L. Cassius ille, quem populus Romanus verissimum et sapientissimum iudicem putabat, identidem in causis quaerere solebat, cui bono?

—Cicero: Pro Roscio Amerino, §§ 84, 86

God Oh Mighty. I must be getting old. For one thing, I’ve resorted to (ostentatiously) busting out my Latin chops. And, if that weren’t shameful enough, to retreading on old thematic ground.

Oh well, at least I was able to shout a holler to my ol’ pal Marcus Cicero — always a plus.

And besides, the whole cui bono (in English “who benefits?) thing is everywhere one cares to cast one’s eyeand I have long found the answer to this question to be quite handy in determining root causes and likely outcomes of any number of issues. It is so today, as applied to the full range of challenges we face. Thus, cui bono, abides.

It came up, for instance, just the other day at work, in a pre-FOMC discussion about Wednesday’s pending rate announcement.

Perhaps out of sheer boredom, the crew was engaged the old “what are they gonna do?” chatter, even though we all knew they was gonna stand pat and talk tough. One of our newer members, however (who can perhaps be forgiven for having attended the Kennedy School of Management at Harvard University), looked at me, surest on the point and asked “why?”

“Because it is in their interest to do so” I responded. However, as this was an insufficient explanation, I went on to offer by belief that the other options were sub-optimal to the Fed’s agenda. Surely, amid the other two choices, a rate cut was off the table, and, as for another hike, well, to me it was abundantly plain that the associated juice wasn’t worth the squeeze.

Sure, if it subsequently came to pass that Inflation surged, they’d look like geniuses, but, on the other hand: a) this is a low-probability outcome; and b) they’d be annoying everyone by doing so in the meanwhile.

And, as it turned out, we were right. They held. And talked tough. So, what happens now? The over/under centers around one more rate hike this year, which sounds about right to me. Why? As a political enterprise, I believe they’d like to take rates as high as they can without crippling the economy, thus enabling them to be as generous as possible/necessary with their cuts in the election year of 2024. This, of course, pre-supposes that their sympathies lie with the current administration, but I simply fail to see how that point can possibly be up for dispute.

To whatever extent this cui bono line of argument is valid, our Central Bank is receiving a massive assist from that unstoppable juggernaut otherwise known as the United States economy. Its Atlanta Division is forecasting an astonishing 5% growth rate for Q3.

And even the curmudgeons that gin out such prognostications for the Banks and Brokerages that track these matters have taken their estimates up to 3%:

Economists, who Nobel Laureate Paul Samuelson once famously said have predicted nine of the last five recessions, are calling for a major slowdown in Q4. As they have all year. Cui bono suggests that they don’t want to be tardy or absent for the next decline in economic activity.

Major headwinds include, for one, the potential for a government shutdown, and I am unable to resist the temptation of pointing out that the correct answer is omne beneficium – all benefit. A big part of me wishes they’d close up shop forever, and, as to those lingering questions – Besos can deliver the mail and Musk can defend the shores.

Convince me that we’d be worse off in any way, and significantly better off from any number of perspectives. Go ahead. I’m waiting.

But I reckon we’re stuck, not only with a government, but one that takes a notion to shut down every other lunar cycle.

That the government itself would be a loser if it were to peace permanently, we will take as a given. It remains, though, to wonder who benefits, from a showdown that both sides know they will ultimately abandon. Mostly, and especially this time, it seems that what is really at play is the battle between factions both within and across the two political parties. Certainly, this is visible on the Republican side, with the hardcore segment wishing to push the hard line as its forever policy stance.

On the Dem side, there appears to be more harmony, as the entire caucus agrees that the more we spend, the more we tax, the better of we, or at any rate, they, are.

Given the way the cui bono chips are stacked, I anticipate a more rather than less annoying cycle, which, when it is finally resolved, will find both sides claiming victory in the name of public good.

Will the markets care? History says no, but I think we gotta keep an eye on this thing nonetheless.

Energy prices are rising, benefitting the Russians, the Arabs, and few others, but threatening our current serene domestic state. If the trend continues, then there’s no possible way to win the next inflation battle, so I’d keep an eye on those markets as well.

And, while we’ve checked in at the commodity store, we may want to take a sticker shock glimpse at Live Cattle and Chicken – getting more expensive in their pens with every moo, every cluck:

The USD is at multi-year highs, but nobody seems to want this.

Given all the above, it strikes me that we are in a cycle of nullus beneficia – nobody benefits. From anything.

But I hate to lay that kind of buzz kill on y’all, in the last week of what the Atlanta Fed projects to be a quarter of 5% GDP growth.

So, maybe we should count our blessings. And that means you, my whiny traders. The Naz is, after all, still up 26% this year, and if you can quit complaining and gather yourselves, maybe we can end the year like we began it.

And please don’t come to me with that cui bono bullsh!t – especially in a raging bull cattle market.

Cui bono? Omne bono.

And with that, you know what to do….

TIMSHEL

Raise your hand, if, like me, until this week, you never heard of Stellantis.

Forgive the redundancy for those with fingers folded in their laps, but Stellantis is apparently the current corporate moniker of what was once Chrysler, along with, eons ago, the American Motors Corporation. Not sure what the “Stell” implies, but the Alantis portion probably, almost certainly, is a nod to its cross-oceanic presence in thirty counties. Its signature products are Italian Fiats. Rams and Jeeps, the last two of which are old-school Detroit specials. Somehow, though, its headquarters is in canal-filled Amsterdam.

Which tells you all you need to know about the modern auto industry.

In any event, Stellantis has the dubious honor of being one leg of the triple target against which the just-announced United Auto Workers strike is trained. The others are General Motors and Ford, neither of which, presumably, needs any introduction.

In solidarity with the trauma no doubt being felt on both sides of the dispute, and exclusively for the purposes of this note, I will refer to the conglomerate as St(rik)elantis.

The objectives of the job action are consistent with the normal protocols attendant to such affairs – albeit at impressive magnitudes. The demands include a 40% pay raise, a 32-hour work week, health care coverage that lasts until that inevitable, “tits up” moment (hopefully not for many years) and an assortment of other goodies.

Somewhat incongruently, I fully endorse their right to strike. Management negotiates as a single agent, and the organization of workers into a solo bargaining unit seems to me to be only fair game (tit for tat?). So, I say, man the pickets, onward to the negotiating table, and may the best economic outfit win. I’m not even terribly put out by the reality that it’s three against one – in a game wherein the smaller number has the competitive advantage. The UAW speaks in a single voice, renders its decisions collectively, whereas the three companies on the other side are deadly competitors, meaning any one of them may cave for the simple joy of sticking it to a hated rival.

But I am hacked off about the whole thing, nonetheless. Those UAW jobs are good gigs, featuring solid wages, extraordinary job security and a juicy package of bennies. Again, I stand by their right to undertake a walkout, but let no one mistake this group as being anything close to an exploited workforce.

Published estimates suggest that the fully loaded union-endorsed package would cause the labor component of domestic auto manufacturing cost to roughly double, and one wonders if, even under the premise of victory, the juice will have been worth the squeeze. It’s bound to take a bite out of demand for the products they manufacture, rendering them less affordable, and adding to allure of buying one of those sexy foreign jobs. We Americans import nearly half of our rides as it is. And a sequence of idled plants leading to higher costs that can only be passed on to consumers, could push the plurality to the Japanese, Korean, German, and Italian jalopies already widely preferred by such a large segment of our car-buying populace.

As was true 50 years ago (the last time the UAW chose to act out in such a manner, and how did that work out?), the implied lower sales will translate into a diminished supply of primo jobs, which can hardly be on the agenda of the United Auto Workers of America.

As I watched this unfold over the last several weeks, I was pretty certain that the Union would strike no matter what. And, to keep me honest, I will further prognosticate that a walkout now isolated to a few plants will quickly morph into a General Strike – with ALL manufacturing facilities idled. I base this on a hunch that what this is really all about is not small-ball worker economics but rather largescale politics. The Labor Movement, moribund for two generations (and especially since global trade reduced the leverage associated with domestic work efforts) is dying to exert itself, to show the world – once and for all – who’s boss in these here parts. They either believe that now is the time, or, at minimum, that their long pined for window is about to close.

Anyone who doubts this, however, should refer to the following chart, which plainly indicates a worker proclivity to point feet out the door:

I am not, however, not terribly optimistic on their behalf. They’ve won a couple of tactical victories of late – the UPS cave job comes to mind – but on balance have lost most of the showdowns they have forced this decade. The Teachers Unions used the lockdowns to demand not only control of education systems but large elements of social and political policy. In doing so, they accomplished very little, eroded large portions of their (finite) goodwill, and put the students which they serve through innumerable months of (irretrievably) lost time and excess agony.

Near as I can tell, nobody east of The 10 cares much about the Hollywood walkout.

But the more important lesson, particularly from a risk management perspective, is that if one is planning on undertaking an aggressive stance in a conflict resolution setting, one is best served to have a firm grasp on the leverage one brings to bear into the throwdown. And to act in accordance.

My guess is that other than the legion of politicians they carry in their pockets, the UAW has a deficiency of this vital negotiating asset. Yes, the Big Three needs workers to turn the screws on the assembly lines, but can find them anywhere on the globe – including, most notably, jurisdictions beyond the Union’s reach. Consumers can simply choose products that don’t feature the hoped for, UAW-extracted premium built into the sticker price.

Perhaps it is these conditions that caused Big Three stock prices to rise in the wake of the announced Job Action:

It is further unfortunate that the negotiations have broken down just at the point when Inflation has taken a nasty upturn.

With Crude Oil prices (you know, the stuff they put in car engines) on the threshold of one-year highs:

With the USD has surging – rendering the price to import an American car that much higher:

But I reckon when you are trying to make the world safe again from the cruelties and caprices of greedy corporations, none of this matters.

******

Come what may, the markets will trade on. After all, even if the UAW manages to remove every car from the road, we can always hop online. We survived, albeit in somewhat battered condition, a rather gruesome Rosh Hashana trading day, and won’t face the even more historically menacing Yom Kippur atonement session till Tuesday week.

Aside for a few interesting but ultimately back benching PMIs, all eyes will be on the FOMC. But my sense is that it will be anticlimactic session. Rate hikes are not on the cards, and we can project with confidence rhetoric featuring the need for continued vigilance, etc.

Yawn.

We are also staring in the face of another potential government shutdown, this time with the battle lines perhaps more acutely drawn. But I can’t bring myself to work up much agita on that score.

Maybe, instead, I’ll go car shopping – before, you know, the prices go up. I’d like to buy American; it is, after all, the patriotic thing to do.

But if I go another route, I don’t wanna hear nothing from my union buddies about stabbing them in the back. They don’t appear to be particularly concerned about my problems, so I’ll leave them to solve their own.

So, I reckon I’ll at least test drive a Fiat, in the hope that it will at least partially assuage the hurt feelings that surely pervade across the transoceanic realms of St(rik)elantis.

TIMSHEL

London calling, yes, I was there, too
And you know what they said? Well, some of it was true
London calling at the top of the dial
And after all this, won’t you give me a smile?

Joe Strummer

Yes, my loves, the sad anniversary is yet again upon us. It thus devolves on me to give a shout out to those gone but not yet completely forgotten. To Goldflam. To Crotty. To Fitzy. And, of course, to Morty and Zep (the latter of which was disputing a trade with us when his phone line went dead).

I will resist the temptation to add to the galaxy of faux profundity as to the meaning of it all. Save this. For most under the age of senility, 9/11 is when it all began. By which I mean our insecurities, our lack of confidence in our surroundings. In our ability, with the tools at our disposal, to meet the challenges which forever plague us.

Oh, sure, we’d moved with wary step in earlier eras. The interval after the Kennedy Assassination/Vietnam/Watergate/Iranian Hostage Crisis was a weak one. But as the ‘80s unfolded into the ‘90s, it seemed we could hardly do wrong.

Then those planes hit the towers, and we have scarcely had the ability to move assertively forward since. We fought a couple of pointless, futile wars. The markets crashed. We lived off helicopter money until a powerful but hardly historically menacing virus sent us down a rabbit hole. We hoovered up the funny money again, and it worked for a while. But we overdid it by any standard. The amount of cash now in circulation is now 10 times what it was before the crash and more than quadruple its level prior to the lockdowns:

But we also face another sad anniversary. On September 10, 1983 – forty years ago Sunday, Joe Strummer fired Mick Jones from The Clash – which called itself as “the only band that matters”. And, at least in the post Beatles/Woodstock era, it nearly lived up to this billing. This wasn’t quite as ballsy as Mike Love handing Brian Wilson his walking papers. But it was close.

A few months earlier, Joe had fired drummer Topper Headon, but at least he had an excuse, as old Top was mainlining heroin. Jones, on the other hand, was released due to his increasing infatuation with such techniques as looping and sampling. Please understand, I agree with Joe that these things are better left to the posers. But (FFS!) Jones wrote most of the band’s most magnificent licks. And he deserved better.

A little over two years later – in fact on my 26th birthday – the reconstituted Clash released its final studio album – ironically named Cut the Crap — because the material was positively scatological compared with its earlier output.

And that’s where I believe we are now in the markets. It’s our Cut the Crap moment.

After an impressive year-to-date run that extended, more or less, until Labor Day, the tape has since felt decidedly weighty. Much of the burden has been born by the TMT complex, which ended the summer season in less than heroic fashion. The much-dreaded (celebrated?) AI takeover of all human endeavor appears less imminent. Our arch chipmaking enemy Huawei – banned from these shores since 2020 – has made some breakthroughs. Contemporaneously, those meanies that run the CCP have prohibited the use of foreign electronics products, including those supplied by that mighty orb Apple.

Other markets are feeling the impacts as well. Small caps are under enormous pressure. Crude Oil is at 18-month highs. The Saudis appear to be dug in on an extension of their production cuts, which project out to ~2M barrel/day shortfall in Q4:

The USD is up an astonishing (for the typically somnolent FX market) 5% in the last two months.

For all the above, it feels like market factors are fixin’ to make their move over the next little while.

So, are they gonna cut the crap? Well, it’s hard to say.

I reckon will get minor glimpses into our future this week, what, with the CPI/PPI numbers dropping and all. Probably nothing on the order of revelation is on the menu, but, particularly with energy prices again on the rise, an upside Inflation surprise might be – shall we say – unpleasant. The United Auto Workers is fixing to vote on the first industry-wide strike in two generations, and if they go, it just might exceed the galactic impact of that Hollywood job action.

The Fed weighs in about a fortnight from now, and we can probably expect them to cut all this rateraising crap. But what of it?

At some point we’re going to have to figure out where we are, whether we’re in the sewer and need to swim our way out, or whether, the hint of noxious gasses notwithstanding, our surroundings are, if not Eden-like, then at minimum endurable.

I’m leaning toward the latter, though it goes against every codger-like cell in my body. I am, after all, a child of the Strummer era, where, to the accompaniment of raging guitars, angry young men exhorted us to, well, to cut the crap.

It worked back then. Is it necessary now, and, if so, will it work a second time? I’m not sure. But I’m old now, so there’s that.

But business profits have been amazingly stalwart, the consumer shockingly resilient. Despite everyone from Beijing to Pyongyang to Tehran to Moscow to Washington seeking to take us down, we remain substantially upright.

Heck, even them little covid buggers are gathering themselves for a counteroffensive, but my guess is that unless they reach such force as to cause folks to drop on the street, they will not keep us at home.

On the other hand, this much is true. The WSJ published a college ranking that placed University of Chicago at a putrid 37. Less dramatically, Birmingham – not the greatest city in Alabam but the second largest town in the United Kingdom – declared itself insolvent last week – in part, so the reports tell us, because it owes its female civil servants some bonuses they missed out on a few years back, and it ain’t got the scratch to pay for it.

Birmingham, however, is not London, so I wasn’t there (too). But The Clash were, and for a brief period, burned the place down.

Strummer has been dead these 20 years, almost as long as my boys Morty and Zep.

Mick Jones is still around, and, when asked, expresses nothing but love and admiration for Joe Strum.

He never Cut the Crap. But then neither, thus far, have the rest of us. Whether we do so — now or in the future — remains to be seen.

Again, I’m on the fence about this. And, moreover, whether we do or not, we will presumably abide.

I remain on the optimistic side, at least in the short term, but less so than I once might have been, as has been the case for nearly all of us since September 11, 2001.

Thus, in conclusion, and on this sad day of remembrance, it only remains to ask:

After all this, won’t you give me a smile?

TIMSHEL

Welcome to the rest of the year, y’all. I hope you’re ready. Because it promises to be a wild ride.

Or not.

Certainly, it’s been a paradoxic, oxymoronic journey thus far, and, in keeping with the inexorable principals of Newton’s Second Law of Motion, I feel this trajectory is likely to continue.

Except, of course, that even Newton’s rules have their limits; the whole system breaks down — within the sub-atomic universe, in black holes, and in other realms beyond rational comprehension.

I nonetheless expect the oxymorons to ensue unabated (in deference to the Newtonian nature of most whats in our field of vision, so I extend thematics from last week’s note, which, as at least some of you may recall, was the oxymoronic notion of pre-virginal acquaintance.

What, after all, is more oxymoronic than that? You can’t know someone – even Doris Day – before she was a virgin — because it violates the relationship between time and space that is the basis of everything Newton taught us. Even if dudes like Einstein proved to us that he was less than universally correct.

I got to thinking about oxymorons which, along with palindromes, hold a sacred place in my psyche (Side question – shouldn’t the folks that created the English language have used a palindrome to describe a verbal sequence that is spelled the same forward as backwards – maybe something like wordrow? This itself is an oxymoron.), when reviewing the earnings report of the last remaining Swiss Banking titan – The Union Bank of Switzerland.

UBS reported the largest earnings – some $29B (Î26.6b) – banking history. It’s stock – un-oxymoronically, rallied to all-time highs.

According to published analysis, the lion’s share of this profit bonanza derives from a concept called Negative Goodwill – an oxymoronic notion if ever there was one. Moreover, it brings, at least to my perverse mind, the alternative paradigm of Positive Badwill, a stunt which, if no one has pulled it yet, someone should, and soon.

Meantime, why the recording of Negative Goodwill is worth tens of billions in profits remains a mystery, and one that I will leave to the accountants to unpack.

I am, however, given to understand that the opportunity presented itself by virtue of its sacrificial, patriotic, heroic takeover of its last remaining substantial domestic competitor – Credit Suisse, which it subsumed at zero cost, and, in fact, with considerable government subsidy.

We have had similar episodes Stateside, most notably JP Morgan’s hoovering of First Republic. JPM has a history of such ravenous consumption, having, over its history, having taken over such depository institutions as Chase, Chemical Bank, BankOne, First Chicago, National Bank of Detroit, and, in oxymoronic verisimilitude (Bear not being a bank), Bear Stearns. But at the point of this correspondence, it is trading below its late ’21 highs. Maybe the public is simply tired of Jamie pulling such maneuvers.

But the oxymorons don’t end there.

For example, by way of late breaking pre-holiday news comes word that Stanford University and the University of California Berkeley – highly proximate, world-class universities nestled at the base of the Pacific Ocean – have joined the Atlantic Coast Conference. One can hardly blame them. Given the recent “last-one-out-of-the-Pac-10-turn-out-the-lights” vibe, they had to do something. But let’s not mistake this as anything other than an oxymoronic cash grab by highly lucrative college athletic programs. Also joining the ACC is Southern Methodist University, which is not on an ocean of any kind, but is an easy 40 kilometers from Lake Ray Hubbard, named after a former Dallas Director of Parks and Recreation (1943 – 1972).

We lost Jimmy Buffet over the weekend and were it not for its relation to our theme, I’d have little to say about this. But Jimmy became a billionaire by espousing the virtues of slacking and loafing, less through his music than by the creation of an endless string of restaurants, resorts, and (for all I know) munitions factories, rendering his entire existence a tribute to the awesome powers of the oxymoron.

In the markets, it was an oxymoronic end to an oxymoronic August. There was a bid all week, and then, on 9/1, what appeared to be a relatively copasetic jobs report dropped. Deeper analysis suggests that it was a bit weaker than expected, with reasonably robust job creation, which was highly tilted toward part-time employment:

On balance, though, you gotta tip an oxymoronic cap to the jobs market, which remains unbowed against a passel of headwinds. Of course, the base rate ticked up a goodly amount, due in part to an increase in the Labor Force, and to the oxymoronic construct under which one government department computes job creation, while another is responsible for calculating the Unemployment Rate itself.

We are staring in the face of a Crude Oil market on the threshold of oxymoronic two-year highs, the end of the driving season notwithstanding. I am also keeping an eye on surging Sugar and Cotton prices and would say something about the impact on Cotton Candy consumption. But. Just. Can’t.

The Yield Curve remains grotesquely inverted, which is an oxymoron in and of itself. But I am past weary of this topic.

All of which leads back to the Equity Complex, which enter the last trimester in (all things considered) fine fettle. No one can justifiably complain much about profit margins, and if one is looking for oxymorons here, it may be just as well to look at declining Net Interest Costs in a rising Interest Rate environment:

Nominally, this can be explained by the perverse combination of corporations having locked in lowvig/ longer term debt in advance of rate hikes, while now enjoying fatter returns on their cash balances.

But I prefer to ascribe it to the Mighty Gods of the Oxymoron.

Again, I expect more oxies to come our way in the coming months, which, by their very definition, are impossible to anticipate. My best risk management advice is to embrace a reactive mindset. The last oxymoronic trimester will unfold in its own good time, and I suspect that matters will assume a different vibe by, say, Halloween, than is observable now.

But hey, it’s Labor Day, when us management types pay for those on our staff to celebrate the toil and tribulation they endure on our behalf the rest of the year. In their honor, I will try to relax. I’m off to Central Texas, to celebrate the festivities on the lake named after a State Bureaucrat who retired 50 years ago. I’ve got “Cheeseburger in Paradise” on the box and not a care in the world.

Care to join me? If not, this is a condition which those who know me will deem oxymoronic enough to conclude on that note.

TIMSHEL

Roses are red, violets are blue, I am a schizophrenic, and so am I

Oscar Levant

And so am I. But I reckon you knew that.

The source of our title quote is Oscar Levant – virtuoso pianist, clever comedian, Renaissance Man.

Its subject is the iconic Doris Day. Bubbling 20th Century actress, whose most pertinent (at any rate, for our purposes) achievement may have been to have believably played Rock Hudson’s Love Interest in the 1959 film Pillow Talk. Levant claims to have known, oxymoronically, before she attained the status of being biblically untouched, and, as he died 50 years ago, we can only take his word for it.

She had four husbands, and, for what it’s worth, she was an activist Republican.

Her persona, of course, was that of a wholesome siren. The type who wore coverups into the shower, and who would never allow wandering hands or other appendages to desecrate her lovely temple.

The truth, as implied by Levant, is, apparently a bit more complicated. But then again, it often is.

And that, at least for now, is all I have to say about that.

However, as we enter this last, bittersweet, portion of Summer, it does seem to me that once the sucky holiday of Labor Day is behind us, investors may yet again be entering virgin territory.

With General Dow roughly flat. With Col. Naz up nearly 30%. With Treasury Yields surging. With mortgage rates reaching, each day, alarming, generational highs:

Beyond the elevated levels, however, I think we must attend to the associated rate of change. Those with the foresight to have financed (or re-financed) a home in late ‘20/early ’21 could do so at the modest vig of +/- 3%. Lotsa houses got themselves sold at those rates. And, in result, prices went. So, now, purchasers are looking at not only higher listing values, but also at the prospect of paying > 2.5x in interest expense.

Outcome? Fewer trades. And fewer Ms. Days being carried across virginal thresholds into introductory, connubial, wedded bliss.

Those looking for relief in these realms were met with disappointment, when Chair Pow took to the podium on Friday, at the decidedly non-virginal setting of the J-Hole Economic Forum. He’s still looking to limpen up the stubbornly firm vigor of Inflation, and one can hardly blame him for so doing. At any rate, the markets took this in stride.

It was one of two signature economic events of the week, the other being the NVDA earnings drop. Which, in keeping with our somewhat salacious theme, was as an epic Doris Day cock tease. Results? Astonishingly strong. Guidance? Even stronger. Upgrades galore across the Street. So, there were the shares – expensive, yes, but fetching, winsome, and waiting to be taken.

But other than a few hot-blooded post-close investing adolescents, no one wanted them. So, no one took them. And, in result, the stock ended down for the week. As my most highly credentialed macro client put it, everyone who could plausibly own NVDA, already owns it.

The Equity Complex held in nicely, nonetheless, as, on balance did Treasuries. But somehow, the trampiest of asset classes, high yielding corporate credit – all the way down to the street walking Leveraged Loans and (even worse) Triple Hook(er)s (CCC paper) stole the show:

In any event, between now and Friday, it’s mostly sloppy seconds, as in, for instance, revised Q2 GDP estimates. There is a smattering of new biz with which to attend – some housing data, and (rudely if you ask me) an ill-timed, Friday, pre-holiday jobs report. In terms of the latter, I doubt many of us are hankering to parse out labor statistics on the last getaway day before the forlorn, ritualistic ending to the summer season. And even here, we’re in sloppy seconds territory, with the two-month revision taking on as much significance as the August number itself.

Assuming (as I do with confidence) that we survive this assault on our buzz, three days of barbeque, suntan oil, etc. await us, and then it will be time to pack the little kiddies off to school – a desolate exercise for me if ever there was one.

And it will be a clean slate for the markets. We will be virgins again.

Yes, in ytd ’23, we’ve been schtupped by a faux banking crisis, squealed in coital delight at the romantic stylings of AI chips, nearly bedded by a government shutdown.

We endured the orgiastic assault of the introduction of zero-day options (what could go wrong there?).

Though still in mourning, we survived that tragic, er, accident in which the head of the Wagner Group lost his life in a plane crash.

All of that is officially erased.

We enter the proceedings as pure as Doris Day.

But all the above is a fortnight away. In the meantime, we all may be well advised to take as full advantage of our pre-virginal status as is in our means to accomplish.

After that, we may wish to enter the interval, as my grandmother advised my sisters, with eyes open and legs closed. Our virginity, after all, is not likely to last long, and it is only in our power to partially control the venue, conditions, and collaborators in this sacrifice.

We cannot, by contrast, control the outcome. But we always knew this.

As did Doris, who, in her signature song, reminds us:

Que sera, sera,
Whatever will be, will be,
The future’s not ours to see,
Que sera, sera

I think she was on to something. After all, she lived to be 97, and if Oscar Levant can be believed, before she died, she became a virgin again.

TIMSHEL

Life had lost its fun
There was nothing to be done
But trade his house that he bought on the GI bill
For a flag-draped casket on a local hero’s hill

There’s a hole in daddy’s arm where all the money goes,
And Jesus Christ died for nothing I suppose,
Little pitchers have big ears,
Don’t stop to count the years,
And sweet songs never last too long on broken radios,

John Prine

Every now and then, it pays to apportion our world between its two primal forces – Pathos and Bathos. It’s been a few years since I done this, and the present day strikes me as being an appropriate point for updating the comparison.

I’m not gonna bother to define Pathos. It’s one of those things that you know when you see, and presumably, y’all have both observed and experienced significant doses of it across the coursings of your existence.

If one cares to look, it can be found everywhere. In them Maui fires for example. In crumbling urban landscapes. With the about-to-be-liberated Miami Zoo orca dying before ever swimming out to sea.

Truth is, should we so choose, we can always wallow in Pathos – both personal and general. It is part of the human condition, but, in these waning days of a summer, draining with pathetic celerity, I will neither enable nor empower this exercise.

So, let’s move on to Bathos, shall we? There are myriad definitions of the term, but for our purposes, we will designate it as situations within our actions or range of awareness, wherein superficially dramatic sequences devolve into the comic — due to irony, hubris, and/or any combination of unforced errors that litter the landscape of our experience.

I took a notion to devote space to this concept after reading about a recent Hollywood controversy, concerning a soon-to-be-released Leonard Bernstein biopic, in which Producer/Director/Lead Actor (and apparent scab) Bradley Cooper dons a prosthetic nose to achieve, er, a more Semite-like appearance, evoking criticisms of implied ethnic stereotyping.

Now, as I seek unadorned honesty in these pages, y’all should know that I have a connection to Cooper – namely, that once, out of sheer boredom, I took a Buzzfeed quiz to determine who would be my ideal Hollywood boyfriend, and got matched with Coop.

This, combined with me coming up as a Jan (instead of a Marcia) in a similar, Brady-based quiz, could cause you to draw certain erroneous conclusions about me. In reality, I am both cis and straight, but I won’t insult your collective intelligence by trying to convince you of same.

Besides, it would crowd out other essential examples of Bathos which obliterate the landscape. For example, with the recent admission of the Universities of Washington and Oregon to the Big 10, the membership tally now reaches 18 – nearly double its name-based allocation. Moreover, a conference once Midwestern to its core, confining its perimeter to the area stretching from Iowa City, IA to Columbus, OH, from St. Paul, MN to Bloomington, IN, now stretches from the Columbia Gorge to the Jersey Shore. Finally, there’s the small problem that the State of California, featuring newly minted Big 10 members UCLA and USC, is too moral to subsidize the patronage of anything residing in jurisdictions of iniquity such as Iowa and Nebraska – including their football stadiums and adjacent hotel facilities.

I’m sure they’ll figure that one out. And we should hope they do, because, as the university presidents hasten to remind us, these moves are all about enhancing and enriching the student athlete experience. We knew that, of course, but it’s nice to be reminded of it when they grab the cash.

While potentially bleeding back into Pathos, as of this past week, the former President/current frontrunner for the Republican nomination is now charged with a dainty, subtle, nuanced 91 felonies – – across 4 jurisdictions. One of these, designated, under the criminal code, as the Racketeering Influence and Corrupt Organization (RICO) statute, includes a co-defendant that is the original author of the law. This individual, once a 9/11 hero, is now a MAGA goat, but, as they say at (my alma mater) Wisconsin, that’s life in the Big 10.

The primary target is, of course, sporting a giant lead in the polls – of magnitude so galactic that he (never to be mistaken for a Shrinking Violet) is skipping this week’s debate – an event that promises to be uber-bathetic whether or not he yields to temptation and demands the podium at the last minute.

On the other side of the ledger, the Incumbent, unambiguously descending both mentally and physically, is at the center of an influence peddling investigation which his own Justice Department is either slow walking or ignoring, the testimony of witnesses under affidavit and the identification of at least $20M in surreptitious payments – to shell companies and various family members — notwithstanding.

These two are the odds-on likely combatants in the pending electoral equivalent of the Zuck/Musk cage match. And no one seems to want either of them.

I’d now turn my attention to market matters, and, ideally, to some thoughts on the wind-down of the earnings season. I am hampered here a bit, though, because a critical source of information for me – Factset – has taken most of August, you know, the key weeks in the Q2 reporting cycle, off.

Oh well, we’re down to the dregs of the season anyway. There’s almost nothing of import on the economic reporting docket, and, by next week at the latest, it will be time for the Labor Day get-outof- Dodge ritual.

There are, however, a couple of matters with which to attend. The first is the tardily scheduled NVDA earnings release, the most recent of which arguably catalyzed the whole summer rally. The shares are ~10% off their all-time highs, but still a respectable 3-bagger in ’23. I don’t know how this plays out after Wednesday’s close, but it is apparent to me that anything issuing forth either Pathetic or Pathetic spells major trouble for the markets.

Then, by Friday, we can turn our attentions to that fabulous Labor Day bash known as the Jackson Hole Economic Forum – sponsored, in time-honored fashion, by those fine folks at the Federal Reserve Bank of Kansas City (does the KC Fed do anything else?).

Historically, along with Davos, it is the most Bathetic event on the market calendar. But it nonetheless requires our attention. It was, after all, the venue wherein both QE2 and QE3 (the latter of which, in my judgement, giftwrapped the 2012 election for Barack Obama) were announced.

Is QE4 on the docket this year? I rather doubt it. Our snowboards are instead pointed in the opposite direction, up the Pathetic, Bathetic hill of Quantitative Tightening. Meantime, Treasury is issuing paper to beat the band, China is divesting, as, perhaps, is Japan.

Mortgage rates, in result and as has been widely reported, are at a 20-year high:

No matter, because who wants to buy a home now anyway? And even if you do, as far as I aware, there’s no GI Bill to speak of at the moment.

On a happier note, there are fewer holes in daddies’ arms these days. Because the smack of choice is now Fentanyl. Which no one save the patently suicidal would ever dream of injecting. There is a hole, however, in Jackson, WY, into which many an investor’s money has gone. So, take care.

For now, and as always, the world and the markets are both Pathetic and Bathetic. I don’t expect much, this side of a major surprise from NVDA, in the way of factor movement between now and Labor Day Tuesday.

The last trimester is bound to be wild and wooly; hopefully with a minimal dose of Pathos.

Meantime, if we so choose, we can embrace the Bathos all around us, letting it waft, serenely and ironically, on the breezes of this waning summer season.

TIMSHEL

Those familiar with this publication and its author are aware that a defining imprimatur is embodied in an epistle otherwise known as the 10 Commandments of Risk Management (TCoRM). The uninitiated, and those in need of a refresher, can, for their own erudition, click on the following link:

Risk Philosophy

I (with acknowledged hubris) believe that this document aspires to biblical proportions. Case and point: my favorite: Commandment 10 – Obey the 10 Commandments. You know, the ones in the bible? Which Moses delivered, destroyed, and re-delivered to the fallible, as-sinning-as-sinnedagainst Chosen People, in the Desert, some 35 odd centuries ago?

Don’t lie. Don’t steal. Don’t kill. Honor thy father and mother. Please believe that adhering to these and the other six will do no harm, and may materially benefit, your investment returns.

Whereas the content sourced from “Exodus” has, by any standard, held up well across the ages, we face a deficiency of time passage to evaluate the staying power of the rules I have established. Perhaps we’ll know more in 3,500 years — at or around the year 5623.

So, I (with irony, as us of the Chosen are instructed to always cover our heads) take my hat off to the biblical tablets. Ten instructions, embodied in a mere 313 words. Encompassing, nonetheless, most, if not all, of the essential rules for righteous living.

Our risk management task is more complicated, requiring not only more verbiage, but also significant annotation. I will spare you the full set of notes that accompany the TCoRM but have taken to mind that a sampling of these is in order. Such as one that occurred to me over the last several days:

Footnote 12: No matter how bad things are, they can always get worse.

How bad things are now, however, is a bit of a sticky wicket. It was a horrible week, for instance, for Geritol rockers, or, like me, passionate admirers of same. Over the past few days, Three of the big Dogs passed into Night. First David LaFlamme – founder, singer, songwriter, and violinist for the briefly magnificent, eternally underappreciated San Francisco ensemble It’s a Beautiful Day.

Bookending on the other side is Rodriguez, a fabulous Detroit songsmith, laboring, in anonymity until about 15 years ago, and then immortalized as Sugarman. Trust me folks: he’s worth checking out.

However, the meat of this dirt nap sandwich is demise of Robbie Robertson, who we’ll just call The Leader of The Band. Solemn duty impels me to offer some expanded thoughts here.

I will cop to some ambivalence about Robbie and The Band. At their best, they absolutely earned their place in the pantheon. 4 Canadian guys and a drummer/singer/mandolin player from Arkansas (and what can be more American than that?). Backing ensemble for Bob Dylan’s at-the-time traitorous conversion to electric music. The quintessence of what the righteous side of rock and roll should be. Musicians working together, playing together, living together – all in the idyllic setting of Woodstock, New York.

The vibe, for a while at any rate, was divine. Dylan hung out with them there, and, together, they recorded some of his greatest output. His pal George Harrison was so inspired by their comradery, particularly as juxtaposed against the John/Paul psychodrama that prevailed at the time, that he quit the Beatles in the immediate aftermath of hanging out with them at their Upstate New York digs — a small house now immortalized in the Rock Cannon under the name of Big Pink.

But like everything else under heaven, it was finite. Robbie decided to break up the group in the mid- 70s, among other reasons because 3 of his 4 bandmates had morphed into stone cold junkies.

OK; fair enough. Unless you’re the Rolling Stones, your band is eventually gonna break up. But then the universally lauded fellowship devolved into abject hatred. Why? Money, of course. Robbie, who had he not been a musician, would’ve made a fine CFO, hoovered it all up. Economically, he was entitled to do so. Their income derived largely from the stratospheric success of three or four songs that he composed. And, as the 10 Commandments of Rock and Roll (TCoRR) advises us — to the composer goes the spoils. But the other guys, particularly Levon, believing they had contributed, felt they got stiffed.

Tough shit, says Robbie, who minted it for several decades while the other guys floundered. And then died.

The enigmatic but unambiguously brilliant Richard Manuel offed himself in ’94. Rick Danko died of cancer in ’99. Levon kept the vibe going in Woodstock, with a lotta help from his friends, until he gathered to the dust of his forebears, about ten years ago.

A great deal has been written and said about The Band, particularly over the last several days. I will keep my editorial contributions brief. Unfortunately, what sticks out to me is the human comedy aspect, under which the most tightly knitted musical band of brothers ever to grace a stage or studio ended up hating so deeply on each other. If Robbie wasn’t entirely to blame here, if the hurt that Levon felt was perhaps more acute than otherwise justified, well, anyway, it seems like Robbie could’ve been a little more generous over the years.

All of which recalls another footnote to the TCoRM/TCoRR, a lesson I have learned, the hard way, more times than I care to count.

Footnote 76: Most affiliations are transactional. If you cling too tightly to the notion that they are build upon relationships, you are setting yourself up for bitter disappointment.

But reverting to Footnote 12, it is important to bear in mind that the possibility of deteriorating conditions does not abide merely under times of duress. It is equally true that during happy intervals, matters can always get worse.

Market conditions, for example, recently strong, have deteriorated over the last few sessions. There is a weight to the tape that wasn’t felt during the heady month of July. There are reasons for this, of course, but none that rise to the dignity of catalyzing an all-out rout.

There’s that whole Fitch downgrade thing, which merits some minor elaboration. Last week, I opined that Fitch may have been motivated to tag U.S. Treasuries as a proxy for playing a whack-a-mole with the whole credit complex, comprised, as it is, of their paying customers.

Well, in support of this hypothesis, the more deliberate Moody’s downgraded ten banks, and put a bunch of others, including the staid, conservative, old school custody outfits BONY and Northern Trust, on ominous review.

Bleakly, there may be more of this sort of thing on the horizon, but a downgrade crescendo appears far from imminent.

Inflation came in a titch higher than had been expected, or, at any rate, hoped for. But not by much.

The justifiably feared $100B Treasury Auction was a bit soft, but far from catastrophic.

Key Risk Factors, including Crude Oil and USDJPY, are at warning level threshold highs, but have not, yet, broken through.

In general, investment conditions have indeed worsened, but: a) from a rather lofty perch; and b) by manageable amounts. All of which has nonetheless darkened the mood of the investment community, as exemplified by their rather ungracious response to upside surprises emanating from the earnings podium:

It would appear, from the above presentation, that the markets are adhering to Footnote 12, recognizing that even when things are, on balance, pretty solid, they can indeed get worse.

We’re in the Dog Days of Summer. Other than the NVDA earnings release, a fortnight hence, which, somehow, has become as important a barometer as there is of market conditions, the news cycle slows dramatically – from here until after Labor Day, whereafter, I promise, the action will be heavy.

Could things get worse? Of course, they could. George rejoined the Beatles, but the group disbanded shortly thereafter. And he’s now gone. As is Rodriguez. As is LaFlamme. As is Robbie. Whose progeny can console themselves with the ~$50 Large he leaves behind. Levon, at the time of his death, was said to be worth ~$12M, causing us to wonder what he was whining about.

Things could have been worse for him and may very well be worse for us in the days to come. So it says in the footnotes of the TCoRM. Be forewarned.

TIMSHEL

Pleasingly, recent events offer us the opportunity to pay tribute to Donavan Leitch, Sr. (aka Donavan) – a Scottish folksinger, who, in the mid-60’s, was widely (if implausibly) hailed as the British Bob Dylan. No, he never remotely approached those heights, but he did have a couple of moments. As in Mellow Yellow. Or Sunshine Superman.

Or Season of the Witch – one of several compositions better presented by cover versions. In this case, Super Sessions, an ensemble that included Al Kooper, Mike Bloomfield, and Stephen Stills.

That version of our title song rocked. But what really put it on the map for me was Bowie’s variation on the titular theme, in perhaps his finest (if lesser known) composition — Diamond Dogs. Check it out. And pay particular close attention when he belts out the line about “the year of the scavenger, season of the bitch”.

But right now, as is evident, it is neither the season of the witch, nor that of the bitch.

It is, rather, the season of the Fitch. As in the Fitch Ratings Agency, which, as everyone knows, rather unceremoniously this past week, and without warning of any kind, downgraded the debt obligations of the United States of America.

Weren’t these guys supposed to put us on watch or something first?

Well, anyway, they didn’t. Went right ahead and rudely downgraded our asses. From AAA to AA+.

It was a somewhat mind-blowing gesture, and yes it took everyone by surprise. Investors, though they responded with dignity, were far from amused. But more about that later, as a couple of thoughts supersede here.

The first is the wearying but inevitable parallels to similar episodes, most notably the identical stunt being pulled by larger rival Moody’s in 2011. That move, was highly telegraphed – albeit to a select audience – leading to one of the most astonishing insider trades in market history.

Specifically, then-CEO Vincent Forlenza, evidently unclear on certain key concepts, called the CEOs of several Bulge Bracket firms to ask them, you know, hypothetically, the following question. If the ratings agency was going to downgrade U.S. debt (at the time an unprecedented action), when do they think would be the best day/time to do so?

It was all, as said, hypothetical, but each Wall Street Chieftain suggested after the close of business the following day (August 4th), which, being a Friday, would give investors all weekend to ponder the implications, without the distraction of being able to adjust their portfolios to the new reality. They then immediately instructed their trading desks to sell short everything in sight.

Well, wouldn’t you know it? The hypothetical then became the actual.

I kind of smelled a rat at the time, because the equity markets were in free fall all that session (which, ironically, was also President Obama’s 50th birthday), without an apparent catalyst. I knew that the big trading desks were sellers all day long, and the pressure unrelenting, tripping circuit breakers and other niceties. But I didn’t know why they were selling.

Then, the announcement came, and it all began to make sense. It was a helluva day – one for the ages — on the Goldman, Morgan(s), and Citi trading desks, and, when the dust settled, the Gallant 500 had yielded > 7% of hard-retaken ground in the wake of the 2008 Crash; Colonel Naz almost 20%.

The Bond Complex on the other hand, took the announcements in stride, sustaining a bid across that entire summer. Of course, that market was in what turned out to be the early stages of that historic money printing/bond-buying spree otherwise known as Quantitative Easing. Though at the time, the Fed Balance sheet stood at a quaint $2.5T, this figure was in fact 150% more than the central bank had held for eons prior to the crash:

Fed’s Witchin’, Bitchin’, Fitchin Balance Sheet

Of course, said asset values held by the Fed tripled and then-some in the intervening years, as aided, in part, by the November ’11 QE2 launch, which committed Big Ben and his crew to the monthy purchase of $75B of Treasury Securities.

Risk assets soon blessedly recovered, retaking lost ground within 2 short months, and, in the time since, the Gallant 500 is about 4.5x the Moody lows; Col. Naz is more than a 7 bagger.

At the time of the ’11 downgrade, Unemployment stood at 9% vs. ~3.5% today. CPIs were where they are at present, at just over 3%. Then, as now, the country was forced to endure a high-drama but ultimately pro-forma Debt Ceiling showdown. Twelve years ago, the Fed was accumulating assets and printing money, a practice they would accelerate over the ensuing decade. Now, of course, the reverse policy applies.

In 2011, the Washingtonian defecit was ~$15T and has more than doubled since. Annual interest payments were then just over $400B, and are now about to surpass $1T:

Oh yeah, and the Treasury just announced a quarterly refunding cycle, which, for the first time in history, will exceed $1T. It kicks off this week, with the sale of> $100B across the Curve.

So, the $33T Questions (named in honor of the value of our current obligations) are: a) was Fitch more justified last week than Moodys was in ’11; b) why did they pull this stunt; and c) why now?

Let’s first offer the caveat that that at all this is nonsense. U.S. paper is no more of a default risk than it has been since aftermath of the Revolutionary War. Two abiding wild cards ensure this – the monetary printing press and the American Military. And, as to any comparison of the timing of these two assaults on our financial sensibilities, I think the argument could go either way. Undoubtedly, our fiscal position has weakened, rendering debt service more problematic than in ’11. On the other hand, in ’23, Debt Ceiling showdowns and 13 figure revenue shortfalls are matters of the routine.

So, why now? This, in my judgment, is the most interesting and elusive of the issues. Some of this is plainly political, but unpacking that aspect of the puzzle is a task above my paygrade.

I’m more thinking that Fitch, being aware that any bona fide (as opposed to technical) failure of the U.S. Treasury Complex is lights out for the entire global capital economy, is putting the world on notice that ALL forms of debt are subject to a heightened default exposure. Rather than downgrading all credit instruments, they issued this message by whacking at our Bills, Notes and Bonds.

If I’m right, I say good on them. Global credit debt are teetering from any longterm viewpoint. The reckoning will come, even if the timing is uncertain, and, in all likelihood, deferred.

But unlike 2011, investors have absorbed the Fitch Bomb with remarkable equanimity. Yes, stocks and bonds sold off, but both were, by the end of the week, offering indications of recovery.

Only time will tell if Fitch’s forboding action will prove to have been prescient, and whether its bigger rivals – not only Moodys, but S&P, will follow suit. All acted in sequence back in the day, but later, with timing I am unable to pinpoint, Moodys quielty restored the Aaa rating on our paper.

For now, the smallest of the 3 firms who dominate the evaluation of credit worthiness stands alone.

Must be the Season of the Fitch.

TIMSHEL

It was the best of times, it was the worst of times…

Charles Dickens

And you’re a Prima Ballerina on a Spring Afternoon,
Change on into the Wolfman, howling at the moon

David Johansen and Johnny Thunders

This one goes out to The New York Dolls, in honor of the 50th anniversary of the release of their self-titled debut album. I seek no converts here – either you’ve heard about The Dolls or you ain’t. Either you get The Dolls, or you don’t.

I was exposed, and hooked, early. So early, in fact, that I remember when their feature record dropped, with perhaps the perfect cover art to capture the moment:

While this image is pedestrian by modern standards, it was positively outrageous in 1973.

As was their sound. They were, in some measure, artistic successors to another great New York ensemble – The Velvet Underground. But rawer, more visibly outrageous.

They paved the way for, among others, The Pistols, The Ramones, even The Clash. Probably, these bands would’ve done what they did anyway, but The Dolls came first, and no one since has ever matched their sound.

I have met DavidJo on two occasions (he was rude the first time, gracious the next) and Sylvain Sylvain — that magnificent Egyptian Jew Rhythm Guitarist, once. Syl’s dead now (having somewhat improbably made it to almost 70), as are all but DJ. Their founding drummer, Billy Murcia, died of alcohol and drug poisoning in ’72 – before our feature album was even recorded. He was, however, immortalized in the Bowie classic “Time” (“Time, in quaaludes and red win, demanding Billy Dolls, and other friends of mine”). Jerry Nolan and Johnny Thunders OD’d. Bassist Arthur (Killer) Kane went bat shit, was rescued by a Mormon Missionaries in L.A.’s Skid Row and was living as church librarian-in-residence when the band located him and patched him together sufficiently to include him in a 2004 reunion show in London. I don’t think he played a note, but was there, looking fabulous.

He returned to L.A., checked into a hospital, and died three weeks later.

The initial enterprise lasted less than two years, and now, as indicated above, all but Johanse are dead. But God Oh Mighty, did they kick up a fuss during that initial surge.

So much so that the then-iconic Creem Magazine’s 1973 listeners poll voted their debut album as both the best and worst record of the year.

Which, if you ask me (and plainly you didn’t) is kind of Dickensian. Ala “A Tale of Two Cities”.

Something akin to this best of times/worst of times vibe also appears to be transpiring in the markets.

I survey standard economic indicators with what I can only describe as wonder and astonishment.

The Earnings season, now at its precise mid-point, if not a blowout, has at minimum produced several amazing beats – particularly at the top of the valuation food chain. One can fairly conclude, worst case, that nothing in these realms is likely to detonate the burgeoning rally.

Macro data had been nothing short of sublime. Q2 GDP materially surpassed expectations, and every single one of 900 different inflation metrics is showing an easing of pricing pressure.

The three major Central Banks weighed in this past week, and each, in its own way, re-affirmed the fight against the dreaded Õ. The Fed’s action was the most straightforward – a simple, widely anticipated 25 bp hike, combined with admonishments that they might not be done. Madame LaGarde, never one to be upstaged, called this bet, and raised – accessorizing an equal magnitude ECB rate hike with the announcement of the discontinuance of interest payments on member bank Reserve balances. The eternally inscrutable BOJ stood pat but succumbed to pressure to expand the bands associated with its controversial Yield Curve Control policy.

All of which caused a noticeable but dignified selloff in the Global Treasury Complex, as well as some wiggling and jiggling in Foreign Exchange markets. But other Risk Assets, as particularly exemplified by Equities, continued their inexorable ascent.

And why not? The economy ignores the lead flying about its ears and charges ahead – higher rates be damned. Companies are making money. Inflation, if not dead, is arguable comatose.

It is, by real-world standards, the best of times for investors. And not much on the horizon is visible to kill the magnificent buzz.

But Hell’s Bells, it’s hot out there – so hot for so long as to even bestow upon us climate skeptics some cause for doubt.

There is ample evidence to suggest that the leaders of both American political parties, each odds-on favorites to capture their nominations and thus subject us to the gruesome spectacle of a ’24 octogenarian match race, are both confirmed felons.

Undoubtedly, this has happened before (Nixon vs. the Kennedys in 1960 comes to mind), but in epochs where it was much easier for polite society to look the other way.

Commercial debt demand is plummeting:

It is not difficult to deconstruct this one. All rational players borrowed to the hilt at pittance level interest rates these past couple of years, and unless they blew that stack with too much celerity, are wise to hold off for now.

But this does raise a couple of challenges. For one, debt issuance is the main engine for monetary creation. Also, it’s a near certainty that as earlier, cheaper obligations mature, demand for credit will increase under much more problematic terms.

I reckon I could go on, but why bother? I simply find it beyond bizarre that the capital and commercial economy is demonstrating so much strength against a backdrop of so much melodrama and agita.

I could live with this era extending itself, but it probably won’t. Not even for much longer. Either the sushi will hit the fan, or we will all stop whining. Maybe both.

Because eras are meant to be finite. One bleeds into another. It was ever thus.

Case and point. On the weekend when our feature album was released, the peroid’s largest ever rock festival of was transpiring in a park outside Watkins Glen, NY. It featured a mere three bands (The Dead, The Band and The Allman Brothers). It lasted more than 12 hours, the last quarter of which featuring a combined jam session in which members of all three ensembles participated.

The audience numbered 600K; the musicians and the crowd were as different as night from day to our featured artists, who, somewhere down I87, were not only releasing a new album but ushering in a brand-new vibe. I don’t think The Dolls ever played before a crowd more than one thousand.

It too passed. Glam yielded to Punk, Disco, New Wave, etc. DavidJo ditched his eyeliner, grew a pompadour, and started recording Louie Prima covers, under the dubious moniker of Buster Poindexter. He’s David Johansen again, for which I at any rate thank the lord.

His high-profile years coincided with the ignominious end of the Vietnam War, Watergate, and the beginning of a decade-long, crippling surge in Inflation. It was a rough spell for the markets, but then the ‘80s unfolded and we barely looked back.

We can therefore anticipate more change – at an unknown pace. Which is twice piteous. First, because the good times never last, and second, because we never know when the party has ended.

Perhaps it’s already over. Perhaps it ended a while ago. Truth is, we just can’t be sure. Which is what makes this the great game it is. A Prima Ballerina on a Spring Afternoon can change into a Wolfman by nightfall.

It’s happened before, you know, so be forewarned.

TIMSHEL

I love those cowboys, I love their gold, Love my uncle, God rest his soul
Taught me good, Lord, taught me all I know, Taught me so well, that I grabbed that gold.
And I left his dead ass there by the side of the road.

Papa John Phillips

Several days after the event, we may now be able to authentically reflect on the end of the Dead and Company era – that latest attempt to cobble together the spare parts of what was once a magnificent band called the Grateful Dead.

I have never taken much interest in these affairs (here, I apply a simple rule – No Jerry, No Dead). But I once took my children – no lie – to an early such configuration, which required no fewer than a dozen musicians to hack up what was at one time so well done by a sublime quintet. I felt particularly sorry for the lead guitarist – a presumably nice fellow/competent musician who looked so bewildered that I think he shortly after sotted off to a desert island, never to be heard from again. The other memorable moments came by observing, standing behind the sound board partition space at the Garden, an entire row of quadriplegics double passing joints throughout the entire show.

The latest ensemble was a tighter outfit, held together by what’s left of Bobby, the undeniably authentic shredding of the otherwise smarmy John Mayer, and the solid bottom provided by a former cover band bass player (Phil has long since begged off) named Oteil.

They never, to my knowledge, recorded any original music (why bother?), but they did go out in a blaze of glory, dusting off some old faves, while being upstaged by an astonishing drone display above San Francisco’s Oracle Park:

I am told that the final set list included “Me and My Uncle”. Which itself is a cover. It was written not by the band, but rather by Mamas and Papas founder John Phillips – who was one of the few mortals to rival Jerry in drug abuse.

The song itself, according to legend, was created in a stupor so intense that Phillips did not even remember writing it. The episode would’ve faded to oblivion had not Judy Collins had the foresight to have taped it, recorded her own forgettable version, it and passed it on, into perpetuity, to various incarnations of the Dead.

This topic came up in one of those pro forma, but touching text threads with some high school chums, designed more to cling to past glories than for information sharing. It quickly morphed into a debate about Uncle/Nephew relationships. I pressed my preference for the ties between Pliny the Elder and Pliny the Younger, and was met with crickets.

But the victor, beyond question is Old Man Pliny. Lawyer. Politician. Military Leader. Provincial Governor. Naturalist. Inventor of the 20-centuries-old template for the modern encyclopedia. His nephew (known locally as Pliny the Squirt) seems mostly to have been his nepotistic beneficiary.

Equally tiresome is where the thread thence migrated: the debate about JFK and one of his 600 nephews – one RFK Jr. – of recently announced hat-in-ring-tossing renown and kicking up more of a fuss than could have been expected. His uncle was a War Hero, Pulitzer Prize Winner, Congressman, Senator, President, and, of course, perhaps the biggest hound dog of the midtwentieth century (and, trust me here – there were a lot of great hound dogs in the mid-20th).

Nephew Bobby Jr. is an adjunct professor at Pace University, so there’s that.

It is thus not much of a contest, but perhaps a sign of the times that he can even draw notice is an upcoming presidential battle where his party leader is the incumbent. That what is shaping up to be a rather important election will likely dispatch several successful governors, senators, and other highly credentialed aspirants in favor of two narcissistic, petulant mediocrities who come up laughably short as horn dogs when compared to the above-mentioned JFK.

So it goes in the Uncle/Nephew game. As mentioned in earlier installments, I have an uncle who was long-time Director of the Metropolitan Transportation Authority in Washington, and thus literally responsible for the creation of the Beltway. He’s gone now, and presumably atoning for this sin. And just for the record, I never left his dead ass there by the side of that road.

Another became a film director, winning a share of the 1966 Cannes Film Festival, but doing nothing since – due, presumably, to his finite talents and eternally petulant arrogance. My uncle Irv (who preferred to be called Joe) was a mattress salesman and then ran a novelty shop in Sarasota, FL. He, too, presumably full of atonement, has long since departed.

But I got my start in the investment game by virtue of my relationship with my youngest and still surviving uncle. He was at one time the bow-tied king of the gone-but-lamented Soybean futures pit. I have arguably travelled more miles than him, but I’m pretty sure he’s richer than me.

Meantime, investors are shrugging it all off, taking the Dead and Company wind down in stride, entirely eschewing the raging Pliny debate, and, for the moment at any rate, blocking out the increasingly bleak prospects of the ’24 election.

Apparently, and perhaps appropriately, they have other Phish (the closest viable proximity to Deadhead bliss) to phry. It is, after all, a relatively big week of what passes for pertinent data. The folks in Washington will lay on us both what promises to be a better-than-deserved Q2 GDP report, and the next FOMC rate proclamation.

In terms of the latter, the markets project > 99% probability of yet another rate increase.

Yawn.

Passing above what is more appropriately each day referred to as fly-over country, the other action transpires in the Northwest, where Tech Titans Alphabet and Microsoft kick off the fat part of the earnings cycle.

This ought to be interesting. But another sign that all is not lost is a modest but noticeable widening of the breadth of this improbable rally.

Case and point: the equal weighted S&P 500 – a wonky variant on the Gallant 500, which doles out identical portions to each constituent company, and to which we will thence apply the appellation Egalitarian 500, after being flat-to-down most of the year, has surged to proximate all-time highs:

It thus perhaps makes sense to adhere a bit more closely than usual to a broader inventory of earnings reports than has been the prevailing protocol for eons hence.

On balance, however, I’m hard pressed to identify much in the near term to obliterate the good market vibes we’ve all enjoyed thus far this summer. It’s out there, but what it is and from where (and when) it will come is, for the moment, a challenge above my pay grade.

Maybe it would be a reformation of the Deadsters with Courtney Love on lead guitar. But I believe the recruitment of Derek Trucks – fabulous guitar player and nephew of original Alman Brothers drummer Butch Trucks is more likely.

Because, sometimes, nephews are worthy of their indirect antecedents. Caesar Augustus, successor to an incomparable but entirely batshit uncle, dispatched Marc Antony, obliterated the Triumvirate, consolidated his own power, dramatically expanded the Roman Empire, and, in general, ran a much tighter ship than his Uncle J.

In doing so, he did not leave Julius’s dead ass there by the side of the road. Somebody else did that. The Roman Empire endured but crumbled several centuries later.

There’s a risk management lesson in there somewhere, but I can’t quite put my finger on it. So, if it’s all the same to you, I’ll take my leave here and seek the guidance of one or both of my surviving uncles.

TIMSHEL