HYBRID VIGOR: VOL 3 ISSUE 38 "Change"

The more things change, it is said, the more they stay the same. Rarely have those seemingly wise words been called so into doubt.

We have a major-party presidential candidate with seemingly no respect for norms or decency, one willing to disrupt and endanger the country in order to satisfy his own apparent insecurity. We have a decent likelihood of a World Series between two franchises that have collectively won zero such series in the past 176 years. We have negative interest rates. We have negative swap spreads.

It’s a jungle out there, Grandmaster Flash told us, and it makes me wonder how I keep from going under. Don’t push me ‘cause I’m close to the edge. I’m trying not to lose my head.

We created HOCS to try to get a grip on this scared new world even before a lot of this stuff happened.  To one extent or another, it’s all coming from the same source—except for maybe the Cubs and the Indians.  It’s coming from an economy whose overseers won’t accept the help that the markets seem to be begging to give in the form of more capital for infrastructure.

What would a change in Washington in favor of more aggressive fiscal policy do?

It would drive demand for capital, getting rates and spreads to more “normal” states of being.

It would create more employment in the parts of the country crying loudest for help, and finding, frighteningly, that the most sympathetic ear is a whiter shade of orange.

It would lead to more convertible-bond issuance, helping increase supply of an asset class sorely needed to help investors get through these times in which allocation decisions seem likelier than ever to be misguided.

And it might even help rebuild the roads between Chicago and Cleveland, in case the series happens.

(This is the cover letter for the subscription-based weekly Hillside's Hybrid Vigor newsletter. For a complete copy, please contact John Anderson at + 1 (646) 712-9289 x 107).