“I got me a man named Doctor Feelgood
Yeah! Yeah!
That man takes care of all of my pains and my ills”
Aretha Franklin,”Dr. Feelgood” - 1967
Before
Aretha Franklin sang about “Dr. Feelgood” there was a German doctor
named Max Jacobson who ran a thriving medical practice in New York City.
Dr. Jacobson’s office catered specifically
to high profile celebrities such as Truman Capote, Eddie Fisher,
Thelonious Monk, Anthony Quinn and Judy Garland. He also served as the
physician of choice for U.S. President John F. Kennedy from 1960 to
1962. Jacobson’s patients nicknamed him “Dr. Feelgood”
in response to the feelings of euphoria and energy they experienced
after the doctor administered his ”specialized” vitamin injection
therapy.
What most of the patients didn’t realize was that Jacobson’s magical cure actually contained between 30 and 50 milligrams of
amphetamines, a mood elevating neural energizer that goes by the
street name “speed.” The drugs were then combined with a jumble of other
ingredients including multivitamins, steroids, enzymes, hormones, bone
marrow, animal organ cells and solubilized
placenta.
Obviously,
given the true contents of the injections, the patient’s symptoms were
never really “cured” but rather masked by the powerful psychotropic
effects of the amphetamines. Thus, patient
relief was artificial in nature and short term in duration as once the
drugs wore off, the unaddressed ailments would inevitably return.
As
one would expect, reality finally came crashing down on Max Jacobson and
his fake remedies. In December 1972, Jacobson’s practice was exposed in
a New York Times 1972 piece entitled “Amphetamines
Used by a Physician to Lift Moods of Famous Patients.” As a result,
Jacobson was charged with 48 counts of unprofessional conduct, and in
1975 the State Department of Education revoked his license to practice
medicine. Jacobson died a few years later in
1979.
During
his heyday, Jacobson bragged that his patients “went out the door
singing,” which may have been exactly what inspired Aretha Franklin to
sing about him in 1967.
Financial Parallels:
Ever
since the start of the “Great Financial Crisis” in 2008, global central
banks, including the Federal Reserve, have aggressively resurrected the
role and unconventional remedies of “Dr.
Feelgood.” Using a dangerous mix of liquidity, monetary accommodation,
asset purchases and risk suppression, central banks have managed to
create a sense of confidence and euphoria within the stock market that
has served to mask the ongoing ailments within
the U.S. economy. Put plainly, the economic recovery we “feel” today
has been vastly overstated thanks to the regular financial amphetamine
injections that have taken place since 2009.
In my 2014 macroeconomic thesis, “The View from 30,000 Feet, The US Economy Was Sick before the Crisis,”
I showed how middle and lower income earners tend to hold fewer, if
any,
financial assets. As such, they have not been able to participate or
benefit from the rising stock market as much as the extremely wealthy.
The growing gap between the wealthy and lower income earners is called “income inequality” and it is just one example of the many negative side effects that inevitably arise when a stock
market is subjected to nine continuous years of aggressive drug therapy.
While
central banks believe wholeheartedly in their amphetamine therapies,
and regard the record level of the stock market as definitive proof that
their injections are working, a more granular
and thorough inspection of the global economy reveals continued
sickness.
For
example, Gross Domestic Product (GDP) in the United States continues to
trend WELL below its’ historical norm. Absent central bank” injections,”
it would be highly unlikely that these anemic
levels of economic growth would result in the same kinds of stock
market gains we’ve enjoyed since 2009.
If
there were no dangerous side effects to using amphetamines over the
longer term, there would be no need for the government to strictly
regulate its use. Doctors would be free to use injections
regularly to suppress their patient’s underlying symptoms and all would
be well. Unfortunately, this is not the case. Instead, physicians must
focus on the health of the patient over the LONGER TERM, which suggests
these extreme forms of drug therapies must
be used sparingly, and over very short periods of time.
I
believe we will eventually realize the central bank’s heavy handed and
extended use of financial amphetamines did not result in a ”miracle cure”
for the global economy at all. It instead
created a false sense of wellness and euphoria within the stock markets
that served to mask and suppress the ongoing problems that continue to
exist within our economy.
As a
portfolio manager, it is my job to obsess about stock market
fundamentals and capital preservation for my clients over the longer
term. The biggest concern I have today is that the vast
majority of the stock market’s rise since 2009 has been a direct result
of a drug induced state of euphoria that has been created and
maintained by central bank monetary policy. I believe that as central
banks begin to wean the stock market off their aggressive
nine year drug program, these feelings of euphoria will fade and once
again expose the true economic pain that’s been suppressed for all of
these years.
It is
for these reasons that I continue to invest with a very conservative
and defensive bias. I am not allowing my strategies and investment
advice to be influenced by the central bank induced
hallucinations that I believe exist within the stock market and
underlying global economy.
With the benefit of hindsight, the dot.com
and sub-prime housing bubbles are now considered two periods where
underlying fundamentals were usurped by a similar sense of strong stock
market euphoria.
In both “bubbles,” euphoria ultimately gave way to reality and the
stock markets corrected sharply. When one looks at the stock market’s
relentless rise since 2009, it’s very hard not to wonder if we aren’t
perhaps falling for Dr. Feelgood’s short term ”cure”
once again.
