July 28, 2019
From what I read, it’s been a tough month for the Bernie Bros. Our favorite scraggly socialist seems increasingly to be yesterday’s news. He seemed so fresh and sparkly in ’16. But time and tide appear to have taken their toll. His message remains constant: tag every economic enterprise that possesses the means to be tagged, and give the bounty to the more deserving. But it’s sort of assumed by everyone now that this is the proper thing to do, and if so, why not allow someone else, say, the entirely more fetching Kamala Harris to lead the effort?
But Les Brers Bernie were offered a lifeline of sorts this past week, from the most unlikely of sources, and one who shares the same first name (I’d use the term Christian name save for the fact that: a) I don’t wish to offend anyone; and b) both gentlemen referenced happen to be Jewish) as our lovable curmudgeon. Presumably, many of you read with the same level of interest as did I the news that earlier this past week, lawyers for the infamous Wall Street Legend/former NASDAQ Chairman Bernard L. Madoff applied to the Justice Department for the commutation of his sentence.
Now, one can accuse the latter Bernie of many things, but lack of cheek is clearly not one of them. He probably figures that 45 is something of a rogue himself, and what’s the point of being a lifelong scamster if you can’t call upon a fellow scamster to do you a solid now and then?
Moreover, published reports indicate that the man who was able to pass off fictitious investment returns for the better part of three decades stands a sportsman’s chance of obtaining said commutation.
And if so, he’d be a perfect partner for the Gentleman from Vermont on the 2020 ticket. Sanders (Bernie 1) could promise to give away the entire private economy, and Madoff (Bernie 2) would (trust me on this) find a way to pay for it. Further, I am indifferent as to who heads the ticket and who holds the coat-tails, as, if one reverses the polarity of responsibility, Bernie 2 could lead by just creating an ocean full of new money to spend, and you can certainly count on Bernie 1 to spend it like a sailor.
Now, before you dismiss this notion out of hand, might wish to consider the reality that this would simply manifest – perhaps in more honest fashion – the current economic policy trends transpiring on a global basis. In advance of an FOMC meeting where the Committee is expected to cut rates (reasonably robust growth, record employment and hyper-charged investment valuations notwithstanding), we now encounter a situation where for the first time in 15 years, not a single Central Bank is hiking rates, and the percentage that are actually cutting is the highest since the early days of the recovery:
What could go wrong? I’m not sure if the grey/neutral contingent includes the ECB, which did not move at its midweek presser, but which promised a multitude of goodies (including a new ÏQE) come September, but the consensus among empowered monetary economists is nonetheless compelling.
And, though thinly reported, we Americans have now also been treated to what amounts to a fiscal stimulus. Embodied in a gargantuan, two-year budget deal.
Among other matters, the deal expands those annoying spending caps to the tune of $320B, and this must have Congressional agents in both parties positively drooling in anticipation. But there are other reasons for rejoicing. Most notably, (at least from my perspective), it ushers in the coming Bernie-squared era in grand style. After all, what says Double Bernie more forcefully than a bi-partisan budget blowout?
I will cop to be somewhat surprised by these tidings. But clearly, the political winds are shifting, and politicians must pay obeisance to these changes. Most of you caught, at minimum, a glimpse of the Mueller testimony on Capitol Hill. I won’t opine much here, but in addition to the blindingly obvious reality that it put a toe tag on current impeachment efforts, I’d note, more in sorrow than in anger, the humanity of the sad spectacle of his testimony. It was not by any stretch a good look for him. The blogosphere has been active in ginning up analogues, but I have my own. Scowling Bob reminded me of no one so much as Captain Queeg under cross-examination in the film version of “The Caine Mutiny”.
All that was missing was the steel balls. In fact, if (when) Hollywood decides to produce a movie of the Mueller saga, they may be left with no alternative other than to dig up Bogart for the title role.
Meanwhile, the market rally soldiers on, without crossing its own tow line or dropping a yellow die marker as it races out of danger (For the uninitiated, this is an additional Queeg/”Mutiny” reference). Stocks, bonds, the USD all benefitted in particular by a surge in the waning hours of the week. Commodities were a different story, but then again they always are.
The dead horse I choose to beat in this edition is the pressure on Crude Oil. Certain data flows suggest that it’s levitation act risks facing a final curtain. I draw your attention, for example, to the short interest build in WTI, which has emerged, seemingly out of nowhere, in the past few sessions:
Now, as a risk manager who cannot drift far from his basic training and reinforced lessons, I would normally look at a chart like this and prepare myself to go long. Everything about the short build cries out for a cycle of nuts squeezing emerging on the horizon.
But need I remind you that the economy, due to credit reasons, cannot abide a selloff in Crude Oil? I have no way of knowing for sure, but I suspect that all of those fiscal and monetary angels spreading their fairy dust on us till we are ready to choke on the stuff are focused on the potential plagues that await us if the energy credit market collapses.
But it seems as though the market is laying aside these and other potential points of worry. We’re nearly half way through Q2 earnings, and it looks like they’re coming in right within middle ranges of expectations. The count now projects out -2.6%, another down cycle in Q3, and then perhaps a reversal.
But investors seem to be in a forgiving mood. With the odd exception of names like Boeing (which maybe deserves their wrath) and Netflix (whose run, to the extent that it isn’t over, is likely, best case, to experience a competitive chop in the coming months and years), there has been little in the way of retributive judgment in the form of pricing pressure.
The reality that investors are overly rewarding expectations beaters while giving a hall pass to disappointers further reinforces the embedded bullish stance I have taken since earlier this year, when I got it into my thick head that the Fed Fix was in:
My gut is that this sort of thing: more aggressively buying up the achievers and only ditching the laggards in tepid fashion, is likely to continue. After all, it’s been, and I think will remain, A Summer of Love.
Of course, the ride to even more unfathomable elevations will be anything but a milk run. This week could itself be a test, with important earnings releases, as well as the Lighthizer/Mnuchin jaunt to Beijing, not to mention a high-drama FOMC disclosure saga, all geared towards the prospect of heightened two- way volatility.
But were I you (and I wish I was), I’d hang in there. The market, after all, will (hang in there that is). And if by some chance it drops, I am likely to recommend to my constituents that they do some shopping.
And if Trump were to just play along and commute Bernie’s sentence, the possibilities for us are endless. And the only question which would linger under these circumstances is whether we’re looking at a Bernie 1/Bernie 2 ticket or Bernie 2/Bernie 1. Either way, we can’t lose. We’ll have free health care, free education, reparations, subsidized living for those who are philosophically opposed to working for a living, etc. We will have clean oceans, skies and all of the kale we can choke down our gullets.
And better yet: from his desktop in Federal Prison, Bernie 2 has assured me that we can achieve all of the above while also eliminating our National Debt. In fact, there will be a surplus, which Bernie 1 wants to pass around to all of his peeps. Including you and me.
Maybe it’s all just a dream I dreamed one afternoon long ago. And before I close, I would be remiss in any failure to point out that we need more than commutation from the Trumpster: maybe even a full pardon for Bernie 2. He might even need to pass an Executive Order allowing Bernie to run for office.
But together, we can make it a reality.
And we will need everyone’s full support. Because even if we’re successful, it will take all of our focus and energy to ensure that when in office, Bernie 2 does not steal it all.