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April
22
2019

I Am the Egg Man
Ken Grant

“Yellow matter custard, dripping from a dead dog’s eye”-- John Winston Ono Lennon

With my 59 ½ birthday now a scant two weeks away, it’s time to face up to the following, mixed-blessing reality: I am indeed the Egg Man. I suppose there’s nothing to be ashamed about in this regard. After all, there is more than one Egg Man out there, and though JL doesn’t specify the quantity, I suspect there are in fact a great number of us. Besides, it’s Easter, and therefore the point in the calendar when the Ova community rises highest in the esteem of Christendom. It also bears mention that All God’s ambulatory Creatures: mankind, other mammals, reptiles, birds, fish and even insects, began their existences as eggs.

So while I and other Egg Men can certainly come to terms with our own status, we must always remember that we fall at least one rung short on the ladder of magnificence. Everyone, of course, would prefer to be The Walrus, of which, by inference, there’s only one. And we don’t know who he (or she) is. We’ve had some hints now and then (including John’s “Glass Onion” deception that The Walrus is Paul. C’mon! How can The Walrus be Paul? George, Ringo or even Brian Epstein maybe, but not Paul), but the fact remains that identity of the large, flippered, tusked, denizen of the extreme North Atlantic has never been definitively determined.

So, from a practical perspective, the highest level of prominence any of us can hope to achieve is that of Egg Man, and it is my sad duty to report on this holiday weekend that the capital markets are throwing shade at us Eggies. According to the most recent USDA reports, the value of a dozen of our signal component parts has fallen to $0.69 per dozen (a beggarly 5 ¾ pennies for an individual yoke/white! At that price, Paul Newman’s entire Cool Hand Luke feat of heroism would’ve cost under $3!): the lowest level in at least three years:

Now, admittedly, this chart is rather confusing, placing, as it does, several contiguous time series within the same horizontal, er, horizon. But any Egg Man worth his shell ought to be able to read the sad tidings it conveys. The world now takes a very diminished view of our financial worth. And this during our busiest, highest profile season!

Were this not a holiday, I might be tempted to stoop to the profane.

We have some company in the Grain Complex, where Corn and Wheat remain on offer, but can only look on in wrathful envy as investors bid up our bovine and porcine equivalents to multi-year highs.

But as this is the biblical season for law-giving, redemption and even resurrection (as will happen on rare and seemingly random occasions, Good Friday was the first night of Passover this year, which transpired on the Shabbat, to boot), I suggest we move on to more uplifting themes.

The overall market was quiet this week, eerily so, in part because the triple whammy holiday shortened it to four sessions. Of course, earnings season is revving up, and so far there are hits and misses in that realm. But with 15% of the precincts having reported, there’s very little clarity on the trajectory of Corporate America’s fortunes. A boat load of firms will report this week, and it will be an interesting cycle, with numbers dropping from such Walrus wannabes as Facebook, Microsoft and Amazon. My sense is that we’ll get a much better picture about condition of domestic commercial universe during this cycle, and, again, I’d pay particularly close attention to guidance for the back half of the year.

Macro data has been, as expected, a mixed basket, with some of those plastic egg shells containing cold hard cash, and others nothing better than a licorice jelly bean. But a couple of the numbers, most notably the blowout in Retail Sales (+1.6% vs. +1.0% estimate, and particular shout outs to autos, gasoline, furniture, consumer electronics and even restaurants – but sadly, not eggs) were a particular delight. And, in consequence, the Fed’s Q1 GDP estimates have transformed from a carpet bomb into a moonshot:

Now, I’m not sure exactly what’s going on with those computer models down in Atlanta, but I think it would be nothing more than a fair question to ask as to how, in the course of five weeks, their algorithms have managed to gin up an estimate that is approximately ten times its original print (0.3% to 2.8%).

It bears mention, in addition, that the Fed’s estimates are clocking in at 2x those of the Street (~1.5%). In any event, it all will be rendered moot come Friday morning, when the U.S. Bureau of Economic Analysis drops its actual introductory results.

In the spirit of Peace on Earth/Goodwill towards (Egg) Men, a strong print would be nice, particularly insofar as it might serve to dial down the din of the rhetoric emanating from Washington. Readers may not be aware of this, but the Mueller Report, at long last, dropped this past Thursday. I interpret it, as perhaps fore-ordained by the Gods, as a somewhat Solomonesque outcome, which from an investigative perspective, was the equivalent of a suggestion to cut the baby in half. It’s clear that Smiling Bob looked high and low to find evidence of the always-implausible narrative that Trump called in his boy Vlad for help on an election he didn’t expect to win. And couldn’t find anything with which to tag him. It then turns into an inevitable, inexorable tome about bad behavior in the White House, some of which, if reviewed with a particularly jaundice eye, rises to the dignity of Obstruction of Justice.

That Mueller’s report would be chockful of vague innuendo and conjecture was always a matter of near- certainty, and the only surprise for me is that he had the discipline not to sling his arrows at an earlier date on the calendar. Yes, he held open the door to the Impeachment Posse, but didn’t give them much room to maneuver around. I kind of feel sorry for this crew, many of whom have promised their constituents that they would gut 45 like a fish in the wake of the conclusion of the investigation. Now, they have to gather the troops to attempt this coup – ill-equipped and under-prepared though they are. There’s no knowing whether they can collect themselves to vote for this in the House, but if they do, their hearts won’t be in it. They KNOW that they can’t convince 67 Senators to vote guilty, and they are terrified about a cross examination process that will reveal the underbelly of their efforts in this sordid affair. But the money people and the media will insist, so it may indeed be a case of “on with the show”.

But one thing that could stop them dead in their tracks right now would be for the dream estimates of the Atlanta Fed to be realized. If Q1 GDP comes in anywhere near 2.8, in a quarter that featured a partial government shutdown, episodic but particularly brutal winter weather conditions, and widely socialized fears of an abrupt slowdown in the global economy, it is likely to give them pause. Further, if Mr. Trump, who at least upon occasion has demonstrated impeccable political timing, announces a deal with China over, say, the next 2-4 weeks, all of the eggs in the impeachment basket might just be smashed into particles.

One way or another, and particularly with respect to market impacts, I expect the political fires to cool a bit – at least temporarily – over the next few days. We’ve got a VERY big week coming up, folks, and I suggest you gird your loins. If you are committing bandwidth to trying to unpack whether unconsummated, out of context statements by the President are act of Impeachable Obstruction, you run the risk of missing out on what might be some rather important market action and opportunity. Don’t do it.

And with that, this here Egg Man will give himself and his readers an early rest on this holiday weekend. For me, the course is clear, and anyone searching will find me sitting on a cornflake, waiting for the van to come.

Perhaps you can find more divine and uplifting ways to spend this time. If so, maybe YOU are the Walrus. Even if you are (also) an Egg Man. Because it’s plain that the two are not mutually exclusive. Remember, of course, that The Walrus himself, as a matter of biological certainty, began his journey as an egg in his mama’s womb. Thus, while there is only one Walrus, logic suggests that he too is an Egg Man, or, at minimum, was an Egg Man at the embryonic point of his existence.

And with that, there’s only one more thing to add. So please, if you will, join me in an enthusiastic: Goo Goo Ga Joob

This post is brought to you by General Risk Advisors, a full-service risk solutions group. For more information, visit genriskadvisors.com or contact [email protected].

Ken Grant is the Founder of General Risk Advisors, LLC and focuses on risk advisory services for our clients. Prior to GRA, Ken founded ConceptONE (previously known as Risk Resources) a risk management outsourcing business, catering to trading/alternative investment business, which provides risk consulting, product development, capital introduction and related services to these groups. The firm employed 50 people and has managed reporting and associated advisor for over 150 clients, including hedge funds, bank asset management groups, fund of funds, family offices, prime brokers and fund administrators, with responsibility for hundreds of billions in capital, covering every asset and strategy class in the global capital markets.

Prior to launching Risk Resources, Ken was the Head of Global Risk Management for Cheyne Capital (a $5 billion alternative money manager), the Managing Director Risk at SAC Capital Advisors and the Director of Risk Management at Tudor Investment Corporation. Ken is a Faculty Member at Columbia University focused on Risk Management/Actuarial Sciences and is a Fellow at the Center for the Management of Systematic Risk at Columbia University. He is the author of “Trading Risk: Enhanced Profitability through Risk Control” (Wiley ’04), Risk Management Curriculum CFA (CFA Institute, ’05) and was the principal author of “Sound Practices for Hedge Fund Managers” (Managed Funds Association, ’00, ’03, ‘05). Mr. Grant has an MBA from the University of Chicago, a Master in Economics from Columbia University and a BS in Mathematics from the University of Wisconsin.

  

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