An American Business

“Being ignorant is not so much a shame, as being unwilling to learn.

-Benjamin Franklin


After finishing “Founding Brothers” by Joseph J. Ellis, I just started digging into “Benjamin Franklin - An American Life” by Walter Isaacson. Being a Canadian hockey player these days can feel golden at times, but not when I’m staring at the mountain that is my reading pile of American history.


On June 23rd I titled my Early Look “Rigorously Frugal” in reference to how the Founding Fathers of America considered government spending. By immersing myself in Franklin’s American story, one thing has already become crystal clear – on a relative basis to Thomas Jefferson, Benjamin Franklin lived frugally.


What I love about Franklin is that he wasn’t twirled up in the trees with the squirrel hunters espousing theories. He was a doer. If we had him running a portfolio in these globally interconnected times, I think he would find a way to do quite well. The man never stopped learning.


Ahead of our 4th of July weekend, here are 3 more Franklin quotes that I think fit our financial times:

  1. “We are all born ignorant, but one must work hard to remain stupid.”
  2. “A penny save is a penny earned.”
  3. “By failing to prepare, you are preparing to fail.”

As a practical matter, I think a lot of Americans are already moving down the right path when it comes to preparing their personal balance sheets for the inevitable. While the US government literally does the opposite of these 3 Franklin quotes, Americans are proving to do what they’ve always done – evolve.


On the first point, dropping Americans 401ks to 201ks and then fear mongering them from the mountain tops of political life did exactly what professional politicians preached – it scared the hell out of the American people. Whether it be from a mortgage application or a US equity fund flow perspective, Americans are proving that they haven’t remained “stupid” enough to make the same mistake twice. They aren’t buying houses or stocks.


On the second score, while the savings rate in this country has its own problems in terms of how it’s calculated, there is no doubt that the direction of cash in savings accounts of fiscally conservative Americans is going one way – up. Earlier this week we saw the US savings rate bump back up to 4%. Everything starts with a penny saved (after buying our Gold position back yesterday, our allocation to cash in the Hedgeye Asset Allocation Model is now 58%).


On the final point, whether it was preparing for a slowdown in Chinese or US economic growth, a lot of our clients were proactively prepared for the swoons that we’ve recently seen in global equities. As of last night’s close, China and the US are down -27.3% and -7.9% YTD, respectively. Those who were unwilling to learn that there is a global interconnectedness to fiat currencies and the Debtor Nations that create them are learning now.


Yesterday we had our largest audience ever for a quarterly Macro Themes conference call. As Big Alberta (Daryl Jones) and I broke bread with our American teammates for dinner last night in New Haven, there was a sense of graciousness that I have not yet felt in my investing life. We are grateful for our clients giving us the opportunity to build a new American business. Without their confidence in us, we wouldn’t have been able to build while we learn.


I realize that sometimes I sound overly doomsday’ish when I write about the state of this American union – and to be clear, I remain bearish on all that has become the Officialdom of Perceived Wisdoms in Washington’s economic department – but I am also humbled and proud to have the opportunity to be industrious and frugal in building this American business. I may not make the money I used to make working on Wall Street, but I am certainly happier.


My immediate term support and resistance levels for the SP500 are now 1012 and 1069, respectively.


Enjoy America’s 4th of July with your families and friends,



Keith R. McCullough
Chief Executive Officer


An American Business - ben

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