CRIME FILES / THE CANARY IN THE FOG / DEBUT FICTION

 

The Singing Canary Cliff Arnett

The Case of the Singing Smuggler 

GUEST BLOG / By Hank Calder, Noir Fiction Debut on PillartoPost.org   

San Francisco’s old waterfront had a way of turning men sideways.   

The fog rolled in every night like a soft accusation, and the ships along the Embarcadero creaked as if they remembered better times. In 1947, the war was finished, prosperity was beginning to hum, and the federal boys were trying to keep contraband from sliding south into Mexico and east into the desert.   

This story begins not with a gangster, but with a tenor. A nightclub singer named Clifford “Cliff” Arnett, whose one great talent was a golden voice — and whose one great weakness was his inability to pay his bills on time.   

The Canary, they called him. Handsome, soft-spoken, always quick with a grin. Women liked him. Bartenders liked him. Even his landlady liked him, and she didn’t like anybody.   

But Cliff had a habit that ruined all habits: he liked living better than his paycheck allowed. 

THE WRONG DOOR IN THE RIGHT ALLEY   

His break came in the shape of a locked door at the back of The Lido, a North Beach supper club where the tables were too small and the drinks too strong. One night after closing, Cliff saw the club manager — a slick man named Oswald Rinaldi — whispering with two strangers in dark coats. Papers changed hands. A quiet handshake. Too much caution for a simple business errand.   

Cliff leaned closer.   

What he overheard became the hinge of his lucky, unlucky life.   

The men were discussing “the courier route,” a weekly run from San Francisco to San Diego and across into Tijuana. The cargo wasn’t narcotics or guns — too messy, too dangerous.   

It was watches. 

Thousands of dollars’ worth of duty-free Swiss watches brought into the Port of San Francisco using falsified manifests, then moved quietly down the coast and sold in Mexico for profit.   

A clean racket. 

No blood. 

No bodies.   

Just numbers and nerve.   

Cliff backed away, but not fast enough.   

Rinaldi’s eyes caught him. “Arnett,” he said, “you looking for trouble?”   

Cliff shrugged. “Only if it pays better than singing.”   

A long stare.   

Then a smile.   

“Maybe it does, said Rinaldi.” 

THE FIRST RUN   

Two weeks later he was driving a borrowed cream-colored Hudson down Highway 101 with a trunk full of timepieces wrapped in butcher paper.   

The rules were simple: Drive at night. Stay off the main roads. Don’t talk if stopped. And once in San Diego, hand the car to a man named Domingo Céspedes, who ran a barbershop in Logan Heights with more secrets than a Hollywood leading lady.   

Cliff delivered the goods. He collected the cash. And he was back on stage by 9:30 the next evening singing Hoagy Carmichael tunes. 

By run four, his debts were paid.   

By run six, he was buying shoes that didn’t squeak.   

By run seven, he was shatterproof.  Nothing could touch him. 

THE GIRL FROM CUSTOMS   

Her name was Ruth Mallory.   

U.S. Customs Service.   

Smart, steady, serious.   

Cliff met her in a random encounter at a café in Little Italy. She liked him immediately — the voice, the humor, the easy charm. Cliff liked her too, but she was exactly the kind of woman a smuggler should avoid.   

One night they walked along India Street telling childhood stories. Ruth talked about always wanting to be a fed customs agent. Cliff talked about wanting to headline at the Palace Theatre. Neither mentioned the word smuggling, but both sensed something dark growing behind them.   

Ruth was sharp. Sharper than Cliff realized. She knew when a man dressed too well for his wages. 

THE WATCHDOG AT THE BORDER   

Across the line in Tijuana, Mexican authorities noticed a sudden spike of mid-range Swiss watches appearing in Zona Norte pawnshops. Not dangerous — just suspicious.   

Enter Customs Agent Martin F. O’Leary, a patient man with a face like a disappointed uncle. He had been following falsified shipping manifests and suddenly heard the same whisper over and over: “El Canario.”   

The Canary.   

A singer from San Francisco.   

He didn’t know if the man was real.   

But legends always spring from someone with bad timing. 

THE STING   

Cliff got bold. Call it careless. 

He spent big at roadside diners. Flirted and tipped lavishly with waitresses.   Sang in a San Luis Obispo restaurant on a night he should’ve been invisible. That night a U.S. Marshal eating at the same place recognized him from a Customs bulletin.   

Phone calls flew.   

The feds were waiting at the San Diego-Coronado ferry. One agent, posing as a dockworker, asked Cliff to move his car. Another lifted the trunk latch just enough to see towers of watch boxes.   

Cliff looked at the man’s eyes — that professional gleam — and knew the game was over. He raised his hands. “Fellas, if I sing, do I get a lighter sentence?”   

They laughed.   

That helped. 

THE TWIST IN THE TALE   

He cooperated fully. Ratted out Rinaldi, Céspedes, the pipeline. He got eighteen months at Terminal Island.   

Rinaldi got five years.   

Céspedes vanished into Mexico and never resurfaced.   

Ruth visited him twice.   

Once to scold him.   

Once to tell him he still had a life ahead if he didn’t blow it.   

In 1950, when Cliff walked free, Ruth was waiting with two tickets to a Los Angeles club where the bandleader owed her a favor. “Try singing legally,” she said. “It suits you.”   

Cliff took her hand. And that was the end of his highway smuggling career. 

THE END. 

MONDAY MONEY / HOW GOES STOCK MARKET AMID THE HUMAN HURRICANE

Weekly Market Wrap: Market jolts shouldn't be too scary 

GUEST BLOG / By James McCann, Senior Economist, Edward Jones Company. 

KEY TAKEAWAYS 

--Global markets were hit by another bout of volatility last week, with equities again finishing lower in a choppy week, continuing the worst run since the tariff driven sell-offs in April*. 

--The weakness in part reflects concerns over the technology sector, with a solid earnings report from NVIDIA unable to stifle the correction emerging across these companies as investors appear to take profits amid ongoing bubble chatter. 

--Meanwhile, ambiguity over the Fed's next steps is unhelpful, with the central bank continuing to struggle to get a clean read on the economy due to shutdown-driven data disruptions. 

--A correction in the buoyant market looked overdue, in our view, and we think investors should not overreact to the November setback. However, we believe recent moves underline the importance of a diversified portfolio in the current environment. 

--Lower entry points could provide an opportunity for investors, especially as the real returns on cash and bonds appear to dwindle. 

There is an old cliche in the movies - "It's quiet, a little too quiet." This probably describes how we had felt about equity markets over recent months during a remarkably steady 40% rally in the S&P 500 from April lows*. As is typical in films, this relative quiet has been rudely interrupted by a spike in volatility through November, which has so far triggered a 3% reversal in this benchmark*

We can point to a couple of plot twists driving this upheaval. First, the boom in AI stocks, which had helped power large-cap equity-market gains, is looking vulnerable, with investors booking profits as concerns grow over valuations and a potential bubble*. Second, there is increasing uncertainty that the Fed will swoop in with rate cuts to help sooth markets*. 

 To stretch our analogy perhaps uncomfortably far, we don't think this is the end of the show. Spikes in volatility are normal in equity markets, and we think even less surprising given the speed and scale of recent gains. A reset in expectations might be a healthy dynamic, in our view, and present an opportunity for investors to put cash to work and diversify portfolios. 

 AI stocks remain under pressure 

 The so called Magnificent Seven mega-cap tech companies have had a tough month. In market-capitalization-weighted terms, this group is down close to 6% in November so far, pushing large-cap markets, and in particular the tech-focused Nasdaq index, lower*. 

 We wrote in last week's wrap that the market appeared ripe for profit-taking following an extraordinary run, particularly as concerns start to build around froth in the tech sector. There looked to be further evidence of these dynamics this week around the much-anticipated NVIDIA third-quarter earnings report. 

At first glance the results were solid. Sales estimates for the third-quarter were stronger than expected, guidance for this quarter was revised higher, and there were bullish signals that the company could exceed the $500 billion uplift in revenue projected over 2026*. 

 However, after an initial rally in NVIDIA stock helped drive a 1% bounce in the S&P, we saw a swift and sharp reversal in sentiment that pushed markets lower*. Since 1957 we have only seen eight instances in which an opening rally of this magnitude has closed in the red*. 

 There might be a couple of factors driving this disappointment: 

-- First, while sales-growth projections remain strong, these are expected to slow in coming years, potentially closing the run of exponential-feeling growth in the sector*; and 

--Second, despite NVIDIA CEO Huang's attempt to push back on the AI-bubble narrative, the market is seemingly increasingly uneasy over the sustainability of current investment rates and their long-term payoff*. 

We flagged last week that certain tech companies are starting to build leverage to finance AI investment and shifting to more asset-heavy business models**, posing risks to margins and free cash flow. On this theme, we saw a further rise in the CDS spread - a measure of credit worthiness - for Oracle this week, a potential gauge of these worries*. 

 Despite these changes - and what looks to be a broader uncertainty around the long-term payoff from AI investments - we don't think investors should overreact to the wobble in short-term sentiment around the sector. Mega-cap stocks have consistently delivered strong earnings growth, the near-term investment outlook remains robust, and valuations, while elevated, do not look stretched to extremes as seen in the lead up to previous bubbles*. However, we think further sentiment- or valuation-driven setbacks are likely possible, despite these still strong-looking fundamentals. 

 Foggy conditions for the Fed 

Alongside booming AI stocks, one of the themes helping drive the market higher in 2025 has, in our view, been the resumption of interest-rate cuts from the Federal Reserve. However, following two consecutive rate cuts in September and October, there appears to be considerable uncertainty over the Fed's next move in early December*. 

 In part, this ambiguity reflects a hangover from the recent record-breaking government shutdown that disrupted the collection and release of economic data. The September payrolls report finally dropped last week, but this raised more questions than answers. 

 On the plus side, hiring was better-than-expected through September, with payrolls up 119,000, helped by improvements across a broader range of sectors***. However, there were familiar downward revisions to past hiring data, and the unemployment rate continues to drift concerningly higher***

This is the last official labor-market data the central bank will get before it decides interest rates December 10. The October and November reports will be delayed until December 16, with only part of the October edition published due to missed data collection***. 

Similarly, the Fed will not get an October CPI report, with the November reading also due after its December gathering*. For a central bank targeting inflation and employment, we think this shortfall is far from ideal. 

 The minutes from the October meeting appear to show clear concerns at the Fed around these disruptions - "various participants expressed concern about‚ the ability to accurately assess economic conditions because of limitations to the availability of federal government data"****. 

 Additionally, following two consecutive rate cuts*, and with inflation at 3%*, well above the Fed's 2% target, the more hawkish members of the committee seem to be becoming uneasy with further policy easing - "Most participants noted that, against a backdrop of elevated inflation readings and a very gradual cooling of labor market conditions, further policy rate reductions could add to the risk of higher inflation becoming entrenched"****. 

 Against this backdrop, market expectations for a cut in December have been on a wild ride*. In late October a cut was seen as a done deal, with pricing in money markets putting close to a 100% chance of a 25 basis point (0.25%) move*. These odds slid to a low of 30% early last week, before bouncing to 70% on Friday amid some dovish commentary from New York Fed President Williams*. 

 We think the decision will be finely balanced, with numerous dissents likely in the case of a cut or a hold. Further forward, we remain confident that the path for the fed funds rate is lower as the Fed reverses the post-pandemic tightening in monetary policy, which should help support U.S. growth and corporate earnings, particularly in the interest-rate-sensitive small-cap sector. However, against the backdrop of solid growth, and potentially persistent inflation, we think market expectations for rates to bottom around 3% next year* might be a little optimistic, and instead we see the fed funds rate falling to between 3% - 3.5% instead. 

 We think this gap between our expectations and market pricing could pose a risk to small-cap equities. However, if the Fed is cutting by less because of a solid, or even improving economic backdrop, these dynamics might compensate for the higher interest-rate costs in the sector, in our view. 

Diversification can soften shocks An outbreak of volatility following a period of calm can feel unsettling. Movie directors use these sudden shifts to keep viewers on the edge of their seats. 

However, we shouldn't be shocked into taking drastic changes to portfolios following the recent market reassessment. Instead, we think these dynamics can provide some useful reminders in the value of diversification. 

 The AI-led sell-off over recent weeks has sparked some rotation in the market toward unloved sectors, like health care and materials/energy*. We believe these companies could offer further potential for catch-up growth should we see further AI selling, especially given their lower valuation. 

More broadly, we think exposure to U.S. mid-cap stocks, international small and mid-cap developed market equities and emerging-market equities can provide additional diversification, especially given our view of an improving economic outlook overseas and more attractive multiples*. Importantly, we think these opportunities look attractive alongside a continued exposure to the AI theme via large-cap U.S. stocks. 

Finally, should we spring into action in the face of this shock? Speak to your financial advisor about potentially taking advantage of this market dip, if appropriate. With inflation running around 3%, the real return on cash-like investments is now running at less than 1%*. Based on your time horizon and risk tolerance, we think the latest pullback could offer some more return potential from strategic allocations in equities and bonds, especially if the three-year bull market continues into 2026 as we expect. 

 Looking Ahead

 Important economic data for the week ahead include housing and consumer confidence data. Government data that were impacted by the government shutdown are expected to gradually resume over the coming weeks, now that the shutdown has ended.