The L7 G7
June 10, 2018
OK; let me say it for you: my, my, Kenny G, we’re getting a bit obtuse with our mash ups, aren’t we?
Well, yes, we are, but to revert back to a pretext upon which I’ve relied perhaps too often, it’s not easy pumping out these masterpieces every weekend, so please bear this in mind. I began this insane exercise in early 2006, missing, in the intervening years, (almost) nary a one. By my count, I am now approaching my 700th ~1,500-word column. I’m also pretty sure that within the last year, I’ve crossed the one million-word threshold. One. Million. Words. I guess my only regret is that I wasn’t doing this in the 19th Century, when guys like Charles Dickens and George Eliot (who was actually a girl) got paid according to the number of nouns, verbs, prepositions and the like they produced.
On the other hand, I don’t get paid for doing this at all.
Sometimes these notes write themselves; sometimes I am forced to pull them from biological recesses I’d prefer not to name. I reckon this week’s installment falls somewhere in the middle.
One indisputably problematic element of this week’s epistle is that it requires some definitions, so let’s begin, shall we? L7 is synonymous with the word “Square”, or unhip, specifically describing an individual or dynamic that lacks fashionable sensibility. Its origins are unclear, but: a) I remember it from my Hippie childhood; and b) it reflects the reality that the L and the 7, when placed in close proximity to one another, form something that looks like a square. This works especially well if one uses one’s fingers to create the combination, as illustrated below:
I’d be remiss if I also failed to mention that L7 is also the name of an all-female LA punk band, whose records I don’t own and never have listened to. They are probably pretty good, but undoubtedly are most famous for a rather vulgar incident that took place at the 1992 Reading Festival, when, in response to some mud-throwing hecklers, lead singer Donita Sparks did something astonishingly rude.
Her action is clearly not suitable for precise description in this family publication, but you can Google it if you want. In the meantime, let’s just say L7 means Square, and leave it at that, OK?
Presumably, most of my readers are familiar with the G7 (short for Group of 7), seeing as how: a) it’s probably the most important annual conference among the leaders of the free world; b) it’s just ended in the L7 Canadian Province of Quebec; and c) let’s face it: most of you are pretty L7 anyway, right?
So, the critical question I pose to my readers is as follows: how L7 is this year’s G7?
My own answer is this: pretty L7. But before you castigate me, please know I have my reasons. First, the G7 is actually an outgrowth of the G6, which began in 1975 and remained unaltered for a couple of years until Canada was added to the list, turning the 6 into a 7. Then, in the mid-90’s, Russia muscled its way into the mix, forcing a renaming of the proceedings to the G8. However, following the latter’s 2014 annexation of the Crimea, Russia was given the gate, so we’re back, for the time being, to the G7.
It should also be noted that the 1975 G6 Meetings took place in the entirely non-L7 environs of the Chateau De Rambouillet in France (about the hippest locale on the planet) and were hosted by French President Valery Giscard d’Estaing, whose name alone removes him for all time from any L7 designation. Other attendees included the Teutonic Helmut Schmidt (Germany), long-forgotten Italian Prime Minister Aldo Moro, Japan’s Takeo Miki, and Harold Wilson and Gerald Ford, from the UK and US, respectively.
Now, admittedly, this group was never destined to set the Thames on fire, and we can perhaps all agree that it was probably too Square to headline Woodstock, or, for that matter, even the Reading Festival. But do yourself a favor and compare that list to this year’s roster of attendees – Trump, May, Merkel, Trudeau, Abe, Macron and whoever they decided to send from the politically dysfunctional Italy.
Now I want to be fair here. Trudeau gets some Street Cred, if nothing else, for being the son of Studio 54 Queen Margaret Trudeau, and Macron deserves the same for marrying his nanny – 25 years his senior. Other than that, though, we’re talking about a bunch of school marms, and here I include not only May and Merkel but also Abe and our own Chieftain, the Leader of the Free world.
Beyond this, we are confronted with the buzz-killing reality that most of the meeting was devoted to rhetorical attempts to avert a trade war, and that the entire event was upstaged by next week’s big cha cha cha between the Trumpster and L’il Kim. So, on the whole I’d say I’m on solid ground by deeming the current sit-down The L7 G7. And, lest there be any residual doubt on the subject, in an L7 move that perhaps only the inimitable Ms. Donita Sparks could appreciate, the Trumpster, in trademark Trumpster fashion, stole everyone’s thunder – before the conference even started – by suggesting that seeing as how things are going so well in that quarter of the world, what we should really do is invite the Russians to rejoin the party.
But when it’s mid-June in an information-bereft capital markets universe, no matter how lame the G7 party is, it’s probably the one we’re going to watch. And here I encourage my comrades to take heart – at least insofar as things could be worse: I could’ve been forced to cover Davos. Or Jackson Hole.
However, it is my unfortunate duty to remind you not only that both Davos and JHole beckon down the road, but also that this upcoming week features one of those rare, but joyous L7 happenstances when not one, not two, but all three big dog central banks will offer policy statements to the somnolent masses. The Fed kicks things off on Wednesday, when they are said to be sure to jack up overnight rates another two bits, and offer clues as to their plans for the second half of the year. Thursday is Flag Day, and therefore ECB Chair Draghi’s turn at the podium. Here, there is at least a nominal effort to gin up some suspense as to whether or not Super Mario will provide explicit or implicit guidance as to when his outfit plans to stop printing Euros. The BOJ’s Kuroda brings up the rear, Friday U.S. time, but is expected to say little of any import.
It would be difficult to look at the images and bios of any of the Big 3 Central Bank honchos, and not come away with a distinctly L7 vibe. Moreover, like the G7 itself, all three monetary chieftains are likely to be upstaged by the contemporaneous Singapore Summit, which, if it produces anything actionable in the markets, will render me surprised
There are, in addition, a number of secondary matters with which to concern ourselves. Quietly last week, iconic Japanese electronics manufacturer Cannon Corporation announced that it will stop producing cameras that actually use film, and I reckon there’s no turning back from that. Here in the States we were probably too busy to mourn an era gone by too soon as we were celebrated the just-revealed fact that domestic Household Wealth surpassed $100 Trillion for the first time ever. The strictly L7 among us (yours truly included) will also this week be forced to keep an eye on whether, in this land of free enterprise, our government will indeed allow AT&T and Time Warner to merge. I’m rooting for the home teams here, because it’s clear that uber-L7 Ma Bell could use the type of hipness upgrade which only the likes of Bugs, Porky and Daffy can provide.
Meanwhile, as predicted, the markets are for the most part quiet. Domestic equity indices are showing signs of breaking out, but I have some doubt that they will – yet. Our 10-year note is knocking on the 3% door-handle again, and I think will break on through – albeit modestly. The Swiss must now again pay – though not much – for any funds they borrow.
The dollar has flattened out – at least for the time being, and in general, one could describe this market as being stuck at the intersection between L Street and 7th Avenue. If you’re looking for some action, though, I’d point you in the direction of Cotton:
I’ve got some friends who ought to know who tell me that this here thing ain’t done yet. But fair warning to anyone who either caught the >15% rally, and/or may benefit from incremental upswings: this sort of action is not likely to buy you a ticket out of L7-Land.
If you doubt this, try the following experiment. Head out to the Hamptons and find somebody bragging about their crypto exploits. Then tell them that you absolutely nailed the Texas drought in the Cotton Market, and are going to double down on the prospects for inadequate crop rotation in the Missouri Valley. Your listener(s) may respond politely, but my guess is that, any plans to the contrary notwithstanding, you’re going home alone.
It is perhaps a sign of the times that during an opaque, rhetorical, but nonetheless raging trade war, with all three Central Banks set to make policy statements this week, and possibility (nay, certainty) of the most elegant round of diplomacy since the Roosevelt/Churchill/Stalin Yalta Conference, there’s really nothing out there to trade but Cotton.
However, I’d look on the bright side: we did manage to survive the G7. Yes, it was a pretty dull affair, and yes, Trump looked like he’d rather be anywhere but the Northern Bank of the St. Lawrence River, on the Canadian side of the border. Lord knows, he got out of there at the first opportunity, but not without first undertaking an infantile exchange with the typically chill Justin Trudeau. It says here that this pique, like so many others of recent vintage, will pass.
On the whole, an L7 event indeed the G7 was. But with the lovely Ms. Merkel and the charming Ms. May in primary attendance, at least it wasn’t the total sausage fest experienced, in, say, ’75. And one can only dream of what might had been: Had Hillary been elected, we’d have had a matched party of Merkel/May/Clinton paired up with Trudeau/Macron/Abe.
This would’ve left out the Italian representative, who I’ve since managed to identify as recently-named Prime Minister Giuseppe Conte. But I don’t think he’d have minded much. His country’s bond markets are imploding again, and it’s doubtful that he’d have had much bandwidth for Amori – and perhaps should speed his way back to Roma – if he has not done so already – at the first opportunity.