Many years ago, a lady by the name of Leslie Shook was contacted by a stranger who told her that she’d saved his life.
She wasn’t the creator of some new wonder drug. Nor had she recently donated an organ, or swerved to avoid an oblivious pedestrian crossing the street. And while she lived in the US, he told her that she had saved his life in the Sea of Japan.
He wasn’t a nutcase, or confusing her for somebody else. But he did know her by a different name: “Bitchin’ Betty”. And without her knowing it, she’d given him a warning from hundreds of miles away that had saved him from a watery grave…
We’ll get back to how Shook had unknowingly saved the stranger’s life in a second. For more urgently, we’ve some more pressing warnings to be paying attention to – audible from a mile away…
What do they know that we don’t?
Over the last two months, the CEOs of major FTSE 100 companies – all household names – have been calling it quits. So far this year, we’ve seen the chief executives of BP, Unilever, RBS, Aviva, HSBC, British American Tobacco and more all decide it’s time to go. And it’s only March.
The executive exodus is by no means limited to the UK (though no doubt some journo has or will attribute this to Brexit). In fact, it’s actually worse over the pond: more US CEOs quit their jobs in January than in any other month since records began in 2002. The exodus isn’t stemming from one industry there either, ranging from Disney to Mastercard just in the last week.
‘Tis the season of “spending more time with family”. The last time CEO departures were anything like this high (in the US at least) was during the financial crisis.
The stockmarket seems to be taking the pessimism of its leading lights to heart. The US stockmarket had its fastest ever fall from a peak last week, dropping 10% in six days last week – its fastest ever move from a peak… while the FTSE dropped over 11%, shedding almost 1,000 points off the index. The global stockmarket as a whole lost the equivalent of over £6 trillion over the course of the week.
There was a wild moment on Friday when the Vix, a measure of perceived stockmarket volatility, was displaying a higher figure than the price of oil, with the Vix hitting 49 – its highest reading since the depths of the sovereign debt crisis – and West Texas Intermediate hitting 44 bucks a barrel.
Vix was one of the only things that was actually in the green on Friday. Though gold has a reputation as a safe haven, it still gets whacked on days when cash is suddenly needed to finance other obligations and debts that are being called in – like in 2008. As Raoul Pal, a macro trader, succinctly puts it, “Gold is dangerous in an illiquidity event but priceless in an insolvency event. The problem is, one usually precedes the other…”
Gradually, then suddenly…
The speed with which stock prices got whacked down is not hugely striking when you consider the influence of passive players that only buy or sell and the development and interconnectedness of modern trading technology. But last weeks’s decline is up in the top ten worst weeks for the US stockmarket, ranking at number eight. While none of the other weeks on that list are consecutive to each other, they occur in years that are, well, let’s just say “troublesome” for bullish investors.
But of course, trouble has been in the air for some time now – it just hasn’t been formally acknowledged. The Federal Reserve’s injection of printed cash into the financial system of roughly $400 billion in three months is at a pace only equalled twice in history: 9/11 and 2008. And yet no similar event was visible when it started in September. Not on the surface, anyhow. And so a sense of crisis hasn’t yet been seeded in the minds of investors through the mainstream narrative.
… Or so it seemed until last week.
I have no doubt in my mind that when somebody writes the history of the post-financial crisis era for markets, what we are experiencing right now will be a key turning point. The question is, in what way? If you’re looking for warnings, you can see them everywhere.
China, the world’s engine of economic growth, ground to a halt, its supply chain appendages in other countries frozen. Iran, in a way that all the US’s sanctions and all Israel’s covert ops have been able to achieve.
Will this be where the “buy the dip” mentality has its ultimate expression, and the market expresses a glorious, triumphant rally higher? Or is Covid-19 the external shock, the “black swan”, the destabilising exogenous force that cannot be culled by central banking?
Is this the melt-up moment, or the meltdown?
My money is on the former. My contrarian streak makes me mistrust the sudden fear that has taken to the market. But what do I know? Hell, I’m one of the millennial generation that wasn’t investing during the crisis which the financial industry now sees as a risk due to its lack of experience. The morbid bearishness I joined this business with has been crushed by our monetary overlords into a cynical bullishness. I trust my instincts, but even I’m not sure if I should right now.
That’s why this week we’ll be exploring the market indicators that can be relied upon to keep your capital safe, rain or shine. Portals of clarity that will tell you where we really are in the market’s cycle – and which warnings investors should really be listening to.
Which brings us back to the case of Leslie Shook – “Bitchin’ Betty” – and the grateful stranger.
The back-seat driver of supersonic jets
The stranger who contacted shook was a pilot flying supersonic F-18 fighter jets off aircraft carriers for the US Navy. One night he was flying low over the water on a training exercise, when suddenly an automated warning signal was activated: the stern voice of a woman telling him in no uncertain terms to “ROLL RIGHT. ROLL RIGHT.”
He obeyed, rolling his aircraft in the darkness to the right. He soon realised he had been flying much closer to the sea than he had assumed in the darkness, and that if not for the cockpit’s aural warning system, he would almost certainly have died from crashing into the sea. This close shave drove him to find the woman whose voice had saved his life, who fellow pilots simply referred to as “Bitchin’ Betty”: one Leslie Shook.
As far back as the 1950s, supersonic bombers in the US Air Force were equipped with warning systems where a woman’s voice would issue cautions to the crew in risky situations.
Ad from a 1962 “Popular Science” magazine about “Sexy Sally” in the supersonic B-58 Hustler
Dubbed “Sexy Sally” by servicemen, the voice of actress and singer Joan Elms would repeat warnings like “CHECK FOR ENGINE FIRE”, “OXYGEN QUANTITY LOW” and “ICE FORMING” from an automated analogue tape player.
(One of the most ominous of these was “SWESS ALTITUDE LOW”. SWESS, the Special Weapons Emergency Separation System, was a “dead-man’s switch” which would detonate any nuclear weapons the bomber had on board if its altitude got too low, under the assumption that if the crew didn’t switch it off, they had been incapacitated by enemy fire.)
After Sexy Sally, came the aforementioned affectionately named “Bitchin’ Betty”, voice-acted by different women for different planes. A woman’s voice is easier to hear amid radio chatter due to its higher pitch and greater vocal range, and pilots (male ones anyhow) supposedly respond better to a woman’s voice when put in a high-pressure environment. Shook, who worked for Boeing, was the voice actress for the F-18, and was given a royal send-off when she retired in 2016.
These days in the Royal Air Force, pilots are kept on the straight and narrow by “Nagging Nora”, whose warnings actually become louder and more forceful the more they are ignored.
What warnings are we ignoring? And what warnings are we paying attention to, which we shouldn’t be? That’s what we’ll be trying to discover this week.
Tomorrow, I’ll tell you a market warning I should have heeded, but didn’t – losing me thousands in one of the greatest bull markets in history.
All the best,
Boaz Shoshan
Editor, Capital & Conflict
Category: Market updates