News From the Homefront While You're Away

December 21, 2023

My Dear Wife,

I hope this letter finds you well on your great adventure south in Antartica. While you trundle about on your expedition, I must give you thanks for the great assistance you’ve provided to us before your journey.

While you visit foreign penguins, know well that I shall be huddled alone comforting our domestic ones. Two little ones without their mother, in the care of their father. I can assure you that all I can do to make it a success will be done, namely the care and with good fortune, survival, of our offsprings.

Hmmm . . . care.

I use that term loosely, one that’s as light as the grasp I have on the domestic necessities these little things require. You apparently agree as documented by the 14 page daily checklist you’ve so lovingly prepared.

Yes, one page per day, with highlights and all for your nearsighted and color-blind spouse.

A check-list Shackleton himself would be proud of.

I know that while our foray is decidedly less challenging than yours, please know that it is no less treacherous. One fraught with danger. No wonder it is engendering great sympathy from all our family, friends and the other parents in our childrens’ schools. At times even strangers whose name I’ve long forgotten and merely address as “hey yoooouuuu . . . .” have approached with kind and encouraging words. The outpouring of support has been vast, and offered as the women clutch their pearls and sob for our younglings, while the men grasp my hands firmly to acknowledge the difficult days ahead. Stiff upper lip chap . . . a stiff upper lip.

They offer up any assistance that I may need, but knowing full well that the acceptance of such help would be an admission that our journey has gone horribly wrong. Thus, I merely nod in politeness, and thank them for their generosity. If perseverance save-th my pride, so be it. Two weeks without their mother, left alone to their father . . . God help us all.

Yet, as we embark on our own adventure, this journey has been graciously aided by our benefactors, his majesty Jerome Powell and company. These financiers, unknown to my children, but known to all children of the markets, have sought fit to provide a swift tailwind for our family vessel. In an effort to engineer a “soft landing” and avoid causing “undue pain” in the labor markets, hinted that in the days ahead, the Fed shall reduce interest rates by nearly 0.75 basis points. Three cuts to rates in 2024 you say? Huzzah, we scream. A strong tailwind will certainly speed our journey to the land of riches. Perhaps to a land of nirvana, where hired help is plentiful and nannies arrive on umbrellas.

Interest rates promptly digested the new guidance, and excitedly asked for seconds.

Unlike my children, they may receive more gruel in the days to come. More rate cuts than three please . . . we’ll see.

The equity market certainly responded in kind, as those most exposed to lower rates (i.e., the growthiest of growth) grew their branches higher and valuations soared. Trees (tech/Nasdaq) can grow to the skies, and even more so when gravity decreases.

For some reason, however, not oil. The black barrel seems to have responded in just the opposite fashion. How this is possible befuddles the observers as oil inventories have been flat. Perhaps the lack of forecasted draws concerned the market, but it certainly isn’t building. One would presume that a healthier economy with lower rates portends to greater mobility and commerce. Oil consumption would surely increase in such a case, would it not? Afraid not, however. While we remain safely on land, the oil market became choppy, and slumped markedly from the day after you left (WTI below).

Given the intermittent WiFi on your vessel, maybe you’ve discovered an enormous pod of whales we never accounted for. Maybe their oil can supplement our depleted energy stores. Maybe. Though one does wonder how likely a Nat Geo expedition would “harvest” such a supply.

About as likely as me not burning toast I think. So alas, we’re the one’s left feeling burnt of late. No matter though, we’re hungry and committed enough to tough this out. Singed on the fringe, we’ll just scrape it off, and move on. Perhaps this is more of an issue with CTAs and algos, so more a paper issue than a physical market one. Sentiment around the black substance has fallen to levels below what we witnessed during the pandemic days (Ninepoint’s chart below).

Lest you forget, however, these are not COVID days, and eventually when paper sentiment recovers, so too will we. Fortunately, that happened before, and we believe that will happen again. As sentiment reverted back upwards, so too did oil prices. No one said this would be easy, least of all not me.

Rest assured though that I’ll keep our offspring busy as we await your return. Certainly the job markets are open and available to them. Since their friends are all gainfully employed, I see no reason why their little hands should not be put to good use.

With luck, their wages in the factories should keep pace with inflation.

Since you are away, I suppose there’s no better time to teach them that the “struggle is real.” You must think the children are absolutely blessed to have their father present to impart such a lesson. I too agree.

Surely we’ll need the extra funding to pay for their purchases while you are away. Who knew they’ve been attempting to single-handedly maintain US retail sales and services all these months as the recent indicators appear to be mean reverting back to their pre-pandemic highs.

As those sports stars say “we collect receipts.” Alas, mine have been from retailers and not naysayers.

While you travel, know also that I shall maintain our lodging and the hearth warm. It pays to stay in place right now given the scarcity in housing, so best to keep the one we have. Housing starts though seem to have arrested its fall and may be actually rising, which should bode well for construction and our economy.

Remember what I told you during our courtship though? Housing represents nearly 15% of our economy. What an endearing figure for my endearing wife. Well news of a hotter housing market will surely warm your heart. We may just have new neighbors indeed when you return.

Well, not too warm mind you, as that’s a waste of energy and money, but warm enough to remind our children of their plentiful collection of sweaters and mittens. Besides, a tad of bitter cold will allow them to vicariously experience the expedition you’re on. So to their desperate pleadings of “Daddy it’s sooo cold,” I shall plan to respond with . . . you’re welcome.

Last, but not least, figures for industrial output were put out last week. You may have missed the news, but they were nothing to write you about.

The best that can be said is that they’ve flattened, which in this economy isn’t necessarily a bad thing.

So as we roundtrip this 2023, know that the homefront is well and our economic hustle and bustle continues unabated. In fact, there may be signs of better days ahead (we hope). So I bid you safe travels and a wondrous time. I shall huddle with the children and peruse these moving pictures you’ve been “instagramming,” whatever that is.

While we eagerly await your return, I shall hold down this fort with all my wits. I don’t like to use the word “hero” very often, but in this journey it seems apropos. Mine not yours.

Your Hero.

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