Never before have I seen, or very seldom, [maybe only 2001?], when financial markets made less sense than they do today in these United States. We suffered the dotcom bubble burst and the Islamic Terrorist attack pretty much back to back by the end of 2001, after which uncertainly in the U.S. economy seemed to be piled up a mile high! To further exacerbate the problem, I’m a Macro guy, a person that looks out upon the world for potential risks. And back then you didn’t have to look very far, which kind of reminds me of today? However, when the world is right, it’s right and I can go forward [invest] with confidence. However, when you have this much total lunacy from the powers that be [mostly within the Federal Government], people that literally screw up every decision imaginable, then collude with major media outlets to lie and cover up all their misgivings, I’m sorry to have to break this to you but, that’s not a backdrop for entering a new sustainable bull market. Sorry, not sorry.

I’d like to list all the things that make absolutely no sense to me today, meaning things that work against forming anything sustainable, as they are so abundant. The probability of making a measurable profit within a sea of total incompetence is quite small. So I wouldn’t be a big buyer of anything unless, it plays on their theme of destroying the U.S. economic expansion.
Please let me explain – In this kind of unsustainable economy the most attractive positions are going to be those that are unsustainable but, at the same time, very likely to have a price run-up before the explosion, or a market blow-off top occurs. So it’s best to focus on what is scarce and use that theme during this unusual time we are in – you know, when the tail is once again wagging the dog?

I remember a strategist came out to meet with us a few times, it was probably a decade ago now when well-regarded Wall St. strategist Rich Bernstein paid us a visit in the office after he had launched his own asset management firm, Bernstein Associates. The stock market was quite rocky and suspect at the time and Rich said something that still resonates with me today – “buy what is scarce”. That’s a concept that I had never heard before and something that I always keep in the back of my mind still today. His thesis is that capital will congregate into that which is “scarce”. I can’t remember what he specifically stated was scarce back then but I do remember it was a time like today when the stock market was having trouble getting out of bed. So what is scare today? You might answer oil and several other commodities? Definitely fossil fuels are a scarce commodity these days but that’s mainly from public policy errors coming directly out of Washington. However, note that the origin of the scarcity is really immaterial; it’s necessary and it’s scarce, that’s what really matters.

There is one caveat here, this scarcity theme does not work for investing in certain political leaders; the ones in office as of this writing are suffering from a scarcity of brain matter; as people with brains are mighty scarce – from the federal government and its agencies to state and local governments to boardrooms and even c-suite offices all across America these days. This fact serves as the number one reason for discussing this issue in the first place and until that [disappearing] brain matter re-appears I see no compelling reason for a new bull market to begin… cash is getting ready to be real scarce! 🙂