As hard as they might try, perma-bulls, QE forever doves, and any other blind lemming looking to jump off the ‘inflation is transitory’ cliff, can do so now to get it out of the way. While the Big Short claimed to have seen this coming, he isn’t alone. As Bloomberg’s John Authers wrote, ‘It’s official. The inflation numbers are a hot sticky mess.’ What accompanied the piece was a chart lovers dream. Here are a few choice ones. Steamy in Cleveland? I mean, come on…
Here is your chart of stagflation with prices way up, earnings only slightly getting off the mat, and four million people still out of work who had jobs before the pandemic. Part of that has to do with ‘life pivots’ and the existential desire for something more meaningful. Hey, if you are going to ride a bike with no chain, might as well do it someplace you like.
The hot inflation print gave the bond market pause, as rates spiked right along with anxiety at the Federal Reserve. And while a twelve basis point move higher on the ten-year note might not sound like much, it is, considering 1.44% was where it came from. And poorly positioned, low vol, high leverage, trading books jacked up with treasuries have been getting killed.
As for our friends in ‘dreary old Manhattan’, it looks like the nuclear winter is over for people eying cheaper rents than they had been paying in a city where ‘inexpensive’ is very relative.
So where does that leave us? Same place we were back in May when billionaire investor Stanley Druckenmiller wrote ‘The Fed is Playing with Fire’ in the Wall Street Journal. As George Soros’ onetime trading Sherpa, his opinion matters.
Distilled down, it said that while we needed a massive flood of liquidity in the early days of Covid, that time had passed. But the Fed hasn’t moved enough and is now behind the curve. His argument was so persuasive, that we wrote an entire Mid-Current piece on his theory and premise for our monthly deep dive. It’s still available here for those looking to travel down further down the rabbit hole.
Enough of the charts and cartoons, let’s get back to making money in the market, long and short. Fortunately for us, the latter has started to work as once high-flying thematic stocks like Peloton and Beyond Meat have been getting eviscerated by investors for not living up to high expectations. Looks like both companies suffer from a ‘market saturation’ problem and lives that are getting back to normal. All hail the return to normal, and a properly fired ribeye.
We don’t plug much, but when we do, we go big. Or at least big enough to get some investor interest in an idea or strategy we are working on. With that in mind, Stillwater is announcing the launch of a long/short food, health and fitness strategy that will key in on both the good and the bad that is happening across a dynamic landscape of opportunities.
The structure is liquid and transparent. Client assets are held in their individual name and there is no lockup, no partnership accounting, co-mingling of funds, or K-1s to wait on during tax time. Account minimum is $100,000 with a 1% management fee, half the rate of most underperforming long/short strategies with no performance carry. Because we hate 2/20 as much as Gary Gensler.
To encourage new money, we are offering 50 basis points for life on all assets committed by December 31st of this year. Don’t look for the strategy to have a high correlation to the S&P 500. You want that, buy a SPY. Contact Stillwater Capital with indications of interest.
In a sign of the frothy times, Hershey bought Dot’s Pretzels for $1 billion this week. That price tag is still astonishing because for all the success Dorothy ‘Dot’ Henke has had, annual sales of Dot’s is only $10 million. Search as we might, we still can’t find the press release that says ‘correction, we meant $100 million’. So we are going with Hershey just paid a billion dollars for ten million in revenue. That’s a lot of (pretzel) dough.
And if that isn’t an amazing story of American grit, creativity, determination, matched with a need for salty snacks at every Exxon, Chevron, Shell, and Sinclair, we don’t know what is. Dorothy founded the company after sampling Chex mix at a wedding and liked the way the pretzels tasted, and now she has private jet money. What a country!
Keeping with the subject of food, Grammy-winning producer DJ Kahlid is working with ghost kitchen operator Reef Technologies to open 150 chicken wing locations worldwide, except in this case there are no locations. Everything is done by delivery, with dockside available via jet ski. Another Wing joins the tidal wave of food purveyors who want to go with a high volume, asset light busines model.
If you are even the occasional watcher of financial journalism, it was tough not to notice the IPO this week of Rivian, the electric vehicle maker that delivered all of 156 trucks last year, all to employees. While Rivian’s CEO made the rounds touting the long-term merits of the business, Elon Musk took a shot at the company that is valued higher than Ford and General Motors. This comes with the territory when you are valued at $90 billion with no recorded revenue. Welcome to Bizzaro World once again.
Looking ahead to next week, we have a read on the pulse of the consumer when retail sales for October are reported on Tuesday. Expectations are for another 0.7% year over year gain, the same as September. All of which is rather remarkable given how many container ships are currently parked off the Port of Los Angeles. That’s a lot of goods looking to make it to retailers shelves.
This time of year, we would usually write up something about college football and how the home stretch to conference playoffs and the national championship is upon us. But with Alabama making its way back to number three in the rankings, we know how this is going to end. That said, maybe just maybe, the Bulldogs of Georgia can ‘bear down’ and get it done this year. They are a special team, one that we hope will help save college football from the evil empire overlorded by Coach Nick Saban. The Dawgs play a woeful Tennessee Volunteers team this Saturday.
So, the real focus of this week is to get the word out that the art world is coming back along with everything else. Look no further than Miami Beach in two weeks when Art|Basel returns. The event runs from November 30th through December 5th and Ocean Avenue magazine gives you their ‘must attend’ events this year.
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