Hedge Fund CIO: "What's Next Is Messy, And You Better Hope We Succeed. If We Fail, We'll Implode"

Excerpted From the latest Weekend Notes by Eric Peters, CIO of One River Asset Management

“Mate, seriously, what the hell is going on with your country?” asked my old buddy, Sunny in Sydney. Spent the week in Australia. Singapore too. And in my decades of travel, discussions, debates, never has this one question dominated all others. “America has actually become the Gong Show!” he cried, pulling up his iPhone newsfeed, replete with porn stars, trade wars, revolving doors. Bump stocks and budget deficits. Rocket men and Dennis Rodman. “It’s better than it looks, but worse than it seems,” I said, shrugging, trying to shift topic. “What kind of bollocks is that mate? Give me a real answer!” he insisted. So I tried…

Imagine an Alien arrived just ahead of World War II. From space, it watched us spin. Americans appeared reluctant to fight. But they eventually obliterated the aggressors, who had themselves destroyed the developed world. Being the only nation left standing, America rebuilt both its allies and the vanquished from their ruin. Russia sealed itself for decades. China too. And this left America to recreate in its image all that remained. The pursuit was at once selfless and selfish. Well-intended, idealistic, magnificent, flawed, human. On balance the world welcomed the model, prospered, even though America prospered more. The nation became protector of the free world. After the Soviet model collapsed in 1989, it accepted a role as global policeman; an unsustainably expensive proposition. Year by year its debts grew as economic rivals watched their peace dividend compound. America used global trade to promote its model, and accepted trade terms that allowed every ambitious nation to catch up. America’s CEOs off-shored production, jobs, and transferred technology abroad to hit quarterly profit targets. Trade partners stole the nation’s technology too, and invested enormously in education, infrastructure, research, development – all things that America let dwindle. The Alien saw billions of humans lifted out of abject poverty. The species appeared more prosperous than it could have imagined possible amidst 1945’s smoking rubble. And it was true for everyone, except a growing group of forgotten Americans, who had been told by Washington’s elites that they were perpetually better off. They felt the opposite. They lived paycheck to paycheck, indebted. They heard the Chinese stole $1trln of their intellectual property, that Germans impose 10% tariffs on Ford imports, while America imposes 2.5% tariffs on BMWs. They felt cheated, disrespected, betrayed by allies and rivals. Having rebuilt the world, the Americans quit, and headed home.

Percent: “What if I told you that Trump was our destiny?” I asked Sunny in Sydney, still trying to explain America. He laughed. “I’m serious.” First, one simple stat. Roughly 50% of Americans with high-school or less education participate in the labor force. The other 50% don’t. The opportunities for them to retrain are severely limited. The impact on their communities and families is devastating. That kind of social decay quickly becomes entrenched. The chances that the children from these communities will live the American Dream is nearly zero percent.

Percent II: “Do you think a single establishment Democrat or Republican would have done anything to improve these forgotten communities or address the conditions that contribute to their problems?” I asked Sunny. He shrugged. “Zero percent chance,” I said. Not a single President or party has earnestly attempted to help these people in decades - which is why we’re here. Bernie Sanders would have tried, but establishment Democrats denied him a fair shot. Obama did not improve their lot. And the chances that Clinton would’ve helped are zero percent.

Percent III: “You know what frightens American voters?” I asked Sunny. “NRA?” he asked. They’re scared of becoming the forgotten people Trump talks about. They see technological disruption, driverless taxis, trucks, robo advisors, global supply chains. They’ve seen others displaced, outsourced, struggling to reinvent themselves as disruption creeps inexorably up the economic ladder. And they see the globalist political/business/central banking elites conspiring to stay on course. Enriching one another. Widening inequality. One hundred percent.

Desperation: “Know how you can tell Americans were desperate for change?” I asked Sunny. He shook his head. Trump jumped off that bus and grabbed 53% of the white women vote. Just imagine the landslide if an anti-establishment candidate had come along who had not ranked as the most ‘unfavorable’ in history? Now Evangelical Christians are splicing scripture to justify Stormy Daniels. America was crying out for a Trump. But the only choice we got was The Donald. And had we not gotten him in 2016, just image who we would’ve gotten in 2020?

Creative Destruction: “Want the good news?” I asked Sunny. He nodded. We’re not going to have a full-blown trade war. Did that once, 1930s. We’re broke, we can’t afford a war. We’re just shaking things up hard. Pulling back on global supply chains. Rebuilding some barriers. Charging people for stuff. Want military protection? Pay us for it. No more free riding. And we’re going to get our workers paid more. We’re going to rebalance the way we divide the economic pie. It’ll be messy. Ugly. And you better hope we succeed. If we fail, we’ll implode.

Creative Destruction II: “Want more good news?” I asked. We’re addicted to entertainment. And we have the most entertaining President in history. Which means we’re more politically aware/energized than ever. Trump inspired a sexual assault/harassment movement. 325 women are now running for US House, 72 seek reelection. 75 are running for governorships, 4 seek reelection. He’s inspired an impassioned debate about racism. Immigration. Division. Media. Guns. Trade. Inequality. Kids are engaged. It’s remarkable. Where will it lead? A better place.


macholatte Yellow_Snow Sun, 03/11/2018 - 17:00 Permalink


Australia is fed Progressive Propaganda 24/7 just like the globalist machine wants. They believe CNN. They believe their Reuters regurgitating radio and TV “news” stations fomenting left wing hate speech. Is it any wonder a rational person wants to know “What kind of bollocks is that mate? Give me a real answer!”

"Doublethink means the power of holding two contradictory beliefs in one's mind simultaneously [the lie and the truth], and accepting both of them [Insanity]... with the lie always one leap ahead of the truth... Those who have the best knowledge of what is happening are also those who are furthest from seeing the world as it is; in general the greater the understanding the greater the delusion; the more intelligent the less sane... If one is to rule, and to continue ruling, one must be able to dislocate the sense of reality... If human equality is to be forever averted; if the "high," as we have called them, are to keep their places permanently; then the prevailing mental condition must be controlled insanity..."

George Orwell — 1984



In reply to by Yellow_Snow

spag lloll Sun, 03/11/2018 - 21:10 Permalink

good fairy tale. so far trump has managed to fuck solar panel installers and users in the ass by raising tarrifs for american based but foreign owed manufacturers that will probably meet the new demand by using robots.


next trump fucked all the steel and alum users in the ass for manufacturers that are automating.


so much for the little guy then.

In reply to by lloll

ZeroSpam lloll Sun, 03/11/2018 - 22:21 Permalink

^^^   lloll  <<< CHRONIC  years-long SPAMMER     ^^^

His "disguised" links  (the Coming Financial Cataclysm) will take you to his Trojan- and Spam-laden "Whacked Out Biblicism" webpage.   He also posts as  "stizazz" and has been banned countless times for more than five years with countless log-ons.


Copy and paste the following text and send to abuse@zerohedge.com

"BAN and REMOVE spam accounts  "lloll"  and   "stizazz"   who are more log-ons from CHRONIC Spammers that ZH has been banning for years (that's you, too,  biblicism  &  dailywesterner)"


In reply to by lloll

NVTRIC Yellow_Snow Sun, 03/11/2018 - 18:42 Permalink

Some insightful things in the post.  A nice positive possibility for the future.


We can do better.  We will do better.


Gen X will forgive their parents, then lift up the Millennials.  We will abandoned religious division and accept others think differently than ourselves.  We will share the strengths of others while supporting their weaknesses. 


Shadows and dust, zeros and ones...  

In reply to by Yellow_Snow

besnook Sun, 03/11/2018 - 16:50 Permalink

i think they may be surprised if they can engineer what happened in the late 70s into the reagan recession. if they learned anything from that recession they should see how increasing wages is ultimately what pulled the country out of the oil embargo recession.

wages could not keep up so the fed made a lot of room for growth (inflation) initially causing the stagflation the era is known for and the volcker short, dramatic increase in interest rates when inflation reached 10%. the fed should do the same thing here.

Endgame Napoleon Umh Sun, 03/11/2018 - 18:35 Permalink

Reagan had two recessions, and the marginal-rate cut under Reagan was different. When he cut marginal tax rates, they had been very high for decades — as high as 90% in the 1950s — albeit that was during America’s greatest period of widespread prosperity.

The prosperity was not due to taxes, though. It was due to higher breadwinner wages, when America had mostly one-earner, married households, with far fewer women with spousal income or welfare for reproducing while single, competing for jobs and diluting the wage pool by a willingness to work for low pay due to their unearned income.

We did not have mass offshoring of jobs to Asia, nor a welfare-buttressed infusion of immigrant workers, competing for jobs and driving wages down for male citizens. We also had less wealth concentration from college-educated assortative mates, keeping two of the scarcer, high-paying, salaried jobs in one household.

When Reagan cut rates after all those years of high income taxes, it probably did create economic energy. This time, we have had decade after decade of Uniparty politicians cutting taxes for the rich, with more and more child-tax-credit welfare for working parents used as a way to sell the tax cuts for the rich.

Bush II and Obama both cut taxes in this manner, with Bush cutting taxes on dividends and increasing child tax credits, and Obama, in his stimulus, cutting the alternative mimimum tax for dual high earners and raising the refundable child tax credit for maximum womb productivity over $8,000.

As with this Trump tax cut, everyone outside of the rich and the “poor” and not-so-poor parents got $39. Obama did it through a payroll tax cut. It did not work. It stimulated nothing but stock market gains for the rich and the assortative mates in the top 20%. Half of all employed Americans are working part time, making $13k on average, and 50 million working-aged citizens are out-of-the-workforce. This is Obama’s legacy.

In reply to by Umh

Eric Masters Sun, 03/11/2018 - 17:05 Permalink

this is one of the best zh cross-posts/content in at least 9 years; definitely in top 3

what this guy is saying is true and excellent analysis; but going forward he is saying we. are. totally. fucked and that also needs to be said in the context of his analysis despite the sunny fawning cop-out  ending

Endgame Napoleon Eric Masters Sun, 03/11/2018 - 18:09 Permalink

It was a perceptive, well-written article, although it is by no means just Americans without college degrees who are underemployed.

Assortative mating halved the size of the college-educated middle class, while concentrating the few good-paying, salaried jobs under fewer roofs. Thanks to working moms and family-friendly / absenteeism-friendly workplaces, in the top 20%, we have more high-pitched roofs on McMansions than ever before in US history, but the broad-based post-WWII prosperity has shrunk to the size of a hut.

At the bottom, we have lots of single moms and a 62% out-of-wedlock birthdate. These moms often work part time, dominating many of the female-dominated jobs in the low-wage service sector that replaced the middle-class manufacturing jobs.

They have an incentive to accept low pay and part-time hours to stay below the earned-income limit an for ever expanding number of monthly welfare programs that cover their rent, groceries and other household bills, in addition to refundable child tax credits that, at the $6,444 max, equal 3 to 4 months of full-time wages for the many non-welfare-eligible, non-womb-productive citizens, living in the many states where per-capita income is between $18k and $20k.

Fifty million working-aged citizens are out of the workforce, but amongst those counted as “employed,” HALF are just working part time, with their average yearly income at $13k.

Many in our flood of immigrants — the over 1 million new legal immigrants admitted to the US each year and millions of illegal ones — are likewise given layers of monthly welfare and refundable child-tax-credit welfare for US-born kids to boost up the income of sole, male breadwinners in their case. The immigrants compete mostly for the male-dominated jobs in manual labor, left in America after the offshoring exodus.

Add in the mass offshoring of manufacturing jobs, and you can see what has decimated working-class American males. For the remaining jobs in the male-dominated manual labor fields, they must compete with hordes of immigrants, living in multi-family dwellings, splitting expenses, with several womb-productive females often producing US-born children who qualify them for welfare that makes it easy to accept low pay. 

Many college-educated, single, childless women are competing for low-wage office jobs, with wages driven down by automation, not just with welfare-buttressed single moms. The single moms enjoy independent apartments financed by Uncle Sam and refundable child tax credits that hoist their paychecks higher, even when they are dramatically absentee, and the college-educated, single, childless women (and men) often must live with their parents in adulthood due to unaffordable rent.

The single, childless citizens — whether male or female, college educated or non college educated — must cover rent that absorbs more than half of their monthly pay on earned-only income, with no spousal income, no child support check that covers rent and no free groceries / free rent/ monthly cash assistance / free electricity and $6,444 child tax credits for reproducing while single.

Individual workers compete for jobs in a job market that, for most positions, caters to those with unearned income related to womb productivity.

Female college grads also compete for the office jobs in nicer, safer areas of cities with moms adding keeping-up-with-the-Jones’ income to a spousal income. These moms, too, often work part time — officially or unofficially — banding together, just like the single moms, in discriminatory, back-watching cliques of frequently absentee moms.

America used to be a middle-class manufacturing powerhouse, but is now the land of low-wage service sector jobs, “voted best for moms.” 

In reply to by Eric Masters

Eric Masters Endgame Napoleon Sun, 03/11/2018 - 18:30 Permalink

youre right, see ; you know who owns the most papa johns franchises in colorado a white male, but he hires lots of women; you know who owns the most paneras in the entire western united states? keshawn johnson, a black male, but he hire lots of women, so the ladies/ 'moms' (whatever that means these days) might love their new independence or what have you, but the real owners are still men. period.

women dont run on testosterone and men do. end of story.


In reply to by Endgame Napoleon

resistedliving Sun, 03/11/2018 - 17:12 Permalink

with that steamroller Mueller acting as tRumps 'shawdow' VP,

tRump does right by his base, keeps his campaign promises and swamp gets drained

now get rid of that POS Mulvaney CFPB and Jared the Golem Kushner and I'll

increase the POTUS bimbo quota another 50% as I did for Bill the rapist Clinton

Eric Masters resistedliving Sun, 03/11/2018 - 17:21 Permalink

trump just likes to spike a live football in the redzone and pretend he scored a touchdown...like see trane or see 1000 dollar bonuses vs 4 billion in buybacks and dividends(in just 1st qtr 90 days), syria bombing, xi loves my chocolate cake etc...trump's biggest claim to fame is 'the apprentice' according to him...nbc made him and paid him and the crew on that show have said the purpose was to make him look "respectable" that was the #1 aim of the show no matter what the primary mandate of that show according to multiple people who worked on it was to make trump come up; now whether and where that came from who cares; it worked!

In reply to by resistedliving

resistedliving Eric Masters Sun, 03/11/2018 - 17:34 Permalink

admit it (shockingly and almost begrudgingly) but admit it.

tRump is scoring TD's. 

the working man is better off; country is better off, economy better, markets better.

now tell that Aussie to GTH. like Australia is so much better.  they're like Saudis only sitting on a Au mine in stead of oil.  u know Aussie debt to income ratio better than anyone.

In reply to by Eric Masters

gatorengineer resistedliving Sun, 03/11/2018 - 17:51 Permalink

Ok, Give me the box score ?  Importing chinese steel through Mexico and canada doesnt count as a touchdown, its a poor media play, if had banned all iron then ok, but carve outs fuck him... Failing to secure the boarders didnt happen.  Attacking the Second Amendament, thats a safety (other team scores), Failing to drain the swamp, thats Trumpy throwing a pick six.  Kissing kikestans ass, thats his second Pic Six....  Funding up the MIC, and expanding domestic spying, (thats a fumble returned by the other guys for a TD). We got a Scotus early.  Will give you a field goal for that one....    Its about 44-3 the other guys.  Tell me what I am missing.

In reply to by resistedliving

resistedliving gatorengineer Sun, 03/11/2018 - 18:11 Permalink

Ok, Give me the box score ?  TAKING THE BAIT

Importing chinese steel through Mexico and canada doesnt count as a touchdown, its a poor media play, if had banned all iron then ok, but carve outs fuck him... X ANNOUNCES PLANT REOPENING, WORKERS HIRED, X STOCK UP = TD

Failing to secure the boarders didnt happen.  BORDER CROSSINGS WAY DOWN, ICE ARRESTS WAY UP, PARTIAL WALL = FIELD GOAL

Attacking the Second Amendament, thats a safety (other team scores),  KIDS WIN, TRUMP RE-ELECTED = TD

Failing to drain the swamp, thats Trumpy throwing a pick six.  PUNT.  PARTIAL DRAIN.  TUFF ONE

Kissing kikestans ass, thats his second Pic Six....  PUNT.  ANOTHER TUFF ONE.  SEE COL. WILKERSON

Funding up the MIC, FUMBLE - OTHER TEAM SCORES and expanding domestic spying, (thats a fumble returned by the other guys for a TD). YUP, THAT'S TWO TD'S OTHER TEAM. 

We got a Scotus early.  ANOTHER tRUMP TD.  Will give you a field goal for that one....BAD CALL   

Its about 44-3 the other guys.   GOT IT REVERSED.  MORE LIKE 31 - 14

Tell me what I am missing.  NOT MISSING.  TOO MUCH RYAN/McCONNELL IS ALL

In reply to by gatorengineer