“Goo goo ga joob”
— The Egg Man (Walrus)

To the best of my recollection, we left off last week determined to hatch plans for that epic Dog Ride, and God bless you for agreeing to grace me with your company — on what promises to be magnificent journey.

In contemplating the myriad delights that await us, it occurred to me that we should bring some provisions. So, what would do you think we should pack? Yes, we want to travel light, but I don’t believe including a (moderately sized) cooler would be inappropriate. Kindly tell me what would please you to submit into this vessel, because, as you know, your wish is my command.

As for me, I ask, humbly, if we might not choose, even feature, eggs as part of the culinary entourage?

Like everything else these days, eggs are more expensive than they used to be, but prices, appear, at any rate, to have stabilized – at least in China:

Egg Prices on Some Rando Chinese Futures Exchange:

I will cop to being a little bit distraught that I had to go all the way to the land of Genghis Khan (and his brother Don) – home of those infamous wet markets — to obtain a proper futures market quote. Especially seeing as how it was eggs that launched operations for my old employer – the world’s largest futures exchange. It is now known as the CME Group, but its original handle was the Chicago Butter and Egg Exchange (Trip Note: let’s pack us some butter too).

I had great uncles or some sh!t that used to stand, freezing their asses off trading Egg Futures in the outdoor markets on the corner of Wacker and Van Buren. But that was a long time ago. Them uncles is all dead. And, in one of the more dubious acts of an organization that makes few mistakes, the CME delisted the egg contract in, like, 2010, leaving us to fend for ourselves.

So off we go to China, but not literally (and certainly not riding the dog). Only to get a sense of what that divine element of our mobile larder will set us back.

And, as long as we are on the topic, it strikes me that if we’re gonna lug eggs around, particularly given the vibe of our mode of conveyance (The Dog) we might do worse than selecting them in their demonic rendering.

I don’t insist. As we discussed the other night, Deviled Eggs struggle to find their place in my Edible Ova Top 10, falling, as they do, below Hard Boiled, Soft Boiled, Poached, Scrambled, Fried, Over-Easy, Raw (yes, Raw) and a couple of other concoctions that have little in common other than their primary ingredient.

However, as Dog Riders are aware, you need more than just eggs to make a Deviled Egg. Also essential, if an unhatched baby chick hopes to rise to the dignity of the latter, are mayonnaise, mustard, vinegar, pickle relish, salt and (of course) and paprika. From there, the sky’s the limit. One can, for instance, also include such dainties as bacon bits, cheese (preferably gouda), and, for the truly Continental, Worcestershire Sauce.

At any rate, whatever recipe is involved, it is beyond dispute that from an edibility perspective, Deviled Egg output has exceedingly wide error bars. Moreover, the Deviled Egg Edibility Quotient (DEEQ) nearly always exhibits perfect correlation to the character, reliability and skill of the culinary artiste that prepares them.

One might, for instance, confidently consume any Deviled Egg that Martha Stewart or Master Chef Charlie Trotter put in front of them. Emeril Lagasse? Hit or miss. But would any rational human ever consider choking down one of those bad boys offered up by a Street Meat vendor in Midtown? Didn’t think so.

However, given that this is a market commentary publication, I’ll let you in on a couple of little secrets: 1) Deviled Eggs are an essential at any meeting of the Federal Open Market Committee (FOMC), and 2) the preparation of same falls exclusively into the portfolio of the Fed Chair. This tradition goes back all the way to the 1791 founding of the First Bank of the United States, by Alexander Hamilton, who certainly did credit to himself at the refreshment table – particularly considering that he was born in the British West Indies.

Clearly, he set the bar high for his successors, with mixed results. Some dude named Lennox did such a bad job, disgusted then-President Andrew Jackson so thoroughly, that he went and revoked the organization’s charter (Jackson was notoriously fastidious about the preparation of his Deviled Eggs). The whole concept of a U.S. Central Bank was thus rendered unstable for the subsequent five generations, and was only resurrected permanently, in 1913, right before the War to End All Wars. When we really needed the money. Among the subsequent Baller Fed Chairs/Deviled Egg Preparation Overseers were Marriner S. Eccles (who financed WWII and generated such a fabulous DEQQ that, inside the Fed, he was referred to as Chairman Eggles), William McChesney Martin (who a really cool name and is the consensus GOAT), G. William Miller (who also served as Treasury Secretary) and (tall) Paul Volcker (who specialized in the critical element of DE presentation, and who also rescued us from that nasty bout of early-80s hyper-inflation).

Since then, it’s been a mixed bag. Greenspan had his triumphs, but also his tragedies. Then came Bernanke, The Innovative One, most famous for inventing Quantitative Easing (QE) – a device that enables the Fed to print new money out of thin air and use it to buy marketable securities.

What is less widely known, however, is the other form of QE he conjured up – Quantitative Egging, under which the main ingredient in our side table concoction is not the issuance of hens impregnated by roosters, but rather, facsimiles thereof — mass produced by the same computer algorithms that spin up the new money.

These went down pretty easy across Big Ben’s tenure, and the process was successfully continued, with feminine flourish, by the fetching Janet Yellen. Who recently (following daintily in the footsteps of G. William Miller) has now bounced across town to head up the Treasury Department.

Her successor – current Fed Chai Jerome Powell is now The Egg Man. The Algo is running hot, perhaps too hot (especially if inflation trends sustain themselves), and investors are currently suspended in breathless wonder as to how long, and at what amplitude, the Machine will be allowed to sputter on.

We got a hint of an answer at last Wednesday’s FOMC Presser, during which Chair Pow suggested that for now, he has no plans to power down the device. However, in a nod to investor worry warts, still ravenous to consume those restuffed paprika-sprinkled yokes (but somehow retaining a concern as to the longer-term impacts of excessive monetary/egg output), he literally said that the time has come to “talk about talking about tapering” the whole operation.

The risk markets did not like this, and the Gallant 500 and other indices clocking in with their worst weekly performance since October. When we all was locked down. When that Big Orange Guy was running the show at the White House and still stood a sportsman’s chance of being re-elected.

And as The Fates ordained, just as Powell stepped up to the podium on Wed, the Fed Balance Sheet crossed the significant threshold of $8,000,000,000,000.00. Which (any way you prepare them) is a lot of eggs.

My own take on the sequence is as follows. I can’t imagine a more dovish statement issuing forth, at the moment, from the Fed. Outside of Egg World, inflation is starting to run rampant (May PPI dropped on Tuesday at an astonishing, above expectation 6.6%), and the citizenry (i.e. the electorate) is feeling the pinch. Prices at the pump, for instance, hit a 13-year high this week. Powell was unable to ignore this, particularly with his former boss (still presumably barking orders at him) working the monetary side of the ledger for the current administration, and not wishing to be blamed, politically, for runaway price increases.

So, what does he do? He keeps the machine running full tilt, maintains current short-term rates at the functional equivalent of zero, but sternly warns us that they may begin to discuss turning down the dials of the former at some point, and that the latter may inch up in 2.5 years. If this is what passes for hawkish monetary rhetoric, it is the limpest such expression that I, personally, can envision him making.

We will get our next indication of his thinking at that horrid annual wingding known as the Jackson Hole Economic Symposium. The good news is that should we wish to attend, The Dog can take us there. There’s Greyhound Bus Terminal is at 105 Buffalo Way, in Jackson, WY, and from there, we can probably hitch a ride to the highbrow conference center where the big action will be going down. Don’t worry, though, even if our supply of Deviled Eggs has dwindled by then, there’s sure to be plenty on hand at the event itself.

Because the Fed will not, cannot raise rates here. There’s too much debt out there, held by too many important institutions (enterprises like insurance companies – who – trust me, we do not want to see bleeding P/L). He can smack talk all he wants, but at the end of the day, the money/eggs, will keep coming down the shoot.

The markets seem to understand this, maintaining Chinese Egg Price Stability (see above), and, perhaps more importantly, buying up Treasury Paper in sufficient quantities to beat the band. In consequence, Madame X and her Aging Aunt: The Flirty Thirty (30-year Bond) are at their lowest yields in months.

Thus, over the last week, we saw a rather bizarre coupling of Treasury Yields and equity valuations. I don’t believe that this love match will sustain itself; the Gallant 500 and Madame X simply have more that divides them than that which brings them together for them to canoodle into eternity.

As such, I gotta think that last week’s equity selloff offers nothing more than a compelling entry point for my crew of intrepid risk takers. There’s no rush here. Valuations could drift down a titch more, and if (when) they rise, it is likely to take us for a long, superficially pleasant, ride. We alight, if we wish, later on.

Kind of like what I anticipate when you and me hop on The Dog, with our cooler full of Deviled Eggs at our immediate disposal. We don’t need to start at the Port Authority; the station in the Delaware Gap will do.

Please clear your mind, mi amiga. And think about our upcoming trip. We should have a lovely time of it, and, as for rising gas prices, well, that’s The Dog’s problem; not ours.

Before we go, I can let you in one other secret, which should put your soul further at ease: Chairman Powell, indisputably the Egg Man, is also the Walrus.

And, therefore, in closing, I can only take my leave where I began — with an enthusiastic “goo goo ga joob”.

TIMSHEL

Ride, I’d like to ride again someday, I think I still know how to play,
I play games now, but it’s not fun, a cowboy’s work is never done
— Sonny Bono

Permit me, if you will, to present a modest proposal. Let’s ride the dog (again).

Among teaming hoards that follow this publication, many probably don’t have any clue as to what I refer. If you count yourself among these numbers, please know that I won’t hold this against you. However, I salute the rest – those who comprehend what riding the dog is, and more so, those who have actually ridden the dog, because (as I hardly need to inform you) riding the dog is more than an action, more than a transitory choice. It is, in fact, an Ethos. The Ethos of The Dog – aka – The Greyhound Bus Line.

I’d call it an alternative lifestyle, but I don’t want to insult anyone.

I myself have ridden the dog — to the tune of several thousand miles. From San Bernardino to San Diego. From Madison to Chicago. And back. So often, in fact, that I consider myself fully credentialed to write about it – from both a practical and aesthetic perspective.

Know also that those of you that believe this mode of transportation to be beneath your dignity are objects — more of our pity than of our derision. That we wear our dog riding chops as badges of honor. As we roll down the Interstate in our air-conditioned custom seats, we are almost giddy in the knowledge that if nature calls, relief is right down the aisle (we will allow, however, that you’re on your own in terms of what you encounter when you enter that private inner sanctum). And we can’t help but scoffing at you down there in your Benz, hauling ass to get to the nearest roadside consumer center and its adjacent rest rooms.

Truth, though, is that our dogs have seen better days. Oh, you can still cop a ride on them — from the Port Authority Bus Terminal on 8th Avenue, for instance — to pretty much anywhere in the Lower 48. But the busses themselves could use some polish, the number of routes is diminishing, and yes, even the built-in privy facilities are becoming, quite literally, more of a “hit or miss” affair with each passing day.

Them big dogs gotta eat, though, and the economics around this challenge are, by appearance, quite vexing. This young century alone, Greyhound ownership has changed hands numerous times. A Canadian private equity firm paid, like, $4B for it a few years back, and has been trying to dump it ever since. During the pandemic, they suspended service across their native Canada, and then (in an act I consider to be high treason) abandoned their home country altogether.

I’m pretty sure they unloaded their U.S. unit – busses, routes and bathrooms, for, like 100M quid (~$140M), and, if so, it implies that those latter-day rovers took a Lhasa Apso clipping on their investment.

But all is not lost. Could there possibly be a better time to reinvigorate this divine corner of private, mobile enterprise? The country is reopening, the planet is on the verge of boiling over (or so I’m told), the price of petrol is through the roof (and going higher), and the highways are jammed up. If we all just committed to riding the dog, we’d be saving money, energy, the environment, and, perhaps most importantly, our precious time. It’s all so 2021. So, if you will, woke.

So, waddya say? Should we book reservations on the dog? Just you and me?

What’s that you ask? No, we can’t get directly to Paris that way — unless you’d settle for Paris, TX, with its glorious bus terminal that puts Versailles (and The Port Authority Building) to shame, an image of which I present (along with that of the town’s principal visual attraction), for your particular enticement, below:

Fear not. I promise to take you to the City of Light — home of Baudelaire. Final resting place of Chopin, Wilde, Bernhardt and (of course) Morrison. Stomping grounds of Hemingway, Miller and Parker — and soon.

Meantime, if you accept my interim suggestion, we can meet at the Port Authority, book our tickets, and arrive at our Lone Star destination in little more than 36 hours. It is the Seat of Lamar County, after all, and, once having registered with the local authorities there, we can check out that tower with the derby on top. Yes, we will ride again, someday, baby, to see that Frenchified cowboy, whose work is never done.

And nothing for nothing, but what currently passes for trading and investment strikes me as being the capital markets equivalent of riding the dog anyway. Illustrations and empirical support for this statement abound in abundance, and I’ll start (naturally) with the Treasury Market, which, tepid yields and inflation threats notwithstanding, is en fuego. Madam X sold off $38B of her favors at auction on Wednesday, and her admirers couldn’t get enough of them. So frenzied was the bidding that it took her yields to < 1.5%. Her younger sisters (2, 3 and 5-Year Notes) were objects of similar rapture during their own auctions, and even our past-her-prime 30-Year Bond drew excessive, passionate attention from her suitors (as of now, anyway, the old gal has still got it).

Then, on Thursday, the big Consumer Price Index figures dropped, at a terrifying 5.0%. The Treasury Market’s response? Bid ‘em up!

As such, and by all appearance, investors appear eager to ride these flea-ridden mutts, greedily gobbling up any tidbits they are inclined to yield. Readers who have sufficient devotion to recall my crudely formed real interest rate calculation should be aware, though, that according to the formula, real rates are now at -3.5% (10-year rate of 1.5% less 5% inflation). To me, this doesn’t even rise to the dignity of giving a dog a bone.

But investment dog-riding is not limited to the Treasury Complex; plenty of this sort of thing going on in other asset classes as well. To wit, over the past month, the best performing instruments in equity-land are those short interest indices and baskets. And nothing says “downward dog market” more than generating your alpha by owning bundles of securities that everyone else is short.

One can, of course, eliminate the middleman and invest directly in these names on one’s own. Kennels full of Redditors, as is well known, are doing this very thing. While still not done with their Affaires du Coeur with sellers of obsolete gaming cartridges (GME), they’ve nonetheless expanded their infatuation to include the owners of movie theater complexes (AMC), along with a company that provides – get this – a novel concept called e-commerce services (WISH).

No judgment here, and I’m not saying that any of these companies – per se — are dogs. But whatever species to which they belong, we are unquestionably riding them.

I don’t have much to add to the socialized wisdom on these topics, and, meanwhile, me and my buddies find it more compelling to try to figure out which name is next. Best suggestion I’ve heard thus far is Tootsie Roll Industries (TR), a company whose exclusive mission is the production of, well, Tootsie Rolls.

Toot Toot Tootsie – Hello!!

I really like Tootsie Rolls – who doesn’t? Plus, they have the added appeal for me of being manufactured on the banks of the Chicago River. And, in consequence, for the six warm months of the year, the late afternoon West Loop is filled with the delicious aroma of chocolate.

But more importantly, the stock looks ripe for meme-ing. Tootsie features a healthy 20% short interest, a spiffy  P.E. of > 40, declining cash flows, etc. All the trimmings necessary for a canine joy ride. But these things take on a life, vibe of their own. I don’t know what drives the selection process, and, for the most part, I don’t care.

Meantime, for actual and aspiring market dog riders, I think it’s a fine time to either climb or stay on board. The Washingtonian cupboards are full of kibbles and their custodians will dole them out without expecting us to either beg or roll over. Prices in the real economy are rising, and neither policy makers nor investors are showing particular concern. We’ll get a measure of corroboration of this dynamic next week, with Tuesday’s Producer Price Index Report (projected at a petrifying 6.2%), and Wednesday’s FOMC meeting, where (shock) the Committee is expected to let the Inflation Dogs ride. So much so, in fact, that its latest Dot Plot looks like nothing so much as the trail left behind a pooch that has been ridden too hard, for too long, and is destined to be put away wet.

Not much, therefore, is being asked of the investor class; only that they keep quiet and enjoy the ride. We are likely to hit additional potholes on this stretch of road, which (not gonna lie) has offered anything a smooth sojourn lately. But I believe we’re certain, ultimately, to reach our intended destination of higher valuations.

And as for the physical ritual of boarding and occupying a Greyhound Bus, I’m ready if you are. And I don’t particularly care about the destination. The Westminster Dog Show started this weekend, but they’re holding it in Tarrytown, NY rather than at the Garden. So what better time to hop on our silver, motorized canine and speed away.

So yeah, let’s do it. The Tootsie Rolls are on me.

TIMSHEL

I see you got your list out, say your peace and get out
Yes, I get the gist of it, But it’s alright
Sorry that you feel that way, the only thing there is to say
Every silver lining’s got a Touch of grey
— Jerry Garcia and Robert Hunter

For once in the storied history of this publication, I’m gonna get straight to the point:

Let’s go big.

Let’s cut taxes.

Across the board.

Slash the personal rate in every bracket. Take capital gains taxes to zero. Eliminate the death tax.

Obliterate that gruesome FICA withholding. Or at least that horrifying employer match part.

Discontinue the income tax for New York City residents. Cut state taxes – in New York, Illinois and New Jersey (yes, Jersey).

Do not cut taxes in California (or Oregon or Washington State); in fact, it wouldn’t bother me if you raised them. Even if it is the state of my birth. Despite my having tons of friends, family and even clients out there. Because I don’t like the way they roll in Sacramento (or Salem – where my sister lives, or Olympia) and don’t believe we should encourage such behavior — any more than is necessary in the interest of decorum.

C’mon, Biden, you said that you wanted to go big. And this is the way to do it. I know, you might get some whines from Warren, sobs from Sanders and squawks from The Squad. But let me ask you – who’s running this here show? A soon-to-be-octogenarian curmudgeon from Vermont? A 90-pound female former Harvard Professor? Four Windy Wendy Whiners in the House? Or the guy who once confidently proclaimed he’d like nothing better than to take his predecessor (who outweighs him by at least 5 stone) out back and beat the sh!t out of him?

I’m here to inform you that you’d be delighted with the result. The economy would explode. Innovation, the scope and breadth of which we could only, heretofore, have dreamed, of would materialize. Professor Laffer would (yet again) be proved correct – the government would actually end up collecting more revenues than even the huge pile it is extracting at the moment.

And, whatever fiscal hole was left in the aftermath, the Fed could just print away. After all, it’s what they’re doing now, and how’s that working out?

Yup, great. Especially for the capital economy. After lurching about for 3-4 weeks, the Gallant 500 and its brothers/sisters in arms gathered themselves rather gallantly this week, with the G5 settling just 3 skinny points (0.071%) below its all-time highs. In addition, our Fair Ladies of Adjacent Asset Classes are bestowing their favors in dainty, divine portion, with Madame X yields submerged to 1.55% and Vixen VIX in sweet repose at nearly pre-virus lows: 16.42.

Much of the love came gloriously at the end of the week, in the wake of a May Jobs Report, which, if problematic from certain perspectives, was a received with unmixed delight by market participants.

And all of this before we put into action our jointly devised (yes, I’m willing to even share authorship credits with you) go big/tax cut plan.

Two forming cumulus clouds (a touch of grey), however, loom menacingly on the horizon.

The first is embedded in the above-mentioned Jobs Report, which unfolded in such a way as to corroborate the emerging hypothesis that the United States is, improbably, suffering from a Labor shortage. Just as we are getting the “all clear” to actually leave our houses, the Labor Force Participation Rate is shrinking. Small businesses are nearly uniform in their complaints about their inability to fill open positions. This problem is particularly acute in the leisure and hospitality industries, the annualized 25% increase in median wages for those sectors notwithstanding.

So, the restaurants are full, but the prices are high, and the service is less than lightening quick. That’s OK, honey, because you know what we’re gonna do? We’re gonna take our time, eat slow, and then order a couple of hot fudge sundaes for dessert.

Which brings us to the other pending problem (the silver lining with a touch of grey): Inflation. While there have been, as previously reported, some ebbs and flows in these realms, the directionality of essential commodity prices is unmistakably towards the heavens. West Texas Intermediate Crude Oil closed Friday at five year highs — ~$70/barrel – in striking contrast to that surreal interval last spring, when, for a brief instant, sellers were actually forced to pay up to $40/unit to rid themselves any crude they had hanging around.

Published reports indicate that California (which should not be encouraged) residents could be paying $7/gallon at the pump this weekend. And the driving season has only just begun.

Thus, for typical the wallet-stretched, SUV-driving, non-kosher-keeping, restaurant-preferring Californian (who should not be encouraged), the pressure is illustrated in the following images:

I reckon my CA friends will suck it up, though, because many of them are flush with the incremental cash to assume the extra cost burden.

And the cash keeps coming – from the Fed and from Capitol Hill. The dynamic has reached the point where it is beyond dispute that a) financial institutions will buy unlimited amounts of Treasury paper at a zero percent yield; and b) millions of able-bodied citizens are, on balance, better off spending their days waiting for government checks, and then Driving to Carl’s Jr. (where I hear the service is slow, but we got nowhere we got to get to in a hurry anyway) than they are, tramping off to the job site or office.

The answer? Cut taxes. Big. Across the Board. Maybe even in California.

A theory has emerged in forums not yet banned by Big Tech Overlords that the direct payments to the jobless from the government are a back-door form of raising the minimum wage. Having failed, thus far, in passing a floor of $15/hr. (so the theory goes), the links between subsidized unemployment and labor shortages are a suitable substitute: forcing business managers to pay an equivalent amount (or more) for able-bodied workers.

I’ve no empirical way of testing this hypothesis, but if it’s true, then what better way to energize the strategy than cutting taxes? Hiring managers, facing the high-class but mounting challenge of processing new business flows, would be incentivized to offer deals that might impel even our most dyed in the wool slackers off the couch. Plus, with FICA gone, owners and workers might actually save money – particularly if the former pay their staff in the form of stock options, which, under my plan, would be taxed at zero.

And before you call me out for not attending to it, let’s address the following question. Does the strategy place our two cumulus clouds on a thundering collision course? Or, in other words, would a tax cut be inflationary?

Probably. But I think, on balance, we’d be better off, unleashing the divine benefits of productivity gains and excess demand in a surging economy. There are worse challenges than this to confront in this world, you know.

In addition, a tax cut would show our global trading partners – including China – that we mean business. We might even steal some commerce back from economic juggernauts such as the Ireland or the (soon to be reestablished) Republic of Texas.

It would also be, presumably, accretive to the hard-pressed investment class, but far be it for me to feature this argument. I continue to believe that with gushers of liquidity floating around — of sufficient size to rival the untapped Saudi Oil Fields, opportunities for upside capture exist in growing abundance – with or without a tax cut. It’ll be a little tricky here, but, at the moment, I don’t think markets can’t sell off much, and are more likely to climb to materially higher elevations. Throw in those tax cuts, and, well, one can always dream.

But this proposal is not for professional investors; rather it’s for the masses, those holy recipients of crocodile tears and little else. Cut taxes and they be rockin’.

As for us, well, like I was singing to you just the other night: We. Will. Survive. Which will take some work, but I think we’re equal to the challenge. We’ll start with a trip to Carl’s Jr. But not in (not to be encouraged) California, because the company long ago bounced to the (soon-to-be-reestablished). Republic of Texas.

And so…

The shoe is on the hand that fits, There’s really nothing much to it,
Whistle through your teeth and spit, cause it’s alright,
Oh well a touch of grey, Kind of suits you anyway, That is all I have to say…

Actually, not quite. All I have to say, that is. But the rest of the message I’d like to deliver in person.

Meanwhile, I’m off to do some old-fashioned Washingtonian lobbying, It must (indeed) be getting early and (yes) the clocks are running late. The time has come, in other words, to make my move. I’ll take the Acela bullet train. D.C. is a buttoned up town, so I’m wearing a silver tie with (an obligatory) touch of grey. And, in a final turning of the tables respecting my efforts, and for the benefit of all, I ask you to wish me a sincere…

TIMSHEL

Well we all need, someone, we can feed on,
And if you want it babe, you can feed on me,
Yeah we all need, someone, we can bleed on,
And if you want it babe, you can bleed on me
— The Glimmer Twins

Nope, this note ain’t about Bob, nor pertainin’ to his 80th Birthday. So, yeah, shame on me.

Let’s us instead take a moment – this moment — to celebrate what I believe to be the Stones’ finest record. If you replace the “Country Honk” with “Honky Tonk Women” (they’re basically the same song, with the latter given the sublime rock and roll treatment that it so richly deserves), it wouldn’t even be close. Mostly, those of us (pretty much everyone on the planet) who ruminate over these matters are fixated on the debate as to whether “Sticky Fingers” or “Exile on Mainstreet” legitimately owns the top spot. And I will allow that the band probably reached its musical apex on those albums. But they also contain some clunkers (I mean, I know it’s blasphemy to say so, but is, for instance, “Moonlight Mile” even listenable?). Meanwhile, from Song 1/Side A (“Gimme Shelter”) to the last number on Side B (“You Can’t Always Get What You Want”), (again swapping in “Honky Tonk Women”) I’ll take LIB every time.

For what it’s worth, a similar calculus applies to my evaluation of the Beatles’ Catalogue. I think it’s pretty much agreed that they peaked at the end of their run, but among those who obsessively follow the Fab Four fan pages (pretty much everyone on the planet), best album designation reflects a split decision between “Sgt. Pepper”, “Abbey Road” and (unjustifiably in my judgment) “Rubber Soul”. But if you add two of their masterpieces – recorded during the same sessions but released as singles and never included on the album (“Strawberry Fields and “Penny Lane”) – it’s no contest. Pepper by a landslide.

I personally have a deep soft spot for their penultimately recorded/last released album – “Let It Be”, with its under-appreciated gems such as “The Two of Us”, “Dig a Pony”, etc., (to say nothing of the masterpiece title track or the magnificent “Long and Winding Road” and “Across the Universe”), but nobody gives it consideration.

I thus find “Let It Be” and “Let It Bleed” to be two of the most underappreciated records of that era – bittersweet messages of farewell to the decade of the sixties, which also give warning of a more problematic, less idealized vibe waiting around the bend. They were recorded contemporaneously, and illustrate almost to the point of perfection, the whole Beatles/Stones dichotomy.

On the one hand, we have the lovable (if disintegrating) Fab Four, warbling divinely about visits from Mother Mary, waking up to the sound of music, and winding roads always leading to your door. On the other, there are the scruffy Stones — in the midst of sacking the lead guitarist that formed the band (who died a month later, mysteriously, in his own swimming pool), riffing on about junkie friends, shoot ‘em dead, brain bell janglers, and, of course, enticing us as follows:

We all need someone, we can dream on, and if you want it babe, you can dream on me, Yeah, we all need someone, we can cream on, and if you want it babe, you can cream on me

Yes, upon further consideration I insist. Please do. Cream on me, that is. The way only you can.

And gun to my head, I’ll have to pick Let It Bleed as the superior, more relevant musical statement.

“Bleed’s” messaging may, in fact, be perfectly timed for many of the custodians of the portfolios I track, which ended the forgettable month of May, ’21 with an even more forgettable year-to-date performance profile, leaving their overseers burning like a red coal carpet, mad bulls that’s lost their way.

And I’m here to tell you that the way it’s all gone down is one that is particularly painful to your scribbling risk manager. Because it’s not like these books are getting blown apart; rather, they are simply suffering a sustained interval of losing more than they’re making.

In the trade, we call this the “slow bleed”, and, for a number of reasons, there’s nothing more agonizing for a risk manager than the “slow bleed”. First, we always get blamed for this sh!t. But hey, that’s OK, because what on earth is anyone paying us for other than the ability to blame us when things go wrong?

More problematic is that there’s not much in the field of risk management to be done to address the “slow bleed”. Often, and as is the case at present, there’s nothing wrong with underlying portfolio construction, which, in fact may hold more promise than it has held in many a month. Moreover, the losses in these cases often have little to do with sub-optimal risk management. But when you’re in a cycle where you make 25 basis points on Monday, lose 60 on Tuesday, gain more than a percent on Wednesday, are flat on Thursday and drop 1.5% on Friday – ending the week (if my math is correct) down nearly a percent, and then it’s lather, rinse, repeat, for several weeks, whatcha gonna do?

Do you, for instance, let it bleed? I’ll give my opinion at the conclusion of this address.

First, let’s look at the market conditions that are, in my judgment, at the root of all this monkey (man) shine. Though you wouldn’t know it from the chatter in my circles, our equity indices are a) hovering around all-time highs; b) (mostly) up double digits for the year; but c) trading in very narrow ranges for Q2 — now 2/3rds in the books. The Gallant 500, for instance, has been sleepwalking between a 41 and (modest) 42-handle throughout. Most of the data we care about (or should) is already in the books as well. And, between earnings/economic data, and the madness of the current policy debates, it’s all confusing as hell.

Preceding installments have warned, Casandra-like, of astonishing acceleration in pricing patterns of stuff we actually use, like Wheat, Corn, Iron Ore, Led, Tin, Aluminum – even Baltic Shipping — and of the vexing, intractable problems that the economy would face if these trends were to continue. But then, as if on cue, each and every one of these markets put in a V-top. Even Baltic Dry (let’s have a look, shall we?):

Baltic Shipping – Not for Landlubbers:

I still got nothing I need to send by boat across the oceans, but reckon I can take comfort, nonetheless, in the reality that those who do are not witnessing their increasingly pricey cargo being pitched on endless, cresting waves of rising logistics expense.

But I’m still troubled. Why did the price increases reverse themselves, all at once, in the beginning half of May? Is it a temporary anchor drop? A respite from an inexorable journey, that so many out there portend, to rising oceanic levels? Or, conversely, a reversion towards more rational price conditions?

I reckon we’ll find out. But in the meanwhile, were I you (and I am), I’d be keeping a close eye on these here tidings. Because if the surge to higher elevations resumes, then we’ve got a genuine problem with inflation on our hands. If, conversely, physical commodity prices stabilize, then we’re looking at a capital economy that can continue to manufacture excess liquidity – already at historic levels – to its heart’s content.

And lord knows there’s plenty of that out there. Excess liquidity, that is. As was prophesied by the Monetary. Gods, the Fed’s overnight auctions of Treasury Paper hit record levels this week – at a cool ~$500B. The bids at these affairs tend to become most frenzied at the end of each quarter, so the likelihood is that last week’s records won’t stand for very long. Somehow, improbably, there’s just too much cash chasing too little paper, so institutions are wild-eyed to get into this complicated game, the fact that it produces zero return notwithstanding.

Again, I cannot imagine why the Central Banks would discontinue this action if there’s no true inflation blowback with which to contend. I mean, after all, on the other side of the District of Columbia, is there any inclination to stop spending and redistributing until there are true consequences for the sponsors of this largesse? One wouldn’t think so.

And, turning to that subject, in classic pre-holiday “Clinton Tax Return drop” form, Biden released his $6T budget plans on Friday afternoon. I know it’s blasphemy to suggest that he reverted to this old trick, but why, otherwise, would he publish such a monstrosity just as everyone was bouncing for a holiday weekend that may be as sorely needed by the masses as any in recent memory?

It features millions of new unionized federal jobs, created, to take care of the sick, administer to the elderly, watch junior while mummy and/or daddy tramp off to their jobs at the solar and wind farms, and audit our tax returns – all in the name of, er, infrastructure. In addition, of course, it jacks up capital gains taxes, retroactive to last month, to an astonishing 43.4% — and that’s just at the federal level. When you add on state and local levies, and then throw in the proposed dismantling of the Intellectual Property rights of American innovators, you could wonder if the package might not dampen the enthusiasms of latter-day Edisons and such. Which would certainly be a shame in my book, because, to my way of thinking, we need nothing so much as latter day Edisons. As many of them as we can spin up.

But the market, by its actions, seems untroubled by it all, in my judgment primarily owing to that enormous and growing gift of excess liquidity. We are figuratively drowning in cash with no place to put it.

Other than the markets.

None of this puts me into a “there will be an answer, let it be” mood. If investors are a bit troubled by all that is going down, they (as I like to say) come to this condition honestly. But I think that on balance, we gotta stick to our guns here, cover up, and withstand the bloody little flesh wounds that continue to come our way.

So, I’ve been advising my clients to hold on to core positions, and, if necessary, trim or shed everything else. Does this rise to the dignity of “let it bleed”?

Perhaps. But I’ve just got a feeling (a feeling deep inside) that there’s a next big leg up in this rally, which may not transpire immediately, but which is coming, nonetheless to a (recently reopened) theater near you.

“Yeah, we all need, someone we can lean on, and if you want it babe, you can lean on me”. So opens the title track to this week’s feature album, and it’s a sentiment I echo. But only to you.

To the rest, while I won’t advise them, unilaterally, to let it bleed, I do think that a few more drops of that internal crimson fluid emanating out of our portfolio veins may indeed stanch the flow, leading to better fortunes, a little further down the road.

I’m not Mother Mary, lord knows, but these are what pass for my words of wisdom for the moment, my friends. Now it’s time to let it be.

TIMSHEL

To Bob and his Back Pages (so much older then, younger than that now). On the occasion of his 80th Birthday.

Let me state flat out that Bob’s 80th merits an entire column, maybe more than one. But somehow, this week, I didn’t have it in me. Maybe I’ll get to it in the next edition; if not, shame on me.

Meanwhile, several years back – more than I care to admit – I published a piece called “The Ten Commandments of Risk Management”. You can (if you care to review it) find it at the link provided below. For what it’s worth, I would probably now tweak it a little; not much but a bit.

Some such wisdom should be (but often isn’t) etched in stone. Anyway, here it is:

https://genriskadvisors.com/risk-philosophy/

I got to thinking about my risk tablets lately — in light of the current state of madness in risk-taking land. Some of its edicts are indeed universal – particularly my Commandment X (Ten): Obey the Actual Ten Commandments. Here, I refer to the ones in the bible. Like, don’t lie, don’t steal, don’t kill. Honor thy father and mother. And all the rest. In my many decades in the field, I have found that adherence to these gifts from above — as delivered by Moses himself – will do you no harm in your investment travels. And will do those with whom you interact a great deal of good.

But then my thoughts turned to what may be a more pressing (albeit earthbound) need: the development, if you will, of a Bill of Risks — a set of essential modifications to a yet to-be-written Risk Constitution. Just like our Founding Fathers saw fit to amend their divine original document, all those years ago.

But first, in terms of the above-mentioned Constitutional Bill of Rights, I have long held a particular partiality to the Third Amendment, which holds: “No Soldier shall, in time of peace be quartered in any house, without the consent of the Owner; nor in time of war, but in a manner to be prescribed by law”.

Pretty important, right? Because I can assure those of you who have never suffered this indignity that encountering a bunch of soldiers quartered in one’s residence during times of peace (or, unlawfully, during times of war) without one’s consent is buzzkill of epic proportions.

But given what I’m currently witnessing, my attention focuses more acutely on the bottom of the list. I’ve always had a difficult time discerning between The Constitution’s #9 and #10, which essentially, and (perhaps) redundantly, advise us: “Hey you putzes, you are allowed to do anything you want to do that we (or the States) have not otherwise outlawed”.

In a better world, we wouldn’t need such guidance, but the Framers, in their infinite wisdom, knew us to be obtuse, so they chose to remind us that freedom means freedom. Does this still hold? Lately, and witnessing the relinquishment of certain liberties being conflated with virtue, I’ve had my doubts.

I have had neither the time nor the energy to put together a comprehensive Bill of Risks, but if I was to jump ahead to the penultimate one (#9), it would mirror its Constitutional Opposite Number, stating that portfolio managers can pretty much do anything you want with their books, provided that: a) it is consistent with their Offering Memoranda and Marketing Materials; and b) is not otherwise prohibited by Securities Law.

Oh yeah, and they probably should also clear any sketchy trades with your Risk Manager (if they have one).

Other than that, you PMs are pretty much at liberty to act as you see fit. Bail out of Bitcoin? Check. Fiddle around with factor models? If you wish. By some SPACs and then package them into a SPAC of your own? If you must (just leave me out of this last one, OK?).

And now to Number Ten: you and your investors/capital allocators must be willing to live with the results.

I’m not sure if the latest market doings rise to the dignity of a Constitutional Crisis (Risk Management Vintage), but we may, in fact be getting close. Returns in my universe have been nothing short of putrid. And are getting worse. And alpha, oh sweet angel alpha, is painted in redder hues with each passing day.

Our equity indices have more or less flatlined for several weeks. The Commodity Complex, somehow, and improbably in my judgment, has backed off from its rageful advances, Madam X remained at a sated and seductive ~1.6% yield. Vixen VIX, all the overwrought action around her notwithstanding, has stayed obedient like a genie in her bottle – around 20. Meanwhile, rolling monthly returns are plunging.

We can always (conveniently) blame the crypto market, which, in case you hadn’t noticed, is getting crushed. And I’m here to tell you that it’s about time. Not that I have anything against crypto – long may it reign. But it has been, is, and will be on a collision course with the current vibe of our political economy, which seeks to impose itself as rudely as it can into all our private affairs. In an environment where our Treasury Secretary is flying around the world in an attempt to set minimum global tax rates – so as to enable our government to jack up levies on these here shores with competitive impunity, where our central banks are whizzing out new cash that is dribbling into oceans of excess liquidity – do you really think that our paymasters are going to roll over and allow a parallel economy to shove them aside and dilute their money grubbing powers?

Consider the recent BTC selloff, therefore, to be a small taste of what’s to come. Which is not to say that Big Bitty couldn’t gather itself and climb to previously unbeached thresholds. The way things are going, it very well might. But when the Internal Revenue Service and even the Chinese are checking in to contain the crypto fires, well, let’s just state that I think governments have the juice to dampen or douse the crypto flames. It’s hard for me to believe that they won’t continue to do some hosing, digital currency style.

Much of the above-mentioned juice takes the form of excess fiat currency liquidity, which is reaching such frightening proportions that it defies verbal description in this family publication. So, let’s use a visual:

Now, unless you’re FRED (or a guy like me), these pictures may be confusing. But they do tell a story – one of: a) the printing new cash; which (surprise); b) is flooding its way into the money stock; but c) not circulating particularly well through the economy.

It’s enough to make a latter-day Moses (risk rabbi) smash down those Charlton Heston slabs, and consign his minions to forty more years in the desert.

And it’s also enough to bring about a couple of other outcomes. First, if I’m in control of this here show, the very last thing I want to see is a bunch of crypto mooks upstaging my narrative.

Perhaps more importantly, though, it socializes a critical message to those wandering tribes of investors: go forth and buy risk assets.

A look at the recent action in the Fed’s Overnight Repurchase Facilities illustrates the point. As mentioned last week, our Central Bank doesn’t just print money and let it sit; rather, it uses these proceeds to purchase securities issued by its besties over at the Treasury Department. The latter, now run by the former Fed Boss, is issuing a great deal of late, more than, like, even usual, and selling these creations – to insiders – at auction. Sometimes the buyers only want to hold this paper overnight (so as to obtain the microscopic level of interest income that cash balances fail to offer) and then want to return it to its natural receptacle – the Fed. So, the Treasury issues, the Fed prints, buys, and sells its holdings, overnight, to the banks, who are accumulating more cash deposits than they can handle. So, they buy more. From the Fed. And then return it. The next day. To the Fed. Then it’s lather, rinse, repeat. One has to admire the futile elegance of this circle jerk.

Because lately, the banks have been buying more of this overnight paper than ever before, and at higher prices/lower yields. As such, untold numbers of bank clerks are employed at the task of bidding for govies — issued by the Treasury, purchased by the Fed with newly minted currency — and then sending them back to the Fed in the morning, copping fractions of basis points for their efforts.

One would think there’s a better way, but I won’t get into that as of now.

I will state, however, that the charts rendered above (along with their explanatory notes) offer a vision of excess cash that almost certainly will eventually find comfort in the warm, if capricious, embraces of risk assets. There’s virtually nowhere else for it to go.

I know it’s tough out there, my loves, but here I refer you to the magnificent pre-amble of the yet-to-be-written Risk Management Constitution. “We the people of the coddled investor class, in order to form a more perfect self-image, secure returns for our allocators, and (more importantly) fees for ourselves, do hereby ordain and promise to someday establish this Constitution for the Risk Management of our Portfolios”.

Well, it’s a start anyway. In the meantime, before I get around to writing the document itself (along with the first eight of its sacred amendments), my best advice is to chill awhile. Maybe cut back on your books.

And look for buying opportunities, which will come like manna from heaven, and perhaps lead us into the Promised Land of the Next Big Rally. Like Moses, I can see it, but may not get there with you. It may fall to my (lovely) assistant to lead you out of the desert and inside the Walls of Jericho. If history is any guide, you’ll have to fight to penetrate this fortress. But with patience and intestinal fortitude, you’ll get there.

But, like Dylan said (or should have) “you don’t need a risk man(ager) to tell you to when to cut expose(ures). He turns 80 on Monday, and may God keep him. Moses is said to have lived to 120, so maybe Bob is only 2/3rds home. I certainly hope so, because he’s my Moses – the giver of my law. In one of my favorite biblical passages (Deuteronomy 34:6), it is stated that at the time of his death, Moses’ water had not left him.

And so it is with me, baby. Got plenty of juice, enough to lead us to the Promised Land. As for the rest of you, I suggest you adhere to the Commandments and the Constitution, which, absent other signposts, and the yet-to-be-written status of the latter notwithstanding, is about the best chance, you, I or any of us got.

TIMSHEL

“Would you tell me, please, which way I ought to go from here?”
“That depends a good deal on where you want to get to,” said the Cat.
“I don’t much care where—” said Alice.
“Then it doesn’t matter which way you go,” said the Cat.
“—so long as I get SOMEWHERE,” Alice added as an explanation.
“Oh, you’re sure to do that,” said the Cat, “if you only walk long enough.”
— Lewis Caroll

Oh Lord we pay the price,
With the spin of a wheel – with the roll of the dice,
Ah yeah you pay your fare,
And if you don’t know where you’re going,
Any road will take you there
— George Harrison

Hard to believe that George has been gone nearly for 20 years. On the other hand, we’ve managed to scrape by without the living presence of Charles Luftwidge Dodgson (aka Lewis Caroll) since early 1898.

Harrison’s final album: the magnificent, posthumously released “Brainwashed”, opens with “Any Road”, in bouncing, joyful tribute, to the above-mentioned writer/inventor/mathematician, and his most famous work.

I got to thinking about all of this – not gonna lie – because I’ve been feeling lost lately, more lost than even usual. I’m on a road, but I don’t know which one. And I don’t know where I’m going. So, I reckon them dead Brits are right – under the circumstances, any road will do.

At least I’m not alone. In fact, I observe this condition pretty much everywhere I turn my attention. Take the Economy, for instance. And the markets.

First, the Economy, which looks like a combined on-ramp/off-ramp, attached to a roundabout, in the middle of a cul-de-sac. The most vivid image that comes to mind is that of the Chicago’s Circle Interchange, often referred to by local traffic reporters as the Spaghetti Bowl:

The Nexus of this madness is the intersection between the Eisenhower, (successor) Kennedy and Dan Ryan Expressways. I’m not sure how Ryan (who rose no higher than Cook County Chair) made the list. But then again, Chicago, like a lot of cities, has a rather idiosyncratic manner of deciding such matters. The entire matrix is named after a whirling dervish of a former mayor (Jane Byrne). The City Council just passed an ordinance rebranding the functionally but elegantly named Lake Shore Drive to honor its first “non indigenous” settler: Jean Baptiste Point Du Sable – who was indisputably one hella guy. But I thought, these days, we were all about indigenousness. Did I miss a memo?

Anyway, you gotta admit, it’s a hot mess of an automotive puzzle. Especially (trust me here) at Rush Hour. You merging out? Merging in? Veering off course? Going in a circle?

Well, Yes (and Yes and Yes and Yes). And so, for that matter, is the Economy.

By way of elaboration, the BLS recently served up an exceedingly tepid April jobs report, featuring a disappointing number of new gigs created, along with an increasing Base Unemployment Rate. Then, this past Tuesday, this same group of tax-payer-funded statisticians improbably informed us that there are now 8.1 million career openings – the highest number in at least ten years, and, maybe, ever.

Retail Sales clocked in at a big fat goose egg (0.0%).

It was also Pi Week (the Greek symbol that us dilatant economists use for inflation; not the truncated appellation of that dude who survived nearly a year in the lifeboat that also carried a zebra, an orangutang, a hyena and a Bengal Tiger), with a great deal riding on its outcome. And, sure as sh!t, on Tuesday, the Consumer Price Index dropped in at a somewhat-alarming 4.2%. But that was just prelude. Wednesday, the Producer Price Index landed like a Bunker Buster at 6.2%.

Now, in a normal economic paradigm, CPI and PPI usually come in pretty close to one another, and are often, as economic indicators, indistinguishable. However, now, it seems to me that Producers are, indeed, in receipt of an important memo — not yet distributed to us put-upon Consumers. Supply chains are tighter than Penn and Teller (or you and me).

I heard from a friend about a friend in the meat distribution business who says that the wholesale cost of skirt steak has more than doubled over the past few months. Now, I like skirt steak, provided it is not prepared by my late Grandma Sylvia, who (god rest her soul) could turn the finest slice of Kobe Beef into shoe leather in a heartbeat. But it is widely considered to be at the bottom rung of the cow meat ladder.

One doesn’t envy the plight of Ponderosa patrons this summer, as (in addition to missing the salad bar) they may experience an extreme form of sticker shock. And if they want to order a Filet? Fugeddaboudit.

Oh yeah, and then there’s that whole pipeline hack, which idled most of the filling stations in towns like Washington and Atlanta — and caused long lines across nearly every spot on the road in between. For those patient petrol purchasers, which road thus doesn’t matter; they can’t traverse it anyway. Word is that the owners, in what is the first such episode, in, like, ever, actually paid ransom to the hackers.

None of this, of course does anything to stem the rising scourge of inflation, which, as discussed last week, has achieved sufficient critical mass to silence any residual debate as to the signage of real interest rates. They are unambiguously negative.

So, they should rise, in a pseudo-Newtonian sense, must rise. But they don’t; arguably can’t. Too much cash floating around. Early in the week, the Treasury Department staged another one in its never-ending stream of auctions, this time of short-term T-Bills. It was over-subscribed and priced at 100.00 – the statutory cap on bids in this market. Why were buyers rushing in to purchase government obligations that yield 0.00%? Well, a) because they need them; and b) they are priced at negative yields — in the nonauction markets. The Fed is printing $120B of new money and using it to elbow aside other buyers (banks), who are burdened with tragically excessive supplies of reserves and demand deposits. These institutions are required to hold government paper and prefer not to pay (accept negative returns) for this privilege. Therefore, they buy what they can at auction and push rates down.

So, whatever economic road we is on, it is one that features troubling crosswinds such as surging inflation trends combined with miniscule or negative interest rates and disappointing growth, along with both an excess (unemployment rate) and deficiency (job openings) of warm bodies in the labor force.

Thus, if investors are confused as to where the market is headed, and by what route, they come by this condition honestly. And the nonfunctional state of their economic compasses and sextons is only part of the problem. The murky world of factor rotation has added to the quagmire, creating portfolio allocation dilemmas reminiscent of those faced by Pi – after the tiger had consumed the zebra, orangutang and hyena, and turned his hangry eyes towards human flesh. Due to the V-like action from last spring, the constituents of benchmarks in such chic factors as Momentum and Growth have shifted from recently infatuating names like Tesla and Twitter, to long-time lumbering lingerers – including Caterpillar and Bank of America.

In part for these reasons, the tape began the week in an extremely menacing mood, reacting to all the potholes in the road described above, with an arguably justifiable selloff. But then it reversed course, recapturing much of its lost ground by Friday’s close, and sending us into the weekend unaware of its destination, or the slightest hint of the path it will take to get there. But, like the Cat told Alice, if we keep walking, we will eventually arrive.

All of which has catalyzed the most gruesome assault on alpha that I can recall across my ancient days. Many, if not most, of the investment pools that I track continue to get pounded. Have gotten pounded all year. And not in the good way. They got gashed by GameStop (January), accosted by Archegos (April) and felled by factor rotations (May). And now, they have little recourse in discovering the way forward other than to inquire of the Cheshire Cat and accept his inscrutable answers.

So, what to do here? From a risk management perspective? Well, if you don’t know where you’re going, or which road is taking you there, my advice is to lighten the road and slow down. Under the circumstances, I don’t see why there is any rush to reach a destination, which, at the present moment (I hasten to remind you), is unknown to you.

My best guess is that my whiny description of our current quagmire notwithstanding, there’s simply too much excess cash out there for it not to continue to find its way into risk assets. I do think that the easy Beta trade is probably over, I anticipate heightened two-way volatility, economic ambiguity, and many other roadblocks, on our journey towards outperformance. The (easier to traverse) rivers of liquidity, however, slant upward, and should lead us towards higher ground. But the climb will be a difficult one, and, without great care, our rafts could get upended or lodged on the rocks. Be forewarned.

Meanwhile, the sun is shining, and the birds are singing. The ducks are just waking after an extended slumber. Last time I saw Alice, she was still in dainty, serene repose, surrounded by her friends, on the northern bank of the Central Park Lagoon.

Why don’t you meet me there? We don’t have anywhere else to go for the moment, and if we take proper time, we can figure out together where we want to go, and which routes will best suit our purposes.

If it rains, we can go window shopping, or, if all else fails, hop a train and head West (again).

TIMSHEL

More Great News! I survived the week! And I’m not just speaking about our most recent topic – my rendezvous with vaccination destiny (wink wink).

We lost David Swenson, which is a helluva shame (and under-reported). But as for me, I have emerged from April 30th closure of my home turf’s largest nuclear power plant, not (visibly) worse for the wear.

The joint operated for nearly two generations, under the handle of The Indian Point Energy Center, having lifted its nomenclature from an amusement park which had operated, in presumed serenity, on the same banks of the Hudson, for many decades prior. Then, in 1954, Consolidated Edison acquired the land and started cranking out the nukes.

It took about a decade to rev them up, but from that point until a week ago Friday, the facility provided >10% of the power consumed across a 50-mile radius that extended, southward, into Mid-Town Manhattan. However, like George said: “all things must pass”, so, I say, so long, ya crazy nuke factory.

But as survivors of the closing, a couple of clean up matters devolve to us. The first of which is, obviously, to posthumously rebrand the facility – in a manner more consistent with current socio-political mores. The compound was certainly named after the designation that geographically confused war criminal Christopher Columbus assigned to the indigenous population in the late 15th Century. These appellations are, of course, no longer acceptable, so, even in its present, zombified state, it falls to our lot to refer, henceforth, to the facility as Native American Point.

Secondly, please, Cuomo, dismantle this eyesore (if you do, you’ll score some points with me, nursing home incidents, wandering hands, and most recently, tax hikes, notwithstanding):

This photo unquestionably rates poorly on the Ansel Adams scale, but it actually fails to capture the visual violence suffered when, as passing by, one observes (in the midst of perhaps the loveliest river setting this side of the Danube) this big honking cement plant degrading the forest-lined setting on the banks of the magnificent estuary.

But in some ways, I hate to see the IPEC (strike that NAPEC) go. We is in the midst of an all-out assault on fossil fuels, and nuclear energy is indeed the latter, but not the former. It burns clean. It lights up over a quarter of the entire European Continent, including 100% of our city, the city of light. Which tells you something. And, if we’re going to shut down all exploration, drilling and refinery, kill all our cows, and retrofit all our consumer and commercial dwellings, without nukes, we must try to keep the lights on with solar, wind and water power, alone. I’m not sure we’re up to the task.

But nukes don’t fit the current narrative, which, as we have discussed privately, most people will go to great lengths to preserve. Narrative preservation abides everywhere, and, in this case, it renders us willing to endure the darkness of night, to forsake power entirely. And connectivity. And (therefore) ways to convey to the world our ethically impeccable critiques of own attitudes and actions.

Beyond this, published reports project that the closure will cost the town of Buchanan, NY, more than a thousand jobs, which is a pretty big hit, for a jurisdiction that is the home to a mere 2,300 souls, to take. Many of them folks is said to be none to pleased with these developments. Nor should they be.

And, neither, for that matter, should we. Particularly after the heartbreak of an April Jobs report that drizzled out only 266K new gigs during that famously showery month. And this against a big, fat, round gully wash of an estimate of 1M.

Any way you shake it, the number was a disappointment, as were, perhaps, both the >100K downward revisions to the February/March tallies and the jump in the Base Unemployment Rate to 6.1%.

All of which seems like kind of a shame, particularly insofar as our friends at the Bureau of Labor Statistics (run, as indicated below, by our old friend FRED) report surging growth in job availability.

I know the chart is small, but there’s only so much space that a boring guy like FRED commands. Right now, there are 7.4 Million open gigs, and trending higher. Moreover, the redoubtable National Federation of Independent Businesses recently announced that fully 42% of the companies in its survey are attempting – unsuccessfully—to hire new employees. A connection of the dots suggests that many out there prefer to remain on the government dole, and, given what the government is offering, why not?

What all of this means is of course, dependent upon the narrative onto which one holds on for dear life (we all do this, you know). The cats in Washington are divided between those who believe the numbers urgently reinforce the urgent need to provide incremental aid and comfort to the masses, and those who, with equal urgency, suggest that the sluggishness offers further proof of the inefficacy of redistributed government largesse. Both can’t be right, any more so than nuclear power is both clean, efficient and environmentally sound, as well as an evil menacing threat to our very existence.

However, irrespective of what position one chooses to take on these issues, the data trend in such a way as to be pleasing to Madam X, who rewarded us by dropping her yields to a positively fetching 1.577%. This is notable, because various winds that should be blowing up her rate skirt are approaching gale-like velocity. Wheat, Corn, Copper, Iron Ore – all at or near all-time historical highs and still climbing. Lumber prices (much discussed of late) are more than 4 times the highest point at which they have traded over the last 25 years. Shipping? Don’t ask.

But somehow, our Lady at the Longer End of the Treasury Curve holds her ground or climbs higher. Even as one of her most stalwart admirers, I wonder how long she can hold out. If we revert to previously referenced inflation data (as measured by the wonky but elegant GDP Deflator), we were already, at the end of Q1, above 4%, and price rises seem to have accelerated since then.

A bit of pointy headed economics, though, suggests with inflation conservatively struck at 4%, and our 10-Year Note yielding, say, 1.6%, real interest rates (essentially the difference between the two) approach negative 2.5%. Which means that every dollar one holds is deteriorating in value by that amount. Every year. Which means that you gotta swap out them dollars. For anything you can get in return. Which means that prices are bound to continue to rise.

It also suggests that anyone not going on a borrowing binge is acting irrationally, at a point when global and domestic debt levels are approaching double what they were in 2007.

Quite a conundrum, no? It’s no wonder that risk assets continue to soar. But what, again, about Madame X? The above-supplied Econ 101 example suggests that outside of our fantasies, and in the real world, she’s taking 2.5% of our blood and treasure every year we continue to cling to her.

But continue to cling to her we (nonetheless) do. Sorta like I do to you.

For how long, though? Who can say? I do worry that as the days fly past, we will lose our grasp. And if we lose hold of Madame X, she will show her menacing wrath across our portfolios. It won’t be pretty.

So, here’s where the market’s atom smashing/particle colliding rubber hits the road. Prices are soaring, and, again, odds are it’s just the beginning of this cycle. Meanwhile, real interest rates are at unambiguously negative levels. Rationally, economic agents should be buying anything and everything they can, and borrowing as much as they are able, to do so. Negative real rates simply don’t jibe with the other components of the scenario. They gotta rise. But (for many reasons) cannot.

I thus can’t imagine a situation, at least somewhere down the road, where the atoms don’t split and their nuclei don’t fuse, setting off the kind of market-based chain reaction first encountered in the world of subatomic particles, underneath Amos Alonzo Stagg Field at the University of Chicago, all those years ago.

But maybe, baby, that’s a discussion for another time.

In the meanwhile, so long as the lights remain on and rates remain low, our path is clear. Buy ‘em once, and then have a go at Sloppy Seconds.

It’s all so surreal to me, though. Particularly living, as we do, in a country whose birth rates (a favorite leading indicator among us pointy-headed economists) have hit an all-time low. Where our leaders are unilaterally giving away our Intellectual Property – perhaps our greatest economic treasure – to other nations that either won’t benefit from it — or will achieve a windfall – to our everlasting disadvantage.

Meantime, I’m not sure what they’re going to do with that beautiful, radioactive stretch of land on the banks of the Hudson. Restoring the amusement park that once stood there isn’t the worst idea – provided, of course, that it is named in such a way as to avoid offense to our sensitive ears.

And, on balance, I wouldn’t lose much time missing the nuclear energy which, till so recently, issued forth, in such abundance, from that heavenly spot. More likely than not, we’ll get all the nuclear action in the markets that we could possibly wish for, and thensome, before much more time passes.

So, keep those lamps trimmed and burning.

TIMSHEL

Great News! I got the vaccine!

Which one, you ask? Well, I don’t exactly remember. I think it was the one where they jab a needle in your arm and inject some sort of fluid into it. Then they put a gauzy patch on the jab spot. Kind of like the bandage they affixed to that Natural History Museum whale (only smaller).

Oh yes, now I remember. It was the potion created by famous blues guitarist Astro Johnson. And the ministering nurse was a lovely creature, of mixed European heritage, named Moderna Pfizer.

OK; so, I made it all up. I haven’t been vaxxed. Yet. I’m not proud of this. I realize it’s the right thing to do, maybe even an obligation. Truth is, I’m lazy. And needle-avoidant. But peer pressure is building, I am running out of excuses, and don’t think I can hold out much longer. Maybe I’ll schedule that appointment for next week. Or the week after.

In the meanwhile, I’ve thought it best to lie about it. And I hope you won’t rat me out.

Early days in my excuse sequence, Biden bailed me out. Claimed that when he got to the White House, there weren’t any doses around. Anywhere. But that ship sailed, as, lately (fickle bastard that he is) he can’t shut up about their availability. “Come on down and get dosed” he says now. “Plenty to go around for everybody”.

Thanks a lot, buddy. For nothing.

I have never considered Joe to be the most reliable character, so I shouldn’t have been surprised when he stabbed (jabbed?) me in the back. He’s been blowing with the wind his entire career, and now, as matters stand, the breezes are blasting him into big spender oblivion.

It was touching to observe him on Wednesday night, puffing out his pitch for sending another $2 Tril of our Benjaminz (which, by the way, we don’t have) into the ionosphere, and taking his 100-day total proposed binge to $6,000,000,000,000 – all in addition to our regular, $4T budget. If one cares to extrapolate forward, in his first year in office alone, he will have served up a fiscal fiesta to an amount greater than our entire GDP ($20T — and that doesn’t even factor in compounding). Moreover, if he stays on this pace, by the end of his (first) term, he will have engineered an amount of incremental government spending approximately equivalent to the annualized economic output of the entire planet.

And of course, if he pulls that off, odds tilt in his favor to be re-elected, at which point he takes on the entire solar system. And then the galaxy.

If I had a word to say about any of this (which of course I do not), I might use it to question whether we want to put that much jack in Joe’s jeans. But again, nobody asked me. However, I’m fairly confident that I’ll be given the honor of contributing to the funding pool, as will most of the rest of you (as well as your progeny). But here, the sequencing is essential, as, first the government giveth; then it taketh away.

All of which is nonetheless (presumably) cause for busting out the conga line, and it ain’t even Cinco di Mayo yet. Certainly, the markets are celebrating. And why not? Earnings are blowing out beyond all proportion. GDP rocked the House. Personal Income/Spending. Pending Home Sales. All expanding at levels that are bound to put a smile on the faces of even the dourest of us Dismal Scientists.

Moreover, as the data revelry unfolded, the Fed dutifully kicked in chips, guacamole and a bottle of wormy mezcal, by way of expressing undying infatuation (kind of like mine for you) for current economic prospects, while contemporaneously (and counterintuitively) pledging to keep the money presses humming at full tilt, for as long as the salsa band can keep playing.

Accordingly, and despite niggling increases prices (GDP Price Deflator up > 4%), Madame X reposes demurely at 1.62%. I hear tell she’s been vaxxed (or at least claims to be), so there’s no need for investors to maintain social or economic distance from her. Sure, there was some selling action on Friday, but I wouldn’t fret me none to much about that, my love.

Probably just a modest weeding out of the anti-vaxxers is all (I reckon).

Meantime, the price of Corn has nearly doubled over the last year and my Shipping Index has registered an astonishing three-bagger in the first trimester of 2021. But I ain’t gonna worry too much about that either, honey. I got nothing I wanna transport by boat across the mighty oceans anyway.

Oh yes, we’re going to traverse the ocean. To Gay Paree and points beyond. But we will do so the civilized way. On the private jet I’m fixing to buy you. Just as soon as they open the joint for international travel. And I can get my hands on one of those fake vax passports they were hawking in the Cell Phone Lot at Kennedy Airport as I was waiting to pick you up.

Fake Covid Vax Passport (See Upper Right-Hand Corner) – Israeli Style

It will be important, then as now, for me to manifest my best authenticity to sell my dissembling narrative, but in these times, I’m not terribly concerned about that either. Because the way I’m reading things, everyone is lying their ass off anyway, and nowhere more so than in Washington.

I do think that Biden’s performance art speech on Wednesday night, was something of a milestone moment in this regard. He now owns, for all time, the most confiscatory, redistributionist elements of the entire confiscatory, redistributive menu that his backers have shoved down our throats. Does he believe in any of it? I doubt it. He’s simply following the directives of his betters. And I think he is enjoying it. Has managed to convince himself that he can be some sort of latter-day/depression era/pre-WWII FDR (as opposed to the actual function he serves – a handy instrument for a handful of political players that now wish to make their move to take over the joint).

But it all strikes me as residing in that uber-human area between comedy and tragedy, and this for a number of reasons. First, FDR’s recovery programs ultimately failed. After a finite boost of fiscal sugar over the first few years of his tenure, the economy faltered. Badly. And, by 1937, we were back at unemployment rates of nearly 20%. It took WWII to bail us out, where, of course, FDR was magnificent.

Anybody out there feeling confident about Joe Bag of Doughnuts in the role of Commander in Chief during a major military conflict? Didn’t think so.

Beyond this, what Joe was laying down on Wednesday night, the country is not, will not be, picking up. His stimulus and tax plans appear to be, by all accounts, DOA. They poll very badly. A Congressional coalition that could pass them simply does not exist and cannot be cobbled together.

Most everything that he glibly proposed will be subject to McConnell’s Steel Curtain, and then, if necessary, challenged in the courts. Each of the critical measures designed to move the goalposts (a necessary component of the power grab which will otherwise do nothing but create a pathway to political Armageddon for its sponsors in 2022), including HR1, the DC Statehood riff, packing the Supreme Court (a stunt that failed for even the fabulous FDR) are constitutionally questionable and will be gummed up in the courts well beyond the point when the electorate can render its displeasure at the ballot box.

Yes, they will get portions of their insulting, destructive agenda passed, mostly through political device. But it will create neither the short-term damage nor the political goodwill that its designers envisioned.

One way or another, Biden now owns the whole strategy, cannot, as a matter of practical political reality, afford to back off. Any more than (G.I.) Joe Manchin can step away from his heroic pledges to protect the filibuster and the fifty stars on the flag. If either one tries to wobble, the political bug they will catch will make them wish they had the covid instead.

So, in the Nation’s Capital, I predict a lot of chicanery on the fringes, which will be annoying but not fatal, most of which investors will manage to block out or ignore entirely

Meanwhile, the Fed will print away. Which investors will notice. Will, in fact, demand.

Thus, I’m feeling pretty perky at the moment. Both physically and in terms of market trajectories. But I’m not gonna lie, there are risks out there aplenty. Madam X could yield to the weakness of her nature and smother us with higher rates. Price trends in the real economy could continue to rise in a manner that demands market attention. Maybe, even, the Dem power players can take several more trillion of cash that we (and our children) will need earn and apply it according to their interests and whims. They’ll certainly try. They hate us anyway, so why not simply take what they can out of our pockets and award it to those that buy into their narratives and are willing to do their bidding?

It will take some world class re-engineering of realities to pull this off, but who am I to call them out? On balance, I’m one of them: double masked, socially distanced, and having no one other than you to whom I can spin my fabulous fables that all will be well.

So, for the record, and if anyone asks, let’s just agree to say that I’m all dosed up with no place to go.

TIMSHEL

“And I only am escaped alone to tell thee.” – (Book of Job 1:15)

Yes, this is a biblical quote, but I lifted it from Melville. Who stole it from the Old Testament and used it to open the final chapter of (you guessed it) “Moby Dick”. Which is a book about whales. Which are the subjects of this week’s essay.

I chose them for my theme after hearing rumors that the famous Blue Whale in the basement of New York’s Museum of Natural History (as of this week a vaccination center) is now sporting an enormous band aid on its dorsal fin:

The implication is clear: the whale has been vaccinated (and so, too, should you be). The museum confirmed as much in an April 20th tweet that reads:

Please join me (if you wish) in taking comfort at the iconic leviathan’s upgraded immunology status. I hadn’t been overly worried about her, but now I know she’s safe. Unfortunately, the same cannot be said for the nameless Native and African American figures who, in days gone by, were at Teddy Roosevelt’s side, as he sits on his horse, gazing out from in front of The Museum, onto Central Park West. They gone. And nobody knows (or, at minimum, is saying) where they disappeared to.

On the other hand, no one would ever mistake them guys for whales, and, as such, their salvation is arguably none of our concern.

It’s the whales we’re worried about. Including market whales, for whom, if one cares to fret over their future prospects, one does so honestly. This past week they had to dodge some Ahab-like harpoons, most prominently some chatter out of Washington that the government is fixing to tax capital gains up to, like, infinity percent. It turns out that this was a warmed-over sound bite from the election. Moreover, it is likely to be either hosed down or fail entirely in Congress, but it caused sufficient agita to catalyze – get this – an actual selloff of equities on Thursday.

By the week’s end, the equity complex, including the (mostly) landlubbing Galant 500, had regained its footing; but still, the cycle ended, somehow, at levels below where it began on Monday morning.

But then again, it’s been tough all year for market whales, what, with all of that GameStop blubber, followed by the blow out of tiger-shark Archegos. The year-to-date performance results are hardly a bloodbath, but as of Friday’s close, while most of our indices are up double digits, the medians for the funds I track are pretty much flattish.

Perhaps this is all prelude, because next week promises to be a whale watchers delight. In addition to the highly anticipated NFL Draft, all five of the big corporate fish (MS, AAPL, GOOG, AMZN, FB) are set to step their fins up to the earnings podium. And if that weren’t enough for the binoculars-peering set, Thursday morning, we get our first glimpse at Q1 GDP. For those keeping score in the mocks, Trevor Lawrence is a virtual lock to go Number 1, and as for those Atlanta (who picks 4th and may take a quarterback, a tight end, or trade down) Fed GDP estimates?

It does look like the heat’s rising – on both the oceans and on terra firma. All of which begs the question as to the health and safety of that loveliest market whale of all – Madam X, the United States Ten Year Note. She survived a dreaded auction of her manifold wares early in the week, and then rose with a gusher issuing from her spout in the wake of the above-mentioned prattle on tax hikes. By Friday’s close, she could be found at the shallow yield depth of 1.56%.

As I’ve prognosticated before, if she stays in this range, risk assets should continue their assault on the heavens. Perhaps this is what the Good Lord intended.

But one way or another, if we’re looking at any market whale to save, Madame X is where we should concentrate our assistance. And, if we assume her “Ahab” is inflation, we must remain on the alert. The price of pretty much everything — in the markets and beyond — is on the rise. As a point of reference, the Bloomberg Basket of Commodity Products (BCOM), and the cost of shipping its content across the mighty oceans (BDIY), are at or approaching a five-year highs:

Madame X has heroically staved off these assaults and may continue to do so, but if she is harpooned to or beached upon higher yield elevations, investors won’t like what happens next.

“And I only escaped alone to tell thee”. But this isn’t strictly true. In addition to Ishmael, the fish himself survives. And so did we. Because you were with me. And I thank the Good Lord for that. But the waters out there are choppy – for amphibious mammals and us earthbound humans — and we need each other if we are to make it to safe ground.

“The drama’s (not) done. Why then here does any one step forth? Because one did survive the wreck… … On the second day, a sail drew near, nearer, and picked me up at last. It was the devious-cruising Rachel, that in her retracing search after her missing children, only found another orphan”.

And thus ends “Moby Dick”. The Book of Job concludes on a more hopeful note. Prosperous, healthy and God-fearing, the Lord tests the last of these by taking away J-man’s blessings, causing the latter to question the man upstairs. But in the end, he casts his own doubts aside, saying, in the King James Version: “Wherefore I abhor myself, and repent in dust and ashes”.

Whereupon God restores all of Job’s sh!t back to him. And he lives to be 140.

From all of which we can conclude that both whales and righteous folks stand a chance of survival in these mad psychodramas. Most of us aren’t in the former group but can at least strive to be a part of the latter. I gotta believe that this is our best hope.

TIMSHEL

So, we lost Bernie – an octogenarian/co-religionist of mine, famous moving other people’s money around (mostly funds residing only in his imagination) — and pissing a lot of people off.

But no, I’m not speaking of Bernie Sanders, who, to the best of my knowledge, is still with us. Rather, this week’s Bernie is Bernard L. Madoff, who departed to the hereafter on Wednesday, from his most recent living quarters in the Butner, NC Federal Prison.

Readers can hardly expect me to allow his final egress to pass, unremarked.

But I was thinking along the lines of our titular themes even before Bernie bounced. It’s a variant of a universal phrase, which reminds us that if certain of our antecedents had been born with a different anatomy, those predecessors’ positioning in our lineage would assume an altered form. The point being that retrospective, hypotheticals (“ifs”) notwithstanding, reality is what it is.

“If your grandma had balls, she’d be your grandpa”. This is the saying’s straight up vernacular. The way an Irishman, for instance, might say it. It’s elegant in its simplicity, no?

But to my ears, it falls, in terms of panache, well short of the modified Yiddish version: “”If your bubbe had beytsim, she’d be your zaidah.”

Which is positively Shakespearean.

It’s not clear to me that in our current, modified social configuration, the phrase even still applies, as the presence (or absence) of beytsim is no longer, it seems, a relevant consideration for our conditional hypothesis. Nowadays, whether one has beytsim or not, it is one’s prerogative to declare themselves a Bubbe, a Zaidah, something in between, or (if one dares to dream) a category beyond this spectrum.

But for all of that, Bernie still died, and it thus devolved to me to shift the phraseology to acknowledge his passing. Let’s start with this. Bernie was not a bubbe, but rather a zaidah. Twice over (had two biological grandchildren). Self-identified as such. He therefore presumably had beytsim, both biologically and certainly in his business dealings.

In any event, he’s gone, and not terribly much lamented. And we won’t bother much more about him.

Forever and ever, though, the “ifs” that plague our retrospective hypotheticals will avail us of very little.

I’d like to be able to conjecture that Bernie (yes, we’re back to Bernie for a minute, but – I promise – not for long) would’ve appreciated the current trajectory of the tape, which, for days and days, has registered nary a downtick. But as we all know, he never really traded in the first place.

Neither did I. Which sucks for me. If only I would’ve bought ‘em a year ago. Or five, ten, twenty, fifty years ago.

But then again, if my bubbe had beytsim….

Anyway, the markets don’t need me to buy ‘em. There are, by all accounts, buyers aplenty out there. They appear, in fact, to be multiplying like hobgoblins.

And why not? It’s like June is busting out all over – only a couple of months ahead of schedule. And I, for one, am happy to forgive it for its excess of punctuality.

Earnings season began last week with banks and other financial institutions putting up blowout numbers, but here I will cop to feeling a little nervous. These institutions are notorious for journaling their books around to achieve various reporting objectives. And I feel if there was ever a time for Jamie, James, DJ DSol and the rest of the crew to hold back a little (maybe goose some loss reserve charges or something) Q1 21 might have been a tempting moment. What with all of this glorious virtue signaling and whatnot, from a PR perspective at any rate, the broadcasting of record, financially driven profits (Goldman’s yearover- year 5-bagger, for instance), might at minimum, be deemed to be poor taste.

None of them guys will ever be considered turnip truck casualties (they’re really smart) and are thus presumably well aware of this dilemma. Which makes me think that even the numbers they did clock reflected something of an understating on their part.

If so, that GOAT of return-journaling: Bernie (there he is again; sorry) would be proud.

But it’s not just Wall Street riding the cha-ching train. Blowouts are transpiring everywhere one cares to cast one’s glance. Retail Sales? A boffo 9.8% in March – driven, gloriously if you ask me, by an unambiguous explosion in consumer spending. One of such great force that Ima gonna share the following chart with y’all, the reality that it graced the top headings of the WSJ Economics Section notwithstanding:

Just a glance at this graph is making me hungry; I’m dying to visit the Colonel. And then visit him again.

And all of the good news just keeps exploding from every quarter. There’s a housing shortage estimated to the tune of 4 million units, which can only boost home values. Crain’s New York recently reported that home sales in Greenwich, CT, that Everytown, USA, which has endured nuclear real estate winter since the 2008 crash, have nearly doubled this year, with median prices up 31% — albeit to a still (for most of us) affordable $2.25M.

It also looks like folks is also getting back to work, as, on Thursday, Weekly Jobless Claims plunged.

The price of a bushel of corn, now nearing six big ones, is the highest in eight years.

If all of this sounds a bit inflationary to you, well, you’re not alone. And the statistics bear this out. Prices for just about everything are on the rise.

If this was a normal market environment, the organic economic response would be a rise in interest rates. But that ain’t happening – at least for the moment. Madame X, who began the month at an (approaching) saucy yield of 1.75% (and expected to go higher), has backed off, rather demurely in my judgment, to a much more docile 1.58%.

I feel certain that our above-mentioned, beytsim-bereft 10 Year Note, remains the belle of this here cow ball. If she stays where she is, very little on the visible horizon is likely to stem the tide of rising valuations for risk assets.

But if that bubbe grows beytsim and becomes a zaidah, it could signal the beginning of the end of the party.

So, I’m watching Madame X, to the point where some might call it stalking. I suggest you do the same. If she behaves herself, we’re headed to much higher elevations than even those breathtaking thresholds that have manifested in recent days.

But even if, on the other hand, we observe her dropping her price panties and lifting her yield skirt, I’m pretty sure that the capital markets overseers will make the appropriate policy adjustments to keep the romance of this rally alive. Powell and Yellen (both of whom may reside somewhere in the middle of the beytsim-possessing spectrum) will not be in a position to allow rates to sustain at elevated levels.

Because both are accountable to the uber-beytsim powers that are pulling the strings. I’ll save my diatribe about who they are, what they want and how I think they’re setting about to get it, for another time. For now, I simply encourage you to connect the following dots.

Capitalism, Corporatism and Private Enterprise are under perhaps the biggest form of rhetorical assault since the Great Depression. Political forces are driving energetically to either destroy, or, at minimum, socialize key sectors of the economy. The swells of a great wave of punitive taxation, regulation and redistribution are forming before our eyes. Corporate leaders, even as they post record profits, are paying obeisance to these tides, in a manner reminiscent of 18th Century French Nobility sidling up to those young bloods who captured the Bastille and removed the head of Louis XVI.

The economy is awash in debt.

Yet the markets keep rising, to the disproportionate benefit of the few. Does this indicate anything to you about who’s calling the shots and the nature of the ultimate outcomes they seek to engineer?

It will take Bernie-like beytsim to pull it off, and I don’t think that, in the end, they can be successful. Any more than Bernie was. Any more than those French Counts were — back in my childhood days of 1789. That episode ended with them all sending each other to the guillotine.

They got their heads chopped off but retained their beytsim. However, without the former, the latter were likely to be of little use to them. From this perspective, it may be fair to state that beytsim are not unilaterally essential. For example, I am delighted that you do not have them. Because I wouldn’t change anything about you. Not. One. Thing.

But while not always indispensable, beytsim do have their utility. I’d like to grow some more for myself, but the good lord only blessed me with what I got.

I will strive to move forward accordingly, and suggest, as your risk manager, that you do the same.

TIMSHEL