations ALL underwrite their own risks in these realms and use companies such as UNH simply to merely push the paper around. When coverage for 40% of our fellow citizens paid for by taxpayers, most notably through programs such as Medicare and Medicaid are added in (the National Institute of Health estimates that 2/3rds of 2024 medical costs were paid by the government), the percentage of the costs of medicines, treatment and the like that are paid by insurance companies themselves drops to the low double digits (or below). Yes, it is your UNH rep that informs you that they won’t cover your hip replacement, but more often than not, they’re simply following guidelines of third-party underwriters.

This is not to suggest that insurance companies don’t play games to goose profits. They most certainly do. It’s the American Way.

We can also blame lawyers, who have boosted liabilities (contingent and actual) into the stratosphere. But I have some sympathy here, because, whatever else happens, lawyers gotta get paid.

There are, in addition, a few other distorting dynamics. First, particularly in this environment of accelerated technological development, many tasks that doctors perform (and for which they charge doctor-level fees) could, with greater ease, lower cost, and perhaps greater efficiency, be undertaken by machines and Health Care personnel without medical degrees. This would liberate physicians to apply their time and efforts to maximum treatment benefit, but I am not optimistic that any change in that direction will be speedy in its rendering. Doctors are like everyone else, insofar as that they don’t like giving up revenue streams. So, they continue to apply stethoscopes, blood pressure monitors and thermometers to our bodies every day, and this drives up costs and reduces treatment availability as well.

The American Medical Association lords over these matters, and one upsets them at one’s own hazard.

Perhaps the most difficult inefficiency to address is the disproportionate skew of Health Care expenditures for a given individual towards treatments taking place at the end of that person’s life. That infallible source – NIH – estimates that the percent of outlays in the last 12 months of an average person’s life is between 10% and 12%. This may not sound exorbitant, but if one recalls that human life spans are now approaching 80 years, it is 10x the amount expended in earlier years of our mortal existence.

The last days of my daddy – that old mixer Stuart Charles Grant, who I don’t believe darkened a doctor’s door for six or so decades, but who in in the last several months of his life spent more time inside medical facilities than out, is an anecdotal example.

And it did no good. He died anyway — I suspect within the same timeframes as would have prevailed if he had chosen to stay home. On the night of her death, they airlifted my mother from a suburban Chicago hospital to Northwestern Memorial, where, upon doctor’s advice, I authorized the same fatal morphine dose that she easily could’ve received without leaving her Lake Forrest deathbed.

We all have stories like these…

There are other issues as well, of course. At the lower end of the socioeconomic spectrum, we encounter untold instances under which all medical services begin in the Emergency Room and extend into the priciest realms of Health Care.

But in general, we have a system under which the supplier sets the demand levels and associated price, where consumers pay for only a small fraction of the products and services consumed, thereby incentivizing overconsumption and disincentivizing price disclipline, where doctors rule and lawyers run wild.

And an efficient mix between costs and competent treatment? Fuggedaboudit.

For anyone who cares to know, our projects involved creating a capital and trading market to swap expense streams for various diseases – most notably diabetes, the treatment of which we spend more than we do on Crude Oil. In our imagined Utopia, markets would set the price of care, based upon those righteous forces that govern other marketized elements of the economy. It could work, but our failed experiences suggest that the idea, best case, is ahead of its time.

The problems, meantime, appear to be intractable, but I think an honest rendering would suggest that we obtain better outcomes than those jurisdictions that feature universal Health Care. You may prefer the latter, but you may want to check with your friends in the U.K. to determine their wait times and experience quality for even the most basic and essential elements of their medical treatments. And please bear in mind that nothing’s for free, and that you’ll pay one way or another. Finally, with our government covering 67% of Health Care costs, we’re closer to socialized medicine than you may imagine.

I’m even more certain that plugging several holes into the back of an insurance CEO is, at best counterproductive and, at worst, catastrophic. We can choose to gaze into those dewy brown eyes and proclaim the hitman a visionary martyr. I don’t, however, feel it will accomplish much and may cause serious incremental carnage.

In the final analysis, like the physician referenced in Luke (4:23), we must seek to heal ourselves. Our problems are chronic and solutions elusive. But let’s at least start with a proper diagnosis, and then work diligently towards constructive, rather than damaging, murderous ends.

TIMSHEL

Whatever else maybe transpiring, ‘tis, from my perspective, a season of comings and goings, of demise and resurrection – several of which events compel my comment.

So, let’s get to it, shall, we?

Though I’m not over-proud of this, I am most joyful about a departure. After 25 years of historically erroneous commentary, pompous virtue peddling, and other misdemeanors, New York Times Columnist Paul Krugman is about to Peace. He has annoyed me for most of my adult life — so much so that when, in the troubled Autumn of 2008, with the financial world collapsing, the Nobel Committee awarded him its coveted prize, given in happier times to world-changing geniuses like Hayek, Friedman, Stigler, Miller, Markowitz and Sharpe, it sent me into a months-long depression.

Not only has Krugman been wrong about so many things for so long, he has done so with criminal arrogance. In 1998, for example, he famously instructed the world that within less than a decade, the Internet would be no more impactful than the fax machine. His interventionist bona fides have impelled him to proclaim, with maddening certainty, dire consequences for any and all free market enhancing policies, and Economic Eden associated with any command-and-control actions taken by our betters (including him). Preferring, instead, infinite taxation, deficit spending, redistribution and government control.

He may be the only individual on the planet that believes that the government has not borrowed enough, spent enough or taxed enough in recent years – on its way to our current >$36T deficit.

In summary, he has, with petulance and certainty, proclaimed that only an elite ruling class is capable of making sound decisions and that anyone who doesn’t understand this is ignorant, vain, and border-line evil.

All of which renders (as an aside) the morally ossified New York Times (which, several years ago, proclaimed that it would abandon factual reporting in favor of the pursuit of “more righteous” ends) his perfect venue. Well, we’re still stuck with the Times, but at least Krugman is gone. Hosannah!

Also gone is that whacky, loveable Bashar al-Assad, who managed to get his ass out of Syria and (presumably) into a Turkish Palace before the victorious rebels blew it into the Land of the 72 Virgins. What follows in Damascus and surrounding environs remains to be seen, but it’s hard to be over- optimistic.

On a more righteous note, I am thrilled beyond words at the resurrection of the Notre Dame Cathedral in Paris. It burned down before the lockdowns, and even then, they said it could not be rebuilt. But it opens again this weekend, and the pictures are breathtaking.

It hath risen! And I think it bears emphasizing that the approaching €1 Billion it took to finish the job all derived from private donations – a feat running in deep conflict with Progressive principals, many of whom proclaimed it was gone forever. I’m sure Krugman has an opinion here – some combination of the impossibility and/or evil intent of such largesse. But he’s gone, and the newly refurbished Notre Dame Cathedral has re-emerged in all its magnificence, in the 5^th Arrondisemont, on the banks of the Seine.

Moreover, a Friday Wall Street Journal article proclaimed the return of the Nehru Jacket – a drive-by fashion statement whose viability was limited to a few months in 1968. The Beatles were photographed wearing them, and everyone else then had to have one:

56 years later, and with a starting price take of $4 Large, its current versions are less of a proclamation of hip countercultural sensibilities than it is a statement of personal opulence. So be it.

I will cop to mixed feelings about this. First time ‘round, I forced my parents to buy me a Nehru, and then, as is the case with all my peers, paid for this with wages of embarrassment.

By the time Woodstock rolled around, nobody with an ounce of self-awareness would be caught dead in a Nehru.

And I would be remiss if I failed to acknowledge that all this is transpiring precisely 44 years after that horrible night that Lennon was assassinated. He’s now been dead for a span covering >110% of his short but magnificent life. He had more music in him, to be sure. And, were he alive today, I believe he’d be rocking a new Nehru like a boss.

Meantime, the market persists in its euphoria, much of it presumably owing to the political resurrection of ‘Ol 45. For some, this divine intervention cannot arrive too soon, but the reality is that it won’t transpire for another 6 weeks. There is a justified worry as to what incremental mischief the Krugmanized outgoing administration can unleash, and, not gonna lie – the late Thanksgiving Weekend news drop of the sweeping Hunter pardon was a rather disturbing indicator. This, of course, was inevitable, but I could’ve done without his casting it as a heroic gesture in the name of sound jurisprudence and good governance. The truth, I suspect, is that they knew that HB was not gonna go to prison quietly, was perfectly capable of taking down his whole Shakedown family.

I don’t blame him for this though, and I suggest to those who are outraged that if they wish to pardon their relatives, they get busy running for President, and, when elected, pardon away.

The markets have, as indicated above, taken these comings and goings in stride – perhaps appropriately so, as there’s not much visible to me overly likely between now and year-end to throw this rally off its stride. Inflation numbers drop this week, and I suppose we should keep a lazy eye in those quarters.

And one concerning aspect of this is the alarming rise in Coffee Prices, which much of the Western World, including me, cannot abide:

More broadly in terms of Inflation pressures, we may wanna pay attention to the reality that 80% of the dollars floating around the planet today were created after the lockdown:

But that, I submit, is a problem for another day. In this season of departures and resurrections, I prefer to focus my attentions more acutely on ethereal matters. Like the return of the Nehru Jacket. Which was very quickly replaced in our sartorial affections by Bell Bottoms. Which had a good run, but ultimately disappeared, and have not, unlike the case with the Nehru, re-emerged.

Thus, in closing, while we all gotta go, whether we are resurrected, by contrast, is out of our hands – partly in those of God but also as dictated by the caprices of human sentiment. With respect to the former, I can pray at Notre Dame Cathedral. As for the latter, I’d ask Krugman, but, alas…

TIMSHEL

Rented a tent, a tent, a tent,
Rented a tent a tent, a tent, rented a rented a tent

For reasons which I have difficulty articulating even to myself, I have recently revisited Kurt Vonnegut’s “Sirens of Titan”. As is the case with many in my generation, Vonnegut’s work was, one of my early portals into the world of literature. At the time, I thought he was better than Shakespeare, but my tastes have since evolved. He put out some good stuff, but much of it was sloppy and some entirely drek.

Nothing he wrote was better than Sirens of Titan – a science fiction work which elaborately but plausibly reduces the reasons for the creation of the earth to realms beyond trivial. I reckon the point is to poke fun at existential navel gazers, seeking more profound answers which fit into their own cosmic narratives. I think, in doing so, he performed the Lord’s work.

An early chapter in SoT is entitled “Between Timid and Timbuktu” – an oblique reference to the reality that most words contained in limited edition dictionaries are related to the concept of Time. A subsequent section — “Tent Rentals” pays homage to the rented-a-tent sound of thrumming war drums as armies enter battle. Vonnegut knew something about this, having not only fought in WWII, but in the Battle of the Bulge. Having not only fought in the Battle of the Bulge but having been taken Prisoner of War therein. Having not only been taken Prisoner of War but having endured one of the worst massacres of the entire conflict – the fire-bombing of Dresden in February 1945.

Meantime, the glossary space between Timid and Timbuktu and the concept of martial tent rentals seemed to me to be particularly relevant — as the national holiday melted away and as we marched – inexorably and for better or worse – into the final month of a fast-paced, action-packed year. Time is indeed hurtling forward, not with Timidity but plausibly toward Timbuktu, and those looking for sanctuary can probably do no better than seeking to occupy rented tents and making do as best they can.

Published reports confirm that November was the strongest return month of the year. It wasn’t a milk run though. After some initial post-election euphoria, markets yielded some ground – only to regather themselves for the final, magnificent charge that continued all the way through Black Friday.

I’d be remiss in any failure to acknowledge the Gallant 500’s introductory breaching into a 6 handle, but special commendation, is owing to Ensign Russ – commander of our nautical small craft/small cap forces. The good ensign piloted his boat to double digit gains, but as the accompanying chart shows, it wasn’t all smooth sailing.

Still and all, I am leery of small cap rallies at this point in the year – particularly when the political trade winds blow fair, fearing that they are fueled by a combination of short squeezes and stays of executions for companies which, under other circumstances, might be facing naval tribunals, and, for some, ultimate dispatch into the drink.

Maybe this time it will be different, but I advise my sea-faring small-cap seeking minions to resist the temptation to open ‘er up full throttle.

And now it’s December and one wonders where the time went. It hardly began in Timbuktu and is now anything but Timid. I suspect that the investing army will continue its push to higher elevations – through year end and perhaps beyond.

And why not? I hear the rented-a-tent pounding of the market bulls. They’re on the march and looking to stampede. I don’t believe, from a risk management perspective that it would be wise to wave a red cape in front of them.

I do, however, believe that whatever direction the markets take early in ’25, the first move – particularly if it is acute – is a fade. An improbable early January selloff is likely to be a buying opportunity, and any (higher probability) lurch towards the heavens will run out of steam and reverse itself.

Why? First, because I said so, and second, because that’s just the way it works ‘round here.

As always, we’ll be dancing to the tune of the tech tape. Which looks strong to me heading into year end, but ominous in its broader implications. I read today on Bloomberg of the emergence of an ill-omened new AI app called Death Clock, which purports to predict the exact day of users’ gathering to the dust of their forebears. It has reached about 125K of the curious thus far, but I will cop to be both Timid about this and to preferring a one-way ticket to Timbuktu.

I suspect, meanwhile, with holiday fare presumably digested by now, investors will eagerly turn their attentions to the solemn, ritualistic exercise of the year-end “marking-up-o-the-tape”. This doesn’t happen every year, but at the end of what has been thus far a strong ’24, and with everybody looking to get paid, it’s virtually in the bag. This Friday brings Jobs tidings, and, before the bells jingle, we’ll be treated to new Inflation figures and a final Fed meeting.

But they are more or less beside the point – largely because the investing universe is uber-fixated on the prospects of cashing in some big orange dividends to be harvested in ’25. Had the election gone the other way, these data drops would’ve been more important. All God’s Children would have been focused on the Jobs Market, Inflation and Fed Interest Rate Policy.

But right now, the joyful chorus is ringing “who cares?”.

I do suspect, however, that we will care about some macro issues in the coming months. Or should. In an eerie verisimilitude to the ebbs and flows of the capital economy that we experienced during Trump 1, the once and future Leader of the Free World is engaging in some (dubious in my judgment) saber rattling at important international trade partners.

For instance, just this past weekend, he issued a warning to our BRIC buddies – a multi-jurisdictional consortium of developing nations, acronymed after Brazil, Russia, India and China, but now, as ordained by the Gods, expanded to include South Africa Egypt, Ethiopia, Iran (!) and the United Arab Emirates, not to even think about creating their own currency. Because we will bring the full measure of our retaliatory forces to bear on them if they do.

Fortunately, his associated rhetoric does not extend to sending the can smashing infantry into these hostile climbs, but rather to the imposition of punitive tariffs. And I remained concerned about the attendant implications. I have a hunch that Americans buy some important stuff from these BRIC layers, who will, inevitably, respond in kind. Not exactly accretive, all of this.

Trade wars last reached this temperature in 2018 – the only year in Trump 1 in which our valuation armies yielded ground. Particularly in December of that year, when: a) the nose-to-nose confrontation between the U.S. and China reached its peak; and b) the Gallant 500 beat an ignominious retreat that ruined what was trending towards a solid, if unspectacular return year:

Also that month, Fed Chair Pow began to sound ominous rate raising rhythms – only to do a 180 in January and launching the G5 to its best sequence since 2013 (and one that has not been surpassed since).

Well, a quick review of current contemporaneous conditions indicates that not only are tariffs again on the docket, but there’s every possibility that the Fed could revert to its late ’18 hawkish stance. Particularly, if as is entirely possible, impending tariff policy morphs into an Inflation problem.

Investors may seek to mitigate these risks by renting the most expensive tent ever manufactured. BTC, which flirted with $100K a couple of weeks ago, but has since retreated to microscopically more affordable levels of 97 large and change. This may seem like an elegant accommodation at present, but how it holds up when the shells start flying is another matter.

So, I do indeed expect a war and wish all the best of fortune with their tent rentals. Only time will tell how all this plays out, nestled as it is between Timid and Timbuktu.

Of course, in any properly constructed dictionary, the ordering would be reversed. The ancient city nestled on the banks of the Niger River comes, alphabetically, before the adjective describing lack of courage and confidence. But like I said. Vonnegut was sloppy. And so am I. And so, perhaps, are you.

And so is the world. Which is always, in one form or another, is in a perpetual state of war. Maybe this is why, somewhere in the distance, I continue to hear the following chant:

Rented a tent, rented a tent, rented a tent a tent….

TIMSHEL

I warned everyone that there might not be much fodder in the coming weeks, particularly given my promise to eschew the moth-to-flame topic of domestic politics. Which I mean to keep. For now.

The early returns on this prediction are mixed. There’s no new information about the much-anticipated Faces reunion. Market data has slowed to a trickle. NVDA survived its earnings release, energetic efforts by the Gloomy Guses seeking to nitpick it notwithstanding. A few PMIs dropped on Friday, and they beat expectations in the U.S., but collapsed in Europe, where they have long toiled in the nether regions.

By a cruel quirk of the calendar, the next round of Inflation numbers is scheduled for release on Thanksgiving Wednesday. When they’ll be blowing up the balloons on the Upper West Side FFS! I suggest that you pay them little heed, as they are unlikely to be sustainingly impactful.

By deductive reasoning, I am thus impelled to point my rhetorical weaponry largely towards next year. And the first factoid I can share is that at long last, the 5-century countdown to the celebrated-in-song Year 2525 can finally begin.

For the uninitiated, “In the Year 2525” is a song by the long-forgotten duo of Zagar and Evans, which, apart from banking some coin on the tune (which sincerely hope they saved), is primarily notable for being: a) the only recording act to have ever reached Number 1 in the U.S. and U.K. and never to have charted again; and b) perhaps (other than the fabulous Electric Flag/Hendrix drummer Buddy Miles) the only credentialed musicians spawned from the plains of Nebraska.

I never liked the song. But my friends did. Even the lyrics are entirely dispensable. But I do owe them a debt of gratitude for supplying me, albeit in modified form, with a theme for this week’s note.

But before we get to what happens next year (i.e. 2025), there are a few emerging ’24 matters with which to dispense. On Friday we learned that the New York (football) Giants will be dime-less in ’25 and beyond – having finally bailed on one of the biggest loser trades in recent sports memory: their $160M investment in Danny Dimes – 6 years into his tenure and less than 12 months after having signed that astonishing deal. He won’t bank the whole buck sixty, more like half. But I impute, after crunching some numbers, that this nonetheless amounts to over 800 million dimes.

And while we’re on the topic of sports, I read with interest that the Number 1 ranked high school player in the country – Bellville MI’s Bryce Underwood, just flipped his allegiance to the (hated by me) University of Michigan. He had committed to LSU, but apparently the lure of the academics at the former institution, and that of playing for his home state’s flagship school, was too many for him.

That and the $10.5M that the Wolves just stroked to him. And I’m not gonna lie — it all depresses me. The B1G now stretches from Westwood to the Jersey Shore. Stanford and Cal, located on either side of the San Francisco Bay – immediately adjacent to the Pacific Ocean, have now joined the Atlantic Coast Conference.

And now, high schoolers are inking eight figure contracts to play college ball. Mark my words – these will be nine figure contracts well before the decade ends, will be sufficiently large to cause even Danny Dimes (late of the ACC’s University of North Carolina) to wish he had a couple of years of eligibility left. But he doesn’t, and in the meanwhile College Football is rapidly becoming unrecognizable.

And if you doubt this, consider that Columbia won a share of the Ivy League title. I happened to be present, as a grad student, at their breaking of their infamous 44 game losing streak when they beat Princeton in 1988. I remember so clearly the joyful “back to Jersey” chants of a half-filled Baker Field on that sunny Autumn day, which seems like a lifetime ago.

Finally, we approach Turkey Day, for the first time in the field of my awareness, without the presence of Alice Brock, eponymous heroine of Arlo Guthrie’s epic saga “Alice’s Restaurant”. She left us on Thursday – precisely one week before the couldn’t-be-beat Thanksgiving dinner she is legendary for hostessing.

Moving on to ’25, after due consideration, I believe that it’s gonna be a baller year for the markets. True, some of this is based upon my favorable reading of the gale-force political winds that prevail, but it begins with my embedded belief that there is simply too much liquidity chasing too few investible assets to keep a lid on valuations.

This would be true under any policy regime other than the ones about which: a) Progressives dream; and b) were roundly rejected by the And I don’t think that the inflatable orange float that will land on Pennsylvania Ave on Jan. 20^th offers a unilateral windfall to the investment universe.

So, I don’t expect the next phase of the rally to be particularly righteous, but the new regime will do some things to break some of the chains that have been impeding an even stronger rally. And here I begin at the Federal Trade Commission, which will bid a not-so-fond farewell to the odious Lina Kahn – the minute that carroty hand is placed on the bible. She worked tirelessly, and with considerable effectiveness, to ensure that no capital markets activity transpired on her watch. But she’s about to Peace, against the backdrop of a huge backlog of IPOs, secondaries and other juicy transactions of similar look and feel.

Yes, the calendar will explode, and it should be accretive to our objectives. For one thing, a hot deal calendar just vibes well, and, perhaps more importantly, the prospect of raising capital unimpeded by obstructive regulation should focus everyone on the holy task of putting it to good use.

We are also well rid, from a market and atmospheric perspective, of that cockroach Gensler. Not only was he a terrible CFTC Chair, and an even worse Head of the SEC, but his path has been that tired and detestable journey from Goldman Sachs Partner/Centimillionaire to Social Justice bureaucrat, bent on blocking the Road to Riches of everyone else — after he banked his own. We haven’t had a great deal of luck with these types, dating back to Former Goldman Chair Jon Corzine, who served as Senator then Governor of New Jersey (whose current governor is also a Goldman Fat Cat) – after which he ran a pretty decent financial firm – MF Global – into the ignominious dust.

At the SEC, Gensler tried to ram through Green New Deal, DEI, ESG initiatives, none of which have much, if anything to do with the regulation of securities markets. More broadly, the list of his hostile actions against market participants rivals that of Ms. Kahn at the FTC. The new administration has yet to name his replacement, but another term under his stewardship would have been dreadful, and his removal alone is cause for celebration.

My boy Bessent, after a knock down/drag out fight, did in fact cop the top spot at Treasury. I am inclined to pardon him for his documented slights to me – particularly as it will be difficult for me to eschew entirely the temptation to pimp his name/our affiliation out to those with whom I interact professionally. Please forgive me for this. And try to walk a mile in my shoes. If you were a risk manager still trying to make a living in risk management, and if you served as the long-time risk manager to the incoming Treasury Secretary, you might do the same.

Bessent and I tended to agree on nearly every matter pertaining to economic policy, but I am troubled by his 11^th hour embracing of tariffs – something I never discerned in our twenty years of interaction. Yes, sometimes tariffs are necessary and certainly the domestic market protecting/intellectual property thieving Chinese are perhaps sorely due for some of this tough love.

But tell me how tariffs — a program under which a government collects a fee on import-based transactions, is anything other than a tax? More often than not, they are passed along to consumers; if not, the provider of the goods and services swallows them. Either way, the government cash register rings. And someone pays. And then the tariffees start to do some tariffing of their own. Prices rise, and only governments benefit. So, let’s tariff away, but not call it anything other than it is.

I reckon, though, the tariff hyperbole will not translate with the flourish with which it has been pushed, and that one way or another, we’ll survive. Part of the Bessent pitch is the unshackling of the Energy Sector, and whatever one thinks about environmental impacts (and my belief is that in a world where India, China and much of the Third World will voraciously consume fossil fuels, our own restraints are futile), cheaper and more abundant energy will be a boon to our economy. The Health Care and Manufacturing Sectors should also benefit from the arrival of the new Washingtonian sheriffs.

I anticipate this feel-good hypothesis will drive incremental gains between Thanksgiving and Christmas, and that we’ll come out of the gates strong in the early portions of next year. At which point we’ll hit a brick wall of unspecified composition. This is as God wills it and should not cause over-consternation.

U.S. markets will continue to obliterate the competition:

I suspect that Interest Rates will remain stubbornly elevated, that the Fed will be less inclined to help the cross-town managers of fiscal policy, that Musk and the other dude will face great difficulty in attacking the expense side of the deficit, and that at some point, the massive credit bubble that we have (ignoring history) blown ourselves will reach a bursting threshold.

I don’t reckon that it will take to The Year 2525 for this reckoning, but I am not paid to offer 500-year prognostications. On the other hand, I’m not paid to offer prognostications of any kind.

Meantime, it’s Thanksgiving and we’ve many blessings with which to garnish our tables. Markets are strong and likely to remain so. No, we won’t have Alice, at whose place it is said that, excepting her, you can get anything you want. And now she’s gone for good. Maybe she never was there at all. But the menu is abundant, and the kitchen is warm.

The Lions are champs of the Ivy League – for the first time since 1961.

This is about all for which we can hope in this forlorn world, so let’s stuff ourselves now, shall we?

2525 can wait.

TIMSHEL

On soft gray mornings widows cry, The wise men share a joke
I run to grasp divining signs, To satisfy the hoax
The yellow jester does not play, But gentle pulls the strings
And smiles as the puppets dance, In the court of the crimson orange king

Peter Sinfield (12/27/43 – 11/14/24)

A quick word about Pete Sinfield, original lyricist for King Crimson and ELP. His run was brief and then he disappeared. Composed our titular lyrics. Died on Thursday.

And that is all I have to say about that.

Meantime, yes, the Election, about which I have vowed in this space never to write again, is behind us, forcing, among other things, a reversion to myriad matters more mundane, but evoking mental gymnastics as to what it all means.

The results were certainly unambiguous, utterly obliterating my clever but ultimately erroneous hypothesis as to the chaos which would ensue under certain outcomes. I will state, however, and in my own defense, that the count was too one-sided for any such shenanigans to unfold, and that had it been close, I might’ve been right. But the electorate has stated its preference and will abide the consequence. Resistance, for the time at any rate, is futile.

I have read, as an exception, of initiatives which channel those global social trend setters in South Korea – through a movement called 4B, under which the damsels of the land withhold the full menu of their charms from sinful, forlorn bearers of Y chromosomes, as retribution for political transgressions which they ascribe disproportionately to us. But I’m not terribly concerned at this point. My personal and observed experience in this regard suggests that it will be difficult, perhaps impossible, for you ladies to hold to this discipline.

But here’s another problem with moving on: we’ve entered the dreary, information-bereft back half of the quarter – which also features two vibe-enhancing but market-disruptive holidays. We await, of course, that holiest of quarterly market events – the ritualistic NVDA earnings report, schedule to drop on Wednesday. The Fed weighs in one final time a week before Christmas. But other than that, Bubkis.

So, we’re kind of stuck, with nowhere to point our peepers but into the past. Most notably to the last 6 weeks of 2016. When Trump, improbably, was President-Elect. Replacing not Biden, but Biden’s former boss. When the loser of the recently completed contest was a member of the fair sex. When every member of the Supreme Court could articulate associated membership criteria.

And exemplary of our fixation on what is visible in the rearview mirror, Friday night gave us a Dallas boxing extravaganza in which the top card featured the 58-year-old ear-biting, Prince-logo-face-tattooed former Heavyweight Champion Mike Tyson against a twenty-something Youtuber. The streamers went wild, so much so that they crashed the Netflix feed. But the results were as expected, proving, yet again that much as we’d all wish to turn back the clock, it just ain’t how the world works.

And regrettably, there are signs that 45 (aka 47) is back to his old tricks. He’s in a frenzy to fill his court of cabinet sycophants, and dubiously demanding unilateral latitude to push these through using a sketchy tactic called Recess Appointment, under which nominees are approved when the Senate is conveniently out of session and thus unable to vote yea or nay. There is even speculation that he will contort a few regs to force both houses out of session and proceed with his plans. If he does, both parties will usurp, probably for all time, the chamber’s critical Advice and Consent role.

And some of his selections reflect a combination of his world-class narcissism and his inability to avoid rubbing the face of his political opposition in scat. He has chosen a few wise men, but also a handful of yellow, string-pulling jesters. We all know who these are: the Fox News guy at Defense, Gaetz at Justice and RFK, Jr. at Health and Human Services come to mind.

With respect to the last of these, one cannot help but wonder how his daddy would’ve felt about it all. As cabinet members go, few in history (dating all the way back to the brilliant but perfidious, adulterous Alexander Hamilton) were as unhinged as Bobby Sr. He single-handedly took on the mob — at a point of their maximum power, going so far as to arrest one of its leaders and deposit him, with little more than the shirt on his back, into the deepest jungles of South America. Egged Brother John on to confront the Russians in the Bay of Pigs, with nearly catastrophic results. Took, according to widely published reports, sloppy seconds (deferring of course to his brother) with Marilyn. These and many other actions on his part confirmed his permanent status as one bad hombre’.

So, part of me believes he would be proud of his renegade son, but overall, I gotta think he would’ve been appalled. His long-suffering widow died a few weeks ago, at a moment almost contemporaneous to her boy’s announcement that he was joining Campaign Orange. And I suspect that for Bobby, pride in Junior’s DNA-driven proclivities to assault the status quo would have failed to negate his disappointment of his abandonment of the political party to which he and his family owe their fame and (along with bootlegging and stock manipulation) fortune.

The common thread across these selections is that perhaps the main thing that Papa Carrot learned from the triumphs and trials of his first go round is that this time, he would surround himself exclusively with his own peeps.

I think this is a missed opportunity to cast himself in more statesmanlike hues. Could’ve nominated a true expert in medical policy to reform our dysfunctional health care system, a distinguished, conservative jurist to attack the many ills at Justice, a military leader with sufficient managerial credentials to efficiently lead the three million employees associated with our armed services. This would’ve paid off politically, but it’s not how he rolls. He is incapable of abandoning the travelling circus or its jesters, and, because of this, Trump II promises to be a terrifying high wire act.

While noting the irony of creating a new government bureaucracy to attack the waste of government bureaucracies, I am encouragingly intrigued to see what can be done by that hedge fund dude and the century’s most successful serial entrepreneur to eliminate the massive overspending of government agencies. But I suspect that they’re in for a tough time. And will find that sending a rocket to Mars and back is a milk run compared to removing the individuals and agencies who have so long been sucking on the federal teet. I am rooting for them, as so should we all.

But the markets, after an initial burst of euphoria, have turned a skeptical eye towards the totality of these tidings. To be sure, they’ve other matters about which to fret. The Fed’s rate cutting ax is showing signs of going wobbly. Earnings have been robust relative to expectations, but The Street has been assertively scaling back 2025 expectations since Labor Day:

None of this worries me overmuch. Yes, the initial post-election rally had the look and feel of eight years ago, when the investing world began to contemplate the bennies associated with a transfer of power from the market scolding Democrats to the Real Estate cowboys that replaced them. With a few stumbles along the way, this bull market is still in place, and I do not believe it has yet stomped its last stomp.

But markets remain fickler than even those 4B objects of our rejected desires, and it pays to prepare for the caprices their wandering preferences.

One salient example is the performance of the USD, which, as measured against a bevy of other lovely units of legal tender, has rallied a lusty, passionate > 6% in last 6 weeks, and has lurched especially heavenward the days since the election results became clear.

But what the delicious dollar giveth, it can taketh away. I suspect that much of the flight of these fluttery wings is driven by expectations of higher domestic interest rates.

And, as everyone knows, she is fast losing her luster against the younger, flashier more luxuriant BTC.

All of which brings me to my final point of the week. Proponents of the incoming administration have, with trademark energy, pointed to post-election rallies in certain markets as incontrovertible evidence of unmixed investor endorsement of the righteousness of their contemplated policies.

Well, maybe, but one doesn’t hear much about these matters when Madame Market expresses her wrath and withholds her favors. And the silence diminishes credibility.

A huge proponent of this rhetorical strategy is a user of my professional advisory services, who, at the point of this correspondence, remains a favorite for the post of Treasury Secretary.

He parted ways with me this past Spring and never said goodbye. And he would be the second former client who held a cabinet post. The other being the Mooch. Who used to caricature me as a clownish ex- hippie, and who only did a drive-by during Trump 1. Other jesters followed and are now ascendent anew.

And all we can do is smile as the puppets dance — in the Court of the Orange King.

TIMSHEL