He marched in the animals, two by two, and called them as they went through,
Hey lord, you got your green alligators and long-necked geese,
Some humpty-backed camels and some chimpanzees,
Some cats and rats and elephants, but sure as you’re born,
You’re never gonna see no unicorn

— The Irish Rovers

This note is not about The Elephants, at least not in any direct sense. But FWIW, I LOVE The Elephants, and, if called upon, for legitimate reasons, to do so, would cheerfully sink with them.

Another topic which I’d prefer to ignore is the whole gender definition debate, which I find counterproductive to the extreme. However, at a recent family gathering, when the topic of the swimmer at Penn (formerly competing as a male, but now boiling the Ivy League waters in women’s swim meets, and shattering one record after the next) arose, my blood pressure began to rise.

I couldn’t help thinking about all those young biological females, living, as the do, in a society that remains stacked against them. Many who have found divine refuge in athletics are now being displaced by those born with bigger, more powerful musculoskeletal configurations. And my heart breaks for them. My general thoughts are as follows: “be what you want, but stay out of the ladies’ racing pool, and off of their running tracks and basketball courts (and locker rooms). K?”

I held my tongue, but eventually was called to weigh in about the expanding number of genders.

Whereupon I (the least religious of the group) said: “It’s in the bible (Genesis: 6-9)! Noah’s Ark! If we followed the current rules, The Elephants alone would sink the boat!”.

And, before y’all call me out, there’s this. While Noah would face a similar challenge with monkeys as he did with The Elephants (albeit at smaller unit size), he would’ve found relief in one section of the vessel. As of Friday, he would have been compelled, via the passing of Michael Nesmith, to ride with only a single Monkee. Davy, Peter (who was way cooler than you might imagine), and now, Mike, have gathered to the dust of their forbears, leaving only the goofy Mickey to carry on.

I won’t add much here. But there was more to the Monkees than Don Kirschner’s crude attempt to capitalize on the film success of The Beatles’ “Help”, with a kitschy, poorly scripted television series. The Monkees could play. If you doubt this, give “Head” (which they wrote, produced, and actually performed) a listen.

And there was a lot to Mike. Who created (for better or worse) MTV. Whose mother invented Liquid Paper. The got dude around, kicked up some dust, and, at the point of his passing, is owed our respect.

But even with only one Monkee aboard, had he set sail in these waning days of 2021, Noah would face a multitude of challenges. If embarking, from, say, Long Beach, he might have difficulty finding passage through all those cargo ships moored at points adjacent to that port — that is — if he could even obtain approval from the dock inspectors, with a load that featured 47 elephants, and an equal number of representatives of every species under heaven (except Monkees).

(Yes, The Elephants loom large in this equation (they always do), but this note is not about The Elephants. And, as such, I’m gonna largely resist the temptation of drawing parallels to the boatsinking efforts of the party that does not feature the pachyderms as its mascot. However, you may feel free to do so on your own).

Moreover, in 2021, History’s best-known Arc builder would have certainly needed mad additional shekels to take the voyage at all.

For instance, ordering the gopher (now cyprus) wood a few months ago would’ve been a disaster:

There was indeed a window, running into last month, when he could’ve picked up 110,000 board feet for about 1,900 shekels (~$633). Not anymore. It’s now trading up in the 2,400-shekel range (>$1,000). And probably going higher.

In addition, Noah would have been compelled to feed his guests (clothing optional), — a prospect that would set him back an additional 6.8% this year.

On a happier note, at least his transportation expense was fixed, because if, instead of an ark, he chose to carry his precious cargo in, say, a caravan of used cars, it would’ve cost him an extra 30% for the trip — relative to last year.

But in 2020, we were mostly in lockdown, rendering the building, populating, and launching of an ark, at best, a dubious enterprise.

And, throughout, Noah would’ve had to pay up for his construction crew, many of whom, presumably, would’ve preferred to sit in their caves and collect their government checks – to the less-pleasant enterprise of sawing and hammering away at that famous boat.

At any rate, the markets dismissed the 6-8 CPI print, boosting the Gallant 500 to new, all-time highs. Gone, perhaps for good (perhaps not) is the post-Thanksgiving omicron agita, as well as contemporaneous concern about rising yields.

Maybe this is owing to the prospect of murky, pending changes to the calculation methodologies for the CPI – no doubt, in an important election year, engineered to becalm us, even if they do little to ease our personal expense burden(s).

And the equity index bounce back was itself becalming. In result, with only a handful of productive days remaining to 2021, the market may just skate by without any disasters of, biblical, 40-day flood proportions.

But I continue to urge my clients to operate with extreme caution, and perhaps, where possible, to lighten their loads.

They might, for instance, wish to follow the wise example of Corporate Insiders, who, as widely reported, are dumping their accumulated stakes in the enterprises for which they toll, like never before:

Nothing for nothing, but it occurs to me that perhaps these inside folks know things that the rest of us don’t. At any rate, it’s worth watching.

Meantime, the tactical objective is to ride out ‘21 without further damage to our hull, stern or balustrades. I’m optimistic. We must, of course, first survive the FOMC’s final meeting of the year, scheduled for Wednesday. Nothing substantive is likely to emerge, but skittish investors cannot be blamed if they over-parse every utterance issuing from the oft-perfidious lips of Chair Pow.

If nothing untoward emanates from this sequence, we’re probably in the clear. At least for the remainder of ’21. No, the economic skies have not cleared, and our point of disembark – Mount Ararat – is not yet visible on the horizon.

But we should also bear in mind that Ararat is in Turkey. Which is in a full-blown economic crisis. The country has devalued its currency to all-time lows (I’d include the graph, but, quite frankly, it’s just too gruesome). Currency-adjusted equity valuations on the Istanbul Exchange are barely a third of what they were in 2018. Its government lurches from one crisis to another.

It was ever thus for Turkey. Throughout history. But it doesn’t ever pay to write off that country, not only home to Noah’s landing spot but locus of the second capital of the Holy Roman Empire. In addition (and I did not know this until the holiday just passed), we derive the name for the birds on which we feast in late November, from that ancient nation, nestled, as it is, between the Mediterranean and Black Seas. It thrashes about, often destructively. But it survives.

Some similar path may await us in the coming months, and I am advising my clients to ride on the light side going into the New Year. There may be opportunities aplenty. We may even encounter a unicorn. Or (better for Noah’s purposes) two.

But risk will also be present – likely in biblical proportions.

Let’s just march along – two by two, like I believe God and nature intended us to – and take it from there.

We will most certainly encounter The Elephants. As well as monkeys, Monkee(s), turkeys and the like. Our ark will roll and pitch with the tides. However, with an appropriately appointed cargo inventory, not only won’t we sink, but stand every chance of reaching dry land, and beginning fresh, anew, in the emerging sunlight, with our one and only partner by our side.

TIMSHEL

“Ce n’est pas le moment de se faire de nouveaux ennemis”

— Voltaire (our title rendered in what I presume to be the language in which it was spoken)”

Can y’all stand any more chatter about Voltaire? Believe me — I know – he’s sucking all the oxygen out of the room, blotting out the suns of our awareness of other matters. He’s the top trender on Twitter. The Infinite Instagram Influencer. His presence is ubiquitous, inescapable – not only on social media – but on cable news outlets of every political denomination.

And, yet, here I am, yammering on my keyboard, and adding perhaps but a drop to the oceans of digital wisdom issuing forth about the omnipresent 18th Century French philosopher.

But attend to my purpose my loves. I write, principally, not about his life and published works, but rather about his demise. Voltaire kicked up such a fuss during his lifetime — in virtually every realm of human endeavor – religion, politics, human rights, etc. upended so many constituencies, that even his friends didn’t know how he’d check out. But in the end, he accepted Christ and received his final sacraments. Having done so, though, when the attending priest asked him to renounce Satan, he gasped out, with his final breaths, our titular phrase.

“This is no time to make new enemies” he said. And then he died.

Nothing for nothing, but I think the man had a point — one that extends forward to the present day. It doesn’t strike me, as 2021 winds down, that adversaries are in particularly short supply.

Voltaire is often looked upon as the philosophical father of the French Revolution. Which he didn’t live to see, having died eleven years before the storming of the Bastille. What followed was rivers of blood, and a multitude of object lessons for modern society.

But perhaps, for now, we can leave that all aside. And it wasn’t all buzzkill with Monsieur V; he is perhaps best known for his novella: “Candide”, which contains his most-remembered phrase: “all is for the best in this best of all possible worlds”. The quote is assigned to a professorial character named Pangloss, a believer in utopias — the existence of which it becomes the book’s primary business to attack. On balance, it succeeds in doing so, but Pangloss himself has achieved Panglossian immortality in our lexicon — as a descriptor of Edens manufactured by the human mind.

But it falls to our lot — hip denizens of Century 21 – to resolve the legacy gifted to us by these partially incongruent phrases. My own view is as follows. The making of new enemies is as untimely as ever. Upon this we can perhaps all agree. But is it truly “the best of all possible worlds”?

With respect to the latter, each of us must judge for ourselves, but the first principal evidence is hardly encouraging.

There’s that pesky pandemic, for one thing. It simply won’t take the hint and bounce. Beyond this, we have inflation problems, supply chain problems, labor problems, problematic race relations, immigration issues, and an atmosphere which is either heating up like a furnace, or it isn’t.

The capital markets, fattened and sloppy drunk from years of over-indulgence at the federal buffet bar, are beginning to experience “morning-after” effects”, which, if we dare to extrapolate from recent experience, are less than pleasant.

It is indeed a bad time to make new enemies, in a world that certainly could be improved.

This is certainly a mixed resolution to our Voltairean Paradox. But the messages, medium and metaphysics are messing with the markets, which, in consequence, are all over the map.

The past week’s action is beyond illustrative of the above. After investors attempted, on Monday, to gather themselves after the post-Turkey (half) Day pounding, darker forces again took hold. Chair Pow chose Tuesday, as the world managed to conjure up images of Omicron lockdown, to inform us that, a) transitory is an imperfect modifier for current inflation conditions; and b) in consideration of a), he might just accelerate the taper.

And how did investors react to the double whammy news — that the Fed believes inflation might be hanging around with covid-like peskiness, and (in result) they may quit buying Treasuries sooner than previously expected? They bought bonds. Like banshees. So much so that Grandma XXX (United States Thirty Year Bond and Madame X’s mother’s mother) dropped her yield shawl to an astounding 1.67%. To put matters in perspective, other than the lockdown blip, these are the lowest level witnessed since the Treasury began issuing this long-duration paper — in 1977:

Our equity indices are being battered about, slapped back down every time they try to rally themselves. And index performance hardly tells the story, which is one of a few haves vs. a pant load of have-nots. There are a handful of darlings and then there’s everything else. In eerie reminiscence to pre (and, for that matter, post) Revolutionary France, the former are living large while the latter subsist on baguettes and bad wine. And the gap is widening at an alarming pace:

Furthermore, woe betide the objects of our earlier infatuation – tech companies who have failed thus far to produce revenues that exceed expenses:

Further evidence of our inability to resolve Voltaire’s refusal to renounce Satan with the Panglossian sensibilities he laid on us in “Candide” derives from the November Jobs Report. It featured tepid news from the business survey combined with bofffo results from the household report. What’s an investor to do? Well, after the Friday morning release, the bought ‘em, then sold ‘em off hard, and then ginned up a partial recoup into the close.

Seems about right to me. A mixed bag, leaving much to be desired, but insufficiently wretched to justify the manufacture of new targets for our animosity.

And just when we thought we had the weekend to relax/recoup came the news of a 20% drop in BTC. And on Shabbos, FFS! Arguably, it all would be enough to bring tears to the Voltairean eye. But on the other hand, Voltaire was a notorious anti-Semite, so perhaps he wouldn’t have cared.

In sum, we’re in the midst of a risk-off sequence, the dynamics of which iare wormwood to the crew with which I roll. To our further dismay, these cycles don’t typically end in an orderly fashion, nor do they telegraph their impending departure. Nay, with deep, anti-Voltairean provocation, they add incremental imperfections to our sub-optimal world, and are keen to make as many enemies as they are able on their way out.

However, it’s always a bad time to make enemies, and no, it’s not the best of all possible worlds. If you doubt the former, consider the reality that tomorrow marks the 80th anniversary of Pearl Harbor, an enemy-making cycle that caused a great deal of subsequent trouble to all concerned.

But take heart, my fellow Voltaireans, because we can still look to our obsessively followed idol for a way forward.

At the end of “Candide”, the title character, after rejecting much of his Panglossian sensibilities, arrives at the the following conclusion.

“We must cultivate our own garden. When man was put in the garden of Eden, he was put there so that he should work, which proves that man was not born to rest.”

And so it goes, not only in life, but in portfolio management. We must cultivate our gardens, which are quite weedy at present. And there’s not much we can do — other than pull the parasitic plants, till the divine soil from which we draw our essence and place the rest in the hands of God. Who Voltaire embraced at the end, albeit in qualified fashion.

My guess is that the current difficulties will remain with us – through year end and perhaps in the immediate months that follow. But with diligence and perseverance, we stand every chance of not only enduring an arduous winter, but of enjoying the fruits of a bountiful printemps.

TIMSHEL

I had not wished to be forced into this but given a) there’s a new viral menace hanging out ‘round, which b) has been given a name (B.1.1529) so obtuse, that: c) despite my pressing insistence to the contrary notwithstanding, it is being redesignated as my beloved Omicron, I feel compelled to bust out the heaviest weapon in my mathematical arsenal.

Yup, gotta lay some e on you.

I don’t take this step lightly because e is not a plaything. For the mathematically immature (my math professors were always harping on about mathematical maturity, but never defining it a to the point where I could discern where I stood on the spectrum), e, π, is one of those mathematical constants that have properties which defy human understanding — and can only be rendered by God himself.

A slight confession is in order here (I told you I lacked full mathematical maturity): π — the universal scale-up from a line to a circle, is the only other magic number in my field of awareness. And even to the mathematically immature π is pretty cool.

But not as cool as e. Because you need a certain level of mathematical maturity to even understand why e matters at all. Having come this far, though, there’s no turning back, so… e, an irrational number that rounds to 2.71828, is the singular answer to the following ethereal equation:

Given that the sequence extends into infinity, I would’ve expected an entirely more impressive figure.

But it only adds up to 2.7 and change. But before you yawn and blow me off, consider the following:e (to whatever power it is raised) is its own derivative. That’s right y’all:

If you don’t believe me, there are any number of mathematical publications that will back me up.

And, having just concluded our annual Feast of the Flightless Bird, it seems to me that we have fully entered the e parallel universe.

Nothing perhaps captures this as clearly as the emergence of B.1.1529, the numerical implications of which, with its two decimals and all, is mathematically nonsensical. And even if you remove the second decimal point, the number is still less than half of our >2.7 target.

B.1.1529 is said to feature as many as fifty variants, but this still doesn’t get us in material proximity to e.

Maybe next time; next variant.

But B.1.1529 was still threatening enough to catalyze the worst day for equities this year, and this in a holiday-truncated half-session. It also collapsed the crude oil markets and sent Madame X into such a frightened tizzy that she dropped her yield skirts to 1.4731%. Her sassy (younger) sister, though, Vixen VIX, when the opposite path – hiking her frock up by > 50%, to 28.62.

In all, made for a must-watch Friday morning. My personal theory is that investors, always seeking to remain ahead of actual events, have made the leap from B.1.1529… to e.

If so, they come to this honestly. Because the current market is nothing if not a derivative of itself. It is driven instantaneously created money, backed by nothing but government promises, and used by governments to purchase dubious debt – including their own sovereign obligations. New forms of digital assets emerge at a rate impossible to track, collateralized by such hard assets as restrictedin- number-Rembrandt reproductions, Rhino Horns, and God knows what else.

If one wishes to better understand the implications of this, head out to Los Angeles (if you’re not already there) and check out a Laker’s game. The naming rights for their home arena, which had long been held by Staples – purveyor of such real-world products as desk chairs, vacuum cleaners, and (yes) staples, have now been usurped by an outfit called crypto.com – purveyors of nothing but derivatives on derivatives.

Crypto.com, however, is repped by our betters, including Matt Damon and (the frustratingly magnificent) Tom Brady. So, there’s that.

Meanwhile, companies borrow stock, issue stock, buy back stock, offer stock awards, grant stock options, engineer stock splits…

And so on and so on and shoobie doobie doo.

For those who had barely digested their turkey and awoke Friday morning to an all-out rout, know that I feel for you. For reasons I don’t choose to redocument, Friday was a difficult day for me as well.

But if you buy into my whole e hypothesis and recognize that the capital markets are nothing more than derivatives of themselves, there’s cause for hope. My guess is that investors will gather themselves this week, shrug off Friday’s carnage, and drag valuations up to their previous, rightful (if improbable) levels. And if they don’t, well, then, there’s new room to roam for traders and investors of every stripe. At prevailing thresholds, one might even do some rational securities shopping.

And maybe there would be a speedbump on those burning inflation locomotive rails.

But that would be too easy, to sensible. And, as such, I simply don’t expect it.

Because in e-land, circumlocution is the solemn protocol to which we all must adhere. I was trained to believe that the capital markets were, first and last, a mechanism for funding of the real economy. And, joyfully, there’s some evidence that this concept has not died out altogether. Last week, the Administration opened the spigot, ever so slightly, on the Strategic Petroleum Reserve (SPR), a move that only triggered further upward pricing pressure – until the dreaded 1,1529 popped into the scene, leaving one to wonder if they wouldn’t wish a do-over on the whole SPR thing.

However, the SPR move was only the beginning. In under-reported but nonetheless astonishing parallel, our Neighbors to the North — Canada, America’s Hat, took the extreme step of unleashing 50 million pounds of sweet, sticky stuff from their Strategic Maple Syrup Reserve (SMSR).

In case you were wondering, Canada produces > 70% of the world’s maple syrup supply, and their processes were stretched. I give them a shout out for bailing us out here. But, as depicted in the graph below, the economic results of the move will not be known for some time, because they only report figures monthly, and this on a lag:

And wherever else we may differ – philosophically, culturally and in matters off taste, whether you eat the stuff or not – perhaps we can all celebrate the divine blessings of Canadian Maple Syrup. And the Canadian custodianship of same. All of which reside outside the e-verse. You gotta grow them trees, care for them, water them, tap their sap, process the syrup, and ship it out.

This, my friends, is the antithesis of e; definitively NOT a derivative unto itself.

But the world doesn’t turn exclusively on syrup. Or staples.

So, now, with the holiday behind us, we’ve all got a month left of immersive, self-deriving, ere the calendar turns.

And we begin the process all over again. Unless I miss my guess, it will be e², e³, e⁴… … all leading back to e^x.

And so on and so on and shoobie doobie doo.

TIMSHEL

Well, your fingers weave quick minarets, speak in secret alphabets
I light another cigarette, Learn, to forget, learn to forget

— Soul Kitchen (The Doors)

Alright everyone, we’ve got a (hard-earned) short week in front of us, and not much fodder for the market insights upon which the teeming millions who read these columns rely. Presumably, though, they also enjoy my time-honored digressions (else, why would there be mile-long subscription waiting list?), so let’s get to them, shall we?

After an approximate two-year hiatus, I attended live performances of three Jurassic bands this week, and I thought I’d give y’all my review(s). The first two were a mash up of an iconic, sixties rock and roll show. I paid my ticket to see the criminally under-rated Doors guitarist Robbie Krieger, and was willing to accept, as part of the price of admission, a set performed by the Vanilla Fudge.

The show was a make-up gig for one that was postponed from that wretched lockdown era, with the fabulous Leslie West slated as the original opening act. But West (born Weinstein) met his maker just before last Christmas, and the Fudge stepped in.

They were never my particular jam – mostly because they were almost exclusively a cover band. But I’ll be switched if they didn’t blow the, er, doors off the joint.

Krieger followed, and didn’t disappoint. Of course, he looked like a centuries-old corpse, but that has been true for a couple of decades. His band featured his son on lead vocals, who tried, but failed miserably, to do his best fat Jim imitation, stumbling around, taunting the audience, missing notes in every song, and generally making an ass out of himself. Robbie isn’t what he once was. He loses the musical thread, at times looks bewildered, but overall, he continues to delight.

And something — unprecedented in my experience – transpired at the end of the show. After a rousing encore of perhaps my all-time fave song: “L.A. Woman” the House Lights came on, the band left the stage, and the crowd began to file out. Whereupon Robbie and Co. re-appeared and said: “Hey, where’s everybody going? We ain’t done”. So, about 40% of the patrons hung in there for a bittersweet, final version of “Soul Kitchen”.

I’ve been to many concerts where the audience, not accepting that the music’s over, pleaded for more. But I’ve never seen a band beg the crowd to hang around for more, and it almost made me cry. This was the last show of the Krieger tour, his first in about five years. There’s not much left of him physically. As such, it may very well have been his last ever performance. Seemingly knowing this, he didn’t want to conclude. If it was, indeed, “The End”, however, then, to me, it should’ve been cause for joy and gratitude. His was a 55-year sonic contribution that enriched us all (or, at minimum, those who cared to pay attention).

Riding the momentum of that show, I gathered my energy and saw Dylan at the Beacon on Friday, for about the 20th time. He don’t get around too good these days, but he was in finer voice than I can recall in decades. He mostly played songs from “Rough and Rowdy Ways”, which he released, without fanfare, or even advance warning, during the lockdown. I’m glad I went.

He didn’t do no encore. He took his bows and bounced. But then again, he didn’t have to, because, well, he’s Bob Dylan. Which means that he does what he wants, when he wants, and nothing else.

One song he didn’t play from the new record was “Murder Most Foul” an astonishing, 17-minute recounting of the Kennedy Assassination, and everything after. Pity, because, today, we mark the 59th anniversary of that wretched, world-altering event.

And this Friday would’ve been my son’s thirtieth birthday, a sad milestone that I cannot allow to pass unremarked. But on this subject, I will say no more.

A few weeks back, I cracked a ten-week-old I-Pad (probably my record for device longevity) but was determined to ride it out – for a while. However, when the Home Button crapped out, I had to act.My new device cannot suffer the same fate as the last; there is no Home Button. But the charger fitting is also different. You gotta use the one from your MacBook, begging the question as to who at Apple calculated the IRR on this little stunt, and the P/L figure at which they arrived.

They musta done alright, though, because, after a difficult early autumn, AAPL is back at new highs.

As is Captain Naz, the index over which it lords. In case you hadn’t noticed, the stock and the index are highly correlated.

But if you’re looking for an uncorrelated investment, you might consider picking up a share of Green Bay Packers stock, a new offering of which — the first in a decade – was announced a few days ago. It features a correlation of 0.00000% to the Gallant 500 and all other factors/benchmarks, because its post-purchase value migrates immediately to $0.00. Buyers obtain bragging rights, entrance into shareholders meetings and discounts on merch. But that’s about it. You can’t (legally) transfer your share, and, if the team ever sells (which it won’t), you will receive nothing for your investment.

Packshares are therefore the world’s least correlated security, as well as the worst hedging instrument, on the planet – the sports finance equivalent of a Vanilla Fudge original song. Ironically, fans that hate on Green Bay often refer to the squad in mashup between the second half of the band’s appellation, and the team’s name. However, the resulting combo is inappropriate for inclusion in this family publication.

But if the Pack are issuing shares of dubious return prospects to the investing public, they are, at minimum, in good company. As you can discover for yourself on Bloomberg, 2021 is: a) already a record year for IPO deals, which: b) are by and large underperforming the broader market:

At the risk of killing your pre-turkey buzz, a close look at the chart on the left informs us that the previous record year was ’07, which, as I recall, was the last trip around the sun of our pre-financial crisis innocence.

I’m not here to predict that ’22 will resemble ’08, especially seeing as how I scarcely can predict last year’s returns, much less those of next year. But you don’t need me to put you onto the notion that valuations are a bit frothy at the moment. And getting frothier.

And not to pile on or anything, but perhaps the most talked about name in the circles in which I roll – NVDIA – makers of life-essential video gaming chips — is up more than 150% this year, having added a cool $500 Bill to its valuation over the last two quarters – an amount that itself is more than the market cap of all but about ten U.S. corporations.

NVDA is now the 8th largest corporation in the world, worth more than, say, JP Morgan and Bank of America, combined.

Number 1? Apple, which now requires MacBook chargers to power its I-Pads.

NVDA stock a ytd 1.5 bagger; Pack stock stationary at zero. Indices ranging from one record to the next, The Market Fudge factor is thus ascendent. But risks hover. I’m keeping a particular eye on the decision – expected this week – as to whether to re-appoint Fed Chair Jerome Powell. The betting markets say yes but offer a persistent 1/3rd shot to Liz Warren bestie Lael Brainard. It may not matter much from a policy perspective – both are likely to do the exclusive bidding of their paymasters. But if one looks at the current nominee for the other key top financial regulator: boss the Office of the Comptroller of the Currency (OCC), a woman who has stopped just short of recommending the wholesale dismantling of the banking industry, a transition from Pow to Brains might not be met with unmixed delight by the throngs in the investment community.

Then there’s that looming next round of bankrupting giveaways that they’re cooking up in Washington. They’ve a long way to go, but God bless ‘em; they’re giving it all they got.

I’m not sure if any of this stops a rally that looks like a locomotive going downhill. And, at the end of the Fudge set, they did a competent version of Curtis Mayfield’s “People Get Ready (There’s a Train a’Coming)”, so I can’t say that I wasn’t warned.

Still and all, I’m glad that The Fudge continues to bake — in far flung oven-like venues across the country – even if has been largely outside my direct field of awareness. They hit their peak, as they themselves describe, around ’68, when three of their records hit the Billboard 100. They toured that summer, with the opening act being Led Zeppelin, newly formed and on their first American tour. If that’s their main claim to fame, so be it. It’s a better gig than ever has come my way.

Now, though, they are the substitute opening act for Robbie Krieger, in an elegant but small Fairfield County, CT theater, the latter shredding admirably even as his physical presence fades away.

There’s a lesson in all of this, people, but it escapes me for the moment. To the best of my recollection, it was spoken to me in a secret alphabet, after you turned me out to wander, baby, stumbling in the neon groves.

But the clock says it’s time to close… …now. I really have to go… …now. And the best I can offer by way of advice is to light another cigarette and learn to forget.

TIMSHEL

Before you get the wrong idea about where my Civil War sympathies lie, and though he was a highly accomplished military officer, this column is not dedicated to Confederate Major General Edward Johnson. Bobby Lee thought enough of him to name him replacement to that pesky Stonewall Jackson, after the latter was dispatched, by friendly fire, to his eternal reward. He wisely avoided a Pickett-like charge up a Gettysburg hill. Got his-self captured in Spotsylvania. Was imprisoned, exchanged, and sent back to the front. The Yankees caught him again in Nashville. And locked him. Again.

Say what you will about him; he was one tough SOB.

But allow me to go on record as stating I have always stood with the Blues in that war, and not just because I share a last name (but alas no bloodlines) with the victorious Commander of the Union Armies. I do, however, carry our shared nomenclature as a badge of honor, so much so that at one stage of my career, the famous leader of an eponymous, high-profile hedge fund that had just hired me as CRO tagged me with the nickname of “General”.

I was at first flattered by this, but quickly decided that, given: a) this individual was a stone cold Tennessee stud; and b) his direct reports who were my bosses proud Virginians, the designation may not have been intended as an unmixed compliment.

But this week’s theme has nothing to do with any of the above. Instead, it derives from the rather surprising news that two of this country’s most ubiquitous multi-national corporations: General Electric and Johnson and Johnson, are voluntarily subdividing themselves.

The long-iconic but recently misanthropic G.E. will split into three parts: one focused on Energy, another on Health Care and a third on Aviation.

Light bulbs didn’t make the cut at all.

And, just as we were absorbing this shocking news came the announcement from Johnny John that it too is breaking itself up – in its case separating out its Consumer Products Division — purveyors of such staples as Band Aids, Baby Powder and Tylenol — from its higher-flying units that manufacture medical devices, difficult-to-find covid vaccines and other, related stuff.

To me, these trades cut against the grain, standing in stark rebuttal to a domestic capital market that goes gaga over mergers and acquisitions.

But who’s to say that that all this isn’t part of a larger strategy? Why not, in a second act, merge the medical device units of both companies, and call it General Johnson? I’ve no intelligence that such a deal is in the offing, but if it transpires, kindly remember where you heard of it first.

Of course, if does go down, it begs the question as to whether the remaining orphans: G.E Aviation G.E. Energy and J&J Consumer Products, couldn’t somehow be kludged together — to create a conglomerate known as Electric Johnson. But that, my friends, may be a bridge too far.

Still and all, on this tape, one never knows. The Equity Complex has recently pulled off wilder stunts than this and gotten away with them. Though there are deep gradients between the “haves” and the ‘have nots”, the former group, at any rate, can do whatever it wants, and take the Gallant 500 along for the ride.

One comparison between modern and ancient sentiment paradigms caught my eye recently. In two weeks, we will mark (celebrate?) the twenty-fifth anniversary of Fed Chairman Alan Greenspan warning of the potential consequences of what he coined as “irrational’ exuberance. Whereupon the markets, perhaps in respect/deference to Greenie (who was highly regarded at the time), promptly declined 5%. They recovered quickly and are more than a six-bagger over the ensuing generation. But at least they showed the decency to sell off.

A few days ago, Chair Pow uttered precisely the same sentiments, and the markets registered nary a downtick.

History has taken a dimmer view of Greenspan than the admiring headlines of ’96 prophesied. and history, certainly, will render its judgment on Powell. At the moment, though, I’ll give him some sympathy. The country are drowning in debt. He’s printed a cool $5T over the last eighteen months, with little to show for it other than rising wealth for fat cats and a corresponding increase in the National Debt. He sold some stock under rather fortuitous timing, was criticized for doing so, and, for this and other reasons, finds himself in the crosshairs of the dreaded Squad.

But these problems arguably pale in comparison to the news flow he must absorb from the Bureau of Labor Statistics – which showed him no mercy this past week. First came the inflation data – PPI 8.6%/CPI 6.2%, but even then, the BLS wasn’t done messing with him. Friday morning, they dropped a Job Openings and Labor Turnover Survey (JOLTs) report which, clocked in at 10.4 million unfilled gigs. To rub salt into the wound, the Survey also told of 4.4 million resignations in 2021 – high since they began tracking these metrics, the reality that he data only reflects what has happened through September notwithstanding.

Runaway indebtedness, accelerating inflation, labor shortages, supply shortages, a pink slip hanging over your own wizened head – what’s a Fed Chair to do?

Beats the hell out of me. All I can say is that he and his predecessors cooked this brew, and now have no choice other than to, somehow, choke it down. As do the rest of us.

But across investor-land, there are no f@cks given. Valuations are poised at or near new yawning records. What passes for a selloff doesn’t extend more than twelve hours.

And now we’re halfway through Q4, which means that as a matter of mathematical certainty, 2021 is 7/8ths complete. Anyone having fun yet? If so, please contact me, because I’d love to hear about it.

There’s thus only a skinny, stepped-on eight ball of a year now remaining to us, and one that will be disrupted by compulsory festivities such as Thanksgiving and Christmas. Somehow, this implies a mere twenty productive trading days that linger in this dwindling year, during which we must do what we are able to top off our widely anemic performance metrics.

Catalysts, unfortunately, will be in short supply. Q3 earnings are substantially in the books, as are most important economic data points. We’ll get the usual smattering of November macro metrics, a few revisions, some survey info; that’s about it.

We will, of course, be compelled to keep our fisheyes cast towards Washington, where they’re likely to ram through some form of additional annoyance, if for no other reason than to remind us that they are still around and ready to annoy us any way they can.

There may be a few surprise deals, ala Johnson Electric, that spring up, because, well ‘tis the season for surprise deals.

But if none of this puts much lead in your pencils, then I think you’re probably taking a rational view of the environment. As for me, my pencil can barely dot an “i”.

And consumers, God bless ‘em, seem, at last, to be cottoning on to it all. For one thing, they’re buying a good deal of cotton, the price of which has doubled since they sent us all home more than a year and a half ago:

I Wish I Was in the Land of Cotton:

General Johnson, while not commanding Confederate Armies, was a cotton farmer, and, when the war was over, it is to his cotton farm that he retired.

We can only infer that the caption above the graph on the left is the first line of one of his favorite tunes, being, as it was, the Confederate National Anthem. I personally prefer it to that Yankee dirge: “The Battle Hymn of the Republic”, which no one ever has tried to whistle. Plus, one must assume that General J would be pleased with his take if he loaded up his 2021 mules and headed to market.

But most of the rest of us are buyers, not sellers, of the fluffy commodity, and for us, the graph tells a darker tale. Perhaps this is part of the reason that Consumer Sentiment is so deeply on the down:

None of this calls for enthusiastic risk taking, and, again, I urge caution. But I also encourage everyone to take heart, to believe in America, the land of Band Aids, Baby Powder and incandescent light bulbs. Over the long haul, we nearly always come out ahead.

We even beat back General Johnson. And, from time to time, I was compelled to remind my former employers just who won that war. It became one of my more effective risk management tools.

Our current battles are less bloody but equally complex. Players often change sides. So, when they call for your indication of interest on that General Johnson IPO, my advice will be to load the boat.

TIMSHEL

Talk to me, So you can see, Oh, what’s going on
– Marvin Gaye (via BB)

I don’t remember if I came up with this week’s theme on my own or lifted it from somewhere else. Probably it’s the latter. And, to boot, our musical quote is a complete non-sequitur.

But let us proceed, shall we? There are two types of people in this world: folks who divide humanity into two categories, and those that do not.

Were it not oxymoronic to our motif, I’d cast my lot with the latter group, with whom, at any rate, I claim full solidarity.

In the meanwhile, let’s just say that the world can be spilt into two camps, but even so, there are any number of choices available as to what form this division assumes. Men and women/boys and girls? Maybe once, but not anymore. Black/white? Please. Rich/poor? Well, perhaps.

Liberal/conservative? Woke/reactionary? Selfish/selfless? Fat/skinny? Cool/square? Hot/not? So many bifurcations — all with some measure of validity, but all containing such massive grey areas as to obscure the spilt from our field of vision.

Does one, for instance, view the US as a miraculous 24-decade experiment in self-governance, demonstrating that consensus law-making — featuring individual choice, initiative encouragement, and the celebration of (often-disproportionate) rewards, would improve the lots of all its citizens and show a better way for the rest of the world? Or is it a four-century criminal enterprise, designed to perpetuate the outrageous advantage of a gender and race-based elite?

Well, yes.

Thus, when we define the two types of people in this world, I state once again that the clearest lines of separation are between those that believe that there are two types of people in this world, and those that don’t.

And again, I cast my lot, in divine, oxymoronic flourish, with the latter group.

But across human affairs, it’s complicated. By contrast, the concept applies more fluidly in the markets, so let’s see how it plays out there.

If you’re paying attention here (and even if you’re not), you’d be compelled to notice that we’ve fired off some new rocket boosters into the capital markets, catapulting valuations into new, previously un-breached levels of the pricing euphoria.

And one can view these tidings in a couple of different ways. It’s possible, for instance, to adopt the mindset that all is as it should be. We’ve got a recovering economy, covid is on the lamb, Washington (Fed, White House and Congress) has our backs, and interest rates remain at improbably low thresholds. Powell tapered, but purred like a kitten in his remarks.

Under this rosy interpretation, average citizens and the creators of such miracles as ETFs, NFTs and crypto are all wizard-level investors and financial engineers.

The other outlook is cloudier. It worries that the capital markets are disproportionately fueled by nearly a decade and a half of central bank created liquidity. That all this manufactured cash has produced a global debt/inflation crisis that will resolve itself – sooner or later — in sorrow. That the plague rising prices will not only not dissipate organically but will increase with broadening and deepening force. That the combination of all that borrowed money and higher cost bases will ultimately be crippling to economic agents of every stripe.

Because we are all rational decision-makers, our worldview informs our investment choices. If you’re in the former group, you load the boat. Those in the latter, by contrast, are sitting on their hands.

Truly, I am conflicted here. I tend to agree with the Debbie Downers — that there are too many economic problems out there which money printing won’t solve (and may make worse). And about the only way I can lift myself out of this depressive, lethargic outlook is to spin up the hypothesis that the world has been operating with an insufficient money supply for eons – a problem which we are only now eradicating.

Well, maybe, but even if this is true, what’s to save us from over-shooting the mark? And, who’s to say that we haven’t already done so?

Two-pronged contradictions of this nature abound. Our betters just landed their private jets – after a Glasgow conference where everyone agreed to – at some point – euthanize the fossil fuel business, only to find, paradoxically, carbon-based fuel prices at seven-year highs, and tidings of record levels of energy exports:

At any rate, for now, all is well in investor-land. Except it’s not. Because there are two types of risktakers in this world: those that rode the > 20% ytd gains in broad-based indices into performance heaven, and those that have taken a more discerning approach to security selection.

The returns of large portions of the latter group are suffering mightily, and I cast my lot with them – in part, but not exclusively, because this is how my client base rolls.

The key question, as ever, is what to do now? And here, there are two paths you can go by.

If you’re so inclined, you can continue to ride the wave – at least while there’s still time to change the road you’re on. You have my blessing to remain sure, all that’ glitters is gold. For now.

Or, you can adopt a more cautious approach. There’s troubles aplenty out there, and let’s just say that if they never manifest themselves, if the stores are all closed, but in a word we can get what we came for, then it will be for the first time in more than three thousand years of market history.

Thus, to the cautious and skeptical among you, I say: keep heart and stay the course. Yes, We’re winding down this road, and shadows may indeed be taller than souls right now. But this cannot last forever. So hang tight.

There’s a third way, but I absolutely forbid it. You can look around you, ask “what’s going on?”, conclude we have all descended into madness, and proceed to short everything out there you can borrow.

I absolutely forbid this.

Because I’m looking out for you and see no way you can benefit. The market may not climb higher, but it ain’t gonna sell off. At least right now.

And they just may continue their heavenward ascent. In which case you will be crushed like a grape.

As a last resort, you can talk to me, so you can see, what’s going on.

Only I might not be able to tell you. Because I don’t know myself.

Because, in my little blogo-verse, there are two types of notes I write – ones that have coherent thoughts to offer about current market conditions, and those that don’t.

Unfortunately, I fear this piece falls into the latter category.

And how you receive it depends upon which of the two types of people you are.

And therein, my friends, lies the heart of the problem.

TIMSHEL

Happy All Saints Day, y’all.

Picking up where matters left off, last week, I had declared a (perhaps permanent) moratorium on risk management.

And, seeing as how today’s a holiday, I’m extending the ban. At least through our annual ritual of honoring all them marching saints.

However, the ban applies exclusively to what I like to refer to as the actual world, and specifically not, to the metaverse.

The latter comes to urgent prominence, of course, with an announcement out of Cupertino, CA that the local corporate colossus is changing its name. Yes, as everyone is now aware, what was once Facebook is now Meta. In one short month, it will also be swapping out its current ticker: from the handy FB (which, at last count, had been fluidly typed a bajillion times into Bloomberg terminals) to the decidedly clunkier MRVS.

The company had been teasing a modification of its handle for several weeks, and I’m thinking: a) it’s a deflection from the political pounding they’ve been taking on all sides; and b) that they’d make a more obtuse move with their modified branding. Maybe something like “VisageManuscript” or swapping in a symbol and calling themselves “The Company Formally Known as Facebook”.

But I was wrong. Facebook is out; Meta is in. Sorta like Google becoming Alphabet. Only different. As the name suggests, Facebook, er, I mean, Meta, is pushing its big, fat, chin and proboscis into the metaverse – an on-line only alternative domain in which the real-world heels of All God’s Children are anticipated to cool.

‘Round those meta-parts, one can buy houses, build schools, malls, playgrounds and other trappings/accoutrements of fine living, and adopt physical appearance based upon avatars of our own creation (on balance, a big upgrade). There, you can bring up your kids, attend ballet recitals and run for local offices. Bands are gonna blow the joints apart with, er, live shows. I’m not sure if they’ve figured out how they’ll work in the whole youth soccer thing, but I promise you this: Zuck and his crew are on the case.

It’s also presently unclear whether real dollars, crypto or meta-bucks will be the ‘verse’s legal tender, or, in the case of the first two of these options, how the whole taxation thing is gonna work. Presumably, though, public revenuers at every level will take a focused interest as all this unfolds.

No one in my field of awareness would accuse Zuck of having fallen off the turnip truck, so, I’m thinking, maybe there’s more to this whole meta deal than I first imagined. Zuck is making a pretty big bet here, after all, and has won more of these than he’s lost.

So maybe it’s time to hop on the meta train — and disembark to that shining City on the (virtual) Cloud.

But doubts, linger, particularly that inconvenient reality that it may take some time for the meta to entirely obliterate the physical, and, in the meantime, challenges associated with the latter, will, unfortunately for most of us, abide.

Take, for example, the recent performance of the stock that, for the next month at any rate, will still trade under the ticker FB. It rallied a bit – presumably owing to its metamorphosis — on Friday, but on the whole, Zucky’s balances have seen better months:

If I’m reading this chart correctly, MZ is > 20% poorer today than he was around Labor Day. And that’s to say nothing about all the hurt feelings he’s had to endure. It seems, lately, that everyone hates him, with half of the country upset that he funneled nearly a half bil into the 2020 election, and the other half absolutely incensed that he’s not doing more to suppress content supplied by those that disagree with elements of the current orthodoxy.

Even his employees are mad at him. What’s a poor Harvard Drop Out/centi-billionaire to do?

Answer: create a metaverse.

And do so quickly — because the non-meta realities that we confront are clearly less pleasant. Q3 GDP just dropped, at a disappointing 2.0%, with it’s inflation gauge clocking in at the highest in more than three decades. On a happier note, a huge blowout in wages was a major contributing factor:

This here graph should be considered glad tidings, and I am not here to kill the buzz. But as everyone knows, the hiring situation in this country is at near-desperation levels. Sooo many job openings, more than ten million of them at last count.

There are those among us (for instance, Janet Yellen) who would characterize this as a high-class problem. But with Frisco gas at $4.75, empty shelves, ship-clogged ports of entry and other shortages, I’m not entirely convinced.

These problems, presumably, don’t exist in Zuck’s metaverse, where ports can be emptied, stores stocked, and petrol aplenty created – all with a click of a mouse.

The metaverse also seems to have solved the problem of rising crime rates. There is no crime in the metaverse. But there is crime here on terra firma, in towns like Minneapolis, which, improbable it would seem, is actually gonna hold a vote on Tuesday to determine whether or not it will eliminate its police force in its entirety. Please join me in hoping for the best – in the town that gave us .

I won’t prognosticate, though, because I must also acknowledge, here in the land where falling trees actually demolish cars, that last week’s prediction of blowout earnings for the big tech high rollers was less than a perfect strike. These reports came to us as a mixed bag, and, overall, as a disappointment.

Investors didn’t seem to give much care, though, pushing our equity indices to yet another series of dubious highs.

Aside from hiring out fabulous architects and interior designers to build new virtual domains, all human focus will presumably turn to this week’s FOMC meeting, where the powers that be are expected to formally announce the dreaded taper. They are doing so at an interesting pass, with an economy losing steam, but with upward price pressure at generational highs. With a wonky, undefined, and morphing reconciliation bill looming. With global bureaucrats agreeing to minimum taxation levels and seeking victory laps on fossil fuel obliteration — amid what may materialize as crisis-level heating fuel shortages across the globe.

Meanwhile, the bubbling crude and its by-products are not the only greasy commodity in short supply. This morning, I had a glance at the latest from the Palm Oil market:

It’s just possible that some of my readers are unaware that Palm Oil is the most consumed edible oil in this real world of ours. The Asians cook with it more than we do, but you’ll be happy to know that we find it in domestic products including lipstick, detergent, and ice cream.

It’s a three-bagger since the lockdown.

It faces a real-world supply/demand imbalance at the moment, but no such issues exist in the metaverse, where Palm Oil emerges on the third drop down menu from the home page.

Considering all of this, while I’ve switched off risk in the legacy markets, I’ll not be idle. I am focusing on my meta risk algos and am pleased to report that there and thus far, all factor models and scenario analyses yield unilaterally positive outcomes.

The details, of course, remain a personal trade secret, and won’t be revealed until a point of my own choosing. I’m in no hurry, though, because even the latter-day Moses of Cupertino is gonna need some time (and a pant load of Benjaminz) to deliver us from our present bondage and into the promised meta land.

In the meanwhile, the rest of us should probably do what has always best suited us: keep out eyes wide open and our feet a’moving.

And, in closing, while I’m not certain if there are saints in the metaverse, I certainly hope there are. And, today at any rate, I’ll include them in my celebrations, as I await their marching in.

TIMSHEL

It’s over. I release you. For all time.

Just kidding. But I am here to declare a robust, global hiatus from the dreary doldrums of risk management.

I’m late, of course, to the party. But then again, isn’t the risk manager always the last to know?

I’m not sure what pushed me over the edge, but let’s just call this past week’s energetic rally, which took all our gallant indices to new zeniths — before pausing (though not retreating) on Friday, a contributing factor.

Yup, they bought ‘em all week. Against a backdrop of misses on Industrial Production, Capacity Utilization, Housing Starts, Building Permits, Philly Fed, and Manufacturing PMI. Bought ‘em as 10-year yields touched the previously unthinkable level of 170 basis points — up 44% from where they were as July gave birth to August.

Interest rates are on the rise across the globe, with perhaps the most alarming jurisdiction being the Netherlands, where benchmark yields crossed into positive territory this past week, and now reside at a usurious 0.028%:

And that’s not the only problem emanating from the land of wooden shoes and dirty canals. Mid-week, Bloomberg reported that the country’s iconic paint maker – Akzo Nobel — is running out of blue, FFS! One wonders if this will impact their ability to produce color wheel-adjacent hues like purple and green.

But more pressing matters come to mind when one considers the impact on the national psyche, as embodied in the (somewhat plagiaristic) Dutch Flag:

The Standard of Holland: Before and After Version:

I don’t know about you, but the flag on the right brings me down. On the other hand, the original is an exact replica of France’s banner – rotated 90 degrees counterclockwise. So maybe they get what they pay for.

Stateside, we have similar issues with which to contend. Chicago-based confectionary manufacturer Ferrara Candy just disclosed that it was on the receiving end of a ransomware attack, which may (or may not) impact operation. Boring, right? Except for the small detail that: a) the enterprise is responsible for 85% of the nation’s candy corn production; and b) Halloween is less than a week away. And, as a public service, I will inform y’all that Lewis Black’s famous claim – that all the candy corn in the world was manufactured in the year 1911 — is a four Pinocchio fib. Nay, they pump it out like madmen on the banks of the Chicago River. Day and night – except, perhaps, when somebody ransoms their wares.

And while I am loathe to mention it, how bout that Trump SPAC? Issued under the rather menacing handle of Digital World Acquisition Corp, it is a ten-bagger over the two days of its trading history. The objective of the enterprise is to provide free form, uncensored social media content. My own view is that particularly given Trump’s online frustrations: a) they better do some heavy acquiring, and b) should consider accumulating some combination of Apple, Amazon, Microsoft and Google, so as to ensure that they can actually gain entry into the cloud-based oligarchy that controls the architecture for these forums. If DWAC continues its current trajectory, they should have the jack to buy them all be for the month ends.

Considering all the above, I Out. At least for now.

But I’d encourage the rest of you to mind your P’s and Q’s. We’re entering the tall grass of the earnings season, with all the behemoths – the very entities which DWAC must access to achieve success — reporting this very week. My casual dialogues suggest a socialized consensus that they’re gonna blow the doors of the joint, and, certainly, market flows reflect such confidence. Let’s hope they’re right.

I’d also be keeping my eye on non-renewable commodities; not only Crude Oil, but also metals such as Copper, Zinc, Aluminum and Lead – all of which have been rocking raging rallies of late. Back in my risk management days, these price trends were viewed to be ominous signs of non-transitory inflation. But those times, apparently, are gone.

However, I still got my eye on some of this sh!t. In renewable commodity realms, it may be useful to remain aware that Milk is now selling at a 5-year high.

Want Milk? It’ll Cost You:

Now, I don’t drink milk – mostly because it only makes me thirstier. But somebody must be choking it down, or it wouldn’t be up 50% over the past year.

I don’t think that huge price increases in stuff that people actually use is likely to be a temporary phenomenon. Supply shortages exist – across such realms as microchips, industrial metals, and other essential inputs. Food prices are going up, as is the cost of labor, which remains scarce. Energy expenses are soaring. Basic economic theory suggests that these trends will feed on one another and will not simply reverse themselves.

Housing costs, which involve and/or are impacted by all the above, are up nearly 20% year-over-year. But don’t worry; as pointed out by others, these trends are no longer included in our inflation metrics. Be glad they’re not, though, because if they were, inflation would be running at > 10%.

As all of this unfolds, estimates of economic growth are decidedly on the wane:

The official Atlanta Fed Q3 GDP estimate is now 0.5%, a noticeable downturn from the 6% which the outfit was joyfully prognosticating in early August — before that above-mentioned 44% climb in ten-year note yields.

But I grant all of you permission to buy whatever you want here. The capital, commercial and consumer economy face enormous headwinds, as measured in terms of rising costs, supply shortages, logistics logjams, and (if the boys and girls in Georgia are correct) waning overall output. Interest rates are rising, and risk asset valuations are at all-time highs.

There’s a word that describes all of this, a mashup between one that applies to an event where no females are present, and the standard term for rising prices. It is on the lips and keyboard fingertips of many economically sensitive souls out there. But it is too vulgar to include in this family publication.

And, anyway, we’re on an indefinitely extended risk management holiday right now, so don’t you fret.

But don’t get too comfortable either, because I am inclined to declare an end to the end of risk management at any time of my own choosing. And (as Dr. John reminds us): “if I don’t do it, somebody else will”.

Probably, it will be your investors/capital providers. So, be forewarned.

TIMSHEL

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

— Tom Traubert’s Blues

Hi y’all. It’s been a minute, right?

FWIW, I hate that phrase, which (or so I’m given to understand) was brought forward into the modern lexicon by my co-religionist, Drake. And, on a related note, I just found out (by picking up his just-dropped memoir) that criminally underrated Doors guitarist Robbie Krieger is also a tribesman.

Not gonna lie: across the singularly impressive span of Sabbatarian musicians, I prefer Krieger to Drake. But this, as with so much else we encounter, is a matter of taste.

Besides, it’s been more like a week, or just over ten thousand minutes. To put this in financial terms, one minute is the equivalent of 0.01%, or 1 basis point, of a seven-day span.

It doesn’t sound like a lot, does it? But sometimes, a minute is, as Rudyard Kipling famously wrote, everlasting. For example (and here my curiosity leads me to ask for reader input), when staring, at a phone that reads 10:59, and waiting to sign into one of those soul-sapping Zoom meetings, several lifetimes seem to pass ere the clock rolls. Right?

By contrast, for those using the free version of this wretched app, Minute 40 flies by. And then the screen goes dark.

There’s a lot that can be accomplished in a single sixty second sequence – if one adopts the proper mindset. For instance, Frederick Chopin (who lies in eternal repose at Pere Lachaise — just under a rise where one will find Krieger’s slumbering bandmate: Jim Morrison) wrote perhaps the best known waltz in music history, which, if the title can be trusted, begins, and ends, within a single rotation of a second hand.

For the truly obtuse among you, I am referring to the “Minute Waltz”, the title of which, in addition to its temporal description, indicates that it unfolds in 3/4 time (one-two-three, one-two-three, one-two-three). Some of my best-loved tunes adopt this beat: “My Favorite Things” for example. Or “Manic Depression” by Hendrix.

Also “Tom Traubert’s Blues”, by Tom Waits, which is this week’s theme song.

3/4 is the time signature of waltzes, like the ones played by Victorian orchestras in 19th century rave ups, with fiddling fiddlers fiddling and twirling ladies twirling. But lots of stuff in our world pulses forward in waltz cadence, offering up, as it does, a more circular trajectory than, say, the hard-driving, unidirectional 4/4 beat that is nearly ubiquitous to rock and roll.

And yes, we can extrapolate this to the markets.

For instance, if one is looking to binge on straight up, 4/4 rock and roll, one might very well consider taking a spin with Crude Oil:

Just one look at this chart brings the guitar riff of “Radar Love” to the ears inside my mind.

If, by contrast, one is thinking more of a minuet vibe, perhaps a little VIX is in order:

However, whatever the time signature, the markets ended Friday’s session in full crescendo. It was a welcome jolt from the repetitive pirouettes of the last several weeks. The question is: why?

Well, the bank earnings, or, say, 3/4ths of them at any rate (Wells continues to screw the pooch) were OK. Retail Sales blew out.

Inflation of both genres soared like Baryshnikov, while measures of confidence (consumer and business) took menacing, banana peel knee bends.

The Fed, however, unleashed nearly $1T of reserves it had hanging around into the dance hall, and, while I won’t pretend to possess the chops to track the precise journey of these boppin’ Benjaminz, I suspect that many of them found their way into the capital markets:

See Ya Tomorrow, Hey FED Can I Borrow, A Couple of Bucks from You?

Clearly, there’s a lot of wallflower cash out there – arguably too much – to swap it, with cost and time efficiency — for various units of value — ranging from semiconductors, copper, petrol, efficient restaurant service, or – investible securities.

This is why, in my judgment, no matter how bleak conditions appear in this wasteland of a capital economy, nothing remotely resembling a respectable correction can truly materialize. Investors were slogging their asses across the floor until Wednesday afternoon, but then, in a stroke of a clock, gathered themselves to gin up a high-stepping rally that places our equity indices proximate to all-time highs.

So, yes, a minute matters, and I implore you to use those allotted to you wisely. When Zooming, for instance, remain advised that this unicorn stock took a mad digger at the end of the last quarter, when a longanticipated acquisition of a cloud service provider fell apart.

Perhaps this is because its target was an outfit called Five9, and, though I’ve researched it, I cannot find a single musical piece that uses that time signature. So, presumably, the folks at Zoom decided it wasn’t worth the “Money”. As everyone knows, there’s a Pink Floyd song of the same name, which begins in 7/4, but then kicks into straight 4/4 for the Gilmour solo.

So, time signatures can change. And often do.

A minute thus lasts as long as one chooses to make it, and consider, as a closing example, that Chopin’s “Minute Waltz” is actually 140 measures, or two minutes, long. That’s OK, though; it’s worth the ride.

So please do waltz, Mathilda, with me, But know that particularly now, we will choose our steps with care.

TIMSHEL

Oleanders, growing outside your door, soon they’re going to be in bloom back in Annandale,
I can’t stand her, doing what she did before, Leaving like a Gypsy Queen in a fairytale,
Well, I heard the whistle, but I can’t go, I want to take her down to Mexico,
But she said “whoah no, Guadalajara won’t do”, Well, I did not think the girl could be so cruel,
And I’m never going back to my old school

— Donald Fagan and Walter Becker

So, there I was, driving up Madison Avenue and who do I run into? Donald M%&rf%&@king Fagan, half of the fabulous duo that drove Steely Dan.

His partner – Walter Becker – was, at the time, nowhere to be found.

Fagan’s presence, though, was unmistakable, so I shouted out “Donald… …I love you”. He smiled and gave me a thumbs up.

That was it. But I thought y’all ought to know.

I won’t call “My Old School” my favorite SD composition, but it’s waaaay up there. As I’m given to understand, it tells the tale of a 1969 drug bust on the campus of Bard College – Fagan and Becker’s alma mater. Apparently, 44 people were arrested (in a positively bizarre twist, by a local prosecutor named G. Gordon Liddy (Daddy G.) of subsequent Watergate fame), taken to a Poughkeepsie jail, where the local 5-0 took the outrageous step of shaving off Becker’s magnificent locks. Very L7 of Daddy G, no?

So, Fagan won’t be going back to his old school. And Becker, as indicated above, is unavailable.

But thankfully, as I write this, his imminent return is not an issue, because today and tomorrow are listed on the college’s schedule as comprising the “Fall Breakaway”. Whether purposefully or otherwise, it coincides to what is traditionally referred, to the never-ending shame of certain elements of our society, as Columbus Day. Presumably, the Bard crew are among the lot that disdains the memory of that misanthropic 15th Century explorer. Business Insider rates it as the 7th most “woke” college in America, itself an impressive feat, and one that is likely, in these times, to be more difficult to sustain than achieve.

But Columbus Day somehow, abides. Government offices are closed, as are schools. They’re even holding the parade again on 5th Avenue this year (a vast improvement over 2020’s pathetic virtual version), albeit to be certain, with many fingers wagging at the more than five centuries of sins that are often laid at the feet of its eponymous seafaring adventurer. But the pageant is going down, and for this, at any rate, I am grateful, as nothing I can recall brings more joy to than watching the 5th Long Island Dealership float with the owner singing, karaoke fashion, “That’s Amore” to the adoring throngs.

The Columbus Day markets schedule is mixed, with no trading in the bond complex, but, for better or worse, the stock (and, of course, crypto) market fully operational.

The former can probably use the break, because bonds have had better weeks than the last one, during which Madam X raised her yield skirts to their highest levels since May (1.61%), taking the entire Treasury

Curve along for the ride. Somewhat counterintuitively, the big surge came on the heels of a Non-Farm Payrolls number that clocked in at < 40% of analyst estimates. The data suggest that there is a Labor shortage; maybe because the lunch pail crew prefers even going back to their old school to working.

The rate carnage also took a bite out of private bond valuations, whether they be Investment Grade or Junk:

Corporate Bonds – To Detention for You:

On the other side of the ledger, certain commodity markets win the “Teacher’s Pet” award:

Cotton and Crude: Go to the Head of the Class!

Joyfully, commodity futures markets are open today, so Cotton and Crude (CL and CT on your symbol guide), can, if they wish, continue their over-achieving ways, without bothering to pause in “parade” rest.

The official portions of Washington, where they do all the damage, will remain dark — in observance of the holiday, but I reckon we’ll have to watch these class clowns anyway – I suspect all day long. The big action of the week involved overwrought debates as to how much unfathomable cash their going to take and dish out, and how, in so doing, to avoid pro forma obstacles such as that annoying statutory limit on borrowings.

My phone has been ringing off the hook with socialized worries about a Treasury default, and the dire implications of same. I was actually talking with one of my clients about this topic when Fagan bounced by. I have done my best to calm these fears, which I believe are silly. All one needs to know is that: a) ALL politicians would pay what for them would be an unacceptable price for allowing this to happen; and b) they can eliminate this risk with a stroke of the pen.

In the end, they followed script and raised the ceiling by about a half tril – a mere trifle, representing barely $1,500 for every man, woman and child in the country, and an amount that will last us almost till Christmas.

I’m glad for this – from both a political and policy perspective. That ol’ Buzzard McConnell has taken some hits for his strategy, but I’m on other side of that argument. Wiley bastard that he is, this summer, he threw his weight behind the $1.2B Infrastructure package, knowing, I suspect, that it would split the coalition on the other side of the aisle. And it did. The Dems must now broker a deal between members who have probably already spent down their share of the pork, and those that wish to go for broke and bundle this with the full smash $3.5B extravaganza that is the real prize. The rift caused an embarrassing delay in the proceedings, but only for a few weeks, during which time the Dems will be required to settle this beef. The Debt Ceiling will surely go up, so why not give the Dems a little more rope with which to hang themselves?

I suspect this was McConnell’s play all along. Let Pelosi either send the Squad into a blinding rage that will positively cripple her coalition — or push all the moderates over the side of the mountain. Don’t allow them to suggest that all would be well if the stingy Republicans simply did the patriotic thing on the debt limit. If I’ve rightly described McConnell’s strategy, then the only role for him at his old school is one of Professor.

Elsewhere, our righteous leaders managed to carve out a comprehensive, minimum global tax deal that I believe is nothing more than optics. But we should pay close attention to the reality that about the only thing about which global politicians can agree is the establishment of minimum levels of our money that they feel compelled to remove from our control. God forbid any evil nation try to undercut this cartel.

And, whether we attend or not, the investment world’s academic calendar is chock full of important events. Earnings commence in earnest this week, with the banks, in time-honored fashion, being the first to the podium. Not gonna lie – the banks worry me. Not so much because they might’ve screwed the pooch in Q3 (though that is certainly plausible), but more so due to valuation. Our bulge bracket betters are about an 8 bagger since this whole QE nonsense began in ’09, and, if QE is indeed destined for wind down, then the rules first set forth by Cambridge Professor Isaac Newton, as they apply to capital markets, might, very well, set in.

Newton learned his lessons in the markets the hard way – schooled through that whole South Sea Bubble fiasco. But that happened so long ago, I barely remember it. He was Royal Master of the Mint at the time and probably should’ve known better.

Because conditions can change on a dime, as can our attitudes about everything under the sun. Newton died knowing this, but the lesson came at a great cost.

Maybe he should’ve gone back to his old school – Trinity College, Cambridge – for a refresher course. And, for the record, you should be made aware that my buddy Donald did just that. In 1985, he personally accepted an honorary doctorate from Bard College.

Daddy G, of course, eventually left the Prosecutors Office in Duchess County, NY, to become one of the central villains of Watergate. Like Becker before him, he went to jail, but then reinvented himself – as a radio host, author, actor and gadfly, all before dying, at 90, earlier this year.

And now, in offering you those 35 sweet goodbyes, I counsel flexibility – in an environment where you never know who you might run into, and which roads might lead you, willingly or not, back to your old school. I’ve actually done this myself, but won’t say more, because here, as everywhere else, your mileage may vary.

TIMSHEL