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

Tom Waits

You may not get what you paid for, but you will pay for what you get.

Maya Angelou

A word, as we approach the mid-point of summer, about the wages of obtaining.

To assist, I’ve selected two passages, the first of which is the opening lines of “Tom Traubert’s Blues”, a catchy variation on the old Aussie folk song about waltzing with the lovely Matilda (whoever she is). I liked it (and the song) so much that I selected it as the quote that launched the intro to my first book, the now-immortalized “Trading Risk” (J. S. Wiley and Sons, 2004 ISBN 13: 978-0471650911).

Trading, after all is like a waltz – one in which you seek to get what you pay for (and, ideally, a little bit more). And as I was determined to take readers on a musical, 3/4 boogie through the markets, I thought it was a propos. Problem was (or so my inestimably helpful publishers told me) that Tom Waits: a) never allows the use of his material by others; and b) is notoriously litigious. We agreed that while TW was unlikely to ever even learn about the usage of his work in some obscure risk management book, it
simply wasn’t worth the hazard. I was thus forced to substitute in the original song, describing a swagman camped along a Billabong, seeking a partner named Matilda and asking her for a waltz.

I don’t even know what either a swagman or a Billabong is, but that song is “traditional”, part of the Public Domain, and, as such, immunized from the caprices of copyright law. And, as the book was about risk management, the decision, I feel, was the right one.

Our other quote is a non-published remark from the immortal Maya Angelou, whose resume is about as content laden as the Manhattan telephone booth. Of humble means, she worked as a cook, (unfortunate though true) sex worker, singer, actress, civil rights activist, diplomat, poet, and educator.

In terms of the last of these, she spent the final generation of her life as a chair-endowed Professor at Wake Forest University, and I had wondered more than once how she ended up there. In the heart of tobacco country, on a campus that was a converted tobacco farm, where her forebears, presumably, toiled in chained servitude for plantation owners. Seems a little odd to me, but no judgment intended.

Both speak of the prospects of getting what one pays for, and paying for what one gets. And both, in my judgment, contain an element of authenticity, as elaborated upon below.

As this is the political season, perhaps beginning in these realms is unavoidable.

The Big Donkey Money Machine switched itself off in the lead-up to the sandbagging of Old Joe. Having achieved this (rational) objective, they have opened wide their wallets in support of his anointed successor, who, as predicted in this space on multiple occasions, and instantaneously: a) achieved an alchemic level of credibility; and b) could actually grab the big prize.

Our betters, in other words, have gotten what they paid for. But for us mere mortals, it’s impossible to ignore the reality that the caucus who has urgently implored us that they alone can save a democracy which they believe to be hanging by a thread has selected its savior in back room deals, sought to manipulate ballot rules in both primary and general elections, and given various other demonstrations that, while they believe in nothing as much as rule by consent of the governed, if it’s all the same to us, they’d sorta like to take charge of things on their own – at least for now.

Again, I think Harris can win. I don’t think she will, but the outcome is now in doubt. And I anticipate a good deal of bad behavior – on both sides – between then and now. As one example of how far matters have devolved, the sorry spectacle of no one from the Dem leadership showing up to Bibi’s speech, AND one legislative representative of this great nation sitting in the audience and flashing, to the leader of its staunchest ally, signs with dainty phrases like “War Criminal”, comes to mind. This, it must be noted, is the side that claims a monopoly on righteousness.

But righteousness is in scarce supply everywhere. And – you read it here first – I think that Team Trump will pull all available invisible strings to ensure the maximum disruption of the Dem Convention. They have a great incentive to do so, the process will be easy as all they need to do is to incentivize a few extra nutbags already inclined to impair the proceedings to do their worst, and, one way or another, I DOUBT they will give the Democratic Party the chance to out-Woodstock their Milwaukee love fest.

Whoever wins will have paid a price, will have paid for what they got. Here’s hoping it was worth it.

In the markets, writ large at any rate, we’ve bought ourselves a rally that is more than a triple bagger
since those lockdowns knocked us on our asses.

Problem is, of, course, that we paid for it with newly minted fiat currency, backed by nothing more than the dubious promises of increasingly perfidious global administrative machines. It’s been a winner thus far. But I believe it would be fair to say that the jury is still out. Investors were in full-on rageful rampage for most of the week, before regaining their equanimity and ending the cycle with a gratifying rally.

My guess is that they’re not, on balance, done buying. And getting what they paid for.

On the obverse side of this – proving that sometimes you pay for what you not only don’t get, but actually shun, we learned on Friday that the Federales have indicted notorious short seller Andrew Left, for serial manipulation of selected securities. I truly don’t know the merits of the case, but have found, historically, that federal prosecutors, even in L.A., seldom bring charges against anyone they’re not pretty sure of convicting.

But my general experience is that consumers, at any rate, pays for what they get – if not sooner, then later, and this is one reason I was disturbed to read that both overall consumer debt AND credit card delinquencies have reached a generational high:

I dunno, Maya, it sure seems like SOMEBODY is getting something WITHOUT paying for it. Of course, it must be allowed that these somebodies is gonna need to pay The Man eventually. The only question is if they can, in this world, achieve this far-flung inevitability. If not, it may be, you know, problematic for us all.

The Central Banks print money. Politicians put thumbs on the scales. Short sellers get busted.

The rest of us are left to confront the carnage. Probably, it’s our mess to clean up, our job to pay the bill. Because, as Professor Angelou reminds us, payment will indeed be forthcoming.

It’s all melancholy enough to revert to “Tom Traubert’s Blues”:

Now the dogs they are barking, and the taxicab’s parking, A lot they can do for me,
I begged you to stab me, you tore my shirt open,
And I’m down on my knees tonight,
And Old Bushmills are staggered, you buried the dagger,
In your silhouette window light,

Well, at any rate, that’s Tom’s take. I’d offer something from Maya, but, shamefully, I have never consumed any of her content.

She’s ten years gone, and my guess is that she shed her mortal coil with a clean balance sheet.

The rest of us? Not so much. We’ll ultimately have to pay down our debts, including the couple a bucks we owe Frank. He’s waiting, after all, and when the music has stopped in our waltz with Matilda, he’ll have every reason to expect us to make good.

Be forewarned.

TIMSHEL

Oh, somewhere in this troubled land, screens are flashing bright,
At some far-distant airport, there’s no delay of flights,
Somewhere banks are doing deals, bootleggers brewing hooch,
But there was no joy at, CrowdStrike, when screwed it the pooch

With apologies to Ernest Lawrence Thayer – Casey at the Bat

OK; maybe stating that they screwed the pooch is a bit harsh, but whatever they were doing to Bowser, it messed up our browsers, inconveniencing many and annoying just about everyone.

And there was even authentic heartbreak, as exemplified by this tragic image from The Vegas Sphere:

If the sight of the ancient “blue screen of death” on America’s most hyped-up, tech-enabled playground
doesn’t move you, well, then, you’re probably a horrible person whom I don’t wish to know.

Miraculously, the outage took place during a break from the venue’s core attractions – residencies for dinosaur rock acts like U2, the Eagles, and, of course, Dead and Co. Currently, and for the rest of the month, they’re rolling with some sort of cheesy “Postcards from Earth” thing, replete with enormous AI- generated tripe. However, the Gratefaux Dead will be back at the beginning of August, for another round of its never-ending “fare-the-well” shows. Let us pray that the glitch will have been mended by then, because this time, they (the reconstituted Dead, that is) might really mean it.

The blame for the fiasco devolves upon baller cyber security firm CrowdStrike (CRWD), whose custodians, by published reports, have demonstrated delayed and perhaps insufficient contriteness.

Apparently, some cyber-security patch failed, impacting everyone not tied exclusively to Apple, so impacting no one. The episode puzzled me greatly, though, having taken place, according to published reports, on Friday morning. But nearly everyone with whom I deal was experiencing internet problems going all the way back to late Wednesday, so what gives?

And this isn’t the first time that CrowdStrike has dominated news feeds in less-than-flattering ways. Approximately eight years ago, they got mixed up in some of those shady shenanigans associated with the since-discredited claims of Russian interference into the 2016 election.

That was bad. This is probably worse.

And, ironically, it transpired amid what is shaping up to be an election season that may even surpass the
outsize expectations we’ve formed for associated psychodrama.

As we went to press, the mulish vultures were circling round Old Joe, while Trump, with a nicely accessorized bandage over his right ear, is back with his own singular form of self-regarding petulance. I will say this though: I think that bullet took something out of him, as well it might have. At Thursday
night’s coronation and ever since, he looks (to me) a bit tired, a bit spooked and a bit wobbly.

Wait… …my system just came back online (thank you CrowdStrike) and I’m told that Biden has bounced. So, the calculus has changed.

Call it inevitable. Joe would have never been there but as the only means to stop Bernie, who, prior to the former’s anointment, was a lock for the 2020 Dem nomination. He beat Bernie. And then Trump. And, ever since, he’s been expendable. As his always unruly wits began to wander uncontrollably, he became a liability. For his party, and, indeed, for the country as a whole, we can file this episode under the heading of Addition by Subtraction.

Still and all, I say Biden and Trump must debate again. Ideally at The Sphere. It’d been the best
entertainment in years.

Meantime, last week, with much of the Internet flat on its back, with a presidential contest entering its most important phase and featuring a doddering incumbent who (whatever else can be said of him) would not possibly have lased in office another 4 years — pitted against a gunshot victim who seems to have retained all his legendary narcissism, is it any wonder that the long-standing rally took a modest breather?

And it’s not like earnings to date have offered much uplift. The Big Tech Pooches, though, have yet to report, and, at least for myself, I promise to avoid the CrowdStrike transgression of screwing them.

Whether they return the accommodation by not screwing us remains to be seen.

On a happier note, with all this talk platitudinous talk about Unity (much coming from the Big Orange himself), Diversity and Inclusion, one cannot be other than pleased at the convergence of the Mag 7 with the rest of the run of the mill Gallant 500 pack:

Pleasing as this be, the convergence tilts towards the downside and it says here that we still need the leadership of the Big Tech Dogs to sustain this here rally. They had a bad week, to be sure, and a particularly bad day on Friday.

But I believe they will be back. For reasons I’ve articulated — ad infinitum, in the past. There’s still too much investible capital chasing too few investible assets, to pull this train off its rails.

So, I’m gonna go ahead and tell you that you don’t want to climb aboard any theoretical short locomotive, heading in the opposite direction, on the same track, at this stop. Lighten your load if you must; you’ll get no complaint from me. But don’t engage direct battle with this rally.

Assuming there’s connectivity and taking the leap of faith that we can episodically ignore the political saga playing out in front of our eyes, over the next couple of weeks, we can perhaps focus on the GDP drop, earnings, and the next ritualized meeting of the FOMC.

Please know that the CRWD crowd is working diligently, if somewhat manually, to restore your devices. Presumably, they’re starting with The Sphere. And here’s hoping that they don’t screw the pooch. Again.

Because none of Bobby/Mickey/Henley/Bono OR Trump is getting any younger. Or stronger.

Bowser, on the other hand, is doing fine, feeling a bit amorous, and looking for bitches in heat. His browser, if not already operative, will soon be restored. And as for CRWD, it’s two strikes against them, but they’re still at bat.

So, be forewarned.

TIMSHEL

Hypocrisy is the compliment vice pays to virtue.

François de La Rochefoucauld, 2nd Duke of La Rochefoucauld, Prince de Marcillac

Let’s divert our attention from Saturday night’s events, to attend to more mundane matters, shall we? I don’t know this de La Rochefoucauld dude, never met him. My research, though, indicates that: 1) he lived and died in 17^th Century France; 2) his name, if one can pronounce it, trips elegantly off the tongue; 3) he was both a Duke and a Prince; and 4) he took a nice portrait/lived in a swell castle:

To me, our purloined quote, attributed to our Ducal Prince, is both pithy and timeless. Perhaps we will revert to it in the denouement of this piece; we usually do.

Because, in a week where we also lost long-ignored icons Dr. Ruth Westheimer and Big Rich Simmons, I wanted to spare a word for Shelly Duvall. She had a rich and storied life. Dated Ringo AND Paul (even if it was Paul Simon). Played a prominent role in several outstanding films, including The Shining, Time Bandits and Nashville. But to me, she will always be remembered for the role she (like Donald Sutherland’s Oddball) was born to play: Olive Oyl — to Robin Williams’ eponymous Popeye:

There they are – a couple for the ages. Both, of course, are now gone, and I cannot but think that those of us that remain are rendered the worse for their absence.

So, I ask my readers to join me in wishing a bon voyage to Shelly, and, for that matter, to Robin as well. Here’s hoping they’re in a better place – where the spinach flows like waters from the River Jordan. Where the beastly but somehow vaguely attractive Bluto is banished, and where the long-unaddressed issue of Sweet Pea’s paternity is settled – once and for all — in Popeye’s favor.

Meantime, in the markets, there’s information aplenty flying off the wires, but as of now, nobody seems to know what to make of it (other than, of course, to buy everything in sight). Inflation came in with a dose of ambiguity. Powell uttered soothing words on Capitol Hill. The Republican National Convention begins today. In the great city of Milwaukee, with Big Orange at the helm – head bloodied but unbowed. On the other side, there appears to be an end game afoot. I won’t delve too deeply here, but my gut tells me that too many powerful people and institutions, unaccustomed to being rolled over and stiffed, have called for his head for him to survive their having turned on him.

Earnings are commencing to roll in, but not too much in the way of discernable trends just yet.

In time-honored fashion, the nation’s largest banks are among the early reporters (investors thus far have reacted with a resounding “meh”), and it is to them that I direct my most acute attention.

Because the Long Arm of Justice finally arrived this past week, for one Bill Hwang, late of an investment platform called Archegos (a term which translates into chief, leader or prince) — in the form of guilty verdicts handed down on 10 out of 11 counts with which he was charged.

His crime? Concealing outsize positions in names such as Verizon, using leverage that he obtained by lying about the size and concentration of his portfolio – to multiple counterparties. My hat is off to him.

Because it’s one thing to corner the market in fluky small cap securities, but to try to pull off this stunt with some of the best capitalized companies in the entire equity complex takes some serious stones. Each of the forlorn banks, at Hwang’s instance, thought they were holding the entire Archegos position, but when the lid lifted, there were about a half dozen institutions lending him mad Benjaminz to load his princely boat.

When, as was inevitable, these names hit a rough patch, each bank was shocked when he was unable to cover his losses. The estimated cost of his adventures has been reported to be as high as $100B, and the banks took the brunt of it. For one of them – the always misanthropic Credit Suisse (which had been ground zero for every banking scandal since the Polk Administration) – it was the last straw. The yodeling regulators in that historically neutral jurisdiction gifted the institution to rival UBS a few fortnights later.

And now, Prince Bill is going to jail – God knows for how long. But if I were him, I’d pack a toothbrush.

More to the point, there’s a risk management lesson in this saga: Don’t. Fuck. With. The. Banks. Case and point, the recently adjudicated judgment against him was his second brush with the law; the first being an insider trading rap from early last decade. But no banks were harmed in result, and that episode only cost him a 4-year ban from the securities industry.

Whereas you stiff the banks, you go to jail.

They win and you (we) lose. It was ever thus. Consider, if you will, that every single government intervention in the modern capital markets era has redounded to the benefit of uber financial institutions. I remember back in ’94 – before I even began drawing Social Security benefits, when the perfidious Mexicans pulled a surprise devaluation of the Peso. It backfired spectacularly, and after lots of bleating about the plight of the Guatemalan guitar players and such, the powers that be came up with a now-quaint but then galactic $50B bailout package.

I don’t think much of it made its way into the pockets of the run-of-the-mill Mexican citizen. But the banks made out like banditos.

The same narrative plays out in a review of government intervention into the banking system over the ensuing thirty years, with the most prominent example being the response to the near collapse in the wake of the Great Financial Crisis. The multitude of sins committed by financial institutions in the lead up to this is the stuff of legend. The leverage applied to dubious speculations alone was criminally astonishing and put Hwang’s stunt to shame. But, unlike Billy Boy, no one went to jail.

So, I worry very little about the banks. Particularly the big ones. UBS now owns the Alps. JPM scoops up every such asset that catches its fancy (recent acquisition of First Republic comes to mind) – often getting paid for the privilege. It is the rest of us who bear the brunt of the risks.

And the big exposures, approaching as inexorably as the galaxy Milky Way moves into a collision course with neighbor Andromeda, is a credit crisis. It may take a couple of billion years but it’s coming:

It does seem to me that a~365% Global Debt to GDP ratio is, you know, kinda problematic. Put in perspective, if the world dedicated every single centime it produces – from this moment onward – to debt reduction, it would be square with The Man by the Spring of 2028.

Just in time for Biden to either pull a Trump and try to recapture his lost position, or, to channel FDR and seek a third term, which, if he succeeds, will put him at a robust 90 at the end. At which point, he will have no alternative other than to go for Term Number 4.

But all that is further down the road, and I suspect that higher valuations will come our way ere the reckoning that awaits us arrives on our threshold. And I suggest we avail ourselves of this bounty. It may be hypocritical to do so, but as Prince/Duke dLR might advise us, we can deem it to be nothing more than the tribute owed by our ubiquitous vices to that elusive blessing of virtue.

And, at some point, we may pay for our sins with more than our hypocrisy. Hopefully not, though, to the extent of Bill H.

Because, speaking strictly for myself, I’d like to avoid the Gulag Archegos with all the energy I can muster. I suggest you do the same. And you can start by limiting your leverage, lest you incur the wrath of the banks, who lever and concentrate at their will and pay the wages of these transgressions through the receipt of bailouts. And, if purely as an experiment, you wish to try your luck at fraudulently seeking to engage in excessive borrowing from them, well, I don’t advise it, but let me know how you make out.

There’s a motif of hypocrisy in all this, of course, but I’ll let Prince Duke dLR have the last word on that score, and simply bid adieu.

TIMSHEL

A pox on FL Governor Ron DeSantis, for stealing the low hanging fruit surrounding the fallout from last month’s debate. His call to end what he describes as a “Weekend at Bernie’s” Presidency removed what may be the among the most accessible of themes that I have encountered in quite a while.

He thus forces me to operate in a more derived fashion. As in, which Bernie? Because there’s a lot of them from which to select, and the first that comes to my mind is this Shmendrik:

It seems like only yesterday that the image on the left was superimposed on virtually every e-picture on the interwebs. Careful observation confirms that this Bernie’s mask skews a little to his left, if anything, insufficiently so.

But the fact is that he had the Dem nomination snatched by party elders from his rightful hands, not once but twice. In 2016 AND 2020. And that had this NOT been the case, a “Weekend at Bernie’s” Presidency would have taken on a whole different meaning. Most likely taking place at his warm weather second home, which, as he has repeatedly pointed out, ALL good Vermont socialists own, and refer to as their “summer camp”.

There is, alternatively, Bernard P. Fife, whose political chops include a losing run for sheriff against Ange. Though known throughout the world as Barney, his fun girl side piece Skippy always (incorrectly) referred to him as Bernie:

There he is on the left, alongside his opposite number – Myrt (Hubcaps) Lesh, who unloaded a lemon on him — in part by claiming to be the widow of another Bernard, which pretty much sealed the deal.

Gomer ultimately discovers that the car needs plugs, points, bearings, valves, rings, starter switch, ignition wires, water pump, fuel pump, oil pump, clutch, clutch bearings, clutch plates, brake lining, brake shoes, brake drums, radiator hose, and radiator hose coupling.

“And I’d give ‘er a good wash, too” adds Gomer, but this is deemed unhelpful.

Gomer does find sawdust in the gears of Barn’s newly acquired jalopy though, and this springs the Mayberry crime fighting team into action. I don’t know about you, but I feel we could use some of that in Washington.

There are, in addition, other Bernie’s to consider. For instance, Bernie Leadon, who, before co-founding the Eagles, was in a band that featured the guys who were part of the Mayberry Darling (known outside of the small screen as the Dillards) krew. So, there’s that.

But the comment was unambiguously pointed towards Joe (Bernie) Biden, referencing the “WaB” storyline involving the feigned re-animation of an individual who had departed these realms for a better land. Everyone gets the joke, but this isn’t the movies, Biden, whatever else may be said of him, can still fog a mirror, and, beyond this, has exclusive access to the nuclear codes.

At the point of this correspondence, he and his closest confidants are “Jilling off” in what presumably is a frantic effort to resist the growing calls for him to bounce. I have no idea where they stand on this score. But all has the look and feel of the inevitable. As was the case with Nixon and so many others, though, until the decision is made to exit (stage left), the central figure in the saga adamantly denies he (or she) is going anywhere.

So let it be with Biden. He’s in till he’s out. And then he’s out.

And it seems, as the second half of ’24 begins to unfold, political drama is impossible to avoid. The French have all but dispatched the leftist Macron. Meantime, in the UK this past week, the Whigs trounced the Tories, ending the brief Prime Ministerial tenure of that hedge fund dude who replaced the bird who dwelled at 10 Downing Street for all of twelve days.

Thus, as the French veer right, the Brits lurch left. However, ironically, the markets fear both outcomes to be fiscally unsound and as dilutive to the associated sovereign debt of each nation.

On this side of the Atlantic, of course, the political games of ring around the rosie have yet to resolve themselves. Mercifully, though, we’ve some more adult level matters with which to, at minimum, distract ourselves. Chair Pow hikes up the Hill on Tuesday/Wednesday, carrying the hopes of a nation for rate cuts — after a Jobs Report showing that the only new gigs being created are those involving the pushing of government paper and the emptying of bed pans filled by the elderly/infirm, along with him.

His Atlanta Division, meanwhile, is projecting a rather ominous diminishing of Q2 GDP figures, relative to that which it published a scant fortnight or so ago:

We’ll also be treated to another round of CPI/PPI. And to the quarterly ritual of earnings and associated guidance. With respect to the latter, expectations run high, raising the prospect of risks tilting to the downside if certain corporate chieftains break our hearts.

But God Oh Mighty, and though I hate to lay this on y’all, it is difficult for me to form any opinion other than that outcomes in November will be the most important determinant of market trajectories in the quarters to come.

And, so long as I’m killing your buzz and harshing your mellow, I may as well offer my own spin on all this.

If I wasn’t a born and bred Conservative, I certainly morphed into one after attending the University of Chicago. I thus cannot claim objectivity.

But from a pure market risk perspective, please know that the capital economy is walking on a thin wire. It has been living on borrowed time (and borrowed money) for years, and even a minor disruption could push it into free fall. Our financial system collapsed in 2008 and recovered largely through historic injections of fiscal and monetary helium. It then received double doses of same in the wake of the lockdowns.

These tanks are nearly empty.

As such, we’re better off trying to fix what we broke, concentrate on productivity and innovation — as opposed to focusing on outflanking ourselves in righteous rhetoric.

These matters, of course, are for the public consensus to determine, but I fear that if the Progressives run the table, they will press their fat left thumbs even harder on the scales than they ever have. And pressing their fat left thumbs on the scales is core to their strategy.

I recognize that thumbs on scales is a specialty of both sides of the aisle. But as of right now, it is the left thumb that terrifies me, mostly because I fear it will be permanent. Let them run the table and they won’t fail to enfranchise beholden immigrants (and perhaps felons), pack the Supreme Court, grant statehood to Puerto Rico and D.C., expand entitlements, increase taxes, cripple the Energy Complex, or some combination thereof.

If one wants to envision the true end of Democracy, that’s what it looks like – to me, at any rate.

And woe to the markets if that happens.

So, my desired outcome is a split government, and I don’t care how it splits.

But can at least elect a non-Bernie to the top spot, and my vote would be for Bernie Fife – so long as he doesn’t choose Hubcaps Lesh as his running mate. Because there is enough sawdust in the gears of our economic engine, without her shady exploitation of the better angels of our nature, to go around.

TIMSHEL

Or shall we say praise? Truly, I can’t decide. I do know that nepotism has a long history – arguably dating back to the Stone Age, or at least back to when Van Halen booted founding bassist Michael Anthony and wedged his zaftig son (Wolfgang, whose mother is the eternally fetching Valerie Bertinelli) into the slot.

Heck, I’m pretty sure that even the papacy was handed down from father to son for several generations during the Iron Age. Caesar’s grandnephew Augustus was arguably the better Emperor of the two, and like his Uncle J, earned himself an eponymous month. Richard M. Daley held the office of Mayor of Chicago for a longer period than his more famous father (Richard J.). And, the British Monarchy has passed down within the same line since the ascension of the fabulous Queen Victoria in 1820, all the way to the smarmy King Charles III. During which time they won two world wars, completed the final pillaging of India, and raised rock and roll to perhaps the highest art form under heaven.

200 years. One family. Lording over an empire upon which the sun never sets. God Oh Mighty.

All of this is rendered timely, of course, by the divine tidings that the Los Angeles Lakers used their second-round draft pick to select one LeBron (Bronny) James, Jr., son of the team’s (and the league’s) most famous player. Strong arguments can be made that this was an authentically meritorious decision; Bronny did manage to average an astonishing 4.8 points/3 rebounds a game (a skinny 27 ppg below Caitlin Clark’s output but placing him just ahead of Grambling’s Mikale Stevenson as 2,236^th greatest scoring machine in last year’s college competition) during his single season with the (Hoop)men of Troy.

True, his efforts were annoyingly interrupted by having suffered full cardiac arrest in the early portions of the season. But what scouting department in any sport would take that trifle into consideration?

On the other hand, it’s just possible that LeBron engineered this whole thing for his own nepotistic gratification. If so, it wouldn’t be the first time. For instance, when he “took his talents to Miami” and stacked a team that won a couple of titles. He then bounced back to his home turf of Cleveland, where he (laudably) led them to a championship. But after that, being a billionaire businessman and all, and wanting to base his operations in Tinsel Town, he engineered a move out there. No, they haven’t won any titles with him in purple and gold, but he has made a pant load of money. And now, he can suit up in a locker next to his anointed heir.

And I say more power to him. In fact, in this simmering-to-a-boil political season, there’s a perfect opportunity for the aspiring leaders of the free world to emulate him and designate one of their progeny as their chosen successors. The obvious question is which one(s)? Trump, who has yet to announce his running mate, has five offspring from which to select, and Biden (stuck with an unpopular shrew as his number two) has two that remain alive. But more about that below.

Because I find it impossible to eschew comments about Thursday’s deba(cle)te. Normally, I am I get so annoyed that I cannot endure more than 5 minutes of these spectacles, but I watched the whole show on Thursday night, and am in no way ashamed to state that I thoroughly enjoyed myself.

As I predicted last week, the mission of both combatants was to make his opposite number lose his cool. This, in fact was the materialized strategy of both sides, but what I most relished was that in executing this tactic, both candidates showed themselves in their unadorned essence. Trump, as was written in the stars, was pompous, routinely inaccurate, and unfiltered in his remarks. He deflected the toughest questions by evading them. But. He. Did. Not. Lose. His. Composure.

Biden, on the other hand, well, y’all saw what happened. My own opinion is that his worst moments were those when his opponent was speaking, where he either stood mouth agape (call it his Resting 25^th Amendment Face), or doing the Saint Vitus Dance.

If one wants to embrace the dark side, it was the wind up of the proceedings that were perhaps the most brutal element of the episode, when the argument between the two flawed nominees (both of whom, it must be remembered, have operated for several years with their fingers on the nuke button) devolved into the trading of insults about handicaps and golf scores. Then, after the official event concluded, we were treated to the sorry spectacle of Dr. Jill telling her husband, in her best “addressing a 5-year-old” voice: “Oh Joe, you did so good. You answered every question”.

So, my view isn’t so much that Trump won, but that Biden lost. Badly. And I couldn’t help thinking that a different opponent (say, even the odious Hillary) would have cleaned his Big Orange Clock.

We thus find ourselves in a position where the nominees’ wing men/women loom larger than is normally the case. Because mostly no one cares about the VP. Washington, for instance, seemed indifferent to the selection of his deputy, and, when John Adams (whose son John Quincy ultimately copped the top job) got the nod, he ignored him for 8 years. After Booth did Lincoln, the latter’s successor, Andrew Johnson, finished out the term with the VP seat empty.

But, in 2025, we’re looking at an entirely different construct; this time, the choice might matter. Presumably, Biden is stuck with Harris, lest “the fury that Hell hath not” be unleashed. This is a shame. Because, from what I can tell, Hunter is available, as is a daughter named Ashley, who charmingly and wisely keeps to herself.

Trump, as in other realms, has an embarrassment of riches in this regard. There’s Don Jr. And Eric. And Ivanka. And this says nothing about the disqualified Tiffany (too unhinged) and Barron (too young).

The response of those paid to care about the debate was near-unanimous. Biden not only lost, but unilaterally proved the widely distributed hypothesis that he is unfit to run and should withdraw. You know that the amps are turned up to 11 on this one when the long-in-the-Dem-tank New York Times Editorial Board put it in writing on Friday.

I’ll take the under on these dynamics. In trademark contrarian fashion, I predict that: 1) Biden will stay in the race, which 2) will be a close contest come what may. Trump has a lotta wood to chop to return to 1.6K Penn, and it won’t be from a cherry tree.

Meantime, we’re precisely halfway through the investment proceedings of 2024, and what a time we’ve had thus far! Our equity indices are at all-time highs, non-avocado commodities are stable, rates are range-bound. Stocks and bonds backed off on Friday, but I ascribe that to quarter end window dressing.

Today commences Q3, and part of me wishes we were off and running. But no, we’ve a holiday to interrupt us.

Upon return, it promises to be volatile. And we’re not off to a great start, what, with sell side royalty from both Goldman Sachs and JP Morgan predicting dire outcomes and recommending the lightening of portfolio loads.

I must admit that I don’t see it. Sure, the market could sell off materially this summer, particularly if external conditions deteriorate from their current pristine state. But if they do, and the world hasn’t blown apart, any selloff will be a buying opportunity sufficiently compelling, in a world still drowning in excess liquidity, that it will be difficult for any down draft to gather steam.

We’ll no doubt confront problems down the road. A world awash in excess liquidity is also drowning in debt. The economic slowdown everyone has been predicting for longer than I can remember could manifest. I don’t think that it will anytime soon, but ya never know.

The June Jobs number will drop shortly after the fireworks embers fade to black. I doubt anyone will pay attention. We’ll all continue our patriotic party through the weekend, as is entirely fitting and proper.

But July 8^th is looming. And then the action ignites. An interesting earnings season will be upon us, as will the prospect of newly rendered Inflation and GDP statistics.

By that Thursday, an unblinded judge will hand down a sentence on 45… ….for 34 convictions tied to a personal payoff of a paramour that, somehow, long past the expiring statute of limitations, have been deemed campaign finance violations. The following Monday, in the great city of Milwaukee, the joyful ritual of the Republican National Convention will commence.

By then, I suspect, that a steroid imbibed, oxygen pumped Biden will be growling behind his aviator glasses and spoiling for a rumble. His krew will have also recovered, accusing anyone who interpreted last Thursday’s knockdown as a sign to throw in the towel of being a fascist.

Still and all, with DJT potentially being remanded to a federal prison by then, and with the prospect of forlorn butterfly nets, at long last, coming to take Joe away to a happy house, it behooves them, and us, to think about the second slot. I considered Bronny, but, apparently, he has other career plans.

This country has, in addition to the John/John Quincy Adams sequence, endured two cycles of progenic White House occupancy. William Henry (Tippecanoe) Harrison’s grandson took office 58 years after his all-too-brief tenure. Then there’s Poppy Bush and W, whose terms were 18 years apart.

It shows that this country can survive nearly any trial, so, if you found Thursday night more depressing than entertaining, I suggest you take heart.

Because, this, too, shall pass.

TIMSHEL

One for Paul, One for Silas, One for to make, my heart rejoice,
Can’t you hear, my lambs a calling? Oh, Good Shepherd, feed my sheep

Traditional American Hymn

I select my theme from a piece so important to me that I consider it among a chosen few (Cat Stevens’ “Longer Boats” and the Dead’s “Uncle John’s Band” come to mind) that are not so much songs, but prayers.

Though “Good Shephard” has materialized, musically, in many forms, dating back to the early 19^th Century, for most of us (me included), only one comes to mind – Jorma Kaukonen’s now-copyrighted arrangement on the Jefferson Airplane’s “Volunteers” LP, which Jorma has continued to perform, night in and night out, long past the Airplane’s consignment to the junk metal heap, through his continued Hot Tuna work, and as a solo artist.

It is rendered timely because, as I read this past week, Jorma has shuttered his iconic Fur Peace Ranch, nestled as it is in Northeast Ohio, has sold off the property, and is fixin’ for another round of truckin’ his blues away.

But more about Fur Peace in a bit.

Because they’s droppin’ like flies. Again. Last week featured the passage of two of our irreplaceable cultural icons: Willie Mays and Donald Sutherland. Both shared a common characteristic: everyone loved and respected them. Everyone.

I will keep my tributes brief. Mays was almost indisputably the outstanding player of his era, and maybe the best of all time. In terms of the latter, I might shade towards Babe, if for no other reason than that he was on his way to a Hall of Fame career as a pitcher before he ever entered a daily starting lineup. But, in comparing the two, it bears remembering that Mays ended his career a skinny 55 dingers short of breaking Ruth’s long held record of 714, notwithstanding that his early career was interrupted by a two- year military stint during the Korean War. Might he have gone yard at least 55 times in those two forsaken seasons and thereby broken maybe the most iconic record in sports? Sure seems possible.

Then there’s Sutherland. So. Much. Magic. But I will always think about him – first and foremost – as Oddball in the magnificent “Kelly’s Heroes”: a leather-helmeted, anachronistic hippie, temporally teleported into the front lines of WWII Europe, fully twenty years before being a hippie was even a thing.

But now, back to Fur Peace. Which, until this past week, was a Jorma-managed guitar instruction camp for old geezer hackers such as myself. There, for a very modest fee, one could spend a long weekend sleeping in bunkbeds, showering communally, choking down mac and cheese, and joining in multi-dozen hacker jams of songs such as “Death Don’t Have No Mercy”.

All taught by Jorma. And, occasionally by other luminaries such as his running mate Jack Casady, Larry Carlton, and other top tier shredders.

I always wanted to go, but my family never let me. And now, of course, it’s too late.

But Jorma is 84, and, as far as I’m concerned, he can (and should) do what he wants. The good shepherd is thus shifting pastures, and here’s hoping they are greener ones.

Investors are routinely forced to do the same, to find new fertile grounds for their ovine financial flock. But the question is: whither, across the financial landscape, should they roam? Short-term, the answer is unclear. We’re in the doldrums of the last week of Q2. School’s out. The 4^th is just ahead of us. Market data flows have slowed to barely a trickle.

All of which has made for thin gruel in terms of investment opportunity. Case and point: Friday marked the once-vaunted options “Triple Witch” (or, if you will “Quadruple Witch”) wherein a quaint $5.5 Trillion of puts and calls linked to American equity indices expired into oblivion. Time was that such action would, at minimum, draw the attention of the investment community. But not this year. It was a complete snoozer. The sound that you heard, if any at all, resembled nothing so much as 39 acoustic guitars slamming their way through some incoherent 12-bar blues (set of course in the key of A), somewhere in Northeast Ohio.

Not that I wish to complain. The Gallant 500 is up something like 38% over the last 8 months, and if it does nothing but continue this trend, we’ll all have cause for celebration.

But I ask again, in the short term, whither should we point our hooves? To NVDA, which for a brief time last week, sported a greater capitalization than either the French or the British equity complexes? Yawn. So does AAPL and MSFT. And they been around quite a while.

NVDA backed off a bit on Friday and is now worth less than not only AAPL and MSFT, but also than the equity complexes of the Brits and the frogs. Its losses on Friday were greater than the market capitalization of all but thirty publicly traded companies.

Such are the wages and humiliations of life at the top.

Trump debates Biden this coming Thursday, and that should be quite a show. I doubt, however, it will move markets in any sustained manner. First principals suggest that the former’s drawing of a second three-card inside straight in November is the more bullish scenario. But allow me to offer some premature risk management advice: if this indeed comes to pass, I’d think twice of loading the boat and expecting similar outcomes to those of late 2016.

In any event, I anticipate that the next couple of weeks will be an authentic slumber-fest. However, I do believe the action picks up in the third quarter. The data flows should be interesting to say the least. The Fed may tip its hand, and, in foreshadow of this dynamic, consider that while the futures market has upped the probability of a late July rate cut to 10%, the Atlanta Fed’s Q2 GDP predictions are a Milton Friedman, slow growth wet dream:

However this plays out, undoubtedly, some Gloomy Gus types will, shoulder to the wheel, and try to test this extended rally. And they might succeed in breaking it. Or not.

Domestic politics, including our two quadrennial conventions, should be interesting. Geopolitics, with Bibi possibly addressing Congress, should be interesting. There’s earnings, Inflation, GDP, the FOMC, AND the Olympics, to anticipate.

And who knows? Markets may, for nonce, be bi-directional.

But, for now, the tape ain’t got no mercy in this land. It remains a tough go for market hackers, and even for those with pretensions to trading competence. And the associated timing is unfortunate, with Friday being the cutoff date against which we must measure first half performance.

Seeing as how there’s not much doing in the markets and given my anticipated pickup in the action post- Independence Day, there might be worse times to take a little breather.

But if you simply can’t forsake the action, you may want to take a glimpse at the Mexican Avocado market: which has gone parabolic this month, and quadrupled this year:

Not gonna lie: 850 Pesos is a big nut to pay for 9 kilos of that admittedly luscious fleshy fruit. And as your risk manager, I can’t authorize you to trade these bad boys. The market is controlled by cartels, they routinely burn down the fields. U.S. inspectors often find it easier to examine Iranian nuclear facilities than they do the agricultural fields of Michoacan.

To top it all off, Mexico has a new left leaning government, of which I am skeptical, even if it is overseen, somehow, by a newly elected Jewish woman (which I applaud).

So, if you must dive in here, you’re on our own. As for my part, I’ll stick to consumption, perhaps cutting back for budgetary reasons, and reminding myself to be thankful that at least it’s not Super Bowl season.

Thus, in winding up, we’re looking at zombie conditions across the non-avocado portion of the capital markets. And I’d like nothing better than to pack y’all off to the Fur Peace ranch, for some 12-bar, communal shower sonic dissonance. But it’s closed.

It saddens me indeed that I never got there. But I did get to meet Jorma once, and have the following visual evidence to verify this outrageous brag:

For those keeping score, that’s me on the left, placing Jorma on the starboard side of this image.

It was a long time ago. In a far away place, and I will go so far as to offer the opinion that we have both have aged magnificently.

And we both keep playing. And I advise you to do the same.

And though death don’t have no mercy in this land, we can keep the faith that somewhere in the great beyond, Willie is lording over the pastures of a heavenly Center Field, and Oddball is drinkin’ some wine, eatin’ some cheese and catching some rays in the rubble of a village in occupied France.

And that the Good Shephard can indeed hear our lambs a’calling, and will, as always in the past, feed our sheep.

TIMSHEL

East is East and West is West (well, you know the rest)

An o’er-used passage to be sure, but how many of you knew that it draws from Rudyard Kipling’s poem “The Battle of East and West”?

Glad to enlighten you.

I got to thinking about this, of course, upon learning of the passage of Jerry West: League Logo, Zeke from Cabin Creek, last week. ‘Tis indeed a sad milestone, but Mr. Clutch was the bane of my existence back in the early ‘70s, wherein, year in and year out, he and his annoying Lakers would dispatch what was a pretty good Chicago Bulls squad in the Conference Finals.

West being West, he crushed us. We’d go on a tear, claw our way to a 4^th Quarter lead, and bam! JW would hit three impossible corner shots with Jerry Sloan in his face. And, in so doing, break our hearts.

So, when I think of West, it is Jerry, who played at both West Virginia, and, professionally, in the West Coast Mecca of Los Angeles, that comes to mind. I don’t give a thought to Yeezy. Or the dude that played Batman on TV. Or James: the main character from the Wild, Wild West franchise.

But who is East? Not a lot of chappies with that surname. Eastman (Paul McCartney’s Father-In-Law)? Yes. Eastwood? (Blondie in The Good, The Bad and The Ugly)? Uh huh. But Google “East” as a handle. and all you come up with is a few footballers, cellists and businessmen (all of whom seem, for some reason, to hail from the U.K.).

So, we must improvise, and I note with interest that Zeke died only a couple of days after the demise of Chet (the Jet) Walker – perhaps the most prominent of that era’s also-ran Bulls. But Chicago isn’t really East. In fact, at the time, it resided in the NBA’s Western Conference. So, we move further from the direction of the sun’s trajectory, and find ourselves in Boston, whose NBA team (the Celtics, Naismith Trophy winners yet again) routinely beat up on West’s Lakers in the finals. And I’m not sure if this counts, but Boston is, by a considerable distance, the eastern-most locus of any NBA franchise.

The twain thus met innumerable times on the hardwood of the NBA finals, with Cowens/White/Havlicek squaring off against Kareem and any handy mirror-foggers that the Lakers threw out there in the latter part of the ‘70s, and then, of course, those classic Bird/Magic showdowns a decade hence.

Wither and how, though, shall the twain meet in the present day? The Celtics remain the Celtics, but the Lakers are stuck in the early stages of creating a post-LeBron identity, and LeBron ain’t even left the building (Staples Center) yet.

We thus must look beyond the realms of ironed rims and hooped twine.

Tupac and Biggie? Only as an object lesson. Them cats were never going to get together, and, as history shows, their eternal fissure didn’t end well for either.

We do have the example of the B1G, which now spans the continent – from L.A./Seattle/Eugene to New Brunswick/College Park. But – NGL – the subject annoys me.

And maybe the meeting of the twain ain’t such a good idea after all. I’m on the East Coast, and this Cali stuff drives me crazier by the day. The geniuses there have destroyed ten thousand fast food jobs this quarter alone – due to the imposition of that $20/hour minimum wage. Meantime, median prices at these culinary establishments (which, whatever one might think of the fare, are a major source of foodstuffs for the disadvantaged masses they purport to assist) are up ~8%.

Now I read, in this weekend’s Wall Street Journal, that Central Valley farmers – hard pressed for so long due to drought conditions – are, post-draught – only receiving 40% of their promised water allocations, though the needed water is both proximate and available in abundance. Their viability is thus rendered dubious. The reason? Normalized water flows are still deemed to interfere with the migratory habits of the region’s smelt population. The latter is protected under typically loony Golden State regulations, so, farmers and those that consume their products (All God’s Children) be damned.

It’ll only get worse from here. CA faces a 10% (and growing) housing deficiency. Within at most a decade, the state will have rid itself – again by regulation — of large diesel trucks, allowing only zero-emission rigs on its roads by that time. That there aren’t (and won’t be) anywhere near enough charging stations to accommodate the preferred battery powered jobs, and the weight (~2.5x diesel rigs) of the latter is certain to produce a strain on already over-taxed roads. But this has not impeded progress towards this righteous end.

Taking my concerns to the extreme, we’re looking at a locus with sinfully fallow farms, an alarming shortage of residential dwellings, sub-optimal logistics to move vital commodities, a dearth of Pizza Huts and Taco Bells, and a populous that is unable to pay the tab at those establishments which survive.

The smelt, though? They’ll be OK.

If we point our shoes north-facing, then East is on the right and West is on the left. And, as I gaze rightward from this orientation, I note that across the mighty Atlantic, the governments of both France and the U.K. are hanging by a thread, causing a selloff in the sovereign obligations of both ancient and proud nations. France is East of Britain, but replacement electoral outcomes push the twain farther apart, with France poised to take menacing steps to the right and England lurching back into the arms of the lefty Labor Party.

Over on these shores, we don’t seem to care. Our stocks and bonds are on the bid. Inflation, as reported this week, remains subdued, placing rate cuts back into play.

And the twain of the handful of mega cap stocks and the rest of the crowd continues to diverge, as is illustrated in the following year-to-date performance comparison between the Gallant 500, and the same group of names, calculated without rank (weight).

And even among those chosen few, the divergence between Supreme Leader NVDA and the rest is striking, with the former having well more than doubled in 2024 and the others mostly just chugging along.

While we might all benefit from certain forms which a twain-meeting of the few equity haves and the many have nots, I fear that were this to come to pass, it is more likely to take the form of a selloff of a former than the resurgence of the latter.

And that we don’t want, right?

Meantime, all this has put the hurt on hedge fund managers, many of whom are worth more sympathy than even the laid off grill jockeys from Cali Mikey D’s. Trust me. I’ve seen the numbers. They ain’t pretty lately.

But markets, are battles between men (and women), and are derisively indifferent to participant positioning on the map. Thus, like the battle between Afghan warrior and the Colonel’s son over the fetching mare that is the subject of the dispute in our thematic poem, the following can be said:

“But there is neither East nor West, Border, nor Breed, nor Birth,
When two strong men stand face to face though they come from the ends of the earth!”

We could do worse as investors, and, indeed, as members of the human colony, to remember this adage. And, as for these and other twain meetings, ‘tis perhaps best to leave these matters in the hands of Providence.

TIMSHEL

Her name was Aphrodite, and she rides the crimson shell,
And you know you cannot meet her, for you’ve touched the distant sands,
With tales of Brave Ulysses, how his naked ears were tortured, By the sirens sweetly singing

Clapton/Sharp

On June 4, 1904, Leopold Bloom wakes up in his non-descript Dublin apartment. He fries himself up a joint of pork. He plays with his cat. He makes his wife tea, wherein she reminds him of a rendezvous she had arranged with a man (aptly named Blazes Boylan) that afternoon, demanding his absence from the premises at the appointed hour. He runs a couple of business errands, goes to a funeral. Wanders around Dublin doing nothing much.

He finds himself, at one point, on the banks of the Irish Sea, whereupon he espies a young girl, who evokes a (possibly two-way) fantasy. She departs, and he realizes she is lame. So, he moves on. Checks in at some pubs in the Temple Bar, where he is, as is commonly the case, disrespected. Gets drunk that night. Goes home and makes up with his wife.

This, in essence, is the storyline of James Joyce’s iconic novel “Ulysses” – considered improbably both one of the greatest works of modern literary fiction and among the most unreadable (though — take my word for this — it’s a walk in the park compared with “Finnegan’s Wake”, a book about which it can only be said that anyone claiming to have actually read it is almost certainly lying).

I am proud to state that I did manage to get through Ulysses, though not without the help of the usually reliable SparkNotes study guide. I believe that, interpreted correctly, the novel challenges the reader with a single question: what was the point of it all?

Well, to me the unifying message, though obtuse, is rather profound. That the single day in the life of even the most ordinary, least interesting, most mundanely flawed among us, can be viewed as an epic, Homeric journey, with activities such as the ordering of one’s lunch or the riding on a trolley car worthy of chapter titles such as Proteus, Cyclops and Penelope.

I find this concept inspirational. Our lives are little more, after all, than a series of moments, which we can choose to either trivialize or enshrine. At least in my better moods, I have chosen the latter, and have thus privately celebrated “Bloomsday” every year. But this past Tuesday being a milestone — the 120^th Bloomsday — I took the extreme (for me) step of posting an acknowledgment on Facebook. It read as follows:

“Bloomsday 120. ReJoyce”.

Note the pun of the last word, which I’d like to claim but as my own, but was instead lifted from Grace Slick, who wrote it as the title of a Ulysses-honoring song that was included within one of my favorite albums of all time: “After Bathing at Baxter’s”.

At any rate, I expected my post to go viral, or at minimum, that a goodly number of my erudite friends and followers would respond to/acknowledge my homage.

What did I get? Bubkis. No comments. No likes. No emojis of any kind. Not gonna lie. My feelings were hurt, but I’m a big enough person to look past this outrageous insult of omission. More than that, I feel sorry for those teeming millions of non-responding keyboards. Or, as Cream put it:

Tiny purple fishes, run laughing through your fingers.

Because I fear that they fail to realize that there’s a good deal of Leopold Bloom in each of us. Tragically average, indistinguishable from the masses, we spend our days wandering around, insulted, cuckolded, ignored, but not oblivious, and thus wondering what the devil it all means.

Market participants are exemplary of this, as, for many of them, they awake each morning to Bloom’s world as it existed on June 4, 1904. They traverse their screens, interact with other schnooks, read unimaginative, consensus-based research, check support and resistance, and make their trades. Their peers are laughing at them, and, for an unfortunate, indeterminate subset, their wives are at home getting smashed by their singing coaches.

That, often, they make money is beside the point. It is, remember, a Bull Market. So, for many of us, we wander through a latter-day, delusional, dollarized (digitized?) Dublin, circa June 1904. And here, I’m reminded of my experience in 2021, when I could hardly leave my house without someone, often of faint acquaintance, buttonholing me to inform me that: a) they were making a fortune in the markets; b) it was only the beginning, because c) (so they believed) they had “cracked the code”.

Almost all were singing a different tune in ’22, but that’s precisely the point.

And this June, which not only features Bloomsday 120, but also the 80^th anniversary of D-Day, seems no different than the rest. Equity markets are enjoying a bang-up year, but alpha has been hard won (if, indeed, won at all) over the last rolling quarter. Earnings and guidance have been stable to strong, Inflation is in tolerable ranges. NVDA has sucked all the oxygen out of the room, having a) crossed the quaint $3T valuation threshold, in doing so; b) reached a capitalization of >$100M per employee; and c) generated, on a single day last week, more volume than the next twenty most active stocks combined.

Meantime, the most recent point on which our wandering wits have focused was Friday’s Jobs Report. Which was a superficial blowout, but, as has routinely been the case, contains much ambiguity in its detail. Because (among other matters) in America, we are not content with a single Employment measure, but rather rely upon two. And the less respected, more Bloom-like of these (Household Survey) showed not a large expansion in payrolls, but rather a significant reduction.

Not sure how they measured these things in early 20^th Century Ireland, but, for the record, Bloom was a print advert salesman, and probably did pretty well. Until Radio/TV. Then the Web. And now, AI/NVDA.

The market was flat-to-down on the news, as it was, in Blooms-world at any rate, expected. Because everyone was kinda hoping for some Employment weakness, not a bona fide pull-back, you understand, but a softening sufficient to keep hope alive that the Fed fairies would float down for some dainty rate cutting. Which we all could sorely use. Particularly consumers who borrow – a group that is now throwing off record-level delinquencies.

So, part of me still feels we’re being played. That Blazes Boylan is romping with the missus in our marital bed, that our friends with whom we exchange bon mots are deriding us – often behind our backs but episodically in our faces.

Like Bloom, we soldier on. The FOMC is on the docket this week, nestled in immediately after the PPI and CPI drop. It all is destined to follow script, with the Fed standing pat, while issuing vague language so as not to entirely discourage market participants into entirely cooling their rate-cut-expecting jets, and with Inflation figures providing scant illumination.

So, likely, we will spend the remainder of June wandering the backstreets to little purpose — other than to allow sufficient time for our cucking sequence to have ended, so that we may return home in a state short of abject humiliation. After that, it sure ought to be quiet. What creates the most dramatic tension in the back half of the month is the pending Biden/Trump debate. I won’t plunge into any depths here, but it should be worth watching as a piece of performance art if nothing else.

Investors aren’t seeming to care. And, on a happy note, I believe they remain oblivious, and that the market will continue its docile upward trajectory.

And, as we belatedly celebrate Bloomsday, it is entirely fitting that it be so. Because >700 pages of pathos and bathos notwithstanding, Ulysses is an uplifting tale of love and redemption. Molly (Mrs. B.) is left unfulfilled by her afternoon adventure, and (spoiler alert), in the end, remembers the authenticity of her marital bond. Bloom lovingly takes her back:

“He kissed the plump mellow yellow smellow melons of her rump, on each plump melonous hemisphere, in their mellow yellow furrow, with obscure prolonged provocative melonsmellonous osculation.”

All of which may be a bit too graphic for those, like me, who have tender sensibilities. But, somehow, it reminds me of our mellow, yellow, smellow markets, which vex and worry us. But at the end, like Molly, offer us the following siren song, rendered all the more painful because we have lashed ourselves to the mast to preclude following it. And thus, it tortures our naked ears all the more.

“I said yes I will. Yes”.

TIMSHEL

Well, friends, we managed to make it through May, which strikes me as having been, from many perspectives, a difficult month. I won’t inventory all the vexing aggravations we endured; suffice to state that it was a challenging period in which to generate returns – new record highs in the Naz, and Gen. Dow’s temporary breaching of the 40K threshold notwithstanding.

And now we roll to June, which, as the magnificent Oscar Hammerstein once lyrically observed, is designed for the sublime mission of “bustin’ out all over”.

But in terms of the markets and other realms of human hyper-focus, this year, I’ll take the under.

Please understand me. I am not predicting a major market correction here, much less a crash. While these outcomes are possible, they would, should they to come to pass, surprise me greatly. But, by the same token, bustin’ out (to the upside) all over? I kinda doubt it and will take the under.

Over the course of my longevity-defying career, I have always found June a particularly difficult month to model. First, as the third lunar cycle of a quarter, all the data we are instructed to care about is in, and, as such, not many catalysts tend to identify or manifest in these final quarterly stanzas. But June, the last of the Q2 triad, is often particularly opaque. In March, we begin to see patterns as to the unfolding of the coming year. September is always a big month for matters ranging from public policy to forward-looking corporate plans, and, after Labor Day, action emerges from traders champing at the bit to book their year. December, even with its narrowly rendered, holiday-distracted investment windows, is often chock full of deals and other niceties.

But June? The last month before the always attention divided summer – a typically quiet interval that ushers in a quiet season.

And this particular June, while fitting into many of these constructs, strikes me as being especially translucent. Because I have a hunch it’s gonna be a more rolickin’ summer than any we’ve seen since at least ’20 — with its lock downs, political knavery, wholesale urban rioting (given a pass by civic authorities otherwise ready to bring the hammer down on anyone daring to go to church or undertake similar virus spending activities) and other shenanigans.

Oh yeah, and with the Fed ginning up ~$3T (and not yet halfway done) of new funny money and using it to buy up every asset upon which it could get its grubby hands.

Why do I believe we are in something of a redux (absent the Fed buying spree)? Though I wearies me to go this route: a) much of it is political; and b) I can’t set it down without also laying a rant on y’all.

So, here goes. With respect to a), we may be lurching into the most dysfunctional, disruptive election cycle since at least 1860, and perhaps going back all the way to 1800, in which it took 36 votes by the House to break an Electoral College tie between Jefferson and Burr. Running a dismal third was incumbent John Adams, who arguably got smoked because the electorate had grown tired of witnessing the criminal prosecution of his political enemies.

Sound familiar?

It should, because we have some of this shady behavior transpiring now, before our eyes..

All of which takes us to b). My rant. Please skip if you wish. You may not agree with me, and I have nothing particular to add to the, er, erudition on a topic that is swarming the ionosphere at incalculable magnitude and rapidity. I have only, instead, my partially informed opinion.

First there’s this. I do not like Trump. Never have. Always thought him a huckster. It’s true that I supported him in 2016 — for one simple reason. I despise Hillary Clinton, thinking her to be the embodiment of all that is detestable about the self-aggrandizing elite.

He exceeded my expectations for most of his time in office. Ran, I think, a pretty tight ship. Though I was on the losing end of this, he (very productively) cut taxes. He reduced nonsensical regulation, installed judges who follow the Constitution. He put our geopolitical ill-wishers on their heels.

The virus came, the lock downs came. And very few things piss me off more than the gross fiction that he botched the pharma-based response. He was the one that put together the public/private coalition that created what appears to be an effective vaccine program – in about 10% of the time it normally takes to get these things out. Ordered, at considerable risk (since the development work was not yet complete) some 100 million doses. By the end of his term, 1 million folks had been vaccinated. When his successor came in, he acted like nothing had been done.

But he lost the election. Yes, there was a lot of monkey business involved, but there always is, and, as I wrote at the time, if it was stolen from him, it was stolen fair and square.

Then, within the ten weeks between vote count and inauguration, he acted as shamefully as any president in history. Refused to concede the outcome. Cajoled his minions to obstruct the certification process. Encouraged the folks in GA not to vote in 2 Senate runoffs – both winnable races, which his party lost, ceding the Senate to the likes of Schumer, Whitehouse, Warren, Blumenthal, Durbin, Bernie and the rest of them clowns, to do what damage they might.

All before January 6^th.

I personally do not think he conspired to overthrow the government on that wretched day, but what he did was bad enough, and boils down in my judgment to nothing less than failing, as he had sworn to do, to uphold the Constitution.

They’ve been after him since ’15 – nearly a decade, and, in the lead up to this year’s contest, one that I hope and prayed he would sit out, they indicted him over 100 times. And now, as of last week, he stands a convicted felon.

But objectively, if such an adverb is in any way applicable, the whole thing was a travesty of justice, even if, indeed, he is among the least sympathetic victims one could imagine. The judge (selected not by random process, as is the norm, but hand-picked by the Justice Department) is an unabashed Dem operative. They found an end around on the Statute of Limitations, accusing him of Election Interference for paying, with his own funds, a stripper who he smashed, like, 15 years ago.

Election Interference? For paying off a stripper? Seriously? If we’re gonna apply equal justice here, we’re gonna need to dig up a lotta guys: FDR, Ike, Poppy Bush (does anyone really believe that these guys contented themselves with Eleanor, Mamie or Bar?), not mention JFK and LBJ, and, of course, Bubba (still among the quick) for similar offenses.

The jury pool was jurisdictionally biased. The Prosecution, presumably for no other reason than to humiliate the defendant, queried the alleged victim about the gory details of the dalliance. The Court disallowed expert defense witnesses. Worst of all, in final instructions to the jury, the latter were informed that they did not, somehow, need to agree as to the specific crime committed, only that some offense had transpired.

It was like shooting fish in a barrel. Guilty on all 34 counts. Horrible legal precedent, putrid political precedent.

Though early days, it does not appear that any of this has weakened Trump’s political standing.

But we’re entering the pre-election summer faced with the prospect of a convicted felon squaring off against an Octogenarian of indisputably fading mental and physical faculties, who has probably paid off his own paramours and, whose family has indisputably banked tens of millions of dollars off his power and persona.

I’m thinking that Putin, Zhi, the Mullahs, L’il Kim and others are having a laugh riot.

And these realities might just hit the markets this summer, and if so, there will be few places to hide. Stocks and bonds, which run in opposite directions under risk-off conditions, are extending an historic streak of positive correlation:

USDJPY has soared to levels not witnessed in a decade, taking the NK225 along for the ride:

Of late, the BOJ has paid lip service to strengthening the unit of account in the Land of the Rising Sun, but one wonders what their game truly is. Rates over there remain near zero, as they have for a generation. This has kept the yen carry trade in play (under which investors borrow in yen and deploy capital in more lucrative jurisdictions). But God Oh Mighty, if the BOJ ever gets religion and ends this nonsense, well, I don’t want to think about it.

Finally, and having gone over my limit already I won’t say much about this, I read with interest that Dr. Pepper has surpassed Pepsi as the Number 2 carbonated beverage, and Dr. Pepper is undrinkable.

Back in the days of the Adams Admin, tea was the beverage of choice. While it remains popular to this day, the Alien and Sedition Acts have long since passed into the history of infamy.

Their spirit seems to have arisen of late, though, and I fear for the consequences. But I’ll not say more, because, who knows? I may run for office some of these days and would prefer not to have my historical expenditures scrutinized as potential evidence of Election Interference.

TIMSHEL

This week, we descend into the depths (dregs?), of the ills of upper echelon academia. Ah, my friends, the well is deep. Shall we deem it bottomless? It would often seem so.

The topic is, of course, timely, with the world’s attentions still fixed upon the sacrifices made by many thousands of tuition over-payers, across dozens of leafy campus settings, in eschewing their focus on secondary matters such as finals and graduation, to unite in outrage in protest of the “war crimes” committed by the lone representative democracy within 1,500 kilometers of the Mediterranean. Abandoning their luxury dorms, plush libraries and world class workout facilities, and ensconcing themselves in tents on the quad, they wile away the hours chanting sing song rhymes, which charmingly call for the elimination of the country in question.

In retrospect, this should surprise no one. It’s all part of a highly marketed, deeply branded experience, under which the privileged pay outrageous sums to send their progeny off for three objectives: 1) to get them laid; 2) to school them in the evils of their underwriting antecedents; and 3) to get them laid.

I will, however, strive to cut this rant short – not because I don’t have an endless source of fodder, but instead in to devote our limited space to our primary subject matter of financial risk management.

To wit, I read with interest that the Power 5 Conference Consortium (including, somehow, the Pac-12, whose membership roll, by my last accounting, had dwindled down to two forlorn universities) intends to convert their athletically gifted scholars into employees. The execution plan, was, inevitably, indecipherable, and is beyond the paygrade of this observer to articulate. Suffice to state that it involves back pay of ~$3B (with the lawyers grabbing their gargantuan but entirely earned share), and a payroll budget of $20M/year per alma mater.

This, of course, begs several questions. Like, how quickly will $20M morph into >$200M? How will the compensation be distributed? And how will all this impact recruiting?

All remains to be seen, but, meantime, there are certain realities we can discern, most important for our purposes, is that university sports departments are now deployers of capital, must operate their programs as portfolios, and as such, must now perform portfolio risk management.

Among the most vexing challenge will be to identify an appropriate Objective Function, which I anticipate will vary from institution to institution. The Domers, with their proud tradition dating back to Rockne and the backing of the Holy See, will almost certainly seek maximum returns, taking the form of gridiron glory – and irrespective, with The Lord on their Side – of associated risk. Other, secular institutions with perpetual eyes on the bottom line and little rational hope of athletic conquest (think University of Chicago) may wish to deploy their capital in more prudent, judicious fashion.

There may also be a crew with sufficient computing chops (think Cal Tech or MIT) to create low-cost arbitrages and thereby lap the completion.

Meantime, we can begin to identify the certain constraints. The initial allocation, as mentioned above, is $20M/year, so we can start there. Presumably, though not yet specified, the NCAA will enforce some diversification – by limiting max payouts to individual athletes and demanding large chunks be allocated to pain-in-the-ass Title IX programs such as Field Hockey.

From there, we can impute some emerging portfolio construction contours. A baller power forward or mauler offensive tackle may justifiably command a premium, but we should bear in mind that in terms of the latter, that two are required to operate an offense.

At any rate, one thing is certain: ‘tis out of elegantly engineered Objective Functions and Constraint identification that effective risk reporting doth emerge. But here’s where our true problems begin to materialize, for, how on earth are we to measure performance?

It’s easy enough to calculate the in-action results of a Jaydon Daniels or a Caitlan Clark, and, with a micro-dose of imagination, we can even impute the associated impacts on the competitive fortunes of their teams. Daniels won the Heisman, but got injured at the end of the season, and his Bayou Bengals finished 12^th in the final AP Coaches Poll. Clark led her team all the way to the final game of the Big Sadie Hawkins Dance, enchanting the world throughout, but her Cyclones got bested by the Lady Gamecocks in the Championship Game.

More pertinent fort our purposes is the Sisyphean challenge of measuring financial impacts and attendant appropriate compensation.

For someone like Caitlan, and with a $20M aggregate cap, we can perhaps approximate the former. As of 2022, the Iowa State Endowment clocked in at just over $1B, or 2% of that of Harvard. My guess is that we’re looking at a double or more, simply in tribute to Ms. Clark. Incremental TV ratings and revenues were also a rocket ride.

So, let’s assume that this lady hoops machine negotiated, say, a $2M payout from Iowa State University – about the max, due to internal political constraints, which I can envision any single player receiving. My guess is that the return on this 2 Large is well into the nine figures, which would surpass that of even early-stage Uber. Or Alphabet.

But if we’re gonna do risk analysis here, we must find a way to incorporate such metrics as volatility, drawdown, and, of course, Factor Sensitivities. Good luck with that, but ultimately, the Board of Trustees is going to demand a Sharpe Ratio on your 5 Star QB or McDonald’s All-American point guard, and price him accordingly. The Mr. Hyde of my risk management persona is giddy at the notion.

Moreover, the challenge will broaden out when the $20M payout constraint is obliterated. If nothing else, the lawyers will successfully demand this, arguing that athletic powerhouse institutions garner hundreds of millions of dollars a year from the toiling of the vassals that represent them in intercollegiate competition, and that in the name fairness (along with, say, a 30% cut) this outrage must be eradicated.

At that point, effective risk analysis as a decision support tool will be rendered even more essential.

The good news here is that I have adapted my models to these first world challenges. However, I am not prepared to share them. But if the provost of the (new BIG Member) University of Oregon (selected here because their athletic program is generously underwritten by Nike Founder Phil Knight) is reading this, he or she should call me. Perhaps we can do a little biz.

Remember in future times that you read it here first: the perennial winners of future NCAA competitions will be those institutions that practice financial risk management with the greatest rigor.

The same can be said about old school portfolio management. You know, the kind involving the holding of positions in financial instruments? I encourage my readership to view this as good news, because simply by virtue of having paid close attention to this space, you have acquired a significant edge over the masses.

And my best advice for the moment is to continue to do what you do. For what it’s worth, I think it pays to stay long here, as, not only will you thus place your rooting interest on a powerful momentum force, but you will avail yourselves of the alarming excess liquidity that continues to slosh around the financial ecosystem. There’s not much doing, data-wise, between now and the end of the Quarter, but if you’re looking for catalysts, it may behoove you to consider the following catalysts. The Treasury Department, for the first time in a generation, is fixing, starting this Wednesday, to buy back some of its wonkiest, most illiquid securities, and their besties at the Fed will, starting next month, reduce their Balance Sheet taper – from $60B to a beggarly $25B per month.

All of which should act to render the rich holders of securities even richer. I think it’s a good bet – kinda like taking UConn in the most recent March Madness series. Or betting on the SEC champ to win it all in the FBS.

The former would’ve worked like clockwork a few weeks back. The latter? Not so much, as, for the first time in a decade, the honors of College Football devolved to my home conference, the BIG, now expanded to 18 teams – including Phil Knight’s Oregon Ducks.

The reigning champs, though it pains me to write this, are the Michigan Wolverines, who I dislike out of pure jealousy. I’d like to call this a one-off, but I fear they will retain an advantage under the new paid paradigm.

Among other matters, their subterranean football stadium – The Big House – accommodates 115,000 ticket buyers, which is a great deal of working capital to redeploy in the payment of their athletic squads. Their alumni rolls also include a host of annoying Wall Street types, who, while many not among my favorite people, are at minimum, capable of calculating Sharpe Ratios and Factor Sensitivities.

As such, and one way or another, though, I am forced to cry uncle and enter the new world with an unenthusiastic “Go Blue”. Like so much else in our evolving world, my heart is not in this. But my choices are depressingly limited, so I preserve and suggest you do the same.

TIMSHEL