Well, today, I stand before you, humbled. For I am wrong and GAVEKAL is right. For the moment. For in my zeal to look ahead, I have been in denial over the simple basic fact of the-here-and-now that nothing nothing nothing could be better for non-fixed income assets (ex-Japan) in general and particularly for most equities (ex-Japan) than soaring inflation coupled with stable interest rates, tame wage-price inflation, and most importantly stable to rising currency values versus the largest surplus nations. My love of independent film and a well-written screenplay seemingly blinded me to the true and utter perfection of this saccharine Hollywood production.
Some in the media have mis-named it Goldilocks. But this is way off the real mark. For it's not a question of "too hot", or "too cold". We know its too hot (just look at "stuff" - gold, art etc., or Chinese and Hong Kong stocks in comparison to forward earnings estimates!). No. It more resembles the Kudlow-Economy as in "A place where it couldn't be better so long one doesn't think about tomorrow." It's a Kudlovian's utopian ideal where we needn't tax our minds (or conscience) with details like how and why we've got here. This is Global Financial Pleasantville , where Stepford Economics, prevail, and are the upside laws by which markets apparently abide.
Nonetheless, we are there (or is it here?!?). And ruminators are frustratingly helpless since, in this world, when one tries to yell or in any other way articulate that it's founded upon unsustainable policies all-around, no sound emerges. Or worse: one thinks that one is speaking English, yet everyone around else hears Gaelic, and everyone knows that not a soul comprehends it anymore.
And so the dollar continues weak against the currencies it perhaps no longer should, and gathers strength against those that it head-scratchingly shouldn't. Yet, the sense of crisis possibility still hasn't quite arrived in Washington, nor in Tokyo or Beijing for that matter. There is no talk of conservation, no urgency to ponder what might happen with a spike to $200 oil, or a gold-spiking loss of confidence. No contemplation of tax increases to begin to pay for the present war, nor of aligning our interests with Europeans to preserve the vestiges of an international monetary system predicated upon market forces in exchange and interest rates to discipline governments that push the envelope of fiscal and/or monetary sensibility, or of the destructive trade wars set to ensue when the system buckles under the neglect. Why does eveything still appear in the reversed contrast of an old, silver-halide negative? When will leadership emerge and scream: "Halt, engines full reverse or else we'll run aground?"
In the meantime, I am SO SO wrong and should fight it no longer. I must for sanity's and financial sake, embrace it, for I am a Capitalist and THIS world of THIS MOMENT is fantastic for capital and asset owners, large. Imagine: Inflationary pricing power yet falling interest rates, with little of the attendant cost-push (ohhh thank you denizens of $2-a-day-workers, and willing buyers of USDs - please may nothing happen to you or your munifidence!). The perfection of this moment just makes me want to break out in song, like Donaldson & Kahn's late 1920s ditty ...
Wishing is good time wasted,
Still it's a habit they say;
Wishing for sweets I've tasted,
That's all I do all day.
Maybe there's nothing in wishing,
But speaking of wishing I'll say:
Nothing could be finer than to be in Carolina in the morning,
No one could be sweeter than my sweetie when I meet her in the morning.
Where the morning glories
Twine around the door,
Whispering pretty stories
I long to hear once more.
Strolling with my girlie where the dew is pearly early in the morning,
Butterflies all flutter up and kiss each little buttercup at dawning,
If I had Aladdin's lamp for only a day,
I'd make a wish and here's what I'd say:
Nothing could be finer than to be in Carolina in the morning.
Dreaming was meant for nighttime,
I live in dreams all the day;
I know it's not the right time,
But still I dream away.
What could be sweeter than dreaming,
Just dreaming and drifting away.