“Originals are people who take the initiative to make their vision a reality.”
-Adam Grant
Isn’t that the truth? That’s one of the opening volleys in one of the better books I’ve read this year called Originals – How Non-Conformists Move The World, by Adam Grant. Sheryl Sandberg (COO of Facebook) called it “one of the most important and captivating books I have ever read.” #OrderIt
Originals aren’t always positive influences that move the world. Ben Bernanke and Dick Fuld were originals, for example. Today is actually tricky Dick’s 8th anniversary. On this day in 2008, Lehman Brothers officially filed for bankruptcy. In 2011, The Post Growth Institute labelled today, Free Money Day. I’m hearing that Bernanke is taking a helicopter ride to commemorate it.
Since those days of many risk management lessons already lost, many central-market-planners, bankers, and pundits have borrowed the original ideas of Bernanke and Fuld. Adam Grant calls this “kleptomnesia” – i.e. “accidentally remembering the ideas of others as our own.” Especially on Wall Street, you know as well as I do that there’s no accident in self-interest.
Back to the Global Macro Grind…
Were Bernanke and Fuld non-conformists? Big time. Did it end well? Obviously for bankers of Fuld’s ilk, no. But what about those who have followed the ideological path of money printing, currency devaluation, and market manipulation?
The story about that central-market-planning #BeliefSystem is still being told.
In the same opening chapter, Adam Grant reminds us of the risks of not changing our minds when going against the grain goes bad. He illuminates that reality using a great quote from George Bernard Shaw:
“The reasonable man adapts himself to the world; the unreasonable one persists in trying to adapt the world to himself. Therefore all progress depends on the unreasonable man.”
Since Draghi, Kuroda, Yellen, etc. took the baton from Bernanke and took us down this rat hole towards Free Money Forever have they adapted themselves to the world’s markets reactions? Or have they continued to try to tell markets to react to them?
These are critical questions that I think most reasonable (and un-reasonable) central bankers would be held to account to if they were actually elected by The People. Instead, as long as no one forwards my notes, I’m one of the originals taking them to task.
I did it in 2008. I’m doing it now. I do it in print, on video, and in cartoons, every day. And I like it.
I do it on the road seeing Institutional Investors too. Between NYC and Kansas City, I just finished 2 days of meetings and I have to say that there’s nothing else people want to talk about other than the Federal Reserve, ECB, BOJ, PBOC, BOE, and the US election.
‘Good call on #GrowthSlowing Keith… but what’s the Fed going to do in response. How about the BOJ in response to the Fed? … can and will Draghi do more? … how about China? Who is Trump going to pick to run the Fed if Hillary’s man is Summers?’
And it goes on and on and on… so many questions that have so few answers as clear as #GrowthSlowing itself.
Meanwhile most establishment economists (non-originals) are sitting in their ivory towers confounded by things like the Philips Curve getting crushed and US Productivity being on its worst run since the 1970s.
Here’s a DCF model I built for them on productivity (please borrow it as your own!):
- D = Demographics
- C = Capex
- F = Federal Reserve
If you don’t get that Demographics is the #1 causal factor on slower and lower for longer, you’re definitely not reading Hedgeye’s Demography Research (see Chart of The Day for details on the rate of change in growth for the 35-54 year old US population). You didn’t need to know anything about Dick’s “level 3 assets” to know what that line going red in 2007 meant.
Capex is running negative -4.9% on a year-over-year basis (negative for 9 straight months) because most sane business people consider the Fed flip-flopping from hawkish to dovish (6x in 8 months) insane. Why in God’s good name would you “invest” at this stage of the #GrowthSlowing cycle as the #BeliefSystem that the Fed, ECB, BOJ, PBOC, BOE, etc. breaks down?
No. The answer isn’t “raise rates so that we can get out of this mess.” The entire capital market system is held up by this mess. And, especially for the original bankers who built the foundations of these non-free “markets”, as our Chief Compliance Officer, Moshe Silver, often reminds us… “it’s a lot easier to make a mess than to clean it up.”
Our immediate-term Global Macro Risk Ranges are now:
UST 10yr Yield 1.48-1.73%
SPX 2109-2160
VIX 13.86-19.62
EUR/USD 1.11--1.13
Oil (WTI) 42.44-46.49
Gold 1
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
