Stillwater - Last Week in the Real World
Got off the market grid last week, and out into the real world. For every asset class that has gone up, the price you are paying for goods and services has now gone up even more. Read on...
We tried getting This Week’s commentary out the door last Friday but found ourselves six hours deep into an excel spreadsheet (not a boast, my pivot tables suck!) until the numbers no longer made sense. Blew up our time, and the schedule. The biggest thing I missed was not writing about what was happening in the markets, but instead a well-deserved acknowledgement of the bravery it has taken to preserve our way of life, and the worlds way of life, over the past two hundred and fifty years. This image of D-Day at Normandy of the first infantry men getting off the boats, charging Omaha Beach, is one of the best reminders I know of.
Imagine what those orders looked like the night before. If at all true to life, this is what it would have probably sounded like…
‘Okay men, here is the deal. I know you have been bobbing around the English Channel, yacking your guts out for three days, but now I’m going to need you to strap on your gear, guns included, and get on a floating tin can. You will get dropped about 100 yards offshore a fortified beach, the front of the boat will fall away, exposing every ounce of your body to the enemy, and then you will jump into ice cold water up to your head.
From there, keep moving inland while heavily armed German soldiers with well-oiled death machines and accompanying guns, mortars, and grenades rain down hell on you. Don’t mind the carnage you will see, keep moving inland. Keep shooting up, while you are getting shot down upon. But keep moving inland. If you get to the other side, we’ve won. If not, we’ve lost. So, keep moving inland. We don’t lose.”
Thank you to those who served and died. We didn’t lose.
Onward to the more mundane. Stocks finally found a little fight last week. And it was about time given the eight-week drubbing that preceded it. More to the upside? Sure, maybe.
This past week, I was checked out in the real-world getting things done, traveling for good reason, and trying to make a side gig into a real gig. So, humor me as I take you on a sojourn into the life of the everyman, off Wall Street, Davos, Tokyo, London, and any of the other mean streets of finance. Because while wealth is growing rapidly, inflation is growing far faster. Just ask the proprietors of Taqueria Rincon in Carpinteria, California. The hard-shelled pastor might change your life
This wasn’t the only place we found passthrough of inflated input prices at restaurants. On Wednesday of last week, we showed true range by having lunch on the run en route to BZN at Dairy Queen in Bozeman, Montana and had to triple check the receipt when $20 got us a marginal chicken basket, French fries, and a small soda. There was no sign telling us why prices were so high, but we didn’t need one.
Same day, after landing in Los Angeles, we were in search of something savory and ethnic and Googled ‘Ethiopian Cuisine’. Next thing you know, we are in the heart of Inglewood at Queen Sheba for some very legit, and much needed food from the Dark Continent. The proprietors are up against it though, and the menu says it all, with a two buck handwritten price increase. We managed to order the Thursday Special, Kurt Sega, on a Wednesday. It was truly amazing. We also found one of the all-time greatest adult entertainment names ever: Kurt Sega. You can’t make this stuff up.
There you have it, a complete ‘boots on the ground’ look at what inflation looks like in three different places, three different genres of cuisine, all of which impacts those who step up to the counter and are willing to exchange ever-decreasing buying power against an ever-increasing cost of a plate of food. Make no mistake, this is all the unintended consequences of unfathomably reckless monetary policy. But eat up, you can always take out a HELOC.
About basic inflation, last week we also tried to book a single upright functioning adult on a flight from Los Angeles to New York in July. Much to our surprise, that flight, which at times can have as little as a two handle on it, is selling for one with an eight handle. A few hundred bucks here, and a few hundred bucks there, and soon you are talking about real money.
Think getting to your destination is expensive? Getting around is worse, as rental car rates this year are going through the roof. This chart is from the St. Louis Fed and runs through April. That’s what they call a ‘blowoff’ and chances are good that Goldman Sachs has a derivative wrapped around it.
Fuel prices remain so elevated that on a recent trip to the pump I said out loud, yet in a slightly muffled voice, ‘are you effing kidding me?’ when $6.68 showed up as the price per gallon for 87 octane juice. Americans driving this summer are getting a fat serving of red, white, and very blue. Keep in mind, a car’s gas tank doesn’t discriminate between the guy who minted money during the pandemic and the guy who is still white knuckling it through recovery.
If one were to make a call, and from time to time that’s what we do, there will most likely be one more painful spike as overshoots are the nature of the markets. And the pain of inflation out there in the real economy is only warming up, as is the threat of an economic slowdown.
The Fed seems to have finally found religion and is picking up the pace. Our call there as well is that you can expect to see another overshoot. You simply can’t match the QE flood of a millennium, without a QT drought that is expected. Keep in mind, this chart goes back to 1905, we’ve never seen anything like it before.
For those with a login, or desire to get one, the Washington Post yesterday ran a long articleon how the Fed and White House missed this one. It printed ahead of yesterday’s inflation summit where President Biden, Fed Chair Jerome Powell, and Treasury Secretary Janet Yellin got together to discuss the ever-widening inflation crisis. The imbedded promise is that this isn’t going to be a ‘photo op’, but instead something serious. Like much coming out of Washington D.C., we are dubious.
In a sign of these inflationary times, the Case-Shiller twenty city home price index popped an astonishing 20% year over year in March. You read that right. Houses across the United States are worth an absolute shit ton more this year than last. And yes, that’s a technical term in my world.
And not to belabor it too much, but we are classily trained in the art of belaborment, inflation has spooked so many people out that a full 25% of Americans are delaying retirement, or so says BMO Bank. That’s right, one out of four are saying they can’t get off the carousel because it’s moving too fast.
Nobody told the people at California’s most haute couture, highest priced natural foods market Erewon, about any of this. But the hot food island at the Venice location is the rumored to be better than Studio 54 in terms of pickups. We love you Erewon, as expensive as you are. Keep buying Skinny Dips & Salsa and help us make seed-based dips a reality.
On that subject, and another story from the real world, a decent part of my Memorial Day weekend was spent in Los Angeles sourcing the best wet and dry ingredients for the 5,000 unit production run of Skinny Dips we are doing this Thursday. The other part of the weekend was spent loading up a cargo van with hundreds of pounds of cilantro and parsley at Talley Farms in Arroyo Grande, California. So, while participating in the Valley Club Member/Guest was a casualty of my busy schedule, advancing the cause of making a great consumer product and diversifying my financial risk in life is right up there with it. I hope you played well, boys. You included, Denny.
Further digression from the real world, and the world of finance, I came across an article in the San Francisco Chronicle detailing the city’s latest pushing of the mental health discoveryenvelope: Professor Seagull’s Smartshop. It’s a retailer focused on selling legal herbs, petals, mushrooms, and cacti that offer some form of enlightenment and clarity of thought. While there is a hint of psychedelicize effects in the products, for the most part they are herbal remedies and elixirs that have been around for centuries.
As readers know, for a long time now I have been advocating for a fast tracking of research into psylocibin and its effects on mental health and the brain. Count me amongst the many people I know who occasionally ‘micro-dose’ their way into a clearer state of mind. But more importantly, count me in as one of those who think that many of the pharmaceuticals prescribed today are worse than what they are looking to treat. Anti-depressants? Welcome to living in a haze from hell. Anti-anxiety? Sure, give me something that makes me want to kill myself even more. I would call them both criminal, but I don’t want to insult criminals.
Full disclosure, I believe in psilocybin for reasonable and appropriate mental health treatments and think it will be so life changing for many that I’m not afraid to advocate its legalization. I have zero interest in hallucinating. If I smoked weed in almost any amount, I’d wind up in the corner under a blanket sucking my thumb. I’m center right in politics, and until Biden I’ve rarely voted Democrat. And I like country music, and Yellowstone.
Point being, this is about treating mental health in a new manner and saving lives along the way. Interesting interview as well this week on Bloomberg with the CEO of Field Trip on the effects of Ketamine therapy, and how it reduces down the effects of anxiety and depression. I’m not so sure that Ketamine has the best reputation in the business, but the guy is directionally accurate.
Finishing up our tales from the real world last week, the Friday before last I got to live a country song by taking the train from Santa Barbara to San Jose, having my momma pick me up at the station, and then driving her across the Nevada desert en route to her summer home in Red Lodge, Montana. We stopped at Thunder Mountain Monument along the way and I’m still trying to shake off what I saw.
The price of gasoline descended along the way, as did the price of meals and hotels. While not cheap, it beat the prices in California, but then again everything does. For the record, Golden Staters are more persona non grata in the Treasure State than you can imagine. It’s so bad, I don’t even like myself when I’m there.
But the trip was well worth it as I got to deliver a warm-hearted mother of two boys, grandmother of six more, to a place that she loves and brings her peace. That said, make her angry and you will experience something that would scare the love child of a wolverine and great white shark straight into therapy for life.
But she earned it, blazing a trail for women in the field of engineering and software when it was a men’s only club. If a guy did what she did he would be called ‘strong willed’ and ‘determined’. But a woman does it, and the moniker is quite different. But there she is, front and center. Pound for pound, the best mind in the bunch.
With that, we are checking out for the week. It’s a short one, and we are going to let the markets do what they are going to do and be back next week with a fresh look at why, and what comes next. In the meantime, we leave you with one of those songs that should be inspire you to get on with living, release the bad, and do everything you rightfully want to do in this life, ‘Til You Can’t’. Saw it performed at Stagecoach, and that’s all I needed to hear.