This note was originally published
at 8am on December 13, 2013 for Hedgeye subscribers.
“Everything was of interest to him.”
-Doris Kearns Goodwin
That’s what the French Ambassador to the US said about a young man by the name of Theodore Roosevelt as he entered the public arena of American life. Everything was interesting to Teddy, “people of today, people of yesterday, animals, minerals, stones, stars, the past, the future” (The Bully Pulpit, pg 67).
The man was constantly learning.
When I read that passage, I thought of my kids. At home, I am in constant awe of the evolution and growth of free minds. At work, I am increasingly frustrated to see how stagnant and mediocre the collective political mind of said American leadership has become. #OldMedia, especially in markets and economics, perpetuates that. They don’t want to think. They just want government access.
Dad, old people are cool. I just don’t want to be old. I want to get younger so that I can go back and not repeat all of the mistakes I have made in my life. That’s not a me versus them thing. It’s a me versus me thing. Two of the best Presidents in US history were the two youngest – Teddy Roosevelt and John F. Kennedy. Both believed that a #StrongDollar = Strong America.
Back to the Global Macro Grind…
The global central planning debate about devaluing the hard earned currency of The People in exchange for political policies that don’t work rages on. Sort of. Our Keynesian overlords sort of read what we write, but never try what we want them to do.
A central banker who I used to respect (Glenn Stevens at the Reserve Bank of Australia) is trying the “weak currency is good for exports” thing. The only thing Australia is exporting now are new lows in both its currency and stock market. Nice job, Glenn.
So what will it be here in the USA? A weaker or stronger Dollar? Taper or no taper?
Not to be confused with the fantastic 9 month move we had during #StrongDollar, #RatesRising period of JAN-SEP 2013 (which delivered a business cycle (with inventories!) high of +3.6% GDP), the last 6 weeks have developed the following Correlation Risk:
- TAPER-ON = US Dollar UP … Stocks, Gold, and Bonds DOWN
- TAPER-OFF = US Dollar DOWN … Stocks, Gold, and Bonds UP
This is a very short-term addiction thing. People who have been begging for the Fed not to taper (perma Gold, Bond, and MLP bulls) do not want the chickens to come home to roost alongside economic gravity (#RatesRising), ever.
Maybe that’s why some Americans were so enamored with the whole Breaking Bad thing. Short-term meth pops, whether into your blood-stream or bank account, feel so goooood. Right?
Irrespective of Teddy, JFK, and a man named Mucker disagreeing with the Dollar Devaluation thing, we need to proactively prepare for what will happen; not what we want to happen.
Which brings me to next week’s Fed decision. To taper or not to taper, remains the question…
- I don’t think Bernanke has the spine to taper in December
- If he doesn’t, the US stock market will probably rip back to all-time highs
- If he does, the long-term outlook for American life will get a lot better, faster
I realize you can count on one-hand how many people who rant and write as often as I do who agree with this long-term view of US purchasing power and economic prosperity. But that’s why it was the view that worked for most of 2013. #StrongDollar + #RatesRising gave you the best US growth investor’s market since the mid-1990s. That ends with Down Dollar.
And who (in popular political life) really wants to see another 1983-89 (Reagan) or 1993-1999 (Clinton) #StrongDollar #RatesRising and sustained economic growth period? More importantly, who actually understands it?
I remember emailing back and forth with his son during the campaign about how all Mitt had to do was keep saying #STRONGDOLLAR and tag Obama (and Bush) with the weakest purchasing power (weakest US Dollar) and highest cost of living (highest food and gas prices) in US history.
Nope. Didn’t want to do that. They marched it up the old pole of Keynesian economists who advised Bush (like Glenn Hubbard), and that new idea ended right then and there.
Is that the America you want? While I may want to, I will never get younger again. Neither will your country. But you might get one hell of a buy-the-damn-#DollarDown stock market pop next week if Bernanke Burns The Buck again. Don’t confuse that with economic progress.
Our immediate-term risk ranges are now:
UST 10yr Yield 2.77-2.91%
Brent Oil 108.01-110.63
Best of luck out there today,
Keith R. McCullough
Chief Executive Officer