This week I wrote about five options for clients sitting in cash. Think of it as a call to action away from the big banks. There’s free money out there, and it’s time our clients seized it!
Much to discuss this week…
Without question, the most overplayed song in business school was Under Pressure. Yes, classes were intellectually rigorous, and the professors don’t pull their punches but come on.
Spending six figures to pretend like those ethics classes matter and get introduced to financial concepts that are readily available on Investopedia is in no way more stressful than starting a business, landing a plane in the Hudson River, or being a trauma surgeon.
But I have to wonder if this classic has become the theme song for the Fed. Imagine J-Pow on the floor, curled up in the fetal position, and listening on replay minutes before walking into FOMC meetings. It’s possible!
Because the pressure he’s under has to be immeasurable. Way more than when Trump wanted to fire him and called him the biggest threat to the country.
This pressure is one of the reasons I’m not sure the Fed has the fortitude to follow through with all this tough talk that began in Jackson Hole. Three stories from this week make me even more skeptical.
First, the United Nations called out the Fed and other central banks to halt interest rate hikes. We don’t see it here, but the strong dollar is wreaking havoc on the rest of the world. If the UN is all over him, imagine what Biden and the Democratic Party are doing weeks before the midterm elections.
Second, the Reserve Bank of Australia (yes, they have their own central bank) raised rates by less than expected. I’d wager this was part of the reason for the rally on Tuesday. The other is the JOLTS survey, which came in worse than expected (bad employment news is good news right now).
This surprise move by Australia (I’m serious they really do have their own central bank) may have hinted to markets that maybe, just maybe, other central banks will follow suit.
Third, the memes floating around are just savage. They have to weigh on him, right?
Imagine J-Pow after a hard day of work. I’m talking about one of those days when he gets his face ripped off by brain-dead Congressmen. The same ones that prompted Alan Greenspan to reply under testimony, “If you think you understand me then I misspoke.”
He comes home late to a cold dinner plate on the table. His wife is passed out upstairs after slamming two Xambiens. He walks straight to the bar cart, pours a four-finger bourbon, and then sits on his Barcalounger with a Chromebook in hand.
He immediately fires up Twitter to see what’s happening in the world, and before he can even see what Justin Bieber did that day, he gets hit with these:
At the end of the day, we’re all human. The pressure facing the Fed and every other central bank except maybe Turkey (yes, they also have a central bank) has to have an impact. It just does.
But will it be enough to fuel a Fed pivot?
About a year ago, I hypothesized about the suspected atrocities that Cathie Wood inflicted upon Matt Tuttle (CEO of Tuttle Asset Management). Because there’s no way Mr. Tuttle would launch an ETF that shorts Ms. Wood’s long book solely for profit. Something deeper had to have transpired.
Fast forward a year, and that ETF (ticker: SARK) has crushed it. During one of the worst 9-month runs for the stock market, this beast has returned over 50%!
Hat goes off to Mr. Tuttle. He could have had one of the best-timed fund launches since Cathie Wood launched ARKK. But why stop there?
This week, Mr. Tuttle announced that he is now targeting Jim Cramer by launching an ETF that shorts his picks (ticker: SJIM). I’m not one to rip on individual pundits, but let’s just say there’s a reason why memes like these are all over Twitter:
I can’t help but feel that this ETF is half-baked. If Tuttle launched a “Long Pelosi” and “Short Cramer” fund, I’d be an anchor investor. Hell, I’d allocate 100% of my two girls’ college funds and take out a second mortgage to lever up the trade.
Now that I think about it, how has someone not already done this? It’s a trillion-dollar fund in the first 30 days!
To be clear, I have no edge here. Few people on the planet know the actual state of Credit Suisse, and none of them are in my LinkedIn network. Gun to the back of my head, and it’s likely nothing more than this week’s conspiracy theory on Twitter (last week was Xi being overthrown in China).
It all began when a reporter in Australia tweeted the following:
The entire financial services industry is based on trust. I deposit money at a bank, and I trust they will have it when I want it back. A hedge fund enters into a total return swap, and both sides trust that the other will act in good faith. Pretty simple stuff.
It’s also why you have to be very careful about communication and transparency after a tweet like this goes viral. Even the slightest tone of concern can cause clients, counterparties, and regulators to panic.
Think about it this way. Proactive communication is critical in nearly every facet of business. Play offense instead of defense. Call clients before they call you. This is obvious.
But there are exceptions to this rule, and one of them is when you’re the CEO of a prominent investment bank who has watched the stock price crater and credit default swap rise over the last 12 months.
Here, you not only want to be incredibly careful about every word that goes into a press release, but more often than not, less is more.
For example, telling the world this is just a conspiracy theory is good. But then ending the press release by disclosing that the “bank faces a critical moment” is really, really bad.
In times like these, you could share 9,999 good data points and just one bad data point (like saying that) and still spook the world. It looks like that’s what is happening right now, but in no way am I going to channel my inner Cramer and make a call like this:
But if it’s true and Credit Suisse is becoming Debit Suisse, then keep in mind that they are a Globally Systematically Important Bank (G-SIB). This means the Swiss government won’t allow them to go under (likely other countries would step in as well).
Hard to say if that would quell the panic, but the domino effect that transpired in September 2008 seems like a pretty big stretch.
The Skyscraper Index is an economic indicator linking the construction of the world’s tallest skyscraper to an impending recession. The idea is that the excess and rottenness that fuels recessions culminate in the collective stupidity of ego-driven developers who think the world needs another $100+ elevator ride.
The most recent one is The Sky Mile Tower in Tokyo, that’s estimated to be – you guessed it – 5,280 feet tall. For scale, here’s how it compares to other large buildings (I paid $120/person to go to the top of the Burj Khalifa, and it’s frightening):
There’s a slightly more unofficial recession indicator that I’ve used for quite some time, which is the Posh Pooch Index.
This states that the risk of a recession increases exponentially as the amount of luxury goods people purchase for their dogs rises. As of today, my official recession forecast has moved up to DEFCON 3 thanks to a restaurant in San Francisco called Dogue that now offers a $75 tasting menu for dogs.
Couple points here.
First, recessions tend to impact salons and other highly discretionary purchases first. I’d wager Dogue gets pushed to the front of the line if J-Pow stands tough and doesn’t pivot next year.
I’m not sure if there’s a more discretionary purchase out there than paying $100 (tax, tip, and the “fair wage” tax that San Francisco mandates on all restaurant bills) for Sunday brunch with a teacup poodle.
Second, the fact that the proprietors selected San Fran – ground zero for inequality activism – is simply too good to be true.
This is a city that spent $1.1 billion last year and employs over 50,000 people to “fix” the homeless problem. That’s $57,000 per homeless person per year. With a total population of about 860,000, roughly 2.2 percent of San Francisco residents are homeless – over 12 times the national average.
But at least you can buy this – a rose-shaped pastry made from wild venison heart and organic beetroot – for your best friend (the one that logs around four hours of every day licking itself).
Nothing but love
I’ve worn water skis maybe two times in my life, and I’m working every day to ensure there won’t be a third. But I still have mad respect for this guy.
Enjoy the weekend…
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