“Vices are sometimes only virtues carried to excess”

Charles Dickens – Dombey and Sons

“A little Dickens is good for the soul”

Greg Baker

“It appears to be a lo-on-g. Ti-ime. Such a long, long time, before the dawn”

David Crosby

This one goes out to our second quotation source – Greg Baker. My high school English teacher. The guy who exposed me not only to Dickens but also to Joseph Heller. And Dostoyevsky. And Albert Camus.

Greg died shortly after the dawn of the new millennium, and it took me about that long to realize the wallop he’d given me. He was part of a wave of educators, hired by our free-thinking, free-loving principal, who gave no guidance to his eclectic assortment of instructors other than to shake us up a bit. Some of them (though not Greg) had no education credentials of any kind.

And shake us up they did, especially Greg. But there is a dash of extra pathos/panache in his story. He was a championship swimmer, of such stature that he qualified for the 1968 U.S. Olympic Team, destined to compete in Mexico City. In the lead up to this epic event, he was involved in a horrific automobile accident, the details of which I am unacquainted, save for the unmistakable reality that it rendered him a quadriplegic.

One could still observe the sinewy swimmer’s physique even in ossified forms of withered legs and stiffened, curled up fingers. But he carried on regardless. And left his mark. He even coached a damned competitive swim team. He and I weren’t close (I wasn’t much of a swimmer back in them days), but in the ensuing years it hit me that I owed him something, and even if the only way I can make good on this debt is to honor him in these pages, I think he’d, nonetheless, be pleased.

“A little Dickens is good for the soul” he’d remark to us. And force us to accept this dose of spiritual remediation – even as, to the extent we read at all, we were more interested in the scribblings of William S. Burroughs, Richard Brautigan and Hunter S. Thompson.

Over time, I reckon I’ve waded through about half of the Dickens Cannon, but it had been a long time – coming and gone. Nobody can deny the singular brilliance of “A Tale of Two Cities”, “Great Expectations”, and any number of his other novels, but I have occasionally found him tedious. Some of this is owing, or so I tell myself, to the fact that he published most of his works in serialized periodicals, wherein he was paid by the word. He was thus financially incentivized, for lack of a better way to describe it, to be a bit “wordy”.

I have recently rediscovered him, though, focusing, this time on secondary works such as “Martin Chuzzlewit”, and, of course, “Dombey and Sons”, the latter from which I have sourced this week’s title and quote.

“Vices are sometimes only virtues carried to excess” sayeth Dickens in Dombey, and if this isn’t true, it certainly ought to be.

But is it? True that is?

A review of history episodically supports the claim. Caesar was ambitions, for his people, who repaid this virtuous vice by doing him on the steps of the Forum.

Robespierre wanted a just constitution but took matters so far that as to cause the heads of tens of thousands to be severed, including, in the end, that of he and all his compatriots.

More recently, when at Harvard, Zuck put together a little computer dashboard, designed with the virtuous objective of placing as many of Cambridge’s nubile young co-eds within his reach as would be possible. Now, a generation later, we are compelled to contend with a monstrosity wherein two billion users assault our senses with pictures of their cats and soon-to-be-consumed vegan omelets.

Perhaps more ambiguously, George W. Bush sent forces into Iraq and Afghanistan, for the virtuous purpose of avenging both the 9/11 attacks and the mean things that Saddam said about his Poppy. More than twenty years later, we departed the latter jurisdiction, leaving our own citizens behind as well as billions of dollars of treasure, and enabling the Taliban to assume fulsome control of that forlorn nation. It made our exit from Vietnam look like the conquering strut of the Hannibal’s Carthaginians across the Alps in the Second Punic War.

In terms of the markets, about 15 years ago, our Central Bank began printing funny money and bailing out banks — in virtuous effort to save our financial system – a stunt that had never been tried in the post WWII era.

One may justifiably question whether said financial system merited this salvation, and I have no quibble with those whose viewpoint shades negative. My own view, though, is that while I hold no brief for the bankers and other shady characters who caused that mess, I think the collateral damage of having not so acted would’ve been brutal, and that the feel-good retribution juice we would’ve rained on the perps would in no way have offset the squeeze we would’ve all felt when our bank deposits were frozen, our loans called in, and our property foreclosed upon.

But then, when we got into that viral trouble a few years, back we redoubled this virtuous strategy. The markets recovered. The economy recovered. Inflation surged but then stabilized at an elevated but far from alarming level. Stock and property holders got fat on excess. Consumers paid more for essentials, and, while jobs were plentiful throughout, many were of dubious quality.

Will this vice come back to bite us? I guess we’ll find out.

A few years ago, some rambunctious cats, led by a bad hombre with the handle Roaring Kitty, took to Reddit to see if they could seek to take down some hedge fund dudes by buying up worthless stocks such as Gamestop (GME) and AMC. They succeeded, so much so that they compelled a heretofore wildly successful fund manager to abandon his enterprise in favor of the lowly and humiliating vocation of NBA team ownership.

Well, now, Roaring Kitty is back. GME is on fire again. Redditt is now a publicly traded company. The hedge fund hoop squad ended the ’24 season with a record of 21-61.

Is this vice born of excessive virtue? Tough to say.

And now, on the threshold of Memorial Day, ushering in, as it does, the summer season, and with most important earnings and macro data in the bag, is as good a time as any to take stock of where we are on the virtue/vice contagium, and to ponder whether it will lead us as the months fly by.

Our equity indices are at or near record levels, having absorbed an extended period of higher interest rates and other annoyances. Long-in-the-tooth General Dow, as one example, closed, for the first time in its storied existence, above 40,000 on Friday. Most of the developed world is in the same configuration.

There’s approximately $6T in money market funds available to pounce on the stock market, and will almost certainly do so if the long anticipated but frustratingly lamented cycle of rate cuts finally commences.

Technological advancement ensues at a breathtaking pace, and not simply in the realms of TMT (though it should be noted that the exalted NVDA has doubled from its ’23 close and accounts for a full quarter of the Gallant 500’s >11% gains thus far this year).

Commodity markets? A mixed bag if ever there was one of late. Consider the acute contrast between the recent paths taken by Copper and Cocoa:

Heavenly Penny Element:                                        Active Ingredient in Cocoa Puffs:

We need ‘em both, but excess consumption of the latter is most certainly a vice, so I’ll take this as good news.

To be sure, and if one cares to look, there are many matters to vex us. The looming presidential election appears to be the most depressing of these affairs as ever we’ve experienced, or, at minimum, since 1856, when the inept James Buchanan defeated the ineffectual Millard Filmore and the unhinged John Freemont, causing, among other effects, the elevation to Vice President one John C. Breckenridge, who went on to become Secretary of War for the Confederates.

The two electoral combatants are scheduled to debate one another next month, the earliest point for such a contest in American History. It should make for compelling theater, but anyone expecting an exchange rising to that of Lincoln/Douglas is likely to be disappointed.

A virtuous act of retributive self-defense on the part of the Israelis morphed, at least in the eyes of much of the world, into a sequence of vicious genocide – so much so, that millions of bystanders have taken to the streets to disrupt the routine of billions who are not thus engaged. Here’s hoping that those moved, somehow to action here do not find themselves to be latter-day Robespierres.

I guess the lesson in all this is that we should embrace our passions, but only to a degree.

I expect the markets to remain strong here, but caution investment enthusiasts to act with a degree of temperance. And this includes you, Roaring Kitty. At some point you’re gonna have to slow your roar, lest you be mauled by an angry bear. Neither GME nor AMC have any business to speak of, and certainly no business rallying energetically – even on this tape. You’ll probably step aside before they crash, but what about all those jabronis that follow you? I fear for their portfolios.

But this note is about Greg. And one more anecdote comes to mind. I hated high school, and on Graduation Night, my last act before exiting the premises for all time was to climb to the science lab at the top of the building and blow a joint there with my buds.

Upon egress, I encountered Greg in the parking lot and garbled out to him “it’s been a long time”. Whereupon, and in sequence, he said, “and a long time gone”. Perhaps thanks to him, I uttered the appropriate response:

“And a long time before the dawn”.

He smiled with satisfaction and rolled away into the night, knowing in his heart that I’d learned something from him after all.

TIMSHEL

“Ashes to ashes, funk to funky, we know Major Tom’s a junkie,
Strung out on heaven’s high reaching an All. Time. Low”

Bowie

Let us acknowledge up front that this is a stupid lyric. I do like the song, but c’mon, Dave. Ashes to ashes, funk to funky? Seriously?

I will give him his propers for writing a sequel to “Space Oddity”, the song that launched him into the Stardust Stratosphere. And I have no real issue with him re-imagining Major T as a smack addict, as, when previously encountered, he was floating round a tin can, and – let’s face it – any condition, from that vantage, has gotta be an uptick. One may also say, in fact, that Bowie was ahead of his time, what, with all that re-imagining that was going on a few years back (not that the latter worked out so well).

So, the purloined quote is mere device, a lead-in, if you will, to the main topic at hand, which, unfortunately and tediously, pays homage to the end of yet another era.

I read with unmixed sadness that Sam Ash, that iconic purveyor of six string razors, is closing its doors — all godforsaken 42 of them, after a hundred frickin’ years. In touching verisimilitude, the announcement was made by one Derek Ash – great grandson of the franchise’s eponymous founder.

It was a good run. But it’s finished.

I must cop to not having helped their cause over-much across the decades. I did buy one ax there – at the flagship 48^th Street location. It was a Brian Moore i2000f – with a lovely Maplewood finish, double humbuckers, and a switch that could alternate the pickup settings between single and double coil (don’t ask me what the significance of this feature is, because I have no idea):

But I broke it, and not, I’m ashamed to say, in Pete Townsend fashion.

It fell 90 degrees — from perpendicular to horizontal, causing a fatal fissure just at the point where the neck meets the machine head. This is known (or should be) among us shredders as the Humpty Dumpty crack, one which all the king’s horses and all the king’s men…

And now Sam Ash is gone. Along with the Village Voice. And the Minnesota North Stars, who shamefully moved to Big D and became the Dallas Stars. For reasons I am unable to explain even to myself, I was outraged by the move, and this notwithstanding the reality that: a) I’m not much of a hockey fan; b) I certainly never pulled for the North Stars; and c) the NHL replaced the 10K-Lake representative with an outfit called The Wild.

But there was something about a hockey team called the Minnesota North Stars morphing into the Dallas Stars that outraged all I hold as holy in this forlorn world.

One is tempted here to derive no lesson other than the old “ashes to ashes” bit, which, paraphrasing Genesis 3:19, is never explicitly included in biblical text. Instead, it is prominently featured in the Anglican Book of Common Prayer, which, in turn, dates its origin back to the 16^th Century – during my old sandlot pal Edward VI’s time. So, let’s give a shout out to Eddie the 6^th, who: a) replaced his Pops: Henry VIII; b) at the age of 9; but c) died at 15. Say what you will: The Book of Common Prayer is an impressive legacy for the boy king.

So, yes, ashes are said to revert to ashes – in life as well as the investment game. Consider, if you will, the example of Bernie, who built a Potemkin-like trading colossus, out of the financial equivalent of ash and dust, which, inexorably returned to dust when market conditions precluded its ability to present itself as anything else.

But sometimes, ashes reconfigure themselves not into ashes, but rather into something spectacular. Consider, if you will, a recent announcement by the FTX Bankruptcy Trustees indicating that claimants are now likely to receive as much as $1.50 for every dollar invested. One way of looking at this is that being stiffed by FTX turned out to be one of the most lucrative investments of the emerging decade.

Much of this miracle is owing, in circular fashion, to the remarkable rally in Bitcoin, which rallied 4x from its contemporaneous-to-FTX-collapse, before rudely pulling back again. Coincidence? I think not.

Still undetermined is the fate of Renaissance Capital, founded by a physicist named Jim Simons, who left us this week, and whom we would be remiss not to honor. He was as important a figure in hedge fund history as any you could name, having built Renaissance out of the dusty ash of an idea – that market prices were not always random and could, with some regularity, be anticipated by quantitative models — into perhaps the most successful alternative investment platform of all time. He formed it in such a way, using legions of quant geniuses building quant models before anyone had an idea that such a thing was possible, that his platform is likely to continue to thrive. But the jury’s still out.

More broadly, it falls to our lot to discern what in our path will assume the Sam Ash/Village Voice/Minnesota North Star configuration and revert, for all time, to the ashes from which it derives, and what will re-emerge, Phoenix-like. I wanted to understand the latter a bit better, so as to more effectively report it back to you. So, for those who don’t know this, the avian form of the term (from which all other forms derive) originates around 8^th Century, BC, in the region of Mycenaean Greece, and tells of a creature rising from the ashes of a predecessor, a recently toe-tagged bird of the same feather.

The good news here is that risk assets are showing aquiline symptoms, with equity indices, fixed income securities and sundry other speculative instruments encouragingly bouncing off recent bottoms, and, in doing so, demonstrating admirable staying power.

Dare I say momentum?

We’ll be better able to answer this question by mid next week, after the big, ritualistic CPI/PPI drop. A blip upwards will equate to the closeout sale on 48^th street, while a downtick will extend the Phoenix trajectory. I think these numbers, assuming that they come in within reasonable ranges of expectation, are of less import than the feel of the tape would suggest, but I reckon we’ll see.

And, somehow, now, we are in the Middle of May, which ushers in the back half of Q2, wherein the information flow slows to a bare trickle.

So, I really don’t know. I suspect the current low-vol conditions will ensue for a few weeks. Any downward draft will likely be met with significant buying pressure, but there’s hardly context for a surge at this point. My best guess is that we’ll end the quarter at proximate valuations to those we currently observe.

Still and all, I can’t help but lament and worry about all the changes – observable and otherwise – that are transpiring all around us. Maybe the fanciest office I ever had – one that embarrassingly transcended both my professional station and my associated comp – overlooked the Sam Ash HQ. At that time, 47^th Street featured about a dozen guitar galleries. Now, there’s nary a one. Much earlier in my career, I had a brief, improbable stint working for CBS, which at the time owned the Fender Corporation. They had a merch store on the 20^th floor, next to the cafeteria, where in addition to buying Walter Cronkite coffee mugs, they had a full suite of Strats, Teles, and Mustangs. At the noon hour, one would always find innumerable suited geeks hacking away ineptly at some basic blues.

As a guilty pleasure, I occasionally joined this throng. Perhaps it was my embarrassingly superior chops that got me fired from that gig.

Ashes to ashes, though. Cronkite is dead, and Fender is now owned, you guessed it, by a private equity concern.

And, one might add, considering the shuttering of Sam Ash and my careless mistreatment of my BM i2000f, axes to ashes. I have replaced it with a hot pink Paul Reid Smith job. But I think I’ll hold on to the former. Because you never know: the Book of Common Prayer could be wrong, and the Greeks right: ashes may not always revert to ashes, but instead, rise-Phoenix-like, into new, stronger versions of their former selves.

TIMSHEL

“Start off slow. Don’t add nothin’ extra. And stop when I tell ya”.

Archie Bunker

I borrow the above quote from the iconic 1970s sitcom “All in the Family”, which ruled the ratings roost for the better part of the decade, and as accompanied by the following contextualization.

The plot of the episode featured is an inability of son-in-law Mike to, for lack of a better way to put it, get his mojo working. His Johnson, in other words, quit on him. This naturally disconcerts his wife Gloria, who confides the intelligence to her delightful but entirely sheltered mother Edith.

Not knowing what else to do, and after much consideration, Edith determines to consult with Archie, who, after all, might have a better understanding of the intricate workings of the offending appendage than would his missus. But this is uncharted conversation territory for the Bunkers — Pere and Mere, Archie for all his Dubya Dubya Two macho, is a stone-cold prude, and Edith knows she must introduce the subject with all the delicate aplomb she is able to muster. So, she tells him that she’s got something private and somewhat embarrassing to discuss with him. She tries the side door, but Archie isn’t answering it. So, she plows ahead:

“Awchie, it’s sex-u-al”, she cringingly informs him.

After grimacing, Archie offers up our thematic quote.

Edith tries to slide into the topic, begins by mentioning an army buddy of Archie’s, who, injured in the war, was “wasn’t able to…”

Whereupon Archie tells her to stop. Other than verifying that she is referring to their offspring and her lord, he needs hear no more.

He tries his best to counsel his lump-headed son-in-law – of course to no avail.

But the point is this: I highly empathize with Arch on this one. Don’t wanna hear much about sex these days; still less about sexual problems. Thus, if you wish to consult me about same, I ask you to: 1) start slow; 2) avoid adding unnecessary detail; and 3) stop when I give the command.

More broadly, and as time goes by, I find myself in deeper sympatico with this man, who, for several seasons, was the world’s caricature of narrowmindedness. Archie was the quintessential L7. But if one digs, deeper, there’s more there. A working-class guy who proudly fought for his country. Came home, married, got a job, bought a house, had a daughter, and generally minded his own business.

He sees the world changing rapidly around him and tries to make sense of it all. More often than not, he fails. He is confused and frustrated and doesn’t try to hide it. He is baffled by the unrest, the dissatisfaction of youth with the global state of affairs. While he is not, per se, against racial equality, its details are too many for him.

The “free love” sexual revolution espoused by the young bloods is entirely above his paygrade.

But he works hard, loves his family, and, against his better judgment, takes his unemployed, annoyingly overeducated son-in-law into his hearth and home. The latter, a quintessential know-it-all, routinely belittles and disdains him. But never truly gets the best of him.

And all I can state, to tie together this digression, is that if I had the choice to interact with either of them in nearly any construct, I’d pick Archie every time.

And here I sit, as confused about the doings, as confused about next gen sensibilities, as Archie was on his worst day. And, fabulous though I continue to look, having on Saturday reached the age of 64 ½, I am now ten years older than Caroll O’Connor was when the original series ended. Archie’s book learnin’ ended with high school, whereas I hold three degrees from accredited universities. Arch busted his hump on the loading docks to earn his bread. I sit on my ass and think great thoughts.

But my world, like his, is changing in ways that confuse and frustrate me. I try to keep up but can’t.

And this (like Archie) across virtually all realms of existence. I have no idea what The Sphere is. I neither Tweet nor X. Tick nor Tock. I have not kept up with the Kardashians (though Lord knows I’ve tried).

I influence not a soul.

I worry perhaps less than I should about Greenhouse Gas Emissions. I tend to identify those I encounter as belonging to one of the two genders which I can recognize sensorially.

I root, nay, pray, for the prosperity, or, at minimum, the continued viability, of the State of Israel.

I favor low taxes, limited regulation, and a strong national defense.

In my spare hours, I watch the Hallmark Channel. And, during commercial breaks often cry.

I think, to summarize, I am deeply at odds with the core of the newfangled orthodoxy, and being so, have fully embraced a Bunker Mentality.

In my non-spare time, I watch the markets, think great thoughts about them, and share them with investors. For a fee. Frequently, they puzzle me, but I don’t let that interfere with my professional activities. I simply pretend that I know something, fake it till I make it. The strategy works surprisingly often.

And, while we’re on the subject of the markets, not much, according to my predictive models, is relevant before the commencement of 2023, when the equity complex, fresh off a deeply disappointing year, embarked on a 5-quarter rally which caused Col Naz to nearly double in girth. Other indices in arms similarly swelled, but then, as Q1/24 concluded, they all apparently decided that maybe it was time to go on a little diet. The party’s died down a bit since then. Not only are equities considerably off their highs but yields across the board are substantially elevated.

Economic trends have caused Fed Watchers to, in an Archie Bunker sense, “stifle themselves” with respect to their giddy shilling for rate cuts. Until, that is, last week. When first Chair Pow offered them soothing rhetoric, and then the April Jobs Report came in very meagerly – particularly when one backs out the hiring done by government agencies and the like. Now, hope for reduced rates is renewed.

This added some welcoming mojo to the equity tape, as further, er, goosed by a strong finish to the Mag 7 reporting cycle. So, the week ended on a strong note, as investors entered the weekend with visions of rate cuts and earnings surges dancing in their heads.

But at least some market participants are failing to pick up what’s being laid down:

If I read this correctly, nearly all God’s Children are short interest rate instruments and are this expecting higher yields in the near term.

I’m OK with this viewpoint. More than that, I believe a bit of rate discipline may yield tasty dividends down the road. Unless they skyrocket, while they may dampen investor exuberance a bit, they are not likely to cause much undue market damage. So, my best guess is that we drift around here a bit – if not much better, than not much worse – for the experience.

And I can’t take my leave without addressing the greatest issue of the day: the protests and the implied antisemitism implied therein. All of which recalls another great moment in the career of my idol, Archie Bunker.

When Archie’s longtime bestie Stretch Cunningham dies suddenly, and Arch is called upon to make the eulogy, he finds out, much to his surprise, that Stretch was Jewish. It was a moment of supreme irony, because the two buddies often bonded based on their racist and xenophobic sensibilities. Those around him offer various explanations as to how this could be true. Among these is the possibility that the surname Cunningham could indeed have an Hebraic origin. Archie considers this, but rejects it using the following argument:

“There ain’t supposed to be no ham in there”.

He’s not wrong on that score.

A yarmulke-wearing Archie delivers a moving farewell address to Stretch, furnishing one more reason for placing him in the pantheon of my hero worship objects.

So, I reckon I’ll continue giving this man mad respect, and emulating him – by remaining puzzled and frustrated, but retaining my determination to carry on regardless.

And all I ask of those around. me is that if they want to discuss market matters, social issues of the day, or (heaven forbid) sex, they start off slow, don’t add nothing extra, and stop when I tell them to.

TIMSHEL

Then we heard the Sermon on the Mount, but I knew it was too complex,
It didn’t amount to anything more than what the broken glass reflects.

Bob (who else?)

Mind if I lay a little of the Gospel on y’all? Didn’t think so. Having, after all, just laid to rest Bagan, Gabe and Dickie, it would seem the proper occasion for doing so.

Our title comes from that all-time-great biblical passage known as the Sermon on the Mount. Those looking for the specific citation need search no further than Matthew 6:34.

I would view the Sermon as the biblical equivalent of something like “Abbey Road”. Some clunkers in there, but also some, well, divine moments. Such as the “blessed are the meek” bit. The totality of the piece has rendered it timeless. Just like “Abbey Road”.

I also learned, only by researching this note, that it is the SotM that contains The Lord’s Prayer.

So, mad props to Matthew, who, as an apostle, kept a fairly low profile – certainly more so than, say, Peter or John. Perhaps this is because, apart from being an apostle and all, his side gig was as a tax collector — a profession which, presumably back in them days, demanded its practitioners to keep it on the DL.

Shame, though, because he takes a nice snapshot:

Eventually (or so I read), he dropped his tax collecting ways and took to apostling full-time – a job which, among other obligations, featured an extensive travel schedule.

Unfortunately, on a trip to Ethiopia, he got into a beef with a local king – named Hirtacus – of course over a chick. Seems the king wished to wed an indigenous beauty who Matthew had previously consigned to a nunnery. King H asked for dispensation, and when Apostle A refused this accommodation, the latter got his-self martyred.

Meantime, we have his Gospel to remember him by, including the singular Sermon on the Mount.

Sufficient to the day is the evil thereof, sayeth Jesus. And he had reason to know, because his evil hour was, at that point, not far off in the offing.

But I digress.

Still and all, I am somewhat puzzled by this theme, as it runs in direct contrast — if not to the word of Christ, then at minimum to its application over the past > 20 centuries – much of which involves eating one’s vegetables, abstaining from the pleasures of the flesh, and awaiting one’s reward in the hereafter.

It devolves to me to report that humanity has only imperfectly adhered to these interpreted teachings of Jesus of Nazareth. Often as not, it has adopted the more direct construction of the “sufficient to the day….” vibe – letting it all hang out and deferring any thought of attendant consequence.

This, of course, as much as anywhere else in these earthly realms, applies to the Capital Economy. Particularly since the pseudo-biblical Plague of ’20, we been printin’ and spendin’ and taxin’ and regulatin’ and redistributin’ and otherwise transgressin’ to beat the band. And bidding up risk assets like bargain hunters at the Temple of Jerusalem. Nowhere in the text of either testament, to the best of my knowledge, does it suggest that that this is the way to prosperity. But as Saint Matt tells us Jesus said: “sufficient to the day”.

And, after a rollicking time of it over the past several quarters, one wonders if “the day” might not be hard upon us. GDP slowing. Inflation on the rise. Treasury Department issuing astonishing amounts of paper. To a lukewarm reception, causing interest rates to continue their biblical ascent.

It is of course, impossible to determine what all this portends. The economy has, in an Old Testament sense, been asking for a bout of stagnation for God knows how long, and last week’s data trended in that direction. The high priests (and rabbis) of economic orthodoxy are wagging a figurative finger in our faces, admonishing us to repent. But all may be rendered moot, because either we have entered a phase of where the wages of such sin are nil, or we have already brought the economic flames of hell down upon ourselves sufficiently to obviate any benefit of correcting the error of our ways.

I suspect that we’re still in a state of financial grace. We can certainly absorb an economic slowing and/or a gentle upward drift in pricing trajectories. Elevated interest rates have not thus far, and are not likely in the immediate future, to do much more than annoy us.

We’ve an election coming up, with every likelihood that the prevailing powers will goose the energy and treasury markets — so as to create better optics entering into the final autumn stretch. We probably pay for such manipulation down the road, but (everyone say it with me) sufficient to the day…

Other pandering political bennies include the unilateral negation, by unelected bureaucrats at the FTC, of Non-Compete Agreements embedded in certain employment agreements. Not gonna lie – this one hacks me off. Nobody likes to sign Non-Competes, but they are nothing more than a clause in a private contract between employer and employee, within which the Government has no standing. No one is impelled to sign on to them. I am hardly a corporate shill, but it strikes me that even The Man is entitled to protect himself from mercenary employees seeking to absorb proprietary information and then sell it to the highest bidder. Moreover, and perhaps more importantly, absent such protection, there is every likelihood that The Man will hire fewer innovators, and, hiring fewer innovators, will innovate less.

What is this? Russia?

Additional sops take the form of proposals for an impressive 44.6% federal tax on Capital Gains, up from the current threshold of less than half of this amount. All done in the righteous name of “ensuring the rich pay their “fair share” (precisely what this amounts to never specified). If y’all want an example of Big Government and Big Biz colluding to our detriment, here it is. The Fed prints ~$10T in the wake of the covid plague. Most of this finds its way to the market, which is a 2-3 bagger since the lockdowns.
Now’s time for the kickback to the folks in Washington. It’s a square deal for the swamp and the titans of Silicon Valley, but the shame of it all is this. It will now become that much harder for anyone with a new idea to risk their capital and substance to grab for the brass ring of commercial success, knowing, as they will, that if it somehow comes, and after those avaricious state revenuers grab their share, less than half of the spoils will remain to these visionaries. Seems like a dirty deal to me…

Aside from all this aggravation, I have been forced to set aside time to knock heads together at my second alma mater: Columbia University. Located a short mile north of my Manhattan digs. I do not wish to enter into a debate as to who is the sponsor of the evil thereof in these here proceedings.
Further, I have no doubt that those forced to contend with the IDF often have a bad time of it. But FFS! When one considers the genocidal brutality that traverses the globe – From Cuba to the Congo, from (Omar’s beloved) Somalia to the Sudan, it both frightens and astonishes me that it is Israel’s behavior that causes the world to unite in outrage.

Probably, this all peters out eventually, and certainly will when the cameras and other gear are sent away from 116th and Broadway. But the bad feeling will remain, the lingering odor of a world that will pick and choose its outrage based upon what will sustain the attention of the tele-connected world. And let me state one final beef. Let’s say all those righteous freedom fighters in Morningside Heights manage to eliminate Israel from “the river to the sea”. What happens then? Well, it’s my guess that this is the moment when the REAL violence in the Middle East commences. Sunni v. Shia v Houthis.

Meantime, one of the world’s leading centers of capitalist democracy, with all its culture, technological innovation and history, will become a minimally lamented memory.

Sufficient to the day…

But in the end, who cares? We’re in the middle of an Earnings Calendar which has brought more delight than despair. We’re off our highs; Bitcoin is halving. There is, in short, every piece of the puzzle required to abide by the literal musings of the Sermon on the Mount — and buy risk assets ere someone else hoovers ‘em up.

However, if we simply follow the train of our time-honored Dylan quote, the next lines are as follows:

“When you bit off more than you can chew, you gotta pay the penalty. Someone’s gonna have to tell the tale, I guess it’s up to me”.

This I have tried my best to do. I may indeed have bitten off more than I can chew and have cause to regret it down the road. But, returning to our titular theme “sufficient to the day…”.

TIMSHEL

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