-Stuart Witt (General Manager of the Mojave Air and Space Port)
For those of us moving upward and onward in The New Reality, this week was a fantastic one. We spent time with our families, rang in a New Year, and made some serious weekly returns!
This week was all about “Re-flation.” In sharp contrast to 1970’s style inflation, all we did was “re-flate” the asset inflation balloons that have already popped. After the worst stock market deflation since 1931, the SP500 raced higher for another +6.8% weekly gain, taking its cumulative “re-flation” from the freak-out “de-leveraging” November 08’ lows to a whopping +24%.
Not to be outdone were them sneaky little hard assets formerly known by the “Investment Banking Inc.” leverage traders as Commodities. The CRB Commodities Index tacked on a “re-flation” dance of her own for New Year’s, adding +8.4% on the week. Crude oil busted out with a +23% “go to move” for all the snooze you lose bad news bears to end their year on.
Bonds, of course, got hammered - like they should in an environment when there is no incremental buyer for a ZERO return. That’s reason number 1, 2, and 3 as to why we have had a ZERO allocation to Bonds in our Asset Allocation model since October of 2008.
Stuart Witt is a man who look is looking forward, and his quote this week couldn’t be more appropriate within the context of how an American Capitalist should be thinking about risk. On the insert of Barron’s this weekend, there is a full page color ad from the CBOE on a “Risk Management” conference. After cutting global equity and commodity prices by almost 2/3d’s in the aggregate in less than a year, don’t you think these bearish bulls are a little late to the proactive risk management party?!
Failure, in any capitalistic system, should always be an option…. But you shouldn’t fear it most when the whole wide world is screaming bloody murder. The bears continue to signal the coming of the apocalypse while the bulls remain bearish. This consensus will continue to resolve itself in a Darwinian way – this is America - “let the natural forces of accountability work for all.”
Keith R. McCullough
CEO / Chief Investment Officer