Greed and Loathing in the United States

The party, it seems, is finally over.

Fun while it lasted, for sure. Lots of people made lots of money. US stocks shucked and jived their way to a gain of more than 800% between the 2009 Great Recession trough and the S&P 500’s all-time high in February.

The S&P seemed invincible. All but impervious to bad news. The Teflon stock market.

But things change.

Turntables turn.

And new presidential administrations arrive with fresh ideas… that scare the bejeezus out of investors.

So, the scared investors gather up their marbles and go look for a game somewhere else.

It’s the cycle of greed and loathing.

The greed that once defined the US stock market is now loathing that’s bringing stock prices back down.

Greed, in short, has flown the coop.

And it landed in Europe…

To wit: Bank of America’s latest Fund Manager Survey.

Some salient points to color and spice today’s dispatch:

• 39% of fund managers held an overweight position in European stocks, up sharply from 12% just a month earlier… and the largest overweighting in four years.
• 23% of managers are underweight in the US vs. being 17% overweight a month earlier—a historically large 40 percentage-point swing… in a single month.
• 83% of fund managers now expect US economic growth to slow, up from 28% who shared that view in February. Bank of America called it “the sharpest deterioration in sentiment in years.”
• 69% of fund managers say the era of “US exceptionalism” is now kaput.

Those are big numbers. They’re not “within the margin of error” kinds of statistics.

They’re loud.

And shocking.

They represent Godzilla-sized quantities of dollars making the trek across the Atlantic. And these are fund managers calling the audible, they’re not teenage girls flitting randomly between one outfit and another as they try to decide what to wear to the Friday night dance down at the VFW hall.

Moreover, there’s no anti-Trump biases here. Wall Street tends to be pro-GOP to begin with.

The message in this massive move is simple: Wall Street is officially freaked out by the randomness and breadth of Trump’s tariffs. It’s worried, as well, that Trump and Team Red haven’t thought through the whole “you punch me, I punch you back just as hard” scenario that’s now unfolding as countries retaliate; or, if they have thought it through, Team Red doesn’t care, which is even more worrisome for Wall Street.

And they’re concerned by what they’re reading about the unofficial Mar-a-Lago Accord I wrote about recently. Trump wants a weaker dollar and is (apparently) prepared to default on America’s debt by forcing countries to trade-in their existing Treasuries for new Treasuries that carry lower interest rates.

The move would save Uncle Sam trillions of dollars in interest payments, but would destroy that whole “full faith and credit of the United States government” schtick that Congress always falls back on in the debt-ceiling dustups. After all, who professes faith in a government that purposefully defaults on its IOUs to save itself from decades of financial overindulgence?

See, the thing about money is that it flows a lot like water, meaning it flows to the where resistance is the least.

American financial markets represent a lot of resistance these days.

So, money is flowing to Europe instead because it sees greater opportunity and reduced resistance there.

Which means that’s where we should be looking to put cash to work these days.

Trump’s policies, ironically, are making Europe great again.

Europeans now see America as something between a fair-weather friend and a frenemy. So, they’re disconnecting from the US in various ways and refocusing efforts at home. Fund managers recognize this shift and see big opportunities to turn a lot of dollars into a lot more euros.

I say this all the time, but when governments and institutional investors at scale are making big calls—be that building up large gold reserves, launching bitcoin/crypto reserve funds, or shifting the focus of their investments from one continent to another—you want to follow the money.

That’s what we’re doing in the April issue of Global Intelligence Letter. European markets and the European economy—one economy in particular—are very likely to outpace America going forward.

I want my readers to be part of that, because capital gains and a big fat 7% dividend (with the recommendation I make in the latest issue) are going to plump up our portfolio.

And because Trump will purposefully weaken the dollar, all those profits and dividends we collect in euro are going to buy more and more dollars when we bring them back home. A win-win all around.

So even though the party is wrapping up in New York, it’s just kicking off in London, Frankfurt, Madrid, Paris, Zurich, Stockholm… all over Europe, really.

And this party promises to be a rager.