Cmaj7, Amin7, Cmaj7, Bmin7

“In Memory of Elizabeth Reed”

******

Don’t fly Mr. Bluebird, I’m just walkin’ down the road,
Early morning sunshine, tells me all I need to know…

“Blue Sky”

Forrest Richard Betts

I had a different theme in mind for this week, but it’s an eternal one, so I reckon it’ll keep.

Because, as often is the case, they’s droppin’ like flies lately, and duty impels me to attend to the carnage.

First, I’d like to offer a bit of tribute to my recently departed friend Mark Bagan, Chief Executive Officer of the Minneapolis Grain Exchange. Like the Exchange itself, Mark was low profile but formidable. And he was doing things with MGEX. And doing them, I think, the right way. Always accessible. Always willing to listen. Never avaricious. Never power-hungry.

I heard from a friend that he died this past week. And I feel diminished by these tidings. My mad love also goes out to his wife, Anne, who I’ve known for an improbable 35 years.

Perhaps also a word about Roman Gabriel, the LA Rams QB who was my guy when I was a little fella, first noticing the NFL. Before my moms whisked me from So Cal to Chicago, and I found the One True Way with the Bears.

Then there’s Dickie. And what’s to be said about his passing? Either a great deal or not very much. But let’s try to thread a needle.

Dickie is often overlooked/inappropriately excluded from the shredder pantheon – perhaps because, rising to fame as a founding member of the Allman Brothers, he shared lead guitar duties with the legendary Duane Allman, who justifiably earned his place among the axe-wielding immortals. In addition to his magnificent work with Les Brers, he not only guested on Wilson Pickett’s extraordinary cover of “Hey Jude”, but also was a full-fledged member of Derek and the Dominos during the iconic “Layla and Other Assorted Love Songs” sessions.

When the Wicked Pickett AND Clapton (considered by many – erroneously in my judgment – to be the greatest guitarist of all time) invite you into the studio, it ends the argument about your chops.

A goodly portion of Duane’s eternal fame is also, it must be stated, owing to his untimely death in a motorcycle crash in Macon, GA, in 1971. His legend endures.

But the Allman Brothers (by then down to a single Allman) carried on, with Dickie taking sole command of the six-string solo sections. They barely missed a beat – for a while. But of course, it couldn’t last. Greg and Dickie fought like cats and dogs. Greg himself went off the rails, first letting his manager take the rap on a nasty narcotics charge, and then, unthinkably at the time, marrying Cher.

It took Greg many years to re-establish his cred, and then he and Dickie carried on. But only for a while. Because, by all accounts, Dickie was a difficult character himself. Big ego. No filter. The surviving Brothers held it together episodically through the early ‘90s, but then Dickie was on his own.

His best work, though, is almost certainly his Brothers stuff, including his songwriting output, which includes “In Memory of Elizabeth Reed” (chords supplied above), “Ramblin’’ Man” and “Blue Sky” (lyrics supplied above).

Only now, in no small part due to Dickie’s passing, the skies look kinda grey.

The atmospheric change is abundantly apparent in market realms. Wasn’t long ago that the Naz, the 5 and the Dow were all annualizing at a 100% clip. Now, they’s barely registering a year-to-date gain.

What gives?

Well, the wars in Eastern Europe and the Middle East rage on. Domestic politics are in a beyond depressing state. Inflation has been muted but persists. The Federal Deficit expands like a desert fire. Nobody knows what the Fed is gonna do.

But wasn’t that all the case a month ago? When investors were bidding up risk assets with abandon?

It is my long-held observation, though, that markets will routinely react to identical sets of conditions in precisely opposite ways. And, for the rolling seven months between mid-August and early April, they shrugged off bad news and embraced any data point that could be contorted into a constructive catalyst.

For now, they don’t.

Because, while not widely reported, Captain Naz’s Adjutant General Cousin – the NASDAQ 100, is in full correction mode – down ~14% from highs registered exactly one month ago. Yields are up across the curve, and Mortgage Rates have risen, as the selling season emerges, to an ominous ~7.5%.

Heck, even the fabulous Bitcoin has dropped by ~10% — and this in advance of a concept that nobody understands called “halving”, which holds promise, somehow, to send this crypto top cat into the stratosphere.

Corporate Bonds across the Ratings spectrum are all on offer as well.

Conditions are precisely the opposite in the world of Commodities, where my late friend Mr. Bagan mainly rolled. Breakfast staples Coffee, Orange Juice and Eggs have all become more costly this young but aging year.

And as for Cocoa? Don’t ask (SPOILER ALERT: up 183% in ’24).

Lustrously drawing our attentions away from this is the performance of Gold, which is breaching one material all-time high after another:

I know a passel of folks who’ve been waiting for this breakout since 1971, the year when: a) Duane swerved around that truck and skidded to his death; b) Gabe led his last winning Rams team; and c) the United States abandoned the Bretton Woods Gold Standard. Justifications range from the logical (Gold, in fixed supply, had served admirably as a ballast to fiat currency for about 4,000 years), to the highly sus (they’s lying to us about the Fort Knox inventory; there ain’t none there). And I am completely down with the first of these.

I do not, however, know if this is indeed the moment that the masses demand that their cash be tied to something tangible. But none of the above-described tidings are earmarks of a robust market.

However, as Dickie would’ve presumably wished, the tape keeps ramblin’ on. The upcoming week is data heavy, with the first glimpse of Q1 GDP awaiting us, and equity superstars META, MSFT, GOOG and TSLA – along with many important back benchers — all fixed on the Earnings Calendar.

My stubborn hunch is that there’s a bid down here somewhere. We’ll see Blue Market Skies before to long. But the road will be that much more desolate without Mark, Roman and Dickie across the aisle on that Greyhound Bus where Dickie was born and which we call life.

Best to keep an extra eye open these days. We may own the clothes we’re wearing, and the road does not go on forever. But there’s endless stretches of highway in front of us, and, like it or not, we are compelled to ramble on.

TIMSHEL

Betcha thought I was gonna write about Juice, right?

Nah, I think I’ll pass. Too much erudition, from too many sources, for me to contribute much here.

Instead, I’ll give this one out to my chum from school days – Johan (not his real name). Jo and I were pretty tight as kids. We both ultimately landed in the NY Finance Jungle, and continued to share some fabulous innings until – well – until the Great Financial Crisis nearly did him in.

I haven’t heard from him since.

There’s only one way to describe Johan: BIG. When I last encountered him, I’d put his height at about 6- 4 and his weight (to be generous) at a shade under 4 bills. He also possessed a big personality and an outsize ambition. To celebrate his 5th grade graduation, he wrote, directed, produced and (natch) starred in a musical called “Under 12”. He – no lie – escorted the current Mrs. Neil Young (Daryl Hannah) to Senior Prom. In Junior High, he organized dozens of the fellas into a force tasked with drawing martial images – soldiers, motorized vehicles, weapons, munitions – arranged in branch style of Army, Navy, Air Core, designated it his personal armed force, and named himself Commander in Chief.

For reasons I cannot fully articulate (including my inability to render even a recognizable stick figure) I remained a civilian.

As a relatively young age, he formed a mortgage origination company, which, before it ran into trouble (more about this below), became one of the largest such enterprises in the land.

All of which enabled his voracious appetites. I have accompanied him to witness his consumption of a 90 oz. Lugar’s Porterhouse, with all the fixins’. For dessert? The Cheese Plate if you please.

He also loaded up on Real Estate, purchasing a 5-story townhouse on 5th Avenue, located precisely in between the French and Polish Consulates. And then there was the place in the Hamptons (Southampton of course). You know? The one with the elevator?

We remained friends throughout, and, having established myself — albeit on a more modest scale, on Wall Street, we had a common set of acquaintances. As such, I was a frequent guest of his at the many uptight, look-at-those-rich-white-asshole parties he hosted at his East End palace every summer.

The crowd milling around the cee-ment pond was always somewhat stiff, and, having known him for ages, I was quite fond of him. So, each time, I made him the following promises:

1. I won’t be the first one in the pool.
2. If you go in, you won’t be alone.

I wish to state formally that I received no incremental consideration for these pledges. I offered them in the name of love alone, implicitly assuring him that I’d do nothing on my own initiative to embarrass him, but that if he chose to discomfit himself, I’d be his wing man.

But that was all long ago. At some point, Johan saw a big opportunity to convert a magnificent mortgage origination business into a REIT and was thus invested up to the gills in ’08 when the sushi hit the fois gras. His business went, inexorably, tits up. There were a lot of pissed off investors and employees. Lawsuits flew. The regulators came sniffing around.

He kinda went underground after that, and I don’t fault him for doing so. But he has not been heard of – at least by me – since.

T’was another lifetime; much of the world has changed since then. Mortgage underwriting standards, for example, have tightened dramatically. Newly minted fiat currency has overwhelmed the availability of assets against which to deploy it, leading to unthinkable-in-2008 surges in cross asset class valuations.

Perhaps of equal or greater importance, I defy my readers to find anyone that will blindly offer the above-mentioned promises to even their closest friend and/or relation. I certainly would not do so again. Not for five bucks.

Maybe it’s just me, but it seems that our community sharers are more likely to push us into the pool, and then laugh at us as we flounder around in our bedrenched polo shirts and chinos.

On the plus side, the Gallant 500 is an approximate 6 bagger since the Chablis stopped flowing at Casa Johan (East), and home prices have doubled:

There have been 4 occupants of the White House, 3 Fed Chairs and 5 Speakers of the House.

And, as we gaze into our crystal balls, the images are cloudier than they have been in quite a spell. Heck, the FBI Director his-self blithely informed Congress that he is unable to recall a point in his memory where so many contemporaneous threats have hovered over us. That, when one stops to ponder it, is quite a statement, covering a period that traverses the Cold War, the Vietnam era, Watergate, AIDS, 9/11, two Persian Gulf wars, the Great Financial Crisis, the coronavirus, the Jan 6^th monkey circus….

And, of course, we can now no longer look to the Juice to guide us.

Meantime, the tape feels somewhat heavy, as investors register their disappointment that the Fed might be sheathing its rate cutting meat axe. I will cop to be triggered here. I know I have gone on and on about this, but whose nutty idea was it that rates should be declining at this juncture? In what universe would this be considered sound monetary policy — what, with solid GDP growth, full employment and stubbornly persistent Inflation?

Probably some of the same folks who believe increasing the deficit by a tril every hundred days is sound fiscal policy is who. Or cancelling student loan debt for millions with the stroke of a pen – in the name of compassion – is who.

I retain a tiny sliver of sympathy for the Fed, which, for the first time in its complex history, is losing money hand over fist:

This is most certainly an impressive result, particularly given that the stated capitalization of the organization is a skinny $43B – implying that last year’s loss equated to more than double the nominal valuation of the entire enterprise.

Of course, the Fed is worth more than 43B; one can call it priceless. But at some point, one can also forgive them for tiring of losing money – particularly given that they possess unlimited mitigants. They can simply lower interest rates, buy their own paper, and paint away these reversals.

I suspect they’ll need to wait a spell before doing so. I nonetheless remain bulled up here but won’t withhold a gnawing concern that maybe the financial chickens are coming home to roost sooner than I expected.

Because, in addition to our frenemies at the Fed, we must attend to the mullahs, who are acting up. Tactically, I believe this is a mistake on their part, as I don’t think that they can improve on the dividends they continue to cash in the aftermath of sending some thugs into Israel to kill hundreds of civilians, and then watch the world reverse the polarity of victim/perpetrator. Like the Fed, I believe that their wiser course would have been to stand pat.

Instead, they are acting in a bafflingly troubling manner. First, they telegraph this big drone attack, ensuring its failure. Then, in the midst of this, they announce that they’re done, that they ain’t gonna lob no more metal at their sworn enemies.

It doesn’t add up, and one can only speculate that they have more tricks under their Taqiyahs.

If they do, well, that will be a problem. But it’s not like we’re not gonna have to settle our obligations at some point. I mean, after all, after Juice did Brown and Goldman but was allowed to walk, a form of retribution awaited him. Approximately a decade later, they got pretty good. Took some of the merch he was storing in a Vegas hotel suite moved it to the next room, shoved a gun in his hand, and said something like “Juice, Juice, the guy next door has your stuff”. Naturally, he went over to get his shit back.

Whereupon they arrested him for armed robbery and sent him up the river for the better part of a decade.

Though less discussed than the murders, it stands as one of the most epic set ups in legal history.

And as for Johan, from what I hear, he waited out his ban from the mortgage industry, started another company, and ran into similar problems when the virus emerged. From all appearance, he’ll continue to spend the lion’s share of his remaining days fighting off lawsuits.

There’s a risk management lesson in all of this, but, as usual, I’ll be dipped in sh!+ if I know what it is.

I will, however, reiterate my unwillingness to either refrain from diving into your pool, or following you in if you go first.

Heck, I won’t even live up to my commitment not to write about the Juice.

Yup, that’s right. It’s sink or swim for all. And, given my withdrawal of the above-designated pledges, if it’s the latter, we’re all on our own.

Sinkro swim, in other words, is, for now, off the table.

TIMSHEL

We are Starbucks, we are Google, we are Nvidia,
And we’ve got to get ourselves, back to the Ha-a-a-mptons…

With apologies to Joni Mitchell.

From time to time, I must revert to the most important Risk Management rule of them all – one that transcends even the eternally enshrined Ten Commandments:

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

It is as follows: STAY AWAY FROM THE BROWN ACID.

For the uninitiated, this warning was first issued from the stage of the Woodstock Music and Art Fair, held on Max Yasgur’s dairy farm – Not in Woodstock itself, but rather in nearby Bethel, NY.

An improbable near-45 years have elapsed since that August 1969 weekend. Many performers (Jimi, Janis, Jerry, Pig, most of the Jefferson Airplane, half of the Who, Alvin Lee, Canned Heat’s Al (Blind Owl) Wilson and Bob (the Bear) Hite and even the ubiquitous motorcycle-riding organizer Michael Lang) are dead. But themes from that long-ago dream abide, including:

STAY AWAY FROM THE BROWN ACID.

Why the warning? Because, as Festival M.C. Chip Mounck admonished the crowd, “it is not specifically too good”. I haven’t sampled any of the offending doses lately but feel that the warning still holds.

All of which comes to mind as, from my perspective, Wall Street has, increasingly of late, assumed a Woodstockian feel. It’s a big tent. Everybody is welcome, as evidenced in part by a decline in correlations among members of the Gallant 500 host:

It’s rained like a sumbitch over the past week or so, but it did at Woodstock too. At the time, Country Joe and the Fish’s Berry Melton intoned “if you think real hard, maybe we can stop the rain” and, from his lofty perch on the stage, Mounck reiterated the sentiment. By the final morning, when Headliner Hendrix played, the sun was shining brightly.

The event is emblazed in our culture as the high-water mark of the Hippy Generation, and perhaps appropriately so. But of course, there were problems beneath the feel-good vibe. There were 12-hour backups on the New York State Thruway. The sponsors spent most of the festival BEGGING NY Governor Nelson Rockefeller NOT to send in the National Guard. Equipment failures ruined the Grateful Dead set.

Nobody really understood why Sha Na Na was even there.

When everyone went home, the Vietnam War was still raging and would do so for another five years. The Hong Kong flu was taking out a covid-like share of the population.

Racial and social unrest ran rampant. We did land on the moon, though. So, there’s that.

Similarly, in today’s market of Peace Love and Music, we are plagued by a whiny, disaffected public, political unrest, multiple wars, and deep confusion as to our best course forward.

So, what to make of the Woodstock Market? Well, for now, the Wall of Sound still blares, and the partakers still, well, partake.

Thursday afternoon, seemingly out of nowhere, the tape experienced a bummer of selloff, which (in a Woodstockian sense) evoked images of the helicopters that transported most of the top performers to the stage dropping caseloads of brown acid on the masses.

But then, on Friday, it was as if a latter-day Chip Mounck had issued his silent warning, which everyone heeded, and our equity indices recovered most of their previous day reversals.

As a long-time market observer, to me, the puke had all the earmarks of one or more large capital pools, for whatever reason, de-risking. This, of course, is unpleasant, but largely transitory.

Friday’s proceedings began with an outasight, groovy, far out bang, catalyzed by a superficially strong March Jobs Report. The banging continued through mid-morning, against the backdrop of a 4.8 quake, which rocked the entire metro area, but failed to dampen the focus of investors, determined, as they were, to recapture the lost ground.

So, the party continues, but not without trouble spots on the horizon. No, Rocky is not amassing troops on the Thruway, but if he did, it would cost more to fill the tanks of them tanks than it has in quite a spell. Crude Oil and Gasoline are at or near multi-year highs. The Saudis are cutting production. The Gaza War is at a tipping point, with multiple contingencies poised to render it a bona fide global crisis – including those that could send energy prices into the stratosphere.

Treasury Yields are also menacingly on the rise, taking mortgage rates with them – just at the point when the Home Sales season is commencing.

The Fed is going all swishy on the number, timing, and magnitude of those promised rate cuts. I feel that this is wise on their part, but probably less than ideal from a rally-continuance perspective.

March Inflation statistics drop this week, and the markets could react to them. Or not.

The earnings season also commences over the next few days, and oh boy, won’t that be fun? Growth projections are in the 3% range, but in a decidedly anti-Woodstock construct, are expected to be concentrated among a few of those fat cat corporations, whose products we devour, but whom we otherwise hate on:

Apart from all that, I believe that market fortunes and political caprice will become more inextricably entwined as the weather warms. This stands in benign contrast to conditions in ’69, which was post- election, after somebody did both Kennedy and King, and with attendees forced to contemplate the wearying prospect of 4, and possibly 8, years of Tricky Dick. Which turned into a mere 5.5, for reasons that bear no need of reiteration.

Woodstock also transpired almost precisely one year after a somewhat disturbing Democratic National Convention, held in Chicago. And, in sublime keeping with my theme, the Big Donkey Wing Ding will take place at the same location this summer.

Not gonna lie – I’m a bit worried about this. Chi ain’t exactly Yasgur’s Farm these days and things could get out of hand on that score alone. Disrupters will no doubt seek to disrupt – if for no other reason than for the social media photo op joy of it all. I also believe that the Dems, with their shady Super Delegate tools, could try to pull a fast one on Ol’ Man Joe.

By that time, and just up the road in Milwaukee, their opposite numbers will, presumably, have anointed you know who. Problem is that “you know who” could be well on his way to having been designated a convicted felon by then.

Meantime, expect the incumbents to pull out all the stops to pay their way towards re-election. Just this past week, Ol’ Joe busted out that tried and true student loan debt forgiveness riff. Perhaps by mere coincidence, several universities, particularly those in the Northeast, have announced tuition levels rising to the indignity of $90K per year.

I would expect the Administration – particularly if the economy shows any signs of faltering — to put a big fat thumb on the scales of both the Energy and Treasury markets, and, though it be risky, see opportunity on the short side of the former and the long side of the latter.

I still say it’s Woodstock on Wall Street – so much so that I didn’t even notice that our equity indices actually lost ground last week – the biggest such reversal since the aftermath of that nasty Hamas attack in October.

It was kinda like Country Joe’s second performance at the ‘Stock (he was the only performer who appeared twice). I mean, I like Country Joe and all, but two sets might’ve been a bit excessive, and at any rate, I’m expecting the markets to rise again.

Maybe, on the other hand, it’s the brown acid. But no, those days are long gone for me.

TIMSHEL

Two bits, four bits, six bits a dollar…

Attributed to George (Mr. Two Bits) Edmonson, Jr.

Not a tremendous amount to this story, but on this First of April, it seems a propos.

Mr. Two Bits was an avid Florida Gators fan, but ironically, he never attended the big school in Gainesville. Instead, he spent two years at the Citadel Military Academy, enlisted in the Navy after Pearl Harbor, went on to fly Grumman F6Fs in the Pacific Theater, and, in the aftermath of V-J Day, settled in Tampa to sell insurance, where he developed a passion for the blue/orange chomping grounds of Emmitt Smith, Steve Spurrier and Tim Tebow.

Early on, he took to leading the two-bit chorus and this avocation was so encompassing that from 1950 until his “retirement” in 2008, he was the official cheermaster of our quoted chant.

I think the incantation predates all the above by a good bit, but it was Two Bit Edmonson who immortalized it, and I say God Bless him for it.

By inference, and unless there are non-linearities involved, two bits equates to a quarter. And that’s just where we are; we’ve expended two bits – one quarter — of ’24.

And what a quarter it was. Equity indices across the globe soared. Bitcoin posted a two and a half bagger and is now, priced as it is near $70K, implied a modification of our titular canto must now be modified to something on the order of: “two bits, four bits, six bits, $560,000”.

The groundhog saw its shadow. Easter came early. The Chiefs repeated. Voters, in their wisdom, all but confirmed the Biden/Trump rematch.

The Jobs Market engine hummed at full gear. GDP chugged along. Inflation acted up, but for the moment at least, has not gone hog wild.

Contemporaneously, some significant monuments toppled. They handed SBF a two-bit sentence of 25 years. Gravity pulled RDDT to below its Day 1 close, leading to countless queries about purchasing the stock (particularly post-IPO) on r/AITAH.

The impeccably decent but decidedly dorky Joe Lieberman took a tumble and died. As did Daniel Kahneman – Father of Behavioral Finance.

Whatever that is.

No matter, we move on, with 6 bits of the year burning a hole in our collective pockets, which we must, one way or another, spend by the end of December.

If current patterns hold, we will continue to belly up to the securities bar, consuming till we’ve had our fill. My own view is that we’re still in a sweet spot. Fundamentals remain strong. And, more importantly, the technical configuration (which I, somewhat gratuitously, define as the implied supply/demand characteristics of a given market) are positively on fire.

I posit here that at the intersection of these crossroads resides the most recent comments from Fed Chair Jay (Mr. Six Bit) Powell, who earned his new handle by sustaining his commitment to three 25 bp rate cuts this year. In addition to the plain fundamental goose this supplies to the market, the technical implications are even more profound, implying his willingness to come to the rescue of the investment community the instant that signs of trouble emerge.

Problematically, though, as likely as anything else, it may be that said signs will arrive in the guise of a resurgence of inflation. I do get tired of this topic, but if one looks at the Energy Complex, there may indeed be some cause for concern:

Crude Oil:                                                                                   Gasoline:

And if that ain’t enough to cool your jets, consider the Cocoa market:

Perhaps, with Easter now behind us, we can obtain some relief with respect to the last of these. I can personally attest to having consumed so much chocolate over this past weekend that I couldn’t choke down another Cadbury to save my life.

And, of course, we must keep a leery eye on those rascals in Washington. They did manage, heroically and statutorily, to expand their own borrowing by a cool $1.2 Tril, which I reckon will last us till sometime in the summer. This will take our debt servicing costs to > $1.5T/year, rendering it the largest line item in the Federal Budget.

By then we’ll be staring down the barrel of the major parties’ two-bit convention. The Dems hold theirs in Chicago. In August. Against a backdrop of acute and expanding civil unrest. What could possibly go wrong there?

Richard J. Daley won’t be there to issue a “shoot to kill” order. So, there’s that. But at some point, we may hit that “holy shi+” moment, when: a) the entire electorate realizes how patently pathetic are the choices it has made for us; and b) investors realize that this may indeed be problematic to their risk- adjusted return objectives.

But for now, the six bits that remain to us look like quite a bounty, and I can almost hear Edmonson Jr. (who went to that Big Gator Swamp in the Sky in 2019) gearing up that time-honored Gator chant.

Personally, I prefer the ritual down the road in Tallahassee, where games commence with the righteous Seminole Spear Plant, wherein a lucky Noles fan mounts the noble steed Osceola, and solemnly impales a burning spike into the logo at midfield. A few years back, in a pricelessly sublime moment, this honor devolved to a former Nole halfback/QB named Burt Reynolds.

Even more sublime to that is the stationary steed on Main Street in Sag Harbor, who feeds not on hay and oats, but rather on – you guessed it – two-bit coin pieces.

It is my dream to ride this horse with you into eternity and wish you to know that I am saving my quarters, two bits at a time, with this in mind.

But in the meanwhile, I reckon I’ll move through the bits we got, as the hero of this story did so elegantly for nearly six decades.

What was good enough for him, must be, as a matter of necessity, must be good enough for me.

TIMSHEL

As a matter of pure vibe, I believe it’s time to lay some Willie Shake on y’all.

Our titular quote, perhaps my favorite Shakespeare line, is a throwaway in one of The Bard’s lesser- appreciated works — Measure for Measure.

M4M has an interesting if somewhat convoluted plot, focusing on the pending execution of some cat for making pre-marital love to his fiancé. A local nun comes to plead on his behalf, and this fair virgin is offered a diabolical deal from a demonic deputy (the transitory holder of absolute Viennese authority, devolved upon him by virtue of the temporary absence of a much-more-reasonable Duke) wherein she is empowered to save the poor son of a bitch’s life by yielding her favors to the evil bureaucrat.

Of course, one must wade through a significant amount of indecipherable posey to capture the good stuff. But such is always the case with WS, who I will cop to not fully appreciating. I recognize his singular brilliance. But – Not Gonna Lie – it is seldom the case that I select his works for entertainment purposes alone. One must admit, nonetheless, that our title quote is both sublime and eerily applicable to the entire human experience. Nine short words that summarize the patent unfairness of the world as we find it.

And all so thoroughly relevant, at least in my judgment, to our current conditions.

So, who (or what) is currently rising by sin? Well, obviously, the markets come to mind. Not that they’ve sinned themselves, because “they” aren’t even a “they” but rather an “it”.

A portion of the fault (not in our stars, dear Brutus, but in ourselves (JULIUS CAESAR (I, II, 140-141)), must certainly be assigned to investors, who: a) have plainly risen; and b) have been inarguably sinful. But I am not here to lecture investors, who: 1) are my professional paymasters; and who 2) by bidding up stocks are only acting according to their nature.

So, let’s focus instead on other entities where sin has evoked rising.

First, on somewhat of a mixed note, the RDDT (AITA) IPO can only be designated a triumph, the reality that the Company catalogues a multitude of sins notwithstanding. It priced at the top of the range and promptly rallied 40% at on the first day of trading, before nominally coming back to earth on Friday.

Did RDDT rise by sin? By virtue, did it fall? You decide. Or, alternatively, you can consult r/AskReddit (#2 on the subreddit hit parade),

That, however, is mere sideshow. The main action, unsurprisingly, transpires in Washington, which might be deemed Sin City for the purposes of this note.

To begin with, risk assets received yet another boost from those sinners at the Fed, who recommitted to three rate cuts this year. What they hope to accomplish by this transgression is beyond my range of understanding. An economy growing at 2-3%, with full employment is a Milton Friedman wet dream. Inflation is way down but showing stubborn resilience, and is, in fact, on the rise.

As observed in last week’s note, I am unaware of any previous episode in economic history wherein a Central Bank cut rates into a robust growth environment, with full employment, AND inflation statistics on an upswing. However, the policy statement did put lead into the proverbial investor pencil — AND may just give a little goose to incumbents across town who must run for-reelection this year.

But elected officials are certainly not relying upon Fed largesse alone. The Administration recently published a ballsy $7.3T budget proposal, featuring free cheese for nearly all. Except the military, which was assigned an inflation-adjusted reduction in its budget — with two nasty wars raging, with Putin threatening nuclear conflict, with China arming to the teeth.

With the mullahs having pulled off its second historic terrorist PR coup in a generation (9/11, among other matters, was a master stroke, continuing to impose billions of dollars of costs on the West – all for the price of a few plane tickets and box cutters). This time, they have managed to convert an horrific, unprovoked terrorist attack into a Star Chamber Inquisition of Israeli demonization, causing the (Jewish) Senate Majority Leader to call for regime change in another jurisdiction, and forcing enormous pressure on the IDF to either pull back, having, by doing so, accomplished nothing, or proceed with the destruction of their attackers, and, by such action, incurring the world’s incremental wrath.

There’s talk of Netanyahu addressing a joint session of Congress. I would advise against this, as it is nothing more than a redux of that episode nearly a decade ago. I said at the time that his remarks, designed to discourage the U.S. from entering into that Iranian nuclear agreement, that nothing would serve so fully to ensure that a petulant Obama would ink the deal.

And I was right. And now, the mullahs are raging. On our dime. Meantime, the United States Navy retires its already obsolete submarine fleet with no plans for replacement.

But we are certainly spending money that we don’t have on other stuff. It took more than two centuries for the Federales to amass its first $1 Trillion of debt. At the current, accelerating pace, we now turn this trick every three months. We hit $35T in the next few weeks, including $1.2T authorized late Friday under emergency conditions (lest we breach the 467^th debt ceiling limit this century). It was a feat of bi- partisan heroism. But, in its aftermath, the cranky, squawky contingent of the Republican, er, coalition (whose majority will soon be down to a single vote), called, yet again, for the head of the Speaker of the House – a position that no one else seems to be able to secure, or, for that matter, wants.

They’s also fixin to raise taxes by a whole bunch. And not only at the Federal level. The folks in Sacramento, Albany, Trenton, Springfield are a little short, and could use a boost. You can afford it, so, why not?

On paper at least, The Big Orange is also rising by sin. The NY SS Brigade is squeezing his red/yellow nuts to the tune of a half Bill. But one a happier note, he has fully consolidated his control of the GOP, AND, is about to book > $3B of profits on one of those goofy blank check SPACs – tied to a Social Media site that no one has ever visited.

Col. Naz, in the meanwhile, closed at yet another all-time high on Friday, and is annualizing at an impressive 45% thus far in ’24.

But I reckon, now, though wearying (and certainly less interesting), we must turn to the virtuously fallen. I begin by proclaiming that I resisted the temptation to submit an AI-generated March Madness sheet. In fact, I skipped the proceedings altogether and thus can do no better (and no worse) than breaking even. I feel cleansed by my forbearance here, but I am in no ways spared from descent into heartbreak. Wiscy lost in Round 1 – to James Madison University – the alma mater of Ben Finkelstein (yes, that Ben Finkelstein).

Elsewhere, the vaunted Bank of Japan – the last holdout — has finally ended more than a decade of sinful negative interest rate policy, and, by removing the transgression, has placed itself on a path towards righteousness. One would think this would have given a boost to the Yen, but one would be wrong on that score:

Nipponophiles can solace themselves in the performance of the NK 2-2-5 – up a gaudy 22% this young year and annualizing at an eye-popping 140%. This on the heels of the prolonged celebrations tied to their recapture of highs last breached in the early ‘90s.

Finally, as we enter Holy Week, I’d be remiss if I didn’t mention the virtuous fall of Yeshayahu of Nazareth. I won’t delve into his resurrection, as it is outside of my field of expertise.

I do believe it is possible to rise by virtue and fall by sin. I aspire to the former.

No, it won’t be easy. It never is. But even in M4M (SPOILER ALERT) it all comes sorta right in the end. Turns out, the Big Duke never left town. Instead, he bounced around incognito to spy on the deputy. As it all winds up, the poor lover wins his liberty, the deputy is arrested, and the Duke proposes to the nun.

I won’t promise that outcome, but as we approach this righteous holiday, it can, at minimum, be our hoped-for result.

After all, it certainly beats the ending of Hamlet, MacBeth or King Lear.

TIMSHEL

So, the inevitable transaction, leads, naturally, to the inevitable question.

First, as was pre-ordained by the Gods, Reddit, which bills itself as “the front page of the internet”, has filed for an IPO. And why not? It is the 15^th most visited website in the world, trailing only such titans as Google Search, Facebook, Insty, Amazon, YouTube and (regrettably) PornHub. It runs, also, just behind TikTok, but, given the recent antagonistic action emanating out of Washington against the Sino-video colossus, how much longer the latter can it hold its lofty position?

Reddit, meantime, generates hundreds of millions of dollars in revenues and is growing in a gratifying manner.

For the uninitiated, the site is subdivided by topic (or in the parlance of our times, subreddits), which cover any and every obsession under the sun. Interested in the pending move of the Oakland Athletics to Las Vegas? Simply visit r/OaklandAthletics. Prefer to commune with others, who, perhaps like many of us, enjoy passing our time by gazing at pictures of body parts mangled by motorized lawn instruments? Well, I can’t divulge the name of this subreddit, which, at any rate, is private, so perhaps the less said about this, the sooner mended.

Reddit achieved the Wall Street equivalent of the Warhol 15 minutes a couple of years ago, when a group of retail stock spit ballers took down some legit hedge fund ballers with one whale of a short squeeze. This adds an element of irony to the Reddit listing — a topic which we may (or may not) return to later.

All of which evokes the above referenced question: what is the ideal ticker symbol for the new listing?

To me the answer is obvious: AITA, which, as insiders know, is a reference to one of its most iconic subreddits, one that is in expanded form, is AMITHEASSHOLE, or r/AMITHEASSHOLE. Its content consists of posters presenting a conundrum wherein they have been compelled to act in ways with which they are not entirely comfortable. They lay out their stories and ask for the forum’s judgment as to whether or not they are the asshole. Commenters respond with NTA (Not the Asshole), or, at the other extreme DTA (Definitely the Asshole).

Now, it should be acknowledged that there is an element of subjectivity in these postings, as to ask posters to have laid out their strife-laden stories with perfect objectivity is perhaps beyond the realm of reasonable human expectation. But the collective wisdom of Redditors is routinely entertaining and occasionally enlightening.

Having looked this up, I find that r/AMITHEASSHOLE ranks a meager 100 on the list of most popular subreddits. But, for a couple of reasons, this is not an entirely fair representation of its influence. First, the traffic is split up relatively equally between r/AMITHEASSHOLE and r/AITA, which, when combined, places the concept at about 50^th in the standings. Beyond this, I believe that AITA, more than anything else, is the most a propos branding for the Reddit platform.

One would believe, nay, expect, that the singularly brilliant company co-Founder/Owner Alexis Ohanian (who, among other brilliant strokes, managed to marry the fabulous Serena Williams), would understand this better than anyone. But one would be wrong on that score. Ohanian (no doubt as advised by an army of PR and Investment Banking types) has chosen instead the pedestrian handle of RDDT. The lawyers probably weighed in here as well, as AITA is allocated to an obscure Asian real estate consulting concern. Given that it has never, near as I can tell, traded, this can hardly be an obstacle.

One further wonders whether he might not be inclined to post to r/AITA whether or not he was the asshole for not selecting the sublime AITA for his ticker symbol. And, more broadly, whether an IPO is timely.

To wit respecting the latter, Reddit is unprofitable, having dropped a cool $90M last year. Moreover, the projected valuation is ~$6.5B – a material down round from the $10B at which, in the private market, it last raised capital.

I have no idea whether he has done so, but, much as I admire him, my only answer could be DTA, and I am compelled to assume that his early-round investors would vote the same way.

However, and in any event, I would counsel Alexis against losing heart. Because the world is full of As. Consider, if you will, the doings in Cambridge – a town which has seen happier days. In the most recent episode of Crimson Bathos, Harvard University released a summary of its finding in an investigation of Business School Professor Francesca Gino, renowned for research into fraudulent behavior by economic agents, for – get this – falsifying data. Moreover, the results only became public in consequence of Gino having sued the University for $25 large. My verdict here is that ETA – Everybody’s the Asshole.

However, returning to our primary theme, the RDDT (AITA) listing should make for some interesting Bathos on its own accord. On this tape at any rate, it is likely to be over-subscribed. Then, if the script holds, hedge funds that believe they know better will perhaps aggressively short it. Whereupon the Reddit investment militia will gleefully engage in another round of nut squeezing.

And, if current conditions sustain, they’re bound to be successful. The miscreant hedge fund owners will fold up shop. And probably console themselves with the purchase of sports franchises.

Because the tape remains mad powerful, its relatively tepid performance last week notwithstanding. Equity indices were tragically flat, and even the mighty BTC sold off. On the other hand, the data flows from macro land were fairly putrid – particularly on the Inflation front, and this is to say nothing of the depressing reality that the two ass-hat losers (DTAs) that no one wants have now locked down their party nominations.

The Inflation numbers (combined with disappointing Retail Sales figures) alone should have been a signal sufficient to engender, say, a couple of percentage point reversal, which might, under other circumstances, have done little more than corroborate an extension of the Bull Market. But nothing of this nature came to pass. One potentially curve-fitting explanation for this is that, somewhat improbably, the Fed went out of its way to reassure skittish investors that upticks in pricing be damned, interest rate cuts are still on their way. The FOMC, in any event, weighs in on Wednesday, so I reckon we’ll see.

Nominally, we must assume that the buying frenzy will thus continue. For how long, though, is anyone’s guess.

The biggest, darkest cloud on the horizon is the horrifying expansion in credit extension and consumption, as further illustrated below:

I would say that as a society, it’s DTA. The graph on right suggests a highly dubious tendency towards binging. The outcome is the more alarming graph on the left, which indicates that post lockdown, us Yanks are paying thrice the amount of aggregate interest that they was squeezing out of us during that shelter at home yukfest a couple of years back.

Some of this is plainly owing to higher interest rates. The rest? Maybe spending on some stuff we really didn’t need. And some of it, I fear, went into the market. Shame on those who took this route. They are DTA. The current average credit card rate is 22.5%. Thus, and bearing in mind that stock returns are subject to taxation (though not necessarily representation), in order to merely break even on this type of investment financing, one must generate a return of approximately 35%.

So, reiterating one of the cardinal rules of investment risk management, for the retail mooks among us, the best trade that can be made is to pay down credit card debt. Do the opposite and fund trading from this source? Well, DTA. I don’t wish to know you.

If, however, you choose to do so, and join the Reddit Investment Army, holding your fire until some DTA hedge funds load up excessively on the short side of some flukey stock, you will then not need me to tell you what to do.

Perhaps the name in question will be RDDT. If so, your defense of the name would buy you some grace, and possibly place you in the NTA camp.

Meantime, I reckon I’ll keep Redditing. I could post a great deal on AITA, but I am not of a mindset to be flooded with DTAs. I acknowledge both the wisdom and the justice in this. But I mean to fix it. If it’s the last thing I do. At that point, you and I can float away into a parallel universe where neither RDDT nor AITA can possibly enter our entwined consciousness.

TIMSHEL

Nobody told me there’d be days like these, Nobody told me there’d be days like these
Nobody told me there’d be days like these, Strange days indeed
Most peculiar mama

John Lennon

Strange days have found us, strange days have tracked us down,
They’re going to destroy, our casual joys,
We shall go on playing or find… …a new town

Jim Morrison

Yup, a two-fer. No extra charge. And no need to thank me. I just happen to be in a generous mood.

John Lennon and Jim Morrison. For what they did, no one could touch either of them. Ironically, the latter was born on the same calendar day as the murder of the former, who died mysteriously on my mother’s 35^th birthday.

Such are the peculiarities of our existence, the strangeness of our days. And, as I gaze out around me, I am thinking that maybe, our days are now stranger than they have been in quite some time. If one cares to ponder over it, one can see that the old, longstanding protocols have fallen by the boards, and this across many realms – including the obvious ones of race, gender, and other such foci of our obsessions.

But certainly, it extends beyond these overtrodden roads. Consider, for the second consecutive week, basketball, which has, for me become unwatchable, if for no other reason than that they don’t call travelling anymore. Not in college and certainly not in the pros. Highfliers can now begin their nominally allotted 1.5 dribble-free steps from the opposite free throw line, or, at minimum from half court. In result, among other matters, this caused the aggregate final score of the already-farcical NBA Allstar Game to rise to within a shade of an idiotic 400 points.

Then there’s politics. Which are so strange that they must be glossed over. On Thursday, the two presumptive candidates who no one wants, took to the airwaves to insult one another and their respective constituencies, one doing so from the Senate Chamber, the other, presumably, from the comfortable confines of the Mar a Lago resort.

But more to the point, and what got me thinking about all this is the odd doings of the Capital Markets. It has, more specifically, given me the notion that when future generations look back at this pass, they will have no alternative but to conclude that we had no idea, back in those quaint, early days of 2024, what on earth we were investing in.

Examples abound.

Take crypto for instance. While confidently rendered theories flourish as to its logical role in the capital and commercial economy, to me it’s all spit balling. Crypto may become the standard funding mechanism for all commercial activity, or, failing that, a suitable alternative thereto. Conversely, it may be consigned to the ash heap of economic faddishness, joining such other denizens as SPACs, NFTs, and, going back further in time, Dutch Tulips. My theory is that crypto is what it will become, and that as of now, we simply don’t know.

And, for that matter, what is money? I once had a hunch — until > $50 T of it was created out of thin air over the past generation – one that has witnessed a 5-fold increase in the money supply:

Money has always been somewhat of an obtuse phenomenon, having, like crypto, no value other than what we choose to bestow upon it. It unilaterally reflects nothing other than the amount of perceived utility which can be extracted from its exchange.

And, because money, by definition, is only a relative construct, the quintupling of its quantity clearly changes its essence. From what? To what? You tell me.

Moving down the same line of argument, what is debt? An asset for one subset amongst us; a liability for another. It, too, has exploded in proportion – not only against money, but against any asset by which it is measured. Just what Washington owes has grown much faster than even M2 since the turn of the millennium, rising 7x — from ~$5T to ~$35T, and expanding at an accelerating rate. When measured against GDP, the path, over the same period, it looks like this:

We thus entered the new century owing as a country about 30% of what we generate in output; now that figure is well over 100%.

There’s a lotta talk about this, but to analogize it in one imperfect way, consider two economic agents – one who has borrowed 30% of their salary, the other >100%. I believe that any objective comparison would lead to the conclusion that what debt to one is very different from what it is to the other.

I thus no longer believe we have a handle, as borrowers, lenders or bystanders, as to what is meant by the concept.

Among the main differentiator between money and other monetary assets is the time value embedded in the latter, as captured economically by the interest rate. The core of the current conundrum is whether, or more specifically, when, the Central Banks will reduce these, and the associated vibe has migrated over the last several months from euphoria (they’re gonna meat axe ‘em in early Spring) to disappointment (ho, not so fast), to renewed hope, the last of these based upon the soothing comments of Chair Pow at last week’s Humph Hawk.

But why even consider cutting rates? Why now?

I mean, the country is running at full employment, with robust GDP and no recession in sight. Inflation remains a concern and could go either way. Risk assets are at all-time high valuations.

Has the Fed ever cut rates against such a backdrop? No, not if memory serves.

A reduction in yields would accomplish… …what? More borrowing? Swell. Further bloating of equity valuations? Probably. Incremental disadvantages to hard-put-upon savers? Natch. There may, however, be a perceived political benefit to, say, a timely cut in the months leading up to the big November throwdown. If so, I say shame on those behind it. You cut rates when needed, not when expedient, because the need will inevitably arise. I believe this powder should remain dry. But no one asked me…

Moving along, I’m also not sure I can define the essence of the prevailing Equity markets. Here we sit at another round of all-time highs, some of which is undeniably a by-product of all that money printing, but there are other factors at play.

New technologies are enticing to contemplate, but what do they reflect? Everyone is giddy about AI, and perhaps rightfully so, but what impact will it have? Or quantum computing? Fact is, we don’t know, and won’t for quite some time.

Heck, we haven’t even begun to get our arms around the lockdown-abetted explosion in telecommunications. No one, for the moment for instance, knows even where to be. Are we supposed to be in an office? At home? Some hybrid combination of the two? Presumably, new paradigms will more firmly establish themselves. But here, in March ’24, nobody really has a discernable clue.

I don’t know but suspect that the virus response fostered huge breakthroughs in both preventative and response-based medicine. If so, they have yet to be anything but minutely harvested.

Then there’s the odd case of the Energy Complex. As illustrated below, U.S. Production is at an all-time high, while the cost of Nat Gas is at a 25-year low.

What gives? I thought we was shutting down that evil fossil fuel industry, and doing so quickly, lest the entire earth is incinerated in the meanwhile.

The main government response, near as I am able to discern, derives from the Securities and Exchange Commission, taking time out of its busy oversight schedule to force public companies into disclosing their fossil fuel consumption. Forgive me for stating this, but securities regulators policing energy consumption sort of brings to mind Hunter Biden’s lucrative turn on the Board of Burisma.

Perhaps we should simply turn the job of fossil fuel eradication over entirely to Hunter – provided, of course, that he can take time out of his schedule already jammed with criminal defense worries and, you know, painting.

But more to the point, we have no idea what form the future energy matrix may take. We may get greener, but the consensus estimates are that it will take decades to wean ourselves off fossil fuels, that such a transformation will cost untold treasure and considerable annoyance, and that whatever righteous steps we take in this direction, the Chinese, Indians and third world types are unlikely to follow suit.

While I’m ranting and rolling, and on a related note, the NY AG just dropped a whopping lawsuit on the industry’s biggest meat producer, for setting methane gas reduction targets at levels that she believes are unrealistic, and using this pledge as a means of – get this – selling more meat to its customers.
Apparently, and at least in New York, this is a civil transgression.

In summation, everywhere one cares to cast a Capital Markets glance – from crypto to currency to credit to commodities, AND equity sectors ranging from TMT to Health Care to Manufacturing and beyond, the line of sight is blurred and the future more than likely to unfold in ways that we currently do not understand and CANNOT anticipate.

None of which is likely to impede the current buying frenzy, nor should it. Capital assets are, one way or another, likely to become even more expensive than at present, and the best way to address this reality is to own as much of them as one can.

No, nobody told me there’d be days like these, and yes, it’s most peculiar Mama.

But like Jim once prophesied, unless we’re willing to find a new town, we shall keep on playing.

In my estimation, it is fitting and proper that we do so. But let’s not pretend we know, for the moment, what any of this is about.

Strange days indeed.

TIMSHEL

Well, we made it through February, and no worse for the wear. Quite to the contrary, we enter the 2nd sextile of the year in what only can be described as fine fettle (God Oh Mighty, how I hate that phrase).

It’s now, as we all know, March. Which is a difficult month for me. Particularly the early parts of it. I won’t elaborate, because if you know, you know, and if you don’t, you won’t gain much by my having enlightened you. I probably shouldn’t reference it at all, particularly in such an obtuse fashion, but somehow, I feel, it merits (cryptic) acknowledgement.

As in the past, the interlude will soon be over. Then March REALLY begins – taking particularly March- like forms such as St. Patrick’s Day and March Madness Selection Sunday, which, this year, transpire contemporaneously.

So, as of now, we don’t know who’s in and who’s out (they haven’t even held the conference tourneys, FFS!) but I’m here to offer you my secret strategy for crushing the brackets this year. You must promise, though, to keep it TOP Secret.

I’m gonna base my selections entirely on recommendations from Chat GPT. Or maybe Gemini (haven’t decided yet), because the latter will ensure that my picks feature the most appropriate and adaptable sociological makeup.

I don’t know how I came up with this brainstorm, but it is indisputably inspired. This much is certain: no other participant in any pool will lay a glove on me.

I don’t expect to nail every single game, because, after all, even AI models are not thus far equipped to anticipate injuries, perfidious refs, or other accidents which may occur as the tournament unfolds. I fully expect it, nonetheless, to completely crush the Sweet 16, Elite 8, Final 4 and Championship Game.

I’m gonna spread big cash bets across multiple sports books, so as to partially disguise my action. I, was, after all, born at night, but not, as they say, last night.

My entry into these ritualistic proceedings transpires after a long hiatus (I ain’t filled out a bracket in ages), the latter owing to several factors. I haven’t in recent years believed I have had much of an edge, betting the chalk (probably the best human-rendered strategy) is boring, and, most of all, in protest against the NCAA having co-opted the term March Madness from the Illinois High School Basketball Association.

Back when I was playing (OK, not very well), March Madness was a tourney reserved for the top eight teams in the Prairie State, transpiring over two short days, at Assembly Hall in Champaign, IL. The champs would thus be compelled to win two games on Saturday and another two on Sunday.

March Madness indeed. But then the suits at the NCAA and CBS purloined the phrase, and nothing has been the same since they did.

So, maybe it’s not a great idea to bet the ranch on AI-enabled bracket selections after all. And, somehow, I suspect that I’m not the only one who stumbled upon this stroke of genius. In fact, I’m guessing that any number of mooks will try this stunt, and envision untold millions, nay billions, being squandered on this scheme.

Because, while I’m a believer in the potential of AI to transform our lives, I suspect that associated models have not, as yet, conquered the Sisyphean challenge of accurately predicting the outcome of the NCAA hoops tourney. They may have calculated Pi out to a bajillion decimal places, cured cancer, solved Fermat’s Last Theorem in 6 moves, and performed other miracles. But the tourney?

No dice. Not yet anyway.

But please don’t share this shortcoming with investors, who continue to lay into the market with little abandon. This past week brought yet another round of record highs, even as Inflation re-emerges, war rages on multiple fronts, the Fed walks back promised monetary policy goodies, and midsized banks continue to experience the grinding of their gears.

None of the above has caused much, any, disturbance in the buying forces, which have catapulted our indices to yet another round of all-time highs. And they’re not alone.

One might consider, for instance, the rich, creamy contours of the Cocoa market:

And though it pains me to reference it, duty calls: how about that Bitcoin?

Unless either my eyes deceive me or my arithmetic skills have ossified entirely, BTC appears to have tripled over the last rolling year. Which is not a bad showing for a financial instrument the purport of which no one has yet properly and comprehensively set forth.

But – not gonna lie – I get a bit nervous about its coming collision course with AI. What happens if (when) Chat GPT cracks the mining algos?

While I am almost (but not quite) tempted to recommend hedging BTC with long NVDA, I. Just. Can’t.

The standard line is that the insatiable demand for these crypto cookies derive in part from a desire to hedge against the madness of monetary policy – in the U.S. and indeed across the developed world. This seems like a rational, if incomplete, line of argument. And nothing on the horizon – including Chair Pow’s turn on Capitol Hill at his semi-annual Humph Hawk address (Wed/Thurs) is likely to diminish the force of this logic. But still and all, I wonder if crypto buyers truly know what it is that they are buying.

Everyone, by contrast, understands what Cocoa is, being, among other things, the active ingredient in Cocoa Puffs, the signature tagline for which is “I’m cuckoo for Cocoa Puffs”. But surging demand for Cocoa seems to me to be entirely rational, though perhaps not to the extent suggested by CEO of rival cereal maker Kellogg’s, who was recently excoriated for suggesting his products might offer an economical choice for dinner in these hard-pressed times.

This bit of common sense finds no place in the Mad Month of March. So, I say, let’s embrace the mood of the season.

Because, somewhere out there, presumably, someone is running a March Madness Pool, denominated in BTC, with every participant using AI tools to drive their picks.

No, it doesn’t seem rational, but it is March, so, I say, let the Madness run free.

TIMSHEL

Yes, the Superbowl was two weeks ago and yes it was a great game that went into overtime. Yes, we overindulged in result.

But sheesh. One would think that by now, the chips and dip supply/demand curve would have normalized.

But one would be wrong on that score.

Because, by all observation, each commodity is materially divergent from an equilibrium state.

Let’s begin with chips, a product the demand for which is difficult to observe. We can only instead engage in that forlorn exercise, practiced so dismally by dismal scientists everywhere, of estimation.

And our best predictive proxy, which you probably have already guessed, is the astounding performance of bull goose AI chip manufacturer Nvidia, which: a) reported on Wednesday; b) blew the doors off of expectations; c) obliterated the recent, META-set record for single day valuation gains ($277B – an amount greater than the capitalization of all but thirty companies in the global equity complex), and d) shot past the $2T valuation threshold, rendering it the fourth most valuable company in the world. It also, as pined for in last week’s note, revitalized an equity rally that was beginning to look a little saggy in the socks. Meantime, I am now interconnected with 5 of the Mag 7 – a multi-functional user of Microsoft, running my scripts on Apple products – including my aggressive posting of cat pics on Facebook, on the many devices I purchased on Amazon. I Happily search my way through Google, watching the NFL on its YouTube sub. No, I don’t own a Tesla but you gotta draw the line somewheres.

All of which leaves me one short of 7. So, I’m thinkin’ I probably gotta get me some chips, preferably of the NVDA variety. The good news is that you can buy these little buggers on Amazon Prime. The bad? The cheapest of these bad boys will set you back about seven hundred big ones and will take more’n a week to land on your doorstep.

I think I can rustle up the 7 Benjis. But I’m not sure I can wait that long for delivery.

Until then, I’ll just gaze longingly at the product image:

I reckon we can always crank up the foundries/chip factories to meet attendant demand, which appears to be insatiable.

So, I am not going allocate any of my worry to issues that may arise in this pursuit.

Dips. Now that’s another kettle ‘o fish entirely, coming as they do in so many varieties. You’ve got yer tomato-based, avocado-sourced, dairy derivative, and legume originated. There’s something called humus, which I truly do not understand. Dips can also be, or so I am informed, made from caramelized onions. Heck, I have even heard unconfirmed rumors that some demented enterprises sell concoctions based on such back benching foodstuffs as celery and kale.

On the finance side, DIP is an acronym for Debtor in Possession, a trade upon which – trust me – you do not wanna be on the other side. But in the liquid markets, all roads dip in one direction – a noticeable drop in the price of a financial instrument. Unlike chips, dips are a mixed blessing. Nobody particularly wishes to see the dip descend upon what they own, but, more philosophically, market dips are, it can be argued, a healthy element of the construct, offering, as they do, opportunities for strategic and tactical buying, a rationalization of pricing dynamics and other bennies.

Problem is, there ain’t no dips in sight, the last one of any materiality having transpired in October, in result of that nasty attack on a bunch of civilians in Israel. That there conflict is still raging, with much of the world turning its sympathies towards the victims of Israel’s indisputably forceful response.

Tempting though it is, I won’t go down the rabbit hole of offering my opinions on this mess. Suffice to say: 1) the speedy pivot, with barely concealed glee, to blaming the victim nation for the conflict has distressed me; and 2) investors have not cared sufficiently about this to manifest even a skinny 2% pullback in the intervening period.

Nope, investors don’t care. No dips for you. 4 months. And running.

All of which has caused the historic alliance of chips and dip to fray at the edges. The world will take all the chips it can get, dipless though they may be.

We’ll just choke them chips down dry, thank you very much.

And I am starting to believe that the fissure will continue, nay, expand. That the more the world demands of chips, the fewer are the dips that will materialize.

Because the hard fact is that the rate of acceleration of technology development is, well, accelerating – in terms of processing power, the range and scopes of tasks it can and will handle, and other factors.

Yes, there’s AI, but there’s also Quantum Computing. Put these two together and you arrive at a chip- rich dip-bereft market environment.

So, I recommend against shorting NVDA – at these or even significantly higher valuations.

My hunch is that we’re gonna be compelled to pay a heavy price for all the monkey muffins we’ve dropped on this economy since the turn of the century. These the wages of some truly self-serving and economically unholy actions of which we all are guilty.

If I’m right on this, then the associated drop will be more than a dip, might even devolve into a full-scale crash. There is no shortage of catalysts for such a contingency.

Our pig circus that passes for domestic politics could devolve into something deeply unpleasant and perhaps unfixable. Hostile forces around the globe – from the Persian Gulf to the steppes of the Urals to the Yangtze River and beyond could mess with our flow in unthinkable ways. Our bloated credit complex could collapse, taking us back to the good old days of ‘08/’09.

These will be significant tests for our resolve and other human qualities, but, if we survive them, the upside deriving from the next wave of technological innovation is mind-boggling to contemplate. We’re not simply talking about creating term papers with single clicks on our laptops or Power Point presentations generated through this same conveyance. Health Care, Manufacturing, Agriculture, Transportation, all stand to be re-engineered, with unimaginable productivity gains sprinkled like angel dust on the investing masses.

Gloomy Gusses will point out the potential of untold jobs being rendered obsolete. Please. The blacksmith workforce was completely subsumed (and then some) into manufacturing assembly lines. Yes, some clerks lost their lousy gigs at Blockbuster, but how many jobs have replaced them in the realms of streaming content?

Thus, if we can survive (and that, admittedly, is a big “if”), the gains to the capital, commercial and consumer economies stand to be transformative.

But all that is perhaps peering down the road to far — certainly beyond our range of visibility. I don’t see either the big reckoning or the innovation renaissance taking hold on the immediate horizon.

But, meantime, there ain’t much to complain about respecting prevailing market conditions. There are innumerable reasons to expect the worst from the tape, all of them valid, but this has been the case since markets organized themselves a few thousand years ago.

I think that in the meanwhile, the backdrop against which those inclined to add to their holdings is favorable for the cycle.

So, maybe it’s time again to throw a party. Even a stag(flation) party (see last week’s note), which, even if it emerges, I don’t think will do much to stem the demand for chips or the disappearance of dips from the realms of investment.

So, if chips are on back order and dips are nowhere to be found, well, I’m highly confident that with some imagination, most of you will find adequate, alternative forms of refreshment.

TIMSHEL

It’s on. Let the ’24 stag party rage all year. Or (preferably) not.

This past week brought macro tidings which had all the earmarks of stagflation. The two most widely monitored inflation metrics took everyone by surprise by coming in hot. Meantime, measures of economic activity such as Retail Sales and Housing Starts blew unpleasingly frigid.

Slowing economic growth (stag) and rising prices (flation) are thus ascendant. I am always leery of reading too much into one month’s data, particularly in the current era — replete as it has been with counterintuitive, cross-winded content, but if one were to extrapolate, the clinical term for this construct is stagflation.

I’m not in the prediction business, so I will reserve judgment. But the investors have weighed in with their short-term verdict – by throwing a party.

A stag party.

Risk assets, undeterred by mellow-harshing data releases, have continued their upward ascent. Corks is a’poppin’ on Wall Street. Glasses are being raised, with an accompanying variation on the phrase first attributed to Roman Emperor Claudius:

“For those about to buy, we salute you”.

The soiree’ has even designated the logical master of the spin machine in one DJ D Sol, who, in a nod to numerologists everywhere, managed to cop himself a 24% raise in a year where the firm he leads – Goldman Sachs – experienced a 24% drop in profits.

And this in the early days of ’24.

Again, it is premature to hang the stagflation handle on the economy, but I think we can confidently state that a cooldown from ’23, if it comes to pass, would be in some sense understandable. Last year, GDP growth exceeded 3%. Inflation tumbled. There was other good news, perhaps best summarized by the charts in the accompanying link, issued by the White House itself, and which (it must be admitted) reads like a Biden campaign flier.

https://www.whitehouse.gov/cea/written-materials/2023/12/19/ten-charts-that-explain-the-u-s- economy-in-2023/

There’s little doubt that ’23 was a helluva year for the U.S. economy. But it certainly raises the bar for the current solar cycle, now, improbably, 15% in the books.

One might thus be forgiven for fearing that economic conditions can only deteriorate from here.

All the way to stagflation? Who knows? But the markets don’t seem to be terribly concerned. They paid obeisance to the to the nasty CPI/Retail Sales figures, rudely selling off all day Tuesday. By Thursday, we were back at new highs. Friday’s PPI and Housing Starts data put some renewed pressure on stocks. But it says here that the partiers will gather themselves over the next couple of sessions and belly up, yet again, to the buying bar.

And, while there, the imbibers may wish to hoist a Saki to the Nikkei 225 – now a skinny 1% from all- time highs last breached a generation and a half ago. Back in ’89. When I was still young. And cool:

Meantime, on this side of the Pacific, the Inflation numbers were so jarring that it caused no less than Larry Summers – a recognized oracle on these matters – to admonish the spellbound multitudes that the next move by the Fed may be to raise, rather than lower rates. If so, it would be quite a turnaround from the vibes they was layin’ down as recently as December, when the main speculation was whether the Central Bank would issue a baker’s dozen cuts, or the full smash of 967 of them.

Putting this all together, we may be compelled to consider a scenario where the economy weakens, Inflation re-emerges, and the Fed does nothing to ease, may in fact, abet, our ponderous burdens.

Of course, though, investors have an Ace up their sleeve, poised for deployment at the casino adjacent to the DJ D Sol Stagflation dance floor:

NVDA – a three-bagger over the last rolling year and trading at an impressive 20x its 2019 valuation, reports on Wednesday. Here’s hoping they can meet or beat already ludicrously lofty expectations.

If so, we will ask DJ D Sol to kindly kick up the volume and pump up the jams.

If not, well…

In result, I am of mixed sentiment respecting market conditions. Somewhat ominously, corporate chieftains are trippin’ all over theyselves to dampen expectations. And the must know something, right?

So, yes, I’d be surprised if underlying capital economy circumstances are able to sustain/build upon last year’s Goldilocks construct. Beyond the possibility that the CEO earnings partiers may finally fall under the table, a whole lotta stuff could go wrong. We might even stagger into stagflation. And this is to say nothing of the kettle-boiling situation in the Middle East, the looming election battle between two punch drunk, scumbag has-beens, the Damocles Sword of Commercial Real Estate credit…

…and so on and so on and shoobie doobie do.

Conversely, and for the bajillionth time, there remains too much cash chasing too few investible assets for investors, absent a true catastrophe, to turn tail and head for the hills.

This week, after we honor the POTUSes, and setting aside the life-and-death matter of NVDA earnings, there’s little on the docket of import. Moreover, data flows diminish after that, as they always do in the back half of a quarter.

There are, of course, the hazards associated with unscheduled data flows, which are seldom of a nature to gladden our senses. But this is ever the case, and, if we can’t move forward with associated serenity, we perhaps have chosen the wrong existence. Or, at minimum, the wrong profession.

So, while we may look back at this fast-disappearing winter as the beginning of an unpleasant interval of stagflation, I prefer to take a more constructive view.

Let’s just enjoy the stag party. And call upon DJ D Sol to do what he alone knows how best to do.

TIMSHEL