Panza Policy

“Never stand begging for what you have the power to earn.”

-Miguel de Cervantes Saavedra


This is an important quote from one of Western literature’s most important authors. Cervantes wrote Don Quixote in two volumes (in 1605 and 1615) and to this day it is regarded as one of the greatest fictional works of all time.


Wikipedia summarizes the Cervantes central characters well: “Don Quixote is noble-minded, an enthusiastic admirer of everything good and great, yet having all these fine qualities accidentally blended with a relative kind of madness. He is paired with a character of opposite qualities, Sancho Panza, a man of low self-esteem, who is a compound of grossness and simplicity.”


As we prepare to hear the proclamations of Fiat Faith from our central planners in Jackson Hole, Wyoming this morning, we must realize that the developing story of Sancho America is far from fiction. Consumer and small business confidence in this country is abysmally low and the causes of the slowdown in US economic growth are being grossly misrepresented by both the US government and its dogmatic economic advisors.


The “grossness and simplicity” of it all is now being compounded by the world YouTubing us for who our professional politicians have become. When the most compromised and conflicted of all central planners in the world (Japan) launches into public attacks on Americans being “simple” and “single-celled organisms”, folks we have a problem.


Those are Ichiro Ozawa’s quotes. He is challenging the current Japanese Bureaucrat in Chief, Naoto Kan, to an election in Japan on September 14th. The battle lines have already been drawn. This economic disaster of a Japanese quantitative easing experiment provides for a proactively predictable political debate.


Never mind whether his challenger’s platform is calling America a modern day Sancho Panza, there is only one question that matters here. It’s the same question that the Fiat Republic of Japan has been asking of its countless PM’s since Paul Krugman talked the Bank of Japan into “PRINTING LOTS OF MONEY” in 1997. After only 2 months on the job will the current PM of Japan lose his job to an antagonistic charge that he isn’t doing more of what hasn’t worked?


What hasn’t worked in Japan is government “stimulus spending” that is financed with borrowed money (government debt). This week, the Japanese sold 1.1 TRILLION Yen in 20-year debt in order to ostensibly give Naoto Kan that last heroin shot he needs to give his citizenry another enema before the election.


All the while back in America we have our own Panza Policy that will be pandered to, big time, in Jackson Hole as the czars of ‘government is good’ throw down the gauntlet of their long-standing, fear-mongering, marketing message to the American people.


This morning, Paul Krugman has already accused the US government of “sugar coating” the messaging about the recovery. This must me some sad and sadistic attempt to make sure that the fear-mongering messaging that leaves America effectively begging Bernanke for free moneys remains Washington consensus.


Never mind empowering American independence and confidence. Out with the grind and grit that makes the great leaders on this country’s fields of battle earn the world’s respect. Bring in the government  - it’s the elixir you need – debt financed spending will give us all “the power to earn.”


I wish I was coloring Krugman unfairly – I really do. Sadly, the alternative to believing this man doesn’t have an impact on how Bernanke thinks is also fiction. In the flesh, here are the 2 comments that were most alarming to me in his New York Times editorial this morning:

  1. “This isn’t a recovery, in any sense that matters… and policy makers should be doing everything they can to change that fact.”
  2.  “We’ve already seen the consequences of playing it safe, and waiting for recovery to happen all by itself… It has landed us in what looks increasingly like a permanent state of stagnation and high unemployment.”

Alarming, yes. And being blunt about the economy being a mess isn’t what alarms me. It’s A) the misrepresented cause of the mess and B) the dogmatic solution to this mess that makes us trust government so little.


If Americans think that the answer to this Failed Fiat Experiment is empowering government to compound their Japanese spending and quantitative easing mistakes, this is not the United States of America that we used to be.


Put on our cowboy hats in Jackson Hole and pretend you are patriots. Begging for Bernanke and stimulus will have no power in earning this simple man in New Haven, Connecticut’s respect.


My immediate term support and resistance levels for the SP500 are now 1038 and 1070, respectively. I continue to register lower-lows of support and lower-highs of resistance on both the US Dollar and the US stock market. Stocks are down -14% since April and down -33% since 2007. These markets don’t lie folks, politicians do.


Have a great weekend and best of luck out there today,



Keith R. McCullough
Chief Executive Officer


Panza Policy - eldd

6 Charts: The French Election, Nasdaq All-Time Highs & An Earnings Scorecard

We've been telling investors for some time that global growth is picking up, get long stocks.

read more

Another French Revolution?

"Don't be complacent," writes Hedgeye Managing Director Neil Howe. "Tectonic shifts are underway in France. Is there the prospect of the new Sixth Republic? C'est vraiment possible."

read more

Cartoon of the Day: The Trend is Your Friend

"All of the key trending macro data suggests the U.S. economy is accelerating," Hedgeye CEO Keith McCullough says.

read more

A Sneak Peek At Hedgeye's 2017 GDP Estimates

Here's an inside look at our GDP estimates versus Wall Street consensus.

read more

Cartoon of the Day: Green Thumb

So far, 64 of 498 companies in the S&P 500 have reported aggregate sales and earnings growth of 6.1% and 16.8% respectively.

read more

Europe's Battles Against Apple, Google, Innovation & Jobs

"“I am very concerned the E.U. maintains a battle against the American giants while doing everything possible to sustain so-called national champions," writes economist Daniel Lacalle. "Attacking innovation doesn’t create jobs.”

read more

An Open Letter to Pandora Management...

"Please stop leaking information to the press," writes Hedgeye Internet & Media analyst Hesham Shaaban. "You are getting in your own way, and blowing up your shareholders in the process."

read more

A 'Toxic Cocktail' Brewing for A Best Idea Short

The first quarter earnings pre-announcement today is not the end of the story for Mednax (MD). Rising labor costs and slowing volume is a toxic cocktail...

read more

Energy Stocks: Time to Buy? Here's What You Need to Know

If you're heavily-invested in Energy stocks it's been a heck of a year. Energy is the worst-performing sector in the S&P 500 year-to-date and value investors are now hunting for bargains in the oil patch. Before you buy, here's what you need to know.

read more

McCullough: ‘My 1-Minute Summary of My Institutional Meetings in NYC Yesterday’

What are even some of the smartest investors in the world missing right now?

read more

Cartoon of the Day: Political Portfolio Positioning

Leave your politics out of your portfolio.

read more

Jim Rickards Answers the Hedgeye 21

Bestselling author Jim Rickards says if he could be any animal he’d be a T-Rex. He also loves bonds and hates equities. Check out all of his answers to the Hedgeye 21.

read more