This note was originally published at 8am on December 07, 2011. INVESTOR and RISK MANAGER SUBSCRIBERS have access to the EARLY LOOK (published by 8am every trading day) and PORTFOLIO IDEAS in real-time.
“We want control. We need control. And bad things happen when we don’t have it.”
That’s an excellent behavioral psychology quote that I dog-eared this year after reading “Future Babble – Why Expert Predictions Fail and Why We Believe Them Anyway.” (page 134)
Why political consensus still believes the Keynesian Quacks who promise them that money printing in Japan, Europe, and the USA is the best long-term path to prosperity is officially beyond me at this point.
That said, the market can remain beyond what any of us think for longer than even a centrally planned bank can remain solvent. While the core principle of Chaos Theory that Hedgeye’s Risk Management Process adheres to (Embrace Uncertainty) is what I start my every day with, it seems that these government people want to issue you the failed hope of the opposite, daily.
Hope is not a risk management process.
Back to the Global Macro Grind…
First, let me preface this morning’s strategy thoughts with the Top 3 “Most Popular” headlines on the Bloomberg machine:
- Geithner Backs French-German Plan
- Bloomberg News Reponds to Bernanke Criticism
- Citigroup To Cut 4,500 Jobs On Slumping Revenue
Now let’s set aside Washington DC’s Hope Control messaging for 2011 that this Time Is Different, and focus on what’s actually happened since the beginning of the year on all 3 of these headline scores:
- Tim Geithner has spent 47% of his born life working on Big Government Intervention at the US Government – he is doing his very best to make said US style “free-market capitalism” look like whatever Europe is. He needs government control.
- Bernanke, like Obama, has talked a lot about “transparency, accountability, and trust” since 2006. As a functional matter, the US financial system has never looked so compromised, conflicted, and constrained. Main Street America doesn’t trust the Fed or its crony workings. Bloomberg pasted Bernanke to the boards with this article. It’s about time.
- Citigroup’s Vikram Pandit is going to cut costs so that he can get paid. That’s Old Wall Street. That’s what public financial services companies who are missing their revenue targets do. Meanwhile, as Yale’s vaunted Keynesian Economist, Irving Fisher, pleaded from 1929-1932, consensus pleads “but stocks are cheap because corporate profits are good.”
Fisher, Keynes, and all of their Big Government Intervention friends of the “Roaring 1920s”, of course, blew up most of their net worth buying on the way down well before we had a depression in this country.
Keynes, who was quite certain about the ‘devalue your currency and hope for exports model’, actually imploded early (in 1928 he was long corn, rubber – you know, the commodity trade baby!).
After this European Summit, where are we going? Where have we been? Contextualizing reality matters in mean reversion.
If you pull back the multi-duration and multi-factor curtain of what markets have actually done into and out of Big Government Interventions for the last 100 years, you’ll quickly notice that there has never been a central economic plan to debauch a citizenry’s currency that saved the world.
They’ve only saved us from what, allegedly, would have been even worse…
God Save The Geithner.
Timmy continues to take the other side of pretty much everything I think. Yesterday in Europe, this is what he said:
“This of course will take time… and a very substantial commitment and sustained commitment of political will.”
In other words, Japan and the US needed even bigger bailout and socialization bazookas. Timmy believes “deeply” in being fully “committed.”
And if we, The American People, were as “committed” to centrally planned risk taking and price volatility as Geithner and Bernanke wanted us to be, we’d all be fine. That’s what Irving Fisher and John Maynard Keynes said in 1929 too…
In other news – the rest of the world’s Growth Slowdown doesn’t cease to exist:
- Brazil reported its slowest year-over-year GDP number in 2 years (+2.1% y/y in Q311 vs +3.1% last quarter)
- China called the current slowdown in Global Export demand “under severe pressure”
- Santa’s Global Consumption Sleigh is running on $110/barrel oil
Follow the bouncing ball of hope. Piling-debt-upon-debt, bailing out banks, and money printing A) Shorten Economic Cycles and B) Amplify Market Volatility. The Hope Control’s market volume is running on empty. “And bad things happen when we don’t have it.”
My immediate-term support and resistance ranges for Gold, Brent Oil, German DAX, French CAC40, and the SP500 are now $1724-1743, $110-112-39, 5940-6242, 3104-3234, and 1233-1266, respectively.
Best of luck out there today,
Keith R. McCullough
Chief Executive Officer