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“The cheap dollar tactic started a currency war that has been playing out ever since.”

-Jim Rickards

In The New Case For Gold, Rickards reviews a critical period in American history that Ben Bernanke refuses to have the courage to admit. “Though it seems like an extraordinary policy to adopt, since 2010 the US government has effectively abandoned the sound dollar.”


“In January of that year, the United States ended the sound dollar policy that prevailed since 1980. An intentional policy of cheapening the dollar to encourage inflation and nominal growth was commenced.” (pg 120)

This Weak Dollar Policy, of course, has been tried before. If you want to see Trump make America weak again, you should vote for him so that he can triple down on what Nixon/Carter did in the 1970s inasmuch as Bush/Obama did in the most recent decade. It’ll be you-ge!

Making America Weak Again - trump point

Back to the Global Macro Grind

As any bi-partisan and/or objective student of Economic History can teach you, weakening a currency weakens the purchasing power of The People who earn their living (and have to pay to live) in that currency.

Given that you have two deteriorating Boomer Brands (Republican and Democrat parties) fighting over how much their political and corporate leaders should get paid in devalued Dollars, I’m surprised that someone isn’t running on the basic principle of sound money.

Instead of sounding creepy like Cruz, I’d bet my entire net wealth that I could lay a beat-down on Trump in a US Dollar debate. But, who knows, maybe I’ll just get to beat on Mr. Big Time for the next 4-5 years on Twitter instead.

In the meantime, despite the Fed’s renewed Dovish Down Dollar policy in 2016, what’s really getting beaten up are America’s profits:

  1. 441 of 500 S&P 500 companies have reported their Q1 2016 numbers
  2. Aggregate SALES growth is DOWN -2.4% year-over-year
  3. Aggregate EARNINGS growth is DOWN -8.9% year-over-year
  4. Ex-Energy (EPS -109% y/y), Financials have EARNINGS DOWN -14.3% year-over-year
  5. Ex-Energy, Technology has EARNINGS DOWN -8.4% year-over-year

Yeah, I know. Everyone nailed calling #TheCycle and this is all going to be fine. But when? Are Financials (banks, brokers, asset managers, etc.) going to crush it under a Down Dollar Trump and/or Hillary currency policy?

Maybe that’s why REITs have gone parabolic in the last few weeks. Have you seen my boy Big Time’s comments on how to protect his Dad’s original rental/real estate holdings? “I love debt!” And, ‘believe me, the US can never default because we can print money.’

I’m not yet dumb (or is it numb?) enough yet to believe everything Big Time says, but I can believe that he’d print money in order to try to protect his own interests above The People’s.

Don’t forget that RENT remains the largest component of the median US consumer’s cost of living (24% of total expenditures vs. something like gas at 4%) … and it remains at all-time highs.

Back to REITS, in stark contrast to what they did vs. Utilities when #Deflation dominated in JAN-FEB 2016 (REITS got crushed), they’ve really started to rip higher post the ugly 0.5% GDP report and another rate-of-change slow-down in non-farm payroll (NFP) growth:

  1. The Vanguard REIT ETF is pulverizing the Financials (XLF -1% in May) and is now +8.5% YTD
  2. Vs. Utilities (XLU) which continues its impressive, but steady, march higher to +13.5% YTD

Since I do believe that Big Time’s chances at becoming President are higher than Wall St. consensus, shouldn’t I consider adding REITS to our Best Macro Ideas list alongside the Long Bond (TLT), Munis (MUB), Extended Duration Treasuries (EDV), Utilities (XLU) and Gold (GLD)?

Heck, why not? Low Beta and Safe Yield is just one gargantuan bet that US growth continues to slow and that both Republicans and Democrats race to devalue the Dollar to try to show Americans the illusion of growth (asset inflation) again, isn’t it?

Of course it is, but it also runs its course when bad economic data becomes bad (again) for 90-100% of Americans who don’t get paid by Clinton Foundation speeches or owning their own apartment towers and oil wells.

What’s interesting is that the overall US Equity market traded deflationary yesterday, but REITS did not:

  1. US Dollar Up (small) on the day
  2. Oil (WTI) and Gold DOWN -2.9% and -2.3%, respectively
  3. Metals & Mining Equity ETF DOWN -7.8% on the day

So they jammed everyone back into what has not been working since the April 2016 lower-bubble-highs in the SP500 and chased US Retailers, Restaurants, etc. (you know, the stuff that does well when America is actually great, economically) and that was that.

But now what?

What happens when the entire equity market goes to Quad4 (#Deflation), including REITS? Well, I guess that might be my buying opportunity. Unlike Trump, I don’t love debt. But like many Americans (and Canadians), I love buying things on sale.

Our immediate-term Global Macro Risk Ranges are now:

UST 10yr Yield 1.71-1.82%

SPX 2030-2070
RUT 1096-1128


VIX 13.61-17.78
USD 92.49-94.65
Oil (WTI) 42.51-46.34

Gold 1255--1310

Best of luck out there today,


Keith R. McCullough
Chief Executive Officer

Making America Weak Again - 05.10.16 EL Chart