David Zervos is the man. Listen to this guy. It's about as good as it gets from the sell side. Any other individuals that you follow religiously? For me, its Zervos, Minerd, and Gross.
One of this summer's biggest clubbing hits is a tune from Li'l John and DJ Snake entitled "Turn down for what". It's basically a song about keeping the party going, with Li'l John singing over and over again - "Fire up that loud/Another round of shots". It's a catchy tune for sure, and I would argue its also a rather appropriate song for describing the current state of the US economy and monetary policy."Turn down for what" is a rhetorical question. Li'l John is essentially asking, why should we stop the party - why should we "turn down"? And his answer (like ours) is simple - there's nothing, at present, which can derail this party. The club is going strong and the (JY Jell-O) shots are still in ample supply. Of course Janet is tapering the Jell-O "flow", but the "stock" remains at all time highs. And based on her last 6 months of spinning in the DJ booth, she is not about to lower that stock anytime soon.
Further, the party is now morphing from one that required a continuous flow of excessive libation, to one that is organically capable of creating its own real growth based endorphins. Our 5+ years of QE stimulus generated portfolio balance effects which in turn created the risk taking necessary for innovation, productivity gains, real returns on capital and real job creation. And the hand-off from juiced-up animal spirits to real economic activity has only just begun. A different kind of party is about to develop, a real business cycle upswing - a shift out in the aggregate supply curve, and a gorgeous 1990s style bubble that will materially change all of our lives for the better!
Of course we will still have to put up with hater drivel from the other side of the red velvet rope. These folks never entered the club over the last 5 years, or came in briefly and left way too early. They never partook in the Jell-O shots - they just simply "turnt down"...and for what? For a make believe US fiscal policy crisis, a make believe peripheral European crisis, a make believe Chinese trust product crisis, and the list goes on!!! But most importantly these folks "turnt down" because they never believed in the true reflationary power of QE. Instead they consistently looked for some reason for the party to stop in order to justify the fact that they never participated in one of the greatest risk-on raves in history. Sad!
At present the latest round of hating appears to be centered on some sort of future spike in inflation. Those on the other side of the rope have been praying every month for CPI, PPI and PCE to skyrocket while paying away constant negative carry from not being invested in risk. I suspect disappointment will likely be right around the corner with this latest iteration of hating just like it was in all previous incarnations. And then of course there were some die hard haters last week worrying about a Portuguese bank with too much peri-peri sauce splattered on its loan books. Pulllease, haven't we had enough of this sort of this "Euro-contagion to the spoo" rubbish over the last 5 years.
Eventually of course there will be a time to turn down. As our next bubble probes unfathomable heights it will finally pop. Maybe its spoos dropping from 4000 to 3000 in 2018. Or maybe its an even bigger drop, from an even higher level at a later date. At that point of course all the haters will claim victory, but most likely they will be too poor for anyone to notice. Its way to early to start thinking about hangovers! We have Li'l Janet and DJ Stan the Snake along with some strong organic real growth on the horizon to keep this party "turnt up" for a long while. Good luck trading.
