RIGHT PLACE / WRONG TIME

I been in the right place but it must have been the wrong time

I’d have said the right thing but I must have used the wrong line

I been in the right trip but I must have used the wrong car

My head was in a bad place and I’m wondering what it’s good for

— Dr. John (the Night Tripper)
 

I reckon I’ll begin by getting a little unfortunate but vital business out of the way. My deepest apologies about the whole Corn thing last week, because it seems that my heartfelt salute to the stalky grain may have done more harm than good:

On the other hand, while I enthusiastically celebrated Corn’s comeback, I never intimated that it would continue. In fact it didn’t. Instead, it reversed itself and managed to record multi-year lows.

And, based upon this train wreck of a chart, I will promise never to write about Corn again. Well, OK; maybe not never. But at least not often.

Let us not forget – the situation, as it currently stands, could be worse. After all, I could’ve also pointed my admiring keyboard at Soy Beans. Or Sugar:

Cain: 

Beans:

In fairness, I probably bear some responsibility for the Sugar slaughter as well. After all, last week’s note did include a reference to candy corn, which requires at least a Spoonful of Sugar to make the market go down.

But it’s not just Ags; last week, the whole Commodity Complex acted in consort to put on a flop seldom seen since the likes of of “Springtime for Hitler”. And here, I’m talking Precious Metals, Industrial Metals, Softs; even Energy. In fact, the whole smash. All of which is captured succinctly in the trajectory of the Bloomberg Commodity Index:

Now, presumably, not many people care about the Commodity Complex, because, let’s face it: nobody cares about the Commodity Complex. I mean, it’s not like anybody is impacted by the price of such quaint but uninteresting products as Copper, Natural Gas, Cotton or the like.

There are, presumably, some guys (with bad haircuts) and gals that must concern themselves with these matters, but I suggest that us Sophisticates move on.

So how about we give it up for my man, Dr. John the Night Tripper, born, bred and still pumping his 88 key ax in New Orleans? Our titular theme references his biggest hit, but there’s a lot more to the Night Tripper than one early 70’s FM Radio extravaganza. Meanwhile, I got to thinking about the Good Doctor’s main lyrical hook (a timeless lamentation if ever there was one) with respect to the current geopolitical situation.

More specifically, it occurs to me that we Americans have been plagued by a string of Chief Executives who have undertaken arguably justifiable strategic initiatives (i.e. been in the right place), with supremely sub-optimal timing. I’ll start with Bush 43, who squandered a galaxy of post-9/11 goodwill by turning our military towards the task of removing Saddam Hussein. Yes, Hussain was a bad guy, arguably a bull goose sociopath. But couldn’t we have tried to finish taking out the incrementally odious Bin Laden before committing to a quagmire that: a) cost untold blood and treasure; b) produced dubious strategic gains; and c) still remains somewhat unresolved, some 15 years later?

Treading carefully into more controversial ground, we come to Obama. It is indisputable that, for eons, the U.S. Health Care system has been a hot mess, and yes, he had pledged to reform it. However, whatever side of the Obamacare issue one may reside, it was deeply ill-timed to re-engineer a vital sector’s economics, one representing approximately ~18% of U.S. GDP, at a point when our economy had not formally checked out of the critical care unit. Had he waited a few more quarters, we might’ve all been better off.

All of which brings us to our current situation, unfolding under the steady(?) hands of 45. Yes, the Chinese have been gaming us in trade for many decades. Yes, they steal our intellectual property. And yes, the lovely Canadians, our besties, can probably justifiably be tweaked for their 3x tariffs on our dairy products, while we buy their cheese at no mark up. But, for crying out loud, couldn’t it have waited until after the Mid-terms? History shows that the current rhetorical path is a risky one. Trump may have the perfect strategy, but if his timing is off even by minute orders of magnitude, it could take a big bite out of the economy, and, consequentially, deeply impact the outcomes of the Midterms. I don’t know that this is where we’re headed, but consider, if you will, the obverse. I posit that absent the trade issue, equity indices would’ve ripped through new highs, economic indicators would’ve been much jauntier, and the political calculus (as a result) much more favorable for the fortunes of the investor class. But instead, he bulls on ahead, and creates what I believe to be the biggest risk overhang on what otherwise looks to me like a fundamentally strong environment that is poised to take valuations to higher realms.

Before taking leave of the POTUS component of the Right Place/Wrong Time thing, I must present the exception that proves the rule. If not thrilled about Trump’s Monday meeting with Vlad (the Impaler) Putin, I’m not sure it will do any particular harm. And, if these two statesmen for the ages are to convene, now may be as good a time as any. But Helsinki? Why hold the summit at that remote outpost, which by the way, fell on the Soviet side of the Molotov-Ribbentrop Pact of 1939, under which the entire sovereign nation of Finland, lock stock and barrel – was handed to Stalin? Wrong Place/Right Time. Check.

All of this notwithstanding, the private capital markets are in fairly perky configuration these days. As was the case with my Corn call, I was arguably in Right Place/Wrong Time mode when suggesting caution on equities in last week’s epistle. Instead of wobbling, the Gallant 500 managed to bust through to a 28 handle, while Captain Naz piloted his rocket ship to new all-time highs. Q2 earnings, though with only 5% of the precincts having reported, are coming in within the margin of error relative to lofty expectations. As suspected, forward guidance shades to the cautious, but in mild surprise (at least to me), CEOs don’t seem particularly concerned about tariffs, which thus far has clocked in as the 8th biggest concern among them with respect to their forward-looking prospects.

But we’ve only just begun this here cycle, which picks up a bit next week with the remainder of the Banks and a couple of high fliers like NetFlix and Microsoft taking their turns in the star chamber.

And investors seem to be conditioned at the moment to both receive good news and react favorably to it. I hadn’t expected such equanimity at this point, but then again there’s that whole wisdom of the crowd thing, etc. On the other hand, there may be some turbulence beneath the calm top-waters.

Specifically, while index volatility has dropped mercifully over the last several months, the same cannot perhaps be said about dispersion at the individual security level. Consider, if you will, the following chart:

Apparently, in other words, not everyone is buying into the rosy scenarios. Yet, history shows that the increase in the magnitude of short-sided individual stock positioning is perhaps the most consistently valid reason to own these stocks as any that can be imagined.

The most important objective, of course, is to be in the right place at the right time – one of life’s most difficult challenges. Investors who achieve this make billions, of course, while the rest of us take pot luck.

For politicians, on the other hand, it is nearly impossible, as a simple matter of odds, to avoid finding themselves in Night Tripper configuration, at least some of the time. We’ve already covered our last three Presidents, and, before that there was Bush 41, who probably would’ve been re-elected had he not raised taxes at an inopportune moment. For Carter and Ford, nearly all of their actions were ill-timed, and before that we have Nixon (Watergate), Johnson (Vietnam), and Kennedy (Dallas), which covers the full range of Oval Office occupants across my lifetime.

Except for two. First there was Reagan, who, through either dumb luck or improbable skill, seemed to time everything to perfection. And last, we turn to Bubba, and here I’ll leave his time/place mismatches to your own collective imaginations.

TIMSHEL