Manure and Markets

By Jeff Kelly on April 5, 2024

History teaches us many great lessons. One of the ongoing lessons is “the more things change the more they stay the same”. I thought more about this upon reading about the Great Horse Manure Crisis of 1894 in New York City. I’m not sure why the crisis manifested itself in 1894. Seems to me the horses were there in 1893, I assume they were still doing their thing. Maybe the piles (pun intended) just got so large in 1894 it was decided to call it a crisis.

Listen we have 3 dogs. I know the amount of 💩 they can produce. Imagine 15 to 30 pounds per horse multiplied by 150,000+ horses. This results in more than 3 million pounds of horse 💩 per day that somehow need to be collected and disposed of. That’s not to mention the 40,000 gallons of horse urine left on the streets daily.

The piles (again pun intended) of this stuff reached 50-60 feet high. In Denver, folks complain about the smell from people smoking cannabis. Seems to me this issue was a bit worse.

This makes anything currently happening in our big cities look like child’s play by comparison.

The Great Horse Manure Crisis of 1894

Imagine the venture capitalists of the day gathering to try and develop an App to solve this issue. My theory is this problem still exists; we have just relocated those producing the 💩 from NYC to Washington D.C.

The amount of waste produced by the current collection of gas bags might challenge NYC back in the day. But like so many things we’ve delt with over the decades, a solution was found. Eventually the horse was replaced by the car. All those shoveling 💩 moved on to other careers. All those supervising the shovelers also moved on. There’s a rumor they returned to their home areas and ran for Congress but that’s totally unconfirmed.

We have the ingenuity, resources and people needed to solve all our issues from the border to homelessness to healthcare and more. Now all we need is the will to elect those competent to find the solutions. I’m confident many of the current candidates are not the answer to our problems. But I do think many could have found work in 1894 in New York City with the sanitation department.

Markets have begun to correct from recent highs. Worries about interest rates, expansion of the wars and higher commodity prices are all to blame. The reversal on Thursday was troubling for the short-term outlook.

Next Friday begins the 1^st quarter earnings season. The big financials are the first out of the gate. While the numbers should be good, financials have seen quite a run lately. Unlike previous quarters, just being “better than expected” may not be enough.

We fully expect earnings to be good and the outlooks to be better than we have seen in some time. Market corrections can be short, sharp and unnerving. Given the economic backdrop they give us a chance to buy at better prices.

CHARTS FROM THE PAST WEEK

This is simultaneously a top 5 string of days without an SPX move <-2% or >+2%.

Consider how some of these upside streaks ended: 1) 3 months later was GFC 2) volmageddon 7) China Trade/Rates/ETC (SPX -15%) 8) Covid Crash.

Flows to Equity ETFs have been strong but well short of 2021.

Even in great market years declines happen.

Sector flows have favored technology, that’s not surprising.

What is surprising is the lack of flows into energy and healthcare. Both are ahead of technology year-to-date in performance.

U.S. interest costs are now 1.1 trillion per year.

Seems like a lot.

Missing the worst 10 days beats buy and hold by a large margin.

Trucking Capacity.

So much was added during COVID, and we’re still in a capacity glut.

In the first three months of this year, just $9.3 billion was raised in global venture capital … if the slow pace lasts, it will mark a significant drop from 2021 peak of $555 billion.

Market sentiment is stretched, but this is before the decline on Thursday.

Through Tuesday, the drawdown in bonds had been bigger than equities.

Analysts’ optimism not keeping up with the market.

Earnings event volatility is the highest in retail stocks since the pandemic.

Freight headwinds are turning higher.

Intermodal rail traffic up 9.3% for the week vs. 2023.

Up 9.1% YTD. Good numbers.

The S&P 500 has put in the 14^th best performance ever through 61 trading days.

After such a great start the balance of the year is usually good.

The United States is now producing more oil than any country has in the history of the world.

Five month winning streaks are rare.

The S&P 500 just had one.

Customer traffic and same store sales at restaurants moving lower.

Not a positive data point.

The VIX (volatility Index) is below the long-term average.

A positive for markets.

Job cut chatter is picking up on conference calls.

The Aggregate Visits dataset saw an acceleration in this week’s update, continuing the improving trend that we have seen since mid-January.

Redbook continues to follow suit with a stabilized and now accelerating trend over the same duration alongside a continued improvement and positive dynamic in tax refunds. 

Tax refunds have picked up as March progressed.

Improvement in sentiment data continues with number of industries reporting growth moving up to 9 per ISM (as of March).

Amazing science discoveries occur often. They seldom get the reporting they deserve. I think this sounds important.

“Inverse vaccine” shows the potential to treat autoimmune diseases like multiple sclerosis.

It’s the corporate way!

WEEKEND HOMEWORK

A good read by former Justice Stephen Breyer. Plain text readings of the Constitution are not the way forward.

The relatively new judicial philosophy of textualism dominates the Supreme Court. Textualists claim that the right way to interpret the Constitution and statutes is to read the text carefully and examine the language as it was understood at the time the documents were written.

This, however, is not Justice Breyer’s philosophy nor has it been the traditional way to interpret the Constitution since the time of Chief Justice John Marshall. Justice Breyer recalls Marshall’s exhortation that the Constitution must be a workable set of principles to be interpreted by subsequent generations.

Most important in interpreting law, says Breyer, is to understand the purposes of statutes as well as the consequences of deciding a case one way or another. He illustrates these principles by examining some of the most important cases in the nation’s history, among them the Dobbs and Bruen decisions from 2022 that he argues were wrongly decided and have led to harmful results.

Great podcast about the biography of Steven Spielberg by Joseph McBride.

A big weekend ahead. Lots to do. Get outside! Enjoy the great weather in many parts of the country. Big basketball games abound. Get in a workout, take a friend to lunch, call someone unexpectedly. You can make a big difference. Adopt a dog. So many need homes. It’s the only 1^st weekend of April 2024 you’ll ever have. Make it count!!!.