“I watched with glee while your kings and queens,
Fought for ten decades, for the gods they made,
I shouted out “who killed the Kennedys?” when after all it was you and me”.
— Charlie’s Singer

I know our title is trite, but I am sorry about Charlie. Really sorry.

I’m also, however, surprised and gratified by the reaction to his death, which was deep, broad and heartfelt.

His passing took me by by surprise, as it did everyone. He’d been around so long, was such a rock, that even more than Keith, he seemed like a guy that would live forever. However, as is now evident, he was merely mortal.

Now that he’s gone, having undertaken the responsibility to provide probing rock and roll commentary in this financial publication, I want to offer some thoughts about his place in history.

He was most certainly the perfect drummer for the Stones – both musically and (from what I gather) personality-wise. A dignified, centering force against Mick and Keith’s wildly divergent excesses. As a drummer, he knew exactly how to anchor those songs; he provided the beat that was needed, and nothing else. From this perspective, he is to be honored, maybe even sanctified.

But a galactic, creative musical force he was not.

Sorry, Charlie.

Because the Stones were always about the songs they wrote. They were never a jam band. No extended guitar riffs, and no drum solos.

Sorry (again) Charlie. I would’ve liked them to allot you five or six minutes during, say, “Gimme Shelter” or “Sympathy for the Devil”, but that wasn’t how the Stones rolled.

This latter masterpiece, perhaps Charlies’ finest work on the skins (though he did get a righteous assist from a Ghana-based conga player named Rocky Dzidzornu), was recorded in the first half of June 1968. On the night of the 5th, some dude did RFK — forcing Mick to rewrite some of the lyrics. Well, on Friday, the California Parole Board approved the dude’s 16th liberation application – apparently with the blessings of the Kennedy family.

Did Sirhan say he was sorry? Probably.

But this note is about Charlie, and the main question remains: can the Stones carry on without him? I say yes. And, here I present, by way of contrast, the earlier trajectory of Zep, who, while they had some fantastic songs, offered their greatest contribution in the form of overall sound. How four guys – one of them a noninstrumentalist – could create the sonic blast that they did remains, for me, one of life’s sweet mysteries.

And Bonzo was essential to that. So, when he died, though I thought that they could have forged on, I understood why they bagged it. But to replace Charlie? Pick any of the countless drummers who could ape his every strike on the high hat and not miss a beat? Piece of cake.

My guess is that Mick and Keith continue without him – unapologetically. And I hope they do.

Sorry (again), Charlie. But published reports suggest that he gave them his blessing to do so, and one way or another, at this point, the entire band is little more than a caricature of its former greatness.

******

Whether by way of tribute or indifference to Charlie, it was quite a week for risk assets (well, some of them anyway). Our equity indices soared to yet another series of previously un-breached heights, and, in doing so, they unremorsefully ignored a passel of risks and potential problems. I’ll lay aside the ignominious turning of the American Military Tail in Kabul, which drew sufficient attention from investors as to cause benchmark valuations to drop about a half a percent for about half a day – all recovered, and then some, by week’s end.

Yes, investors moved on, shamelessly bid ‘em up in the wake of substantial progress in the passing of the atrocious ~$5T budget add-on (and attendant tax increases, etc.), the highest recorded inflation figures (according to the Fed’s favorite measure) in three decades, the continued, confounding covid conundrum, and, just for good measure, a gathering storm (named after my daddy’s mama, who lived, or at any rate, died, in the threatened region) that pushed Nat Gas prices to their highest summer levels in a generation:

Jumpin’ Jack Flash It’s a Nat Gas Gas:

Most of the unrepentant revelry was catalyzed by Chair Pow’s unabashed, remotely-rendered remarks to an absent audience at Jackson Hole, conveying that: a) tapering might begin this year; but b) there’s no timetable for raising rates at the short end of the curve – which his crew at the Fed explicitly control.

I rate this about a 9.5 on the Bailout Scale, falling plainly short of our wholesale abandonment of Afghanistan, embellished, as it was, by our contribution of billions of dollars of weaponry, cash, other treasures and (of course) blood, to our victorious enemies. Powell might taper before Christmas; on the other hand, he might not. It would take him about 30 seconds to back off, and to do so with impunity.

We’re now in the doggiest end of a very doggy summer. When it concludes, we face the likelihood of myriad virus shutdown showdowns, the pantomime of Congress stuffing the equivalent of nearly two years of incremental obligations onto our already crippling debt load (based exclusively on the signatures of a President and Vice President who have, to put it generously, failed thus far to establish their leadership and judgment credentials). In addition, there will be labor shortages, supply chain disruptions, and myriad other problems too numerous and indecorous to inventory in this family/financial publication.

And while all of this is transpiring, the Stones, what’s left of them anyway, will embark on a tour without their founding lead guitarist, bassist, and keeper of the beat.

But away from the stage, all economic matters will filter inexorably through the flimsy film of politics.

So, I ask you, if we emerge around, say, Halloween with a significant portion of the economy in viral disruption, with higher taxes, with a galactic set of new entitlements passed into law, with manifold immigration, public safety and foreign policy problems worthy of an extension of the Michael Myers film sequence, will the Fed deem it the appropriate time to withdraw support?

I highly doubt it. Because the markets won’t like it. And neither will the electorate. And nobody in Washington will care about anything except creating economic optics that fit their political narrative.

So, I’m expecting the same market conditions to ensue this fall that we’ve suffered since spring. With valuations all dressed up but leaving investors no place to go.

I wish I had better news to report, but unless you want to enrich a select, elite corporate class that is fully in cahoots with the Washington cabal, opportunities are slim. Big Money is calling the shots here. This was always the case, but the dynamic has intensified. It controls the politicians, including Biden and Yellen. In turn, Biden and Yellen control the Fed. And for quite some time, the Fed has controlled the markets.

The rest of us are simply extras in this show – un-miced backup singers holding, if we’re lucky, a tambourine for a prop.

But this note is about Charlie, who left us, this past week, to the world’s sorrow and myriad testaments of gratitude and appreciation. Prominent among the fond remembrances is the time when Mick introduced Charlie as his drummer, whereupon Charlie grabbed him by the collar and said “Don’t ever say that again. I’m not your drummer. You’re my singer”.

Well, sorry, Charlie, but you were wrong. You were Mick’s drummer, and you filled that role with grace, dignity and excellence. I hope it was enough for you.

I suspect it was.

But as for the rest of us, the part we are asked to play is less exciting, glamorous or lucrative than sitting on a riser, sticks in hand, and overlooking teeming masses of admirers. We’re stuck with it, so let’s suck it up and do the best we can.

Meantime, Goodbye Charlie. I won’t forget to put roses on your grave.

TIMSHEL

First there was Delta; then came Lambda. Next… …Omicron.

Well, not really. I have no knowledge that anything of the kind is in the offing.

If there is another variant on its way, I can only hope that they do the right thing and name it after the 15th letter of the Greek Alphabet.

Because, for a couple of reasons, Omicron is my favorite note in Great Hellenic Symphony of Symbols. For one thing, it sounds cool — Aristotelian cool — and if you doubt this, just say it a few times: O-mi-cron, O-micron.

Feel me yet? I thought so.

In addition, I carry considerable empathy for the benign neglect which the symbol, for eons, has endured. Nobody talks about Omicron. It brings about images of… …nothing. It doesn’t even have a fancy formation. It’s just the same, boring O that exists in all Romantic and Germanic languages.

And nowhere is Omicron so rudely ignored as in the field of risk management, otherwise a veritable orgy of Greek symbology. There’s Alpha. And Beta. And Gamma. And Delta. And Theta. And Sigma. And, of course, Vega. Which isn’t even a Greek letter.

But no Omicron. Actually, strike that. Some financial journals designate the credit spread sensitivity of outof- the-money convertible bonds as Omicron Risk.

In other words, Omicron is relegated the risk backwater – asignifying a metric that applies, and only partially, to a complex derivative security that almost no one ever trades, and even then, only when these instruments are out of the money and thus at the low ebb of their value ranges.

This, in my judgment, is insufficient, failing, as it does, to rise to the majestic dignity of the coolest letter in the Greek Alphabet.

So, before we even cover the topic of the Omicron Variant, I’m gonna take the summer dog-day opportunity to throw off the yoke of this insult, and to elevate Omicron Risk to its appropriate level of risk prominence.

I thus now define Omicron Risk as a condition under which an excess of funding liquidity, as conjured up in response to a global health crisis, causes inflation, widespread economic disruption, and a complete breakdown in time-honored protocols for the relative valuation of financial assets.

At the moment, the Omicron Risk meters are flashing red.

But then again, the portfolios I track have been bleeding great globules of Omicron since an unspecified point this past Spring. And here’s the thing: you cannot hedge Omicron Risk; there is no factor that tracks it, and, arguably, when it raises its wrath, you can’t trade or invest in any constructive fashion.

The tip of the Omicron spear is sharp and painful, but it spreads out from its point, and creates carnage across the entire investor nervous system. We tend, naturally, to focus on the Equity Complex, but consider, if you will, its impact on other asset classes.

For example, in what was a difficult week for the equity markets (which somehow ended on a more optimistic note), everyone was in a tizzy about a Fed minutes report which (unsurprisingly) suggested that the taper could come in this calendar year. Almost contemporaneously, though, the size of the Central Bank’s Overnight Repo Liquidity Facility surged to $1.2T, with projections out to over double this amount.

Meanwhile, what did Madame X do? She rallied – dropping her yield skirts a couple of basis points – no doubt to distract us from a focused reading of those pesky Fed minutes.

So, all eyes turn to a possible taper announcement this week at Jackson Hole (now designated as the wealthiest jurisdiction in the country). Only, now, the event won’t even take place at its historic venue. On Friday, the sponsoring KC Fed announced that the event will be, you know, virtual.

In result, perhaps 2021’s most anticipated Fed speech – in a year where not much has mattered other than Fed babble – will now have no live attendees.

Mean bitch, that Omicron. Or sumbitch? In the present ambiguously gendered social paradigm, who’s to say?

And as I survey the thin gruel served up as sustenance by the capital economy, all I can observe is a Mulligan Stew – featuring such dubious ingredients as a Fed taper, a renewed set of lockdowns, pressing inflation, and a policy portfolio hell bent on raising taxes and imposing new regulations and other bureaucratic dainties. If it passes, it will be on the whim of a hard-pressed VP and signed by a Chief Executive with sufficient cognitive ability to do what his paymasters ask of him – and little else.

Or not. We just don’t know.

All of which has caused the Omicron Risk Variant to expand beyond its natural host: portfolio managers, and begin to infect the historically antibody-rich community of sell-side analysts:

Nothing for nothing, but don’t the funneled projection bands seem awfully wide to you? According to Morgan Stanley, the Gallant 500 could decamp by year end at a 37 handle, a 48 handle, or somewhere in between.

On the other hand, they could very well be right.

But in the meanwhile, there ain’t much to do but wait it out. J-Hole-Virtual goes down in the back half of the coming week. It may be a game changer. But it may not. After that, it’s a couple of long weeks until Labor Day. Not much to do if the Fed weasels out. Which I expect them to do. If, on the other hand, they shock (my) world and make specific statements about their shopaholic ways, take explicit actions to cut up their credit cards, matters could become very interesting.

And though it breaks my heart to state this, it might very well be the case that the worse the trajectory of a possibly resurgent virus, the higher risk assets may climb. In early 2020, covid knocked the markets to the floor. Then, the government filled our jeans with jack, which we enthusiastically invested. If they send us all to our rooms again, what alternative do we have but to repeat the cycle (including an untapering of the taper)?

It’s all a little bit like this whole Delta Variant, now, isn’t it? Unpleasant, unproductive and (above all) unpredictable. Just like the last round. Only different. Now, in addition, we can anticipate the delights of the Lambda.

After that, who knows?

Probably more mutations. I started this here note pining for the next variant to be named after the big O. The 15th letter of the Greek alphabet.

But in its conclusion, I am thinking better of it.

Particularly as redefined by this note, we’ve got enough Omicron out there to last a lifetime.

TIMSHEL

Great news! I’m vaccinated! Upon my immortal soul, this time it’s true.

Well, OK. So, I’ve only had one of the two requisite doses; the other one is set for the end of the month.

Does this count?

At the moment, I’m halfway home, so we can call it a half-truth.

Only now I hear tell that a third jab may be necessary. In which case I ask: does my opening amount to a third truth?

I’m gonna give myself a break and mark it at 50%. A half-truth.

Was it painful? Well, yes and no. Couldn’t even feel the shot. No soreness in my victimized arm. I did, however, feel unpleasantly, nauseously high, for about thirty hours after the procedure.

I know I should have taken care of this earlier, instead of lying about it like I did to y’all last spring. The (full) truth is I really don’t understand any of this, not the virus, not the variant, not the vaccine, none of it.

But doesn’t appear that them little covid buggers are preparing to beg off anytime soon. Winter’s coming, and, with it, virus season. I belong to a susceptible (if obnoxiously privileged) demographic. In my unending interactions with the masses, I certainly could catch, or (worse) spread, the germ. And, when wise men like De Blasio and Garcetti start shutting down my access to all my bi-coastal bling, there’s only one thing to do – go out and get dosed.

Which is what I did. But to say I’m vaccinated is a half-truth, nonetheless.

On this much we can perhaps agree: half-truths are dangerous. And painful.

In fact, I’d venture that anything short of 100% truths are probably worse than 0% truths. But they are pervasive. At least in some elements of our existence. Like the economy and the markets. Which, as you know, are the exclusive focus of this publication.

So, let’s talk about financial half-truths. I’ll start with a narrow example and perhaps expand out from there.

By all accounts, we are either face – or don’t face – an existential climate crisis. It is either (as recently reported by the never-perfidious United Nations) entirely caused by human activities/carbon emissions. Or it isn’t. The prescribed remedy, though, is clear. Eliminate fossil fuels. Comprehensively and quickly.

And we’re making, er, progress here. We’ve shut down pipelines. Cancelled drilling licenses. Imposed new regulations. Spun up wind farms and solar panels.

And we’ve paid a price for all of this, as perhaps most clearly evidenced by the soaring cost of Natural Gas we’ve experienced over the last few months:

OK, so Nat Gas backed off a bit this week.

But it’s still at the highest summertime level in a generation.

We can only close our eyes and try to block out images of the potential trajectory of this graph in the winter. Particularly if there is any form of lockdown, and folks is forced to spend nearly all they time indoors.

But why on earth, under the circumstances, is the Department of Defense publicly calling for OPEC to increase production? In half-truth space, the answer takes the following form: politicians wishing to show that they are bringing the hammer down on the domestic fossil fuel production, while avoiding the political fallout of unaffordable energy prices when the weather turns cold (news flash: it still does and probably always will get a bit nippy from time to time).

But politicians are born and bred to speak out of both sides of their mouths; otherwise, they wouldn’t be politicians. As a case and point, I recently read that the Washington Post identified >30,000 Trump lies during his storied tenure. If we assume that there is a mix of full-on whoppers and half-truths in this tally, we can round up the number of fibs up to a tidy 50,000. Which breaks down to about 34 lies a day, or three an hour, every day, for a 12-hour shift, across his entire four years at the helm.

That’s a lot of tall tales. Even for the Trumpster, no slouch in the “pants on fire” department. But are we wrong to wonder if the fact checkers themselves might not be engaging is some of their own half truthing?

Economic statistics also tend to reside in those murky realms between truth and engineered fiction. We just completed Pi (Inflation) Week, and the numbers were pretty alarming. July CPI annualized at 5.4%, and PPI at 7.8%. These figures either underestimate, or overestimate, price changes. Or both. The sponsors of our fiscal and monetary policy assure us that the trends, while discouraging, are transient. And that even if they aren’t, the folks at the Fed and Treasury say they are on the case/have the appropriate tools to fix everything.

I find these assertions partially dubious, particularly given the unprecedented trillions in new money created, and an incremental government expenditure roadmap that may exceed $10,000,000,000,000.00 by this fall. Yeah, maybe they got this, but do they even themselves know? If so, how?

All of which leads us to the big focus of a confused investment community (with little else at present to draw their attention): the Jerome Powell “will he or won’t he taper” star turn at Jackson Hole later this month. He is currently on record as identifying two consecutive months of >800K job growth as his marker. Well, he’s got them – even if the jobs numbers emanating out of the BLS are probably half-truths in and of themselves.

The half-accurate Job Openings and Labor Turnover (JOLTS) Survey informs us that: a) unfilled gigs passed the 10 million threshold last month; meaning that: b) there are now more “Help Wanted” signs across the Lower 48 than there are citizens on the unemployment rolls.

Is that an environment where Powell wants to take the training wheels off the Treasury Funding/Fed Money Printing/Fed Security Purchase tricycle?

My guess is that he will talk tough and do nothing. Particularly if, as is certainly possible, we face a post- Labor Day environment of a virally impaired economy, tax increases, aggressive regulation, and continued flow of funds to both the unemployed and those who will form a marvelous new army of Federal workers. All paid for by borrowings and tax dollars, mostly to ensure that the masses remain in straight and narrow adherence to the current Gospel of Moral Imperative in our newly woken society.

If my conjecture is accurate, Powell will have certainly engaged in yet another half-truth. He’ll tell us that the taper scissors are there at the ready, but, given all the hardship and injustice in our midst that just won’t banish itself, he’s gonna wait a spell before he applies the sheers to his hairy, money-printing beast.

However, if I’m wrong about this, and he starts clipping away, the markets will respond as though he’s cutting into flesh as opposed to fleecy follicles. And, boy, won’t that be interesting, evoking a plausible scenario under which investors and other economic agents emerge from this long, hot summer, to face the challenges of inflation, higher taxes, delta variant lockdowns, labor shortages, supply chain and logistics frustrations, and higher interest rates.

Investors don’t seem to be picking up what he’s laying down, though, at least not entirely (maybe they buy into half). Our equity indices rallied all week, to another sequence of all-time highs. But the market strength, given that virtually all the valuation gains are concentrated in a handful of names, while the rest of the complex either languishes or ossifies, is arguably yet another fact that falls short of full veracity.

Finally, I read that Wall Street has embraced its bovine vibe at levels not seen for nearly twenty years:

Yup, those privileged but woke prognosticators of valuation, if I read this chart correctly, are calling for the Gallant 500 to approach the exalted threshold of 5,000 – which of course is ten times the number of soldiers in its host. They could be right. But do I believe them? Do they believe this themselves?

It may very well be another example of half truthing. If so, it is the worst form of this counterproductive behavior: the half-truths we tell ourselves.

We’ve got to stop this sh!t while we still can. Before it’s too late. I hope I’ve set an example by owning my own statements of partial veracity. A half dose is just that: a half dose. It is not, by any stretch, a full vax.

And that’s the full truth. In so disclosing my status, I feel liberated and unburdened.

It’ll do you no harm to follow my lead in this respect. But meantime, I’d remain cautious in taking actions or decisions based upon information you receive, which, while perhaps bearing elements of accuracy, are also sprinkled with the unavoidable folly of human fancy.

TIMSHEL

“Pinch yourself”
– Bob Dylan to a fellow bi-coastal traveller

If, as I posited in my last instalment, the preceding week might never have happened, the one just concluded looks a bit iffy as well. I’m pretty sure it did, though, that it wasn’t just a dream.

Even still, I am fighting off a recurring urge to pinch myself.

On a related note, I ask y’all the following. Will I lose my last shred of credibility if I revert to Bob Dylan theme – for about the bajillionth time?

I guess I’ll just have to risk it.

But I’ll be brief. I heard this story during one of those interminable PBS fundraising breaks in one of the endless series of Dylan tributes that Public Television – God Bless them for that anyway – routinely offers up.

Apparently, Bob once had to endure an entire 6-hour flight from JFK to LAX (or LAX to JFK) with a woman in the seat next to him (yes, it seems, he flies commercial) repeatedly stating aloud “I can’t believe I’m sitting next to Bob Dylan”.

The mantra continued all the way to baggage claim, but he retained his trademark silence. Until he collected his luggage. Then, at the last utterance (or, perhaps, to end the chorus), he turned to her and said:

“Pinch yourself”. And walked away.

Yup, that seems to be about right to me.

Particularly now.

Because I’m having multiple “pinch yourself” episodes a day. And I didn’t even sit next to Bob.

Thus, and for instance, did the Gallant 500 really close at all-time highs on Friday? This, you can check for yourself.

Are retail investors somehow all in? Apparently, the answer is yes:

Have they depleted the windfall of the savings they miraculously built up – for the first time in a generation during the lockdown – to do so? Read em and weep:

Are they compounding this sin by loading up on credit? I fear so:

Is the populace thus depleting its hard-won next egg, and, worse, piling up on debt (including credit cards), to load into what just may be an overvalued equity complex? I hope not – particularly with using latter source of funds (depicted in the graph on the right), which, trust me, is a very bad idea under any circumstances, and a particularly hideous one at present.

Non-financial types often ask me for investment advice, how to play the market, and my introductory answer is always as follows:

Before you do anything else, pay off your credit cards.

With current Visa/MC APRs running a cool 23.7% (a rate against which there are no tax deduction offsets), one would need to generate a before-tax, annualized market return of more than 40% just to break even on these outlays. Which is a pretty high bogie. For everyone except my mother-in-law (for real).

So, to my risk-managed way of thinking, there are few trades that generate a better return than taking those plastic card balances down to zero.

But if this other sh!t is truly going down, if the masses are really borrowing to lay into Meme stocks in their HOOD accounts, are they not merely following the wise example of their leaders in the federal government?

Can any of this last? Perhaps not forever, but maybe for a while longer.

Because the government has a few arrows which are absent from the quivers that the rest of us must tote around. Its own printing press, for instance. Wouldn’t that be nice? But they aren’t in stock. At WalMart, Target, Amazon Prime or any of the other enterprises that will happily run your plastic through their cha-ching machines.

And one suspects that even the big money-spitting box in Washington faces some output constraints. We may, in fact, obtain some idea of the forms that they assume later this month, when central bank officials and other ballers convene for their annual conference in Jackson Hole, WY. First item on the agenda is a motion to rename the joint: Benjamin Hole (reflecting a much larger money supply that is arguably better depicted in $100 bills than $20s).

Once this issue is resolved, all ears will be on Chair Pow, and any hint he might give as to slowing down his hoovering of financial assets with newly minted money. My advice is to attend his words carefully, because the J-Hole Conference has often been the venue for big announcements of this sort. Like, for instance, the 2012 Symposium, when, right before a Presidential Election, he announced QE3 – a truly impressive QE, insofar as it lacked specified limits in terms of size or temporal duration.

It was, or so we thought at the time, a QE for the ages – a QE to end all QEs.

How wrong we were, how quaint it now seems, relative to the action that has transpired over the last five quarters.

It’d be a helluva tough time for him to end the party. What with them delta buggers kicking up such a fuss, with members of Congress outflanking one another in dreaming up ways to spend money that we don’t have, must borrow, and must rely on the Fed to create.

There’ll be pressure on him, but he won’t cave to the hawkish contingent. So, I say it don’t happen. No taper. Not now. Not at any point before the 2022 election.

Inflation be damned. The politicians and their paymasters will simply deem it a cost of doing business.

One way or another, it’s an impossible investment tape, and all I can counsel is to keep risks at the low end, and hold on to key positions, for a hoped-for time down the road when rationality re-enters the capital economy.

But, of course, I could be wrong. About all of this. It could all be a dream. I keep pinching myself but can’t feel a thing.

Which ought, in closing, to tell you something.

TIMSHEL

Did last week really happen?

If so, I missed it.

All sixteen of my linked Apple devices indicate that the calendar did roll forward, and that a troubling, surreal July has now melted into August. I am thus forced to assume that the lost time (in search of which Marcel Proust expended about 2,000 pages) has passed me by.

Among other corroborating events, my above-mentioned linked devices are full of images of Aaron M@&ther F@%cking Rogers taking snaps at the Packer’s training facility.

Aaron M@&ther F@%cking Rogers must have signed. That tells me I missed something. Maybe a lot.

As we left off matters, we were awaiting Big Tech earnings, the FOMC Policy Statement, the first estimate of Q2 GDP and sundry other data tidbits.

Aaron M@&ther F@%cking Rogers remained blissfully at war with the Green Bay Front Office.

But all that sh!t has changed, and I don’t find that we have gained much (other than still having to look at Aaron M@&ther F@%cking Rogers self-satisfied mug twice a year) by the way of clarity, for the trouble. The market took Tech earnings (which were nominally strong) to be a mixed blessing. The FOMC announced nothing, did nothing, and managed to confuse everyone (including, presumably, themselves) in the process.

GDP came in a little light. And investors did not appear to care.

Aaron M@&ther F@%cking Rogers convinced the Packers to re-acquire Randall (Bear Killer) Cobb.

The Fed’s Special Reverse Repo Facility reversed out an amount that surpassed the magic threshold of $1,000,000,000,000, and the tally probably rises from there.

Robbin Hood is now a publicly traded company – even if the investment community it serves was decidedly blasé about its debut.

Thursday marked the 100th anniversary of the date when the 3,600-member National Socialist German Workers Party named an obscure Austrian corporal as its Supreme Leader. Not sorry I missed that one.

And, on balance, I find us no better, and perhaps a little worse, off, for The Week That Wasn’t.

Not gonna lie – I’d really like to get that week back, because – let’s face it – none of us know how many of these cycles we have left to us. But I don’t reckon that’s the way it works, so we’ll just carry on from here.

However, I find the situation, from a market perspective, to be beyond confusing. On the one hand, lots of risks out there – inflation, them new country covid cousins, supply chain aggravations, political civil war, and the like. On the other, the gully wash of liquidity continues to flow. Yields are on the down – all over the world and particularly in Europe. Germany, for example (we won’t say in celebration of the above-mentioned Centennial) is knocking on the door of new Bund rate lows – mired as they have been in deep negative territory:

You Vill Lend to Deutschland. Und You Vill Pay for Doing So:

On a happier note, the NFL pre-season kicks of on Thursday, with a Hall of Fame game between the Cowboys and the Steelers, two teams that carry the divine virtue of having rosters that do not include….

Well, you know who.

And all I can add is my gratitude that, somewhere, they’ll be snapping the ball. Because it gives me something to watch that isn’t inane political commentary, contrived televised game show contests or reruns of Tom and Jerry. And before you call me out on this, the Olympics are simply not an option. They’re not watchable.

The NFL added an extra game to the season, and God bless them for that. Then there’s College, High School and (if deemed necessary as it may be) the CFL.

But I reckon that I’ll also be compelled to keep an obsessive eye on the markets, where I perceive an Irresistible Force of impossibly excessive liquidity careening towards the Immovable Object of an unhinged global capital economy, with no idea where it is, and (thus) no tools to determine wither it is headed.

On balance, I think the former wins the desperate contest, that valuations, for now, will hold, and, holding, are more likely than not to rise. But there won’t be much joy in the proceedings. All the flows are designated for a handful of privileged companies. In this respect, this market kind of reminds me of the NFL salary cap – the big money goes to a handful of roster participants (for example, Aaron M@&ther F@%cking Rogers) while everyone else breaks their @sses and hopes to suck hind tit.

The Week That Wasn’t sets an unappetizing table. Most of the interesting earnings are in the book, and, while, by standard measures, they were strong, they weren’t – in and of themselves — sufficient to supply a boost to the languishing cast of solid companies with outstanding prospects (and clean balance sheets) that are currently disdained by most investors.

This, as I mentioned last week, is what I believe constitutes a form of Alpha Hell for stalwart, diligent portfolio managers. Their names are just not working – long or short. They are stuck in the trenches, lobbing and taking shots like their forebears in WWI (including our above-referenced corporal), observing and experiencing the carnage they encounter in every direction, and no one gaining any meaningful ground for their effort.

It is indeed a war of attrition for the investor class, which hardly claim, much less receive, sympathy from the masses. They don’t have many alternatives but to hold the line as best they can. And need to do so with great care. To add to their travails, as illustrated in the following chart, the less experienced retail investing contingent takes an entirely different view of the proceedings:

I had to review this a couple of times to take in its significance. Non-Professional investor market sentiment has reached a three year high. What do these folks know that we don’t?

We’d better find out.

Normally this is deemed to be a sure indicator that the rally is winding down. Retail is always the last in (and the last out). And, under normal circumstances, I would agree with this hypothesis.

But these are anything other than normal circumstances. There’s just so much money floating around, and so much idle time (published reports are replete with stories of job openings that are going begging and the attendant desperation of business owners to fill key positions) with which to squander it – among other destinations, in the markets.

The Fed is printing more, and Congress is dying to hand it out. And as I’ve stated previously, while Chair Pow gathered himself sufficiently to reference tapering and other hawkish monetary measures, I’m just not picking up what he’s laying down. Especially with the visible headwinds in the economy, the enormous touching intended largesse of our elected federal officials, and a life and death Congressional election cycle creeping ever closer, turning the money spigot to the right is simply not a viable political option.

And, if Delta Dawn truly rages, forcing everyone back indoors, what are our intrepid leaders gonna do? Print even more money and hand it out to the masses, who won’t have anywhere to spend it. Except the markets, which may help Robin Hood, but the rest of us? Maybe not so much.

But even if it doesn’t go down that way, Congress is probably going to give away an extra few tril, which can only be paid for by higher taxes, running the magic money machine at full tilt, or some combination of the two.

The markets don’t want the stimulus, and certainly would take a dim view of higher taxes. If they come to pass, it will put enormous pressure on the capital economy, and will, in turn, take its toll on the real economy. Does anybody think that in this scenario, the increasingly politicized Fed is going to add to the dilemma of its political paymasters by reducing money flows and raising interest rates heading into an election year?

I’ll take the under.

So, I believe that at the index/factor level, valuations will hold the line and maybe climb. But it’s likely to be ugly beneath this shiny veneer.

To close on a more uplifting note, this here condition won’t last forever, and when it runs its course, there’ll be investment opportunities aplenty. Like many aspects of life, it’s a waiting game. I read, for instance, that Aaron M@&ther F@%cking Rogers’ deal is such that it buys him a ticket out of Title Town in 2022.

Maybe, just maybe, then, we can gut it out for a little while longer, and, in the meanwhile, this is about the most hopeful final message I can offer – in the wake of The Week That Wasn’t.

TIMSHEL

What’s it all about? Alpha?
When you sort it out? Alpha?
Are you meant to take more than you give?
Do you really think that funds we run, are just a sieve?

— With apologies to Burt Bacharach and Hal David

This week’s hook is so deliciously obvious, that, as I feared when I dreamed it up, I find that it has been used before. The distinguished market economist Jason DeSena Trennert published a widely read essay under substantially the same title in 2016. Prior to this, the fabulously successful Chairman of Oak Tree Investments(Howard Marks) used the phrase as the subject line in a 2011 memo to his investors.

But I’m gonna give myself a pass here, on the (dubious) grounds of modified punctuation. Both pieces apply a comma in their use of the expression (i.e. “what’s it all about, alpha) and fail to add a question mark at the end. By contrast, I offer it up in two sentences, with the second being in the form of a query.

I also admit to having further demeaned myself by engaging in a partial re-lyric of the 1966 smash hit(“What’s It All About, Alfie”) – written by Bacharach/David, and recorded, as only she could — by Dione Warwick – fifty-five long years ago.

Probably, very few of you even know what I’m writing about, and those to whom this applies are certainly unaware that the tune is the theme song of a rather mediocre movie of the same name – a film that failed to merit consideration on the AFI 100. It tells the story of a London Louse/Lothario, swinging his way through Carnaby Street during the days when swinging your way through Carnaby Street was just the thing to do.

Alfie (played by a young Michael Caine) is a chauffeur who wreaks a lot of damage as he navigates the left side of the streets of that singular British Metropolis. And doesn’t care.

The same perhaps, can be said about Alpha – that elusive object of investor desire, for which we sacrifice so much of our Blood and Treasure — often, and at times like these, with such tragic futility.

And never more so, in my experience, than over the last few months. As is consistent with the slippery vibe that characterizes this note, there are many definitions of Alpha. However, for our purposes, we will define it as it is widely applied to portfolio management. Specifically, it is the extent to which a portfolio achieves (or fails) to outperform the market. Me and my guys have simplified it even further: market outperformance (or lack thereof) is measured by the difference between actual portfolio returns, versus those implied by the amount of market exposure embedded in the investment book itself. If we assign (as we often do) the role of “the market” to the Gallant 500, a fully invested portfolio would, at present have needed a 17.5% ytd return to have recorded a positive Alpha result; anything less devolves to the negative a showing.

Well, as of now, we have more Alpha painted in red, deep red, than I have experienced in my career. The Benchmarks continue to soar to the heavens. Portfolio performance, across the board, lags, in woeful fashion.

I ascribe a good portion of this debacle to the divine, Newtonian laws of investment – the part that instructs us that “what goes up must come down” (the first line from a 1968 song that wasn’t written by Bacharach/David, but should have been). In 2020, the Gallant 500 put up 15.76%, but any investors with numbers as tepid as that would either have kept it to themselves or hung their heads in shame for such a poor performance. 2021 has been exactly the opposite kind of investment experience. Many of the portfolios I track are down for the year, and anyone who is up anything close to double digits is justifiably puffing out their chest.

If it is any consolation to any of you caught in this Alpha Hell, I believe that you have come by the condition honestly. By virtually any measure, the Big Equity Market Dogs (you know who they are) have contributed over half, and perhaps up to 75% of year-to-date SPX return. But the crew with which I roll is not paid to own large chunks of Apple. Or Google. Or Microsoft. Their investors expect more nuance, more (Alfie-like) panache. They can pay Cathie Wood (a helluva lot less) to trade the $1T companies if that’s what they want. Or do it themselves. For free.

Meanwhile, the current earnings season has matched or exceeded blowout expectations, and, for those companies that have told of glad tidings, all is well. But God help those who miss:

Of course, the small handful of earnings reports that matter are those on the docket over the next few trading sessions, with each of the ONLY IMPORTANT COMPANIES IN THE WORLD stepping up to the podium over the next week. Much as is the case with our Alpha conundrum, if they bring happy news, it is likely to further propel them – and, in, result, our benchmarks – to higher elevations. But not necessarily the rest of the market. By contrast, if they disappoint, everything is likely to sell off.

If one chooses to find a convenient source to blame, the poor retail schlump (along with the algos) is, as ever, a handy target:

And what are these market deplorables going to buy? A biotech company with a clean balance sheet and lifealtering medications in its pipeline? Nope and Nope. They gonna lap up The Big Dogs, and hope, that in this reverse Newtonian market mess, that The Big Dogs throw them a bone.

But here we are most of the way through our self-allotted space and we haven’t even addressed The Biggest Dog of Them All – our fair (well, I won’t use the vernacular term) curvaceous female dog — Madame X. It seems that no transgression on her part dampens our desire. No matter what she throws at us, at no matter at what cost, we must have more of her.

Last week, in the wake of horrifying inflation numbers, tepid auctions, dreaded Taper Talk and other unladylike actions in and around her person, we actually bid her up to a yield threshold below 1.2%, before deciding enough, at least for now, was enough, and putting her back on a pedestal that rises to a more dignified 1.28%. My guess, though, is that we’ll be lusting for more of her charms very soon.

Either way, she’ll be testing our intestinal fortitude all week. Her chaperone – Fed Chair Powell – will offer his latest FOMC wisdom on Wednesday. And, while there’s no chance on earth that he will back off on his own showering of gifts to curry her favor, he may be (politically) obliged to threaten to cut the crippling allowance he has for so long granted, at some specified date in the future.

Once we have slept on these mysteries, we can awaken to an introductory look at Commerce Department Q2 GDP estimate. Going into this interlude, the folks from Atlanta are showing some estimate fatigue:

One way or another, the lower the actual number, the more we will seek the warm embrace of Madam X.

And the Big Alpha Dogs.

So, what’s it all about?

I’m glad you asked. The capital economy is awash in a liquidity bubble the likes of which has not been witnessed since those swinging days of the Weimar Republic (which didn’t end well). Where there is not paralysis among policy makers in Washington, the only moves they can make are the wrong ones (tax increases, huge stimulus). But nothing, at this point, is gonna happen till Fall – if then.

So, my investment peeps wanna take this cash hoard and invest it, but are so timid, so bereft of imagination, that the only place they will do so is in The Big Dogs or in Madame X.

Unless, of course, you wanna add Big (Junkyard) Debt Dogs, because, apparently, the obligations of potentially insolvent companies are also highly appealing:

This, my friends, is what an impossible market looks like. I believe it continues, that indices continue to rally, while Alpha, oh that elusive excess over Expected Return, extends its descent into the Underworld.

I wish there was more I could do to help you. But I’m so lost without you for the moment, so heartbroken about what I’ve put you through this year, that I’m having trouble looking in the mirror and carrying through.

However, I can do this much. I can advise you to keep risks tight till further notice.

Yes, Alpha giveth and Alpha taketh away. In our titular film, Alfie got his comeuppance – both from the people he abused and at the box office. He figures out who he really loves but finds that she has moved passed him. Meanwhile, and in addition, WIAAA was a stone-cold flop.

The tune, however, abides. It’s part of The American Songbook. It alone, gives new life to the Alfies of the world, every time it plays on an Oldies Radio Station.

Alfie always comes back. And so, too, will Alpha.

And so will I. Soon.

In the meanwhile, we just gotta hold on and stay alive. Please anyway try for me, because this, more than anything else is what I think it’s all about.

TIMSHEL

Two bulls – a father and a son, are up on a ridge, where they observe a herd of cows below. “Hey dad, let’s
run down and f@ck a couple of those cows” suggests the son.
“I’ve got a better idea, son. Let’s WALK down. And f@ck ‘em all”. He responded.
— Paraphrased from an episode of “The Sopranos” I once saw

Whilst we’re on this whole movie thing, I might as well tell you that I recently re-watched Marty’s “Raging Bull”. Most everyone agrees on one thing: it’s one helluva a picture. The American Film Institute (AFI) places it at Number 24 of all time, 17 slots below “The Graduate”. AFI has “Citizen Kane” at #1.

I want you to know that I’m OK with this. “Kane”, though entertaining, is a bit too clinical for my tastes. However, I respectfully defer to The Experts here.

“Raging Bull”, for the uninitiated, is based on the life story of Middleweight Champion Jake LaMotta. Insofar as: a) LaMotta himself consulted on the film; and b) much of it is, shall we say, less than flattering, we can presume the portrayal bears a measure of authenticity.

LaMotta’s persona is not overly nuanced; none of Marty’s best characters are. He’s a bonehead from The Bronx, who (for whatever other flaws he possessed) was a Raging Bull in the ring. He both dished out and took his lumps — in galactic proportions, as though they were his due.

He drew no grand lessons from any of it.

I wish there were more guys like him hanging around today; guys who go out, do what they do, and live with the consequences. More Raging Bulls are needed. Especially now.

So, where are they? You certainly don’t see them in the ring, and if you doubt this, I defy anybody – even myself – to name more than three currently active professional fighters in the world.

I can’t. Can you?

In other arenas, whatever bulls remain appear to be rather tame. It doesn’t matter if they walk or run; they ain’t f@cking all the cows. Or even one of them. Maybe that’s by design, particularly given the purported contribution of the species to carbon emissions. Because if bulls ain’t f@cking cows, there soon won’t be any cows left to f@ck.

Or bulls to f@ck them.

There are certainly all forms of raging going on, but from my perspective, they manifest in light, one might say, effete, motifs. We rage against ourselves. We apologize — in advance – often for transgressions of which we were either previously unaware, or never had committed in the first place. We recast our founding and all ensuing events in terms of crimes against history. We invent new genders for ourselves, and filter virtually all our enterprises through the prism of racism.

To wit: just this past week, our Secretary of State invited the United Nations – that noble body of statesmen and women from more “enlightened” countries such as Iran, Russia, China, Venezuela, Cuba and Haiti, who, when not lecturing their Half Moon Bay Hosts on morality, spend most of their time clogging up traffic by double parking in front of Manhattan Strip Clubs – to evaluate Human Rights in the United States. They will then energetically give us notes. And we will apologize, promise to do better. Again.

If I didn’t know better (and I don’t), I’d wonder if we – all of us – haven’t fallen victim to the same anatomical procedure that converts bulls into steers.

Plainly, though, we no longer stomp around, stampede, seek alpha status in the herd. Instead, we meekly follow where we are led. Of course, we derive some comforts from this. No reason in the world to lock horns/risk injury or humiliation from others in the corral. Plenty of grass to munch – all day long if we wish it. When it rains, they shuffle us indoors. It’s a pretty easy ride – so long as we don’t kick up a fuss.

And, for the moment, there’s plenty of cud to chew – with more promised a little further down the road. It’s coming, so long as we don’t recover our god given anatomy and charge towards the China Shop.

Our schoolmarm/paymasters at the Fed are falling all over themselves to reward us for our docility. On that side of town, they’re printing $4B/day of new, leafy-green currency, and using it to buy the creamy paper — issuing from the lactating udders of their neighbors down the block — in volumes sufficient to place our entire bovine economy into a milk coma. The action, for the geographically impaired, all transpires in the following narrow segment of the Lower 48:

The whole area in question is < 10 square miles, and, if one wants to start at Capitol Hill, take a minor detour to the White House and end up at the Fed, it only requires about 7,000 steps, or less than 3/4ths of the average daily walking distance recommended by, well, whoever it is that recommends these things.

And it is within this slim corridor that the capital economy of the entire world is herded, gelded, housed, fed, watered, and made to do the bidding of its betters, who are calling all the shots for the rest of us.

This past week was an important one from a steerage perspective. On the one hand, inflation statistics, at both the Consumer and Producer level, popped up to levels which are problematic to the narrative. On the other Federal Reserve Chairsteer Powell reassured all of us rolling (Rawhide) little doggies that, nonetheless, he has no intention of reducing the $4B daily udder flow.

And down in the Southeast Corner of our map, the cattle ranchers that control fiscal appropriations settled on a new, new stimulus package to the tune of $3.5T – a bill so rich with cream that it will tax the capacity of our best-in-the-world skimmers, to separate. It contains what one would expect: massive expansion of entitlements (written into permanency so as to preclude future potential-pain-in-the-ass-with-their-own-ideas legislatures from messing with them), the creation of millions of public sector/unionized jobs, and of course, queenly amounts of creamery for climate preservation. The plan is to work it all out among the three ladies that run the joint: Pelosi, Harris and (yes) Schumer, and then shove a pen in Biden’s hand for signage.

We can’t say that we weren’t warned. That the scheme doesn’t roll out precisely as advertised. We pump money into the ecosystem, distribute it according to political prerogatives, acquire control of the voting processes across the country, enfranchise and redistribute to a new segment of the populace that will forever be beholden, and then, in result, lock up the corral and throw away the key.

Will it work? I don’t know. But it is a ballsy strategy — emanating from a crew with a thin majority, which has little in common beyond their absence of testicular matter, and their demonstrated disdain of same.

If it does come to pass, though, we can look forward to one last Rocky Mountain Oyster BBQ, and then revert to our vegan diets. Because there won’t be any more material left to produce Rocky Mountain Oysters.

But if any of you steers out there believe that the sponsors of this feast are not preparing an epic bill of fare for the rest of us to cover, think again. They ain’t handing out sh!t without taking back something they value out of our hides (i.e. our agency), in return.

Meantime, this Raging Steer of a market took a brief pause this past week – perhaps worried that, someday, investeers might have to fight for their own food, shelter and companionship. I will cop to feeling a bit uneasy myself – too many moving parts to fully embrace the continued swishy stampede in its entirety.

Among the concerns is the possibility that central banks may decide to park their ice cream trucks for a welldeserved rest. But I’m here to tell you that this won’t happen. Our bovine bankers will continue to print and buy, because, as illustrated in the following graphs, it is in the unambiguous interest of the political class to which they belong that they do so. Ergo, they will extend (and maybe even expand) this exercise:

Governments, in other words, are issuing debt at the cheapest rates in six generations (and maybe ever), so they’re borrowing at record levels, and using the proceeds to fulfill the agendas they have mapped out.

So, why on earth would these trendlines do anything but extend themselves? Are we about to grow back our gonads and impose some discipline on the proceedings?

Not in this world. Not in this time. So, as a bit of market commentary in this financial publication, I can fairly assure my readers that anything which passes for Taper Talk is little more than Table Talk. Which, according to the chivalric codes of the lordly game of bridge (at which I am aware you excel), is simply not allowed.

In my view, the market needs continued succor from the matriarchy, and will crumble into little pieces if it’s withdrawn. The matriarchy knows what it must do and will fulfill its motherly obligations.

Thus, while, on balance, I believe valuations will continue to rise, it probably will be more of a mincing amble than anything resembling a commanding charge down the ravine, where the untold delights of a passel of panting, virginal cows await. It’s anything but the latter. The Market Cap of the Gallant 500 is up about $10T since the lockdowns. The Fed has printed $4T, Congress is about to hand out an amount (including already approved payments) that totals to $6T. You can do the math yourself.

What it is not, is the fertile issuance from the loins of those Raging Bulls of yore. Like Jake LaMotta,

Thus, in summary, at least for the moment, you must consider me not bullish, but rather, steerish. Know, at any rate, that I’m not proud of this. But with you so far away, me missing you so, and my own flow of juices reduced to such a trickle, it’s about the best I can muster.

TIMSHEL

For reasons I cannot entirely explain, I’ve been thinking a lot about Berkeley lately. Berkeley California. The East Bay. Location of the flagship campus of the University of California System.

I came to this fixation early on, long before I’d ever even visited the place. More likely than not, it draws from my youthful obsession with the 1967 film “The Graduate” and the specifically with the passing lovely (like you) Katherine Ross. Particularly the scene where Dustin Hoffman surreptitiously stalks her around campus, with the sorrowful strains of Simon and Garfunkel’s “Scarborough Fair” playing in the background.

Beyond that, I have some connections to the town, and it has been my experience that if you “have some friends, know some people” in Berkeley, you are impelled to bring up the subject as often as you can.

Well, I have some friends, know some people, in Berkeley.

I thought you ought to know this.

My sister Tiff is a graduate of UCB. She put herself through the joint working as an accountant at a Men’s Clothing Shop that sold anachronistic crew neck sweaters and other stuff that came straight out of the Fifties. Her boss was a fall-down drunk. Tiff did the books, and, presumably for a time, kept him from going broke.

So, I hung out around town quite a bit in the late seventies/early eighties. Loved the vibe at Rasputin Records, which, this very year of Graduate ’21, is celebrating its 50th year of continuous operation. Jerry is gone. Janis is gone. Skip M@^%ther F$%&king Spence is gone. Rasputin Records abides.

I remember hanging out in the vicinity of Telegraph Avenue around 1978 — a point when (as with so many other sacred cultural cows) the local coffee bars were way ahead of their time. I recall entering one of these, scanning the menu (etched, of course, in colorful calligraphy on a chalkboard) and recognizing not a single item (note this was long before Starbucks had rendered such terms as Latte’, Mocha and Frap ubiquitous). As an ignorant, L7 visitor might, I boldly ordered a black coffee, and they looked at me like I had three heads.

Wander Northbound to the end of Telegraph, and you soon run into the threshold of the UCB campus, then the Sather Gate, and, just beyond, the Magnificent Sather Tower, which looks something like this:

Nice tower, no? Well, it may please you to be made aware that it is the third largest bell tower in the world, surpassed only by some structure In Italy, and another in Birmingham, U.K.

For better or worse, though, Sather Tower is a notorious suicide spot, its observation deck deemed by the self-annihilation crowd to be a perfect point to make that final jump. Perhaps this is owing to the long-standing legend that the ghosts of the leapers haunt the place for eternity.

All of which caused some clever individual(s) to paint two circumscribed circles at its base, with the outer one labeled “Undergrad” and the inner form designated “Grad”

I figure it must’ve come from the Engineering School.

I searched for online evidence of this glib, grim prank and came up empty. But I swear it is (was?) there. I saw it myself. On the other hand, I may not, at the time, have been in a state where my observational skills were at their most acute. So maybe I’m misremembering?

All of this came into focus for me when I read a widely distributed WSJ expose’ about student loan debt, which pointed out that, for the first time since they began tracking these figures, aggregate borrowings of graduate students now exceed those of their (by contrast) degree-deficient brothers and sisters. So, as was perhaps inevitable, The Graduates win again (just as Mike Nichols won Best Director back in ’67).

But not by all measures. The thrust of the article was that most master’s degree borrowers – particularly at Ivy League schools, depart with, in addition to their sheepskins, considerably more debt than can be offset by their subsequent earnings power. The medians indicate that the former exceeds the latter by a factor of 5.

The Journal singled out one institution, and, without naming names, it is an establishment: a) of which I am quite fond; b) where I have both received a master’s and have taught in a master’s degree program; and c) that is located in New York City. For the idiosyncratically obtuse, I will add that between 1941 and the time of his Death (1968), Dwight David Eisenhower held only three jobs: Supreme Commander of WWII Allied Expeditionary Forces, President of the United States, and President of the above-referenced university.

For what it’s worth, though, I paid off my loans, and I think the record shows that I amortized my borrowings, if not magnificently, then at least at a better clip than those poor schlubs who went into six figure hock to earn an MFA or a similar credential from the Film School. Many of the latter are scrambling to feed themselves, so current lenders are having a difficult time collecting.

The universities which are recipients of the funds, however, have broken the bank with these initiatives.

The newly credentialed obligees can perhaps take comfort in the knowledge that they are not alone on this journey. In addition to outstanding debt of our newly minted (or aspiring to be so) scholars, which exceeds $1.5 Trillion, State and Local governments owe another $4T. The Federales are in for $30T (not including their trivial and therefore uncounted future Social Security and Medicare obligations)

And as for corporations? Well, let’s see what FRED has to say about them:

Thanks as always, FRED. You never let us down.

The visible totals to which the country is thus into The Man approach $50T and the true number is probably 3x that amount. Our entire GDP clocks in, no matter how one measures it, at about $20T.

Thus, one way or another, and just as is the case with our financially burdened Ivy League MFAs, the entire country has borrowed what amounts to several years of its revenue producing capacity — some of which, presumably, must also be allotted to our care, shelter and feeding.

What could possibly go wrong?

I’d ask those smart guys on Wall Street, but they’re too busy buying up everything in sight. Our indices closed out the week at another set of yawning all-time records. They’re buying stocks, bonds, houses, cars, etc. (They’re a little less enthusiastic, as are their bankers, about the purchase of gold. Which I reckon to be a shame if for no other reason than the eponymous donor of our feature structure – Peder Sather – made his fortune lending to miners in the region during the 19th Century Gold Rush).

But the current buying focus is clearly on equities, and even heightened Taper Talk revealed in the Fed Minutes only caused a pause for a brief selloff on Thursday. By week’s end our indices had recaptured lost ground and then some.

The renewed stock market vigor miraculously focuses on our old friends from the Berkeley region, from jurisdictions such as Cupertino, Mountain View and Menlo Park. In other words, Apple, Google and Facebook, all settled at all-time highs. The good vibes are so strong that they carried Northward, bringing the same tidings to Seattle-based behemoths Microsoft and Amazon.

I don’t see any of it ending soon. It cannot, however, possibly, end well. From this perspective, the upcoming week promises to be interesting. Inflation figures drop. And, beyond that, banks report. Their numbers are projected to be boffo – student loan write offs and tepid gold financing action notwithstanding.

But all of this is an old story – one that I’m getting tired of telling.

I’d rather go back to Berkeley. With you. Where the Sather Gate still greets us. Where the ghosts of leapers long gone offer us there spectral their hospitality. Where they’re still spinning “Cheap Thrills” (Vinyl version, natch) on the turntables at Rasputin Records.

The town has no doubt changed since I last visited. The Sather Tower just last year celebrated its Centennial, but is now no longer referred to as such, but rather, by the rather obtuse handle of The Campanile. Sather Gate, however, remains Sather Gate, and I reckon we can take some comfort in that.

The students are currently spending much more time cramming in libraries than they are at the time-honored ritual of occupying administration buildings. A degree (Undergrad or Grad) from the University of California Berkeley is now harder to obtain, but more valuable than ever, once having done so. Particularly from the School of Engineering, under which circumstance you have my assurance that that a job (with a salary that will not only enable you to quickly retire your student loans, but to retain sufficient funds to afford the exorbitant rents that the region commands) awaits you.

A word to the wise, though. Don’t try to paint targets on the grounds adjacent to The Campanile; the Berkeley 5-0 are hip to this lick and are likely to straight up bust your @ss.

Leaving you nowhere to hide. Katherine Ross and Dustin Hoffman, of course, escaped on a Berkeley City Bus in the final scene of “The Graduate”. Where they ended up, no one can say. I’d like to think that they ultimately booked passage on The Dog. To Paris, TX. Taking with them a cooler full of Deviled Eggs.

But all of that is ancient history. It is current destinations that interest me, so, if you are going to Scarborough Fair, please do remember me to my once and always true love.

On second thought, don’t bother. I’ll do it myself.

TIMSHEL

“C’mon people don’t you look so down, you know the Rain Man’s comin’ to town,
Change the weather, change your luck,
And then he’ll teach you how to… …find yourself”
— “L’America” by James Douglas Morrison (December 8, 1943 – July 3, 1971)

I’ve been thinking about this here note for several months – my tribute to Jim Morrison. Marking the 50thanniversary of his passing.

This holiday weekend, I think it best to honor him as a quintessential American – with all the pathos and bathos embedded therein. Though his vision was always dark and often twisted, he, in any event, called things as he saw them. There will never be another one like you, he once sang. Well, Jim. Back at ya.

A songwriter from an even earlier era (George M. Cohan) once wrote about a real live nephew of Uncle Sam, born on the 4th of July. Jim died on the 3rd (my mother’s 36th birthday), admonishing us that no eternal reward will forgive us now for wasting the dawn.

Lately, I have wondered what he would think of the America as he would find it today – two full generations after he shed his mortal coil. And can only come up with the following:

The country’s mojo, I believe he would tell us, in biting, stinging rhetoric, is in free fall.

But let’s back up for a bit. The history of Jim and The Doors fits with precision to the time and place it in which it unfolded – Los Angeles of the 1960s. In 1967, through a series of improbable events, Morrison, then a middling student at the vaunted UCLA Film School, found himself transformed into the front man of what arguably was the greatest band that America (and maybe the world) had ever produced.

The Doors were an odd, mismatched lot. Doomed from the start and knowing it all the time. But determined to kick up an absolute sh!tstorm before while the ride lasted They didn’t even have a bass player (Ray Manzarek’s magnificent keyboard did double duty on those essential, percussive bottom notes). Jim wasn’t a musician, or, before the Doors, even a singer. He just kind of fell into the role.

The band came together on the shores of Venice Beach, and started pumping out records, angry Rock and Roll, that could match, in sonic force, anything issuing from Zeppelin or the Stones. Jim was a raging alcoholic, who couldn’t be relied upon to show up to gigs, or, if he did turn up, to adhere to any agreed upon musical sequence. He stumbled about, stirring up crowds to such a passionate, violent frenzy that by 1969, it became difficult for them to even book any shows, or, having booked them, to complete a coherent set.

The beginning of the end came in Miami, more precisely, in Coconut Grove. At the Dinner Key Theater, on March 1, 1969. Accounts vary, but it appears, to delicately summarize, that while on stage, (and indisputably inebriated) Morrison performed some benign forms of mock masturbation and fellatio on tragically under-rated guitarist/songwriter Robbie Krieger.

It was the type of thing that, these days, not even the censors at the Disney Channel would think of cutting. But those were different times. Miami was not the sex/party capital it is today. It was a conservative city with pseudo-medieval values, run by middle-aged men with thick glasses and pocket protectors.

The cops arrested Morrison, and he was looking down the barrel at 10 years in Raiford State Prison. So, he bounced. To Paris (Our Paris). And never came back (And we haven’t gotten there. Yet. We will).

But not before recording one last album of absolute perfection – L.A. Woman (which along with London Calling, Blonde on Blonde and Tumbleweed Connection forms my Mount Rushmore of Records). Across countless listenings, I can’t find a single note that I can bear part with.

The title track is so jarring that words fail me. A ride along the freeway, a roam across midnight alleys, through your suburbs, and into your blues. A pulsing but heartbreaking trip to nowhere.

But God oh Mighty! What a ride!

And then, somewhere in the middle (introduced by Jim as a “change of mood from glad to sadness”), the song shifts keys from A Major to A Minor, and into the haunting, clairvoyant chant – “Mr. Mojo Risin” – which, as any true Doors fan will tell you, is an approximate anagram for Jim Morrison.

Just as L.A. Woman was being unleashed onto the masses, the news broke that Jim had died. How or why? No one knows. He had been buried in Pere Lachaise Cemetery – near Chopin, Wilde and Bernhardt, for a week before anyone over here knew he was dead. Speculation as to what happened that day has ensued ever since.

In result, and for at least a decade after, the Faithful held out hope that he hadn’t died, that Mr. Mojo Risin would re-appear. Somehow. Somewhere. Just as the song itself reverts to A Major in thrilling crescendo.

But 50 years on, there’s still no sign Mr. MJR, and, by now, we can be fairly certain he ain’t coming back.

And in the meanwhile, from my vantage point, the country can more accurately be described as Mr. Mojo Falling. We take for granted our good works (and the good things our good works have produced). We stand limply, languidly, greedily washing ourselves in our flaws, weaknesses and shame. We are quick to castigate our forebears for sins they had no idea they committed, and, against which, being dead, they cannot defend themselves.

The unpardonable transgressions of antiquity are, quite handily, the flavors of the month. The orthodoxy now proclaims that our society was established to eternally exploit certain subsets of its citizenry. The argument extends to virtually every aspect of our existences. Words, for obtuse, Orwellian reasons, are being banned in real-time. Arithmetic? Samesies. The rewards of merit are now recast as sins, to be replaced by a squishy construct (administered by an all-knowing, anonymous cast of our betters), referred to as equity.

For some, it’s working out just fine. Corporations slam themselves for conjured up moral failings, in the process buying them leeway to ignore their true failings. It may be their most profitable enterprise.

Our adversaries, of course are even more pleased with us as we scold ourselves and beg our own forgiveness — in the most effete manner that can possibly be imagined. As we exhaust ourselves in efforts to reduce our naughtiness, countries with which we compete commercially eat our economic lunch. Those that seek our outright destruction operate with a free hand, knowing, that while at one time we might come back at them in our full wrath, we now much prefer to wag our fingers at each other in acute, but tepid, disapproval.

So (Jim might ask and did):

“What have they done to the earth? What have they done to our fair sister?
Ravaged and plundered and ripped her and bit her.
Stuck her with knives in the side of the dawn. And tied her with fences and dragged her down”

But don’t listen to Jim: a white male whose father was an admiral in our murderous Navy. The Doors’ records were produced by a subsidiary of Warner Brothers, home of the nefarious and arguably racist Bugs Bunny – a conglomerate that Wall Street has bought, sold, reorganized and financially re-engineered too many times to inventory – all to the significant profit of its prevailing overseers.

But what in heavens name are we wasting our time around here for not to point our unilateral efforts to the benefit of the Ruling Class of Wall Street? And recently, we’ve taken matters to the extreme – flooding the markets with liquidity and negative borrowing rates. Pumping cash not only to private enterprise, but also to consumers – to either spend down on products delivered by our coddled public companies, or to unwittingly invest it into a stock market that confuses many professionals, except to the extent that they are able to manipulate the uniformed behavior of retail investors.

The capital of Investment Nanny State is the United States Federal Reserve, the Balance Sheet of which, already bloated beyond recognition, has doubled to >$8T in less than five quarters. They have so much paper on hand that they’re lending it out to banks in the overnight markets, with the latter snapping it up to the tune of $1T – for a return of 0.02%. They’re still printing money and buying securities at a rate of $120B/month. The mere hint at them doing anything less sends investors into a panic. Which the Fed cannot abide.

So, investors continue to suck of the teat of our Central Bank, levering up at negative rates, gorging on the cream of this largesse, and, of course, issuing debt of every stripe – in record amounts – to keep the juices flowing. And the markets are rewarding this behavior like never before. Our indices are all at record levels. And going higher.

In advance of the holiday, everybody was getting tired of hanging around (with their ear down to the ground), but many managed to stick it out in order to evaluate and react to the June Employment Report. The Commerce Department rewarded them with about as tidy a package as could realistically be hoped for. 850,000 new gigs! This indicates that America might just be getting back to work. To trading its hours for a handful of dimes. But there are still 10 million unemployed across the Lower 48 (+2), and, by estimate, 10 million job opportunities left open. Perhaps these numbers will shrink contemporaneously, as a Federal Government — carrying $30T in debt — stops sending its citizens money to stay at home.

But I’m not counting on it, because mojo, once fallen, is not easily resurrected. I expect bureaucrats to continue to coddle corporations, investors and the masses – until some external force blows the whole gig up. Maybe it will be the Miami Police – in better use of their resources than those associated with their unfortunate actions on March 1, 1969. But I doubt it. Right now, they’ve got their hands full.

When this happens (just like Miami/1969), the music’s over. And the time comes to turn out the lights. I don’t think we’re there yet. The band’s still playing – in joyful, energetic beat that serves as the soundtrack for what has begun thus far, from an investment perspective at any rate, as a Summer of Love.

It won’t last forever; never does. And (paraphrasing the Liner Notes from a long-forgotten Doors album) I can still hear those first sorrowful strains of “The End” drifting in, from another room, to find us.

I can only hope that it finds us together. You and me.

But remember this: the butterfly still screams, the killer is still on the road, and the cold grinding grizzly bear draws hotter on our heels every hour.

So keep your eyes on the road.

TIMSHEL

“Going where the wind don’t blow so strange,
Maybe off on some high cool mountain chain,
Lost one round but the price wasn’t anything,
A knife in the back and more of the same….”
— “He’s Gone” by Garcia/Hunter

I can confirm the above. He is indeed gone. In a fact all them guys are gone. I watched them leave. I can’t say nothing’s gonna bring them back, but that, my friends, is beside the point.

I won’t be naming names on this board. Some of them I’d rather keep to myself. But the public domain is littered of late with purportedly permanent departures, which, by contrast, merit discussion in this publication.

I reckon we can begin with Teddy, who, along with his faithful (and ethnically diverse) companions, is gone – or as good as so – from his post on Central Park West. Some official sounding committee voted formally to bounce him on Monday.

Where’s he going? To the final home of all Metallicized Rough Riders: (Undisclosed Location). Maybe they’ll bring him back some day, but I ain’t holding my breath.

For reasons illustrated in the following chart, I’m hoping that they aren’t taking him too far:

To wit: the cost of containers has gone through the roof. Perhaps this is transitory, but it is worrisome, nonetheless. And before you score me on the topic, I AM aware that the graph describes the price path of shipping a large box from Shanghai to Rotterdam. Moreover, I’m quite clear that T.R. is neither in the former megalopolis of the Far East, nor, presumably, bound for the latter/second largest city in the Netherlands.

But from what I hear tell, beyond rising shipping costs, it’s the scarcity of boxes themselves that is sending these prices heavenward, and, if so, it’s likely a worldwide problem. They could always put wheels on Teddy’s horse and tow him to (Undisclosed Location), but doesn’t he deserve at least the dignity of a container? Which we afford even Skid Row corpses (to say nothing of owners of Mt. Rushmore visages)? Forgive me for hoping so.

More gone than Teddy is John McAfee. Who ran for President. Twice. And lost. Twice. Unlike Teddy. Who also ran. Twice. And won. Once. On the other hand, Teddy never invented a paradigm-shifting software security program. So, there’s that.

Both were crazy mofos, and, for my money, their existences net out on the plus side, having periodically enjoyed themselves, and adding, if nothing else, some much-needed color to the landscapes of our daily lives, which can often only be described as drab.

Gone, also, but perhaps not forever, is that cockroach Chauvin, who got a pissant 22.5. However, the less said about that the better.

Lee is also out of here – faded quietly away on Friday, but nonetheless drawing the attentive condolences of the fabulous Phil Lesh – bass player for our theme song. I never met him but will miss him anyway.

Meanwhile, this past week, the markets managed to resume their “nine-mile-skid-on-a-ten-mile-ride” rally, with the Gallant 500 closing out at its all-time high, and Captain Naz, General Dow and Ensign Russ all perched at proximate thresholds.

And why not? If nothing else, I am grateful to these financial armies for bailing me out on my stubborn, bullmoose, bullish attitude. And I’m not gonna stop here.

Because this hot-as-a-pistol market still feels cool inside. Bids abound everywhere one casts one’s eye. Last week, in auction land, the Treasury hit a rough patch on the two and three-year maturities but was able to magnificently scratch its issuance itch on the seven-year note. Some of this, apparently is owing to an improbable slowing in the supply of newly minted Treasury securities, which, as illustrated below, has devolved to such paltry sums as are matched by the Fed’s monthly purchases of this paper:

I believe this is a temporary phenomenon, as: a) I have a sneaking suspicion that the Treasury Department is gathering itself for some renewed, heavy auction action; and b) a handful of Fed Branch Presidents are going decidedly off script and suggesting that maybe the dreaded taper could materialize sooner than what was officially proclaimed at last week’s FOMC presser.

A pox on these turncoats! What are they trying to do? Kill the party just when it’s starting to shake and sizzle? If they’re not careful, they themselves might end up, like Teddy and McAfee: on our list of the newly/dearly departed.

One way or another, their shenanigans caused some minor liquidations of the favors of Madame X, whose rates rose to a positively usurious 1.524% by Friday’s close. Not time to worry. Yet. But if her real rates (nominal yield less inflation) rise much above their current levels of negative > 2.5%, we might actually need to pay attention, or, worse yet, devote more care, to our capital allocation operations.

But let’s not panic for the moment. Better news takes the form of some Health Care company issuing junk bonds, of seven-year duration, at a record low yield of 2.45% this past week. The issue, of course, was oversubscribed, proving that now is as good a time as any to create and sell new securities, and, for that matter, to buy them. I expect that this process will continue – unabated and successfully – until it doesn’t.

And, in terms of risks, it is my sad duty to report that no, they haven’t managed an exit, stage left. The big news out of Washington this past week was the announcement of an, er, bi-partisan infrastructure bill, and its accompanying Biden Victory Lap. However, it took no less than three hours for Little Joe to let us in on a little secret: the real play is to entice this ~$1T into passage, claim bi-partisanship, and then dump several trillion more into the budget (along with whopping tax increases) through reconciliation.

“Rat in a drain ditch, caught on a limb. You know better but I know him”. If the Republicans fall for this one, then they certainly deserve the fait that awaits them.

But the real losers will be the rest of us, who I don’t think deserve to have our faces stolen right off our heads.

I’m relatively optimistic that it won’t go down this way. It was a dubious strategy to begin with, and it’s off to a flawed beginning. If you want to catch a rat in a drain ditch, you’re probably well-advised against pointing out the drain ditch to the rat just as your plans are being hatched.

The whole saga was so absurd that by Saturday, Biden was in full back-pedal. Said he would never even consider going back on his promise to play it straight with the budget. Of course he’s gonna sign the bill he claims to have crafted! No strings attached!

I hate to press the point, but it appears to me that Little Joe is both shrinking and disappearing in real time. If I’m correct, and current trends continue, there won’t be much left of him by Christmas. He will, for all intents and purposes, be gone. Perhaps, then, we can ship him to (Undisclosed Location), and may not even need a container to do so, because there will be so little of him left to transport.

Meantime, we’ll see if the nine-mile-skid rally has another mile to go over the next few weeks. Next Friday’s Jobs Report, after two disappointments in a row, will be instructive. Then there’s the holiday. And then, in July, we see where we truly stand.

Meantime, we’re still here. A place we’ve never been before, and where we’re not going to stay for long. Wherever we’re headed, it’s somewhere else. Call it (Undisclosed Location).

It’s to a spot, together, where maybe what’s good gets a little bit better, and maybe what’s bad gets gone.

Where (maybe) the wind don’t blow so strange.

There’s a high cold mountain chain not far north of here, where land is cheap and where we might find those who are gone may have went.

Who knows? We may find T.R. up there.

I feel I’m rambling, though. Worse, I’m mixing musical metaphors.

Which means it’s time to take my leave. Yes, he’s gone, and I’ll miss him more than I can say. I want to take a moment to acknowledge and honor those feelings.

And after that?

Well, nothing left to do but smile, smile smile.

TIMSHEL