Hedge Fund Shorts Get Crushed

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NorCal Women Rising [To Power]

Sen. Patrick Leahy (D-Vt.), who is set to preside over the impeachment trial of former President Trump, was taken to the hospital Tuesday, his office said in a statement. 

Leahy, 80, “was not feeling well” in his Capitol office and examined by the attending physician, said David Carle, a spokesperson for the Vermont senator.  – The Hill

Suppose Senator Leahy has to relinquish his duties or retire for health reasons (we certainly hope not). In that case, Senator Diane Feinstein of California (San Francisco) will become president pro tempore of the Senate, third in line to presidential succession.

Think about that, the first three government officials in the line of succession to the presidency will be women from San Franciso, as will be the fifth in line.

Four for five is incredible and only a matter of time before the QAnon shamans see pink elephants in the clouds and conspiracies in the line of succession.

Stay tuned.

 

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Is Peak COVID In?

We think so.  The daily new case curves are turning down and though the death curve will lag for a few weeks, it will also start to turn down soon.

Thank, God, we can see the light at the end of the tunnel.

Back to normal?  Far from it.

In recent days, coronavirus cases have been dropping steadily across the United States, with hospitalizations falling in concert. But health officials are growing increasingly concerned that quickly circulating variants of the virus could cause new surges of cases faster than the country is managing to distribute Covid-19 vaccines.

…“We’re definitely on a downward slope, but I’m worried that the new variants will throw us a curveball in late February or March,” said Caitlin M. Rivers, an epidemiologist at the Johns Hopkins Bloomberg School of Public Health.

Nationwide, new coronavirus cases have fallen 21 percent in the last two weeks, according to a New York Times database, and some experts have suggested this could mark the start of a shifting course after nearly four months of ever-worsening case totals. – NY Times

 

 

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The Trail of Two GOATs

h/t Carol K.

The following video was really touching and reveals the divergent path of the two GOATs.  Can there be two GOATs?  See the tables below.

One, facing retirement, seems to be dealing with the reality by playing catch with his kids for what might be the last time as an NFL player on his home field.   The other, most likely on his way to his 10th Super Bowl and 7th World Championship but gotta get through Aaron Rodgers and Cheeseheads first.

Long Tom Brady.

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Henry “The Hammer” Aaron, R.I.P.

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Presidential Stock Market Returns

Comparative presidential stock market returns are  always interesting and makes for good political fodder but pretty meaningless.  I am not arguing policies don’t matter but the initial conditions or valuation when a president takes office has, in the past, seemed to matter the most on how the market does during that president’s term.   Context, baby.

President Obama,  for example inherited a collapsing stock market, which bottomed about 7 weeks after he took office.  Bush #43  inherited the dot.com bubble, which began to collapse about nine months before he took over, and then existed office with a collapsing credit bubble, handing the Great Financial Crisis (GFC) off to President Obama.

Trump took office with record high valuations and commenced to pump the market higher with his tweets, a China trade deal coming soon meme, and beating the Fed into submission to drive interest rates to zero. Add to that the trillions and trillions and trillions of dollars in rescue and COVID stilumus packages, which drove monetary and fiscal policy in his last year in office, and here we sit.

Moreover,  Hoover’s stock market really distorts the average for the Republicans.  But hey, it’s politics not purity, no?   But so does Silent Calvin Coolidge’s bubble.  As does Clinton’s.

Given the intial valuation of a 180 percent stock market capitalization to GDP,  either Joe Biden will be the first Demcorat with an negative stock market or the country is heading toward hyperinflation.  When you figure that out let us know.

Election Day or Inauguration Day? 

By the way, the last time Carol K. posted the following table we had some pushback on when should the clock start ticking to measure presidential returns: a)  Election day, or b) the Inaugural?

We took a look at the data and found it actually makes the Democrats average look better.  Sorry, Republicans.   In fact, it even hurts Trump’s stock market return as we suspect that is what motivated the pushback.

The Dow 7.63 percent runup from Election Day to Trump’s inauguration was eclipsed by the recent 11.07% increase in the Dow from November 4th to the night before the Biden admistration took power.

2oth Amendment   

A problem also arises when trying to nomarlize the lame duck period — from the election to the new president taking office.  Prior to 1933,  a new president wasn’t swown in until March 4 as is stated in the Constitiuion.  It took an amendment to shorten the lame duck period.

The Twentieth Amendment (Amendment XX) to the United States Constitution moved the beginning and ending of the terms of the president and vice president from March4 to January 20, and of members of Congress from March4 to January 3. It also has provisions that determine what is to be done when there is no president-elect. The Twentieth Amendment was adopted on January 23, 1933.[1]

The amendment reduced the presidential transition and the “lame duck” period, by which members of Congress and the president serve the remainder of their terms after an election. The amendment established congressional terms to begin before presidential terms and that the incoming Congress, rather than the outgoing one, would hold a contingent election in the event that the Electoral College deadlocked regarding either the presidential or vice presidential elections.  – Wikipedia

CAAG

It is interesting to see the Dow’s compounded average annual price return (not including divies) is only 5.54 percent since 1901.   Makes sense as our priors are that is about the average growth rate of nominal GDP during the same period.

That is why we view the times we now live as an anomaly and not sustainable.

Sorry to burst your bubble but perpetual annual 10-15 percent stock market returns are not a Constitutional right nor an entitlement.

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The Best MLK Weekend Of All-Time

We are reposting this for the holiday and in honor of Dr. King, one of our greatest Americans, a patriot, and a true saint.

I exchanged emails with Reverend Senator-elect Raphael Warnock after posting it.

Originally Posted on 

During my Lehman days as a bond strategist, the firm’s research group would do a January roadshow in many of America’s major cities to present our ideas to institutional investors.   One particular year, we were in Atlanta at the end of the week and scheduled for another “greatest show on earth” in Chicago the next Tuesday.

A Weekend In The Peachtree Hyatt

Rather than flying home to New York, I decided to stay over in Atlanta and migrate north on Monday evening.   It was MLK weekend and I wanted to attend services at the Ebenezer Baptist Church, where Martin Luther King, Jr. was baptized as a child and gave his first sermon. If my memory is correct, I believe his father also pastored the church.   His mother was shot and killed while she played the organ in that church in 1974.

Dr. King’s tomb is located just outside the side door of the church in the middle of a reflecting pool.

dr. king

Three Memories Of Ebenezer

I recall three of my main takeaways from that Sunday morning.

First,  I was maybe one of ten whites out of 600-700 people sitting in the pews.  Sadly, as Dr. King said almost 60 years ago.

I think it is one of the tragedies of our nation, one of the shameful tragedies, at 11 o’clock on Sunday morning is one of the most segregated hours, if not the most segregated hour in Christian America.  – MLK, Jr  Meet the Press, April 17, 1960

Nevertheless, I felt incredibly welcome and never — not for one nanosecond —  was conscious about such a silly thing as the difference of the color of my skin.  During the greeting time, the Ebenezers made me feel so welcome and a part of their family.

Second, not to contradict Dr. King, but I believe the service started at 9:30 AM and went to almost 1:00 PM!  Maybe it was a special MLK weekend service.  The pastors in the mostly white churches I have attended have trouble keeping the attention of the congregation for more than 20 minutes.

Third, the sermon was entirely different from those I had experienced in middle-class white churches.  Less doctrine, though similar theology, and more real life.  The struggles of raising children in poverty.  Grandparents raising their grandchildren. Troubles with children with drug addiction. The struggles of being black in white America.   No pretense of being sinless and perfect, no holier than thou vibe, no judgment, no condemnation, no guilt, no shaming.  All love, compassion, kindness, and forgiveness.  Just like the real Jesus.

Also, the sharing of the same joys and blessings.  New babies, college graduates, marriages, medical recoveries, and others.

“Daddy King” was referred to several times.

It truly echoed the genius and saintliness of Dr. King.

I walked away convinced the Church for the African-American community was much more — that is a considerable part of their life — than what I had experienced in white evangelical America.

Yes, maybe some of us attend more than just Sunday services, but many, such as yours truly, often do so with the dubious motive of seeking the blessings of personal peace and personal prosperity.  The community of the Church, as it for the African-Americans, though not always, is secondary.

The next day, Martin Luther King Jr Day, I spent across the street at the King Center.

More Empathy, Less “Being A Dick“

What great memories from that unforgettable MLK weekend.

I grew up lower-middle class in the white suburbs of Los Angeles, attending an all-white high school.  Fortunately, I had a father, who was politically left of the salad fork (out of a rebellion,  I became a conservative in college),  and also spent my first 25 years playing sports, fighting in the baseball trenches with, pulling for, breaking bread, and downing brewskies with my teammates of color; or as I grew to learn colorless.

I am very thankful for those experiences.  It helped me integrate into and see the real greatness of America.

I feel sad for my many brothers and sisters who have not had the same privilege and are stuck still watching black and white television:  unable or unwilling to embrace and enjoy the tremendous diversity of this great country.

Ditto for the similar ignoramuses from other races and ethnic groups.

tv

I can’t imagine eating steak and potatoes every day and every night.

Ignorance And Racism Know No Boundaries

Let me finish by qualifying all of the above.

Racism is such a prominent feature of so many human societies that some evolutionary psychologists have concluded it is “natural” or “innate.”  We don’t know about that but are certain it is not just a “white thing”, a “black thing, or a “brown thing,” etc.

I have shared the story of my brother who was murdered by an undocumented worker, who stated, after stabbing him, “all anglos need to be exterminated.”   This sociopathic asshole killed my brother not because he was brown, or undocumented, but because he was one sick and crazy mother f$@ker.

Now, more than ever it is time to commit to expanding our menu.  Let’s make it a point to understand and enjoy the perspectives and various cultures of all the different races and ethnic groups.

Allegorically, and literally, let’s eat more balaedas, falafel, babaghanoush, borscht, moussaka, and bouilli, among others.  The steak and potatoes will taste sooo much better.

Sorry to end on a note that violates the spirit of Dr. King but I can’t help myself.

Any white man (probably less so for a white woman) who thinks he knows what it is like to be an African-American growing up and living in America, has his head…well…you know where.

head

Bring on the hate mail.

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Comfortably Numb: Are We There Yet?

Markets certainly are.

OK
Just a little pinprick
There’ll be no more aaaaaaaah!
But you may feel a little sick – Pink Floyd

Hard to say what the pinprick will be. 

My bet is higher inflation and higher interest rates.   

On the other hand, it could be a form of Structured Criticality.  Just one more grain of sand will be all it takes to trigger the avalanche.

Structured criticality is a property of complex systems in which small events may trigger larger events due to subtle interdependencies between elements. This often gives rise to a form of stratified chaos where the general behavior of the system can be modeled on one scale while smaller- and larger-scale behaviors remain unpredictable.

For example:

Consider a pile of sand. If you drop one grain of sand on top of this pile every second, the pile will continue to grow in the shape of a cone. The general shape, size, and growth of this cone is fairly easy to model as a function of the rate at which new sand grains are added, the size and shape of the grains, and the number of grains in the pile.

The pile retains its shape because occasionally a new grain of sand will trigger an avalanche which causes some number of grains to slide down the side of the cone into new positions.

These avalanches are chaotic. It is nearly impossible to predict if the next grain of sand will cause an avalanche, where that avalanche will occur on the pile, how many grains of sand will be involved in the event, and so on.  – Wikipedia

 

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Peak Euphoria & Bat Shit Crazy Markets

 

[t]here is no denying that there’s been a shift in market structure over the past few years. Whether it be in the proliferation of free trading platforms, the rise in market share of passive investment strategies, or the ease with which social media can fuel speculative manias further, it does feel like something is different. – FT Alphaville

Yikes, “it’s different this time.”  

Same words to rationalize another bubble,  different rodeo.

OMG!


Timing

I will also tell you my definition of success for a bear market call. It is simply that sooner or later there will come a time when an investor is pleased to have been out of the market. That is to say, he will have saved money by being out, and also have reduced risk or volatility on the round trip. This definition of success absolutely does not include precise timing. (Predicting when a bubble breaks is not about valuation. All prior bubble markets have been extremely overvalued, as is this one. Overvaluation is a necessary but not sufficient condition for their bursting.) Calling the week, month, or quarter of the top is all but impossible. – Jeremy Grantham

In economics, things take longer to happen than you think they will, and then they happen faster than you thought they could. –  Rudiger Dornbusch

 

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The Benedict Arnold Show: My Tommy Lasorda Stories

Tommy Lasorda passed away last week, and I can’t let him go without sharing two of my favorite memories of the man.

In earlier posts, I’ve written about my Walter Mitty childhood in L.A., working as a kid for the Los Angeles Dodgers. Tommy was the Dodgers’ third-base coach, and later their manager, during my years with one of baseball’s most storied franchises. He was loud, profane, hilarious, and larger than life, and underneath all the noise he was a master of his craft. That mastery eventually took him to Cooperstown.

Tommy was always ready, willing, and able to put on a show in The Show.


1) The Benedict Arnold Show

I had just left the Dodgers in the middle of the summer of my gap year, back when almost nobody took one. USC wasn’t exactly kicking down my door with a baseball scholarship, and no one was throwing a million-dollar bonus at me to turn pro.

Back then, a big signing bonus for a top draft pick was around $100,000, roughly half a million in today’s dollars. For context, one of my daughter’s classmates went third overall in the 2019 draft and signed with the Chicago White Sox for $7.2 million. Inflation, or a massive repricing of baseball talent? You decide. (I know where I’d put my money.)

So why not take a year off and hang with the Dodgers? I caught Tommy John in the bullpen during his comeback season, threw batting practice, and handled my other duties around the clubhouse. It was living in The Show without the pressure of playing in The Show. A teenager living the life most kids only dream about.

The Demise Of MLB’s Reserve Clause

The prior offseason, Andy Messersmith, the great Dodger pitcher who was like a big brother to me, won his landmark arbitration case against baseball’s reserve clause. The ruling shattered the monopsony the owners had held over players for nearly a century.

“a well-paid slave is, nonetheless, a slave.” – Curt Flood

Freed from what some called a form of slavery, players could finally sell their services on the open market to the highest bidder.

It was the dawn of the big-money, multi-year contract, and baseball has never been the same.

Ted Turner, the young, swashbuckling media mogul who had just bought the Atlanta Braves, pounced on Messersmith and signed him to a multi-year, multi-million-dollar deal. That same offseason, the Dodgers and Braves swung a blockbuster trade that sent Dusty Baker west and shipped several of my close friends and adopted big brothers to Atlanta, including Jimmy Wynn, Lee Lacy, Tom Paciorek, and Jerry Royster.

When Andy and the boys heard I’d left the Dodgers, they got on the phone and talked me into joining the Braves for the rest of the season. The plan was to meet them in San Diego on their West Coast swing.

When we rolled into Dodger Stadium for a three-game series, it felt strange pulling on a Braves uniform in the visitors’ clubhouse of my old home. My good buddy Possum, the Dodger batboy (and yes, he still looks and drinks like one), met me as I came out of the visitors’ dugout.

We were walking across the field together when Tommy Lasorda came flying out of the Dodger dugout at full speed, arms flailing, bellowing at the top of his lungs for all of Chavez Ravine to hear:

“Benedict Arnold! Benedict Arnold! You are a f__king Benedict Arnold! Get the ____ out of our house!”

It was hilarious. Players on both teams doubled over laughing, yours truly included. Tommy had delivered another Oscar-worthy performance.

I knew it was his schtick. Tommy putting on his show in The Show.

2) Watching Tommy Dress Down an Arrogant Rookie

A couple of years earlier, the Dodgers called up a young, promising left-handed hitter in midseason. He had some early success and quickly became a fan favorite. One night I was working as the batboy while he was in the on-deck circle, and manager Walter Alston called him back to the dugout for a pinch hitter.

Furious, the rookie made a cardinal mistake. He showed up his skipper by slamming his bat and helmet down in the on-deck circle in front of 50,000 fans. Alston, a man who rarely showed emotion, didn’t react.

When the inning ended, I ran up to the clubhouse to grab something from my locker. The rook was there changing clothes. Just him and me, alone.

Then the door flew open and Tommy Lasorda stormed in, screaming:

“You mother f__ker, don’t you ever show up your manager like that again. Never, ever! You ain’t s__t. You couldn’t hit your way out of your underwear, much less hit big-league pitching. You sock sucker. If you ever do that again, I will rip your head off and crap down your throat!”

‘Nuff said. I think the rookie got the message and learned to respect his managers.

I never heard a dressing-down like that again until my first job on Wall Street, working for the Human Piranha of Michael Lewis’s first book, Liar’s Poker.

The Piranha was the best boss I ever had. I took my share of shelling from his tirades, but they never really bothered me. Lasorda had already taught me that it was all part of the act. Like Tommy, the Piranha practiced his craft at the highest level, and he taught me how to trade.

He even wrote a novel, Wall and Mean, based on the bond trading desk I ran for him.

The 1988 World Champions

Tommy knew how to develop young players into major league stars. He managed Garvey, Lopes, Russell, and Cey as minor leaguers and through much of their big-league careers. That group became the longest-running infield in baseball history and one of the most famous of all time.

What I saw in that clubhouse was Tommy beating the false arrogance out of a young player, the kind of arrogance that has ended many a promising career. It wasn’t personal. He did it to make the kid better.

Tommy could also do the opposite. He could take a player of middling talent and fill him with belief, convincing a career .250 hitter he was the second coming of Babe Ruth.

Nowhere was that gift more obvious than in 1988. Sure, that team had Kirk Gibson and Orel Hershiser, but on paper there was no way in hell they should have won the World Series. They were heavy underdogs to the Mets in the NLCS and to the mighty Oakland A’s in the Series. Lasorda convinced them they were the 1927 Yankees, and they played like it.

Tommy used to say he bled Dodger blue and that when he died he’d go to the Big Dodger in the Sky. I hope they had a seat waiting for him in the dugout.

Rest in peace, Tommy. I’m honored to have known you. Baseball, and the world, will miss you.

Skip to 1:31 to see and hear the real Tommy (warning: strong language)

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