Market Apprehension For: “And Then – Depression Set In” Induced Reality Moment

For those that may not get the reference above, it’s from one of the all time best opening scenes that depicted reality for far too many of us trying to find our way during that period. The reference comes from the 1981 movie “Stripes” (Columbia Pictures)

It starts off with Bill Murray mercurially giving up another in a long line of employment opportunities (see: cab driver) in a fashion many of us only dreamed of doing. (and some still do!) Then, just when he thought everything was much the same as it always was, i.e., get food, go home, explain to the “Mrs.” what you’ve done, argue, make up, find another “job,” rinse, repeat. It begins going off the rails – and badly.

Nothing works out the way it once seemed to, which is why this strikes such a chord with today’s “markets.” For, in my view, the similarities are legend. Hence my sudden remembering of the now iconic line “And then…depression set in.”

As I referenced, there are so many metaphorical corollaries it makes it worth watching through today’s eyes, just as it was back then. Or said differently: it never gets old. Here’s what I mean…

You could think of the opening cab ride scene alone, with Murray and his fare, as a metaphor of how to view Uber™, IPO’s in general, their founders and the VC community at large. Trust me, it’s not as much of stretch as it sounds at first blush.

I see Murray’s fare as the embodiment of an all wrapped up into one rich, crass, “I’m just special, because I’m now rich!” crowd. And Bill’s character seems to embody the now after IPO investing public or “employees” that were mercilessly assured by one and all (i.e. the mainstream business/financial media et al.) that “riches” were at hand for everyone.

Hint: Uber’s or even the more recent Slack™ stock valuations looks a lot like (i.e., metaphorically) Bill’s bridge and car keys scene, does it not? But it doesn’t stop there.

As the opening of the movie rolls along Murray is depicted doing what seems to be what he always does, which I referenced in the opening paragraphs. This entire sequence can be laid directly on top of what has been happening in the “markets” over the past decade. Let me illustrate…

Don’t worry, BTFD (buy the f’n dips) rinse repeat. It’s all just a temporary thing. That is until he (Murray) sees his car is being repossessed right in front of him.

“What does this have in common with markets?” you ask. Great question.

Think of the repo scene as a metaphor for what the Fed has been doing with raising interest rates and reducing its balance sheet (QT.)

All that “easy financing” at zero-rates to buy whatever flashy, shiny car badging (i.e., ticker symbol) you wanted, suddenly now gets “margin called” the moment you can’t afford the payments (i.e., margin.)

The reason for this is that lowly “margin clerk” that gets continuously derided or continually promised to “make things right” is no longer nervous every-time there’s a “dip” in your employment.

They’ve now been given the “keys” via management to your ticker symbols and sold them at whatever depreciating valuation they may be worth, today – now. For much like the repo of a car – your once “margin account” has had the keys pulled and is off to the auction, aka “exchange.”

Next, you are then nearly run down via this same “repo” crew (i.e., central bankers) where they hurl the same slurs they’ve been throwing mercilessly at savers everywhere for nearly a decade, as they speed of with your once valued possession. (i.e., money or interest ) shouting, “Tough luck, pal!”

Your ability to pay bills, eat, obtain transportation, maintain a home, apartment and more are suddenly metaphorically represented by Bill’s pizza now out of the box, laying upside down, in the middle of the street.

You (much like Murray) have suddenly reached a point where you have to actually decide on whether or not that “pizza” can be saved.

It seems irrational looking back, but in the moment? You do just what Bill does and put it back in the box and try to figure it out later, because too much has gone on already to “think” anything out at that moment.

Or said differently – that pizza represents many a retiree’s savings account or stock allocation made by some 26 year old bank “executive” following a “diversified” portfolio thesis with “recommended” (or preferred) stock allocations or ETF’s, because that’s what the “bank” told him to do and he read something similar in a Tony Robbins book. Hint: see “Uber” or “Slack” reference while thinking “You need allocations in growth to offset any inflation pressures.”

“Pizza” anyone?

Murray finally makes it back to the apartment where safety and/or coddling seems to have been the norm. Only this time using today’s metaphorical play on words: “It’s different this time.” For suddenly he finds that his girlfriend is no longer amused with his, once again, reckless behavior and concern with holding a job. (remind you of any FOMC participants?)

She’s grown tired of having to carry the weight (think: The Fed et al.) of being the “responsible” one. Let’s just say she, in my mind, represents central bankers deciding to end the charade of just “being there” every-time and anytime rewarding this seemingly unending recklessness.

At some point there has to be a way out or end she muses. Then she does just that, ends it. All to Murray’s dismay, as well as pathetic begging, setting the stage for that iconic line, “And then… depression set in.”

The movie then goes on with far too many other references that one could apply using the same treatment as I’ve highlighted above, but they are far too many to list. However, it’s in that spirit I’ll leave you with just one last example…

In the end Murray finally finds redemption, but only after having to pretty much be knocked down in a moment of reality delivered via his Drill Sgt. It’s one of those scenes that also can include an overlay of another metaphor credited to former Champ Mike Tyson “Everybody has a plan until they get punched in the mouth.”

There are two very consequential central bank meetings due over the next two weeks. The first is the ECB this Thursday. This in one of Mario Draghi’s last appearances before he hands the bag baton off to Ms. Lagarde.

There is a possibility he can either send “markets” scaling ever higher or, send them into a tailspin should he disappoint and not deliver, on all points, the dovish expectations the “markets” demand. (I.e., interest rate cut, QE, et cetera)

Then there’s our own Fed meeting following it the next week on Tuesday and Wednesday.

The Fed, much like the ECB, is under implied pressure, via “market” positioning, that they will in-turn do the same and be uber-dovish with, at the least, a 50 basis point rate cut and jawboning for more QE, and soon.

If they do only 25, there had better be an unequivocal signal, and verbiage to back it up, that another 25 was coming in the next meeting. The need for jawboning more QE would then be even more imperative via my conjecture.

The issue here is the entirety of Wall Street, along with its cheer-leading mainstream business/financial cabal of BTFD’ers, is expecting another “Groundhog Day” delivery and result.

Many could be surprised to find someone changed the reels in the projector booth.

© 2019 Mark St.Cyr