The people I took in on my travels are not in any condition to compete with workers in China or Viet Nam... or even Mexico (now that is embarrassing)! The people I observed were in no condition to put in a full day in a factory or on a farm... many of them had a hard time negotiating the curb in front of the airport. A country is NOT its borders, nor its political leaders (thank goodness)... it is its people. Our people have been misled (or have misled themselves) into thinking that eating themselves into oblivion is somehow acceptable.
I can speak only from my experience. I bought a small farm nearly 5 years ago. I live half the year on the farm and half in South Florida. While on the farm, by my best guess about 80% of the calories I consume come from my production on the farm, and in Florida I live an industrialized lifestyle complete with contrived exercise routines (no need for contrived exercise routines on the farm). Within a month of leaving the farm I usually put on 8 to 10 pounds (and that's with me really watching my intake like a hawk), I am softer, and I don't fall asleep the moment I hit the pillow. After a month back on the farm, I have the makings of a six pack (sort of... for a guy my age... ok, its not that close but it ain't that far), and I feel like a million bucks. I eat eggs, full fat milk and cheese, butter, bacon every day with breakfast, and at least one full serving of beef or pork at lunch or dinner (all grass fed and raised on my farm)... and I am lean, my cholesterol, blood pressure, and resting heart rate are excellent... and my love life is like a newly wed.
This is not to say that I don't miss walking out my door and down the street to pick up a pizza like I do in Florida, or any of the million other conveniences that city dweller's enjoy... I do (and my wife misses them a great deal more than I do)... but just maybe our lives were NOT supposed to be all that convenient, at least as far as our health is concerned.
Recently Matt Simmons passed away. A few years prior, Bruce Wasserstein died suddenly of a heart attack. Most of you know Simmons and likely none of you ever heard of Wasserstein. Wasserstein was a legend on Wall Street and my personal hero; an investment banker that would have made J.P. Morgan (the man) look slow and dim witted... yet he was not smart enough to notice that he looked like a train wreck waiting to happen, and he died of a massive heart attack at the age of 62 with $800 million in his check book... both of these guys spent too much time at the office, and not enough time doing manual labor, drinking wine, and making love (in my opinion... after all, I wasn't there in their bedroom... but a huge gut is not usually indicative of lots of great sex)... and were likely addicted to the "action" that came with their jobs as "masters of the universe".
And I understand. I miss that "action". But I'd rather live.
"You never see the old austerity. That was the essence of civility; young people hereabouts, unbridled, now just want."
That's an old quote from a famous French playwright who has long been dead. "Moliere" was Jean-Baptiste Poquelin's stage name. His urban legend was born when he collapsed and died in the middle of a play in 1673. He was 51 years old.
I'll take some editorial liberty this morning and evolve Moliere's quote for the Age of American Millenials and Baby Boomers: 'You've never seen austerity. That was the essence of our grandparents; Millenials and their parents, unbridled, now just want.'
This is obviously a generalization but, in principle, I can't imagine that an analyst from outer-space wouldn't see the hypocrisy in Americans door busting each other on Black Friday for i-Pads at the same time as their Congress fights to keep interest rates on my savings account at zero percent as a result of an alleged depression.
Want, want, want. What can I get out of this market? Pretended Patriotism be damned, what's in this for me?
The good and the bad news on this front is that we have leaders in this country who can enforce change. Some of that change is going to be slow. Some of it is going to hurt. Some of it is needed or what you're seeing in European stock and bond markets is going to be playing at an American "Lifestyle" Center near you in 2011.
In proposing a 2-year pay freeze for US Federal employees, President Obama did the right thing yesterday in implementing the first stage of what we have been calling for since July of 2010 (when we were short the US Dollar on reckless government spending). Our Q3 of 2010 Hedgeye Macro Theme was titled "American Austerity" and we think that fiscal conservatism is the only path to US Dollar driven prosperity.
The debauching and devaluation experiments of the Big Government Interventionists have been tested and tried. From Japan to Europe and back home again, they have not worked. We need to fix these deficit and debt to GDP ratios, or the global bond market is going to fix us.
This morning you are seeing Greece's stock market test its lows from June 2010 when the European Fiats made a conflicted and compromised promise to the world that Piling more short-term Debt-Upon-Debt was the elixir of life. Apparently 8 centuries of Reinhart & Rogoff data has once again trumped political storytelling. This time isn't different.
Why me? Why now? Shouldn't this be someone else's problem?
I get that line of thinking, but I also get what wearing a team jersey means - and, as legend USA Hockey Coach Herb Brooks said:
"You're looking for players whose name on the front of the sweater is more important than the one on the back."
Back to the construct of our intermediate-term global macro forecast...
1. Growth Slowing
2. Inflation Accelerating
3. Interconnected Risk Compounding
We don't have a choice but to do this now. European and Emerging Bond markets are telling you this and so are American Bond yields:
1. European Sovereign Debt Yields continue to make a series of higher-highs as concerns push rightly towards Spain and Italy.
2. Emerging Market Debt just had its worst month in 2 years (NOV down -2.9% on the EMBI Index with Brazilian and Russian weakness).
3. US Municipal Debt funds just flashed their 2nd consecutive week of outflows, taking the 2-week total to north of $5 BILLION.
Yes, we recognize that a BILLION or a TRILLION dollars isn't what it was to our grandparents, but these are still big numbers to consider on the margin. Remember, everything in global macro that matters happens on the margin.