On My Radar: The Dollar: “Secretariat by 31 Lengths”
February 27, 2026
By Steve Blumenthal
“Remeber to be an advocate and a champion for the people in your life.”
- Andy McOrmond
I’m writing to you from beautiful Park City, Utah, where I’m attending the annual WallachBeth Winter Symposium. Mornings are filled with presentations and discussion; afternoons are reserved for skiing. A pretty wonderful combination.
About 160 participants are here, representing many of Wall Street’s leading firms: JPMorgan Asset Management, Goldman Sachs, NYSE, Nasdaq, VanEck, CBOE, State Street, BNY Mellon, AllianceBernstein, T. Rowe Price, Grayscale, BondBloxx, Direxion, Pacer, and others. The group includes research analysts, product specialists, wealth advisors, and family offices. A thoughtful mix of people who spend their days trying to understand markets and the world.
This marks the 15th year of the conference and my 12th attending. It is hosted by my good friend Andy McOrmond of WallachBeth, and it has become something of a reunion - many familiar faces, a few new ones, and, most importantly, many close friends. WallachBeth has built a remarkable firm. If you need help executing a trade, they are exceptional. If you need clarity on a complex investment product, industry trends, or where the world may be heading with something as complex as blockchain and tokenization, you have a lifeline to an experienced friend just a phone call away.
There is much to share from the week, but let’s begin with Goldman Sachs Chief Investment Strategist John Tousley. He offered an insight I had not previously considered, one he described as “Secretariat by 31 lengths.” I’ll do my best to highlight the key points from his presentation, and you’ll soon understand why one of the greatest racehorses of all time provides such a fitting metaphor for today’s global financial landscape.
Head up. Big heart. Lights on. Grab that coffee and let’s go!
On My Radar: The Dollar, “Secretariat by 31 Lenghts”
John Tousley, Goldman Sachs – Potential Energy Versus Kinetic Energy
Personal Note: Photo’s From Back Country
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John Tousley, Goldman Sachs – Potential Energy Versus Kinetic Energy
Tousley framed today’s environment through a simple physics analogy: potential energy versus kinetic energy. Potential energy is stored risk - things that could happen. Kinetic energy is what is actually moving.
We live in a world overflowing with potential risks: wars, elections, debt, technological disruption, geopolitical tensions. But Tousley argues investors often treat these risks as inevitable outcomes rather than possibilities. I think he is right about that.
His preferred image is not a roller coaster about to plunge, but a shelf filled with books. Any one of them could fall. Most won’t, unless something pushes them.
Markets, he says, do not trade on fear. They trade on motion.
And right now, the forces in motion remain constructive.
Goldman expects U.S. growth near 2.9%, inflation moderating from the current 2.8% down to roughly 2%, a Federal Reserve moving from restrictive toward neutral with two to three rate cuts more likely that one to two cuts, and corporate earnings growth around 12%. That combination: an expanding economy, easing policy, cooling inflation, and rising profits has historically supported equities even in turbulent times.
Valuations, while elevated, are not viewed as an imminent danger. Today’s market consists of higher-margin, less cyclical companies than in past decades, allowing valuations to remain higher without necessarily implying a bubble. My view on valuations differs but it’s important to listen to Tousley’s point. He adds, expensive markets can stay expensive and still produce strong returns -as long as growth and earnings persist. True.
Tousley also downplayed the market impact of next November’s midterm elections. He believes the democrats take the house and sees 13 seats up for grabs. Quoting John,
“The President currently controls both the Senate and the House with basically three seats each. What does he get done in Congress with that three-seat advantage? Nothing, because you always lose three senators and three members of the House representatives on any legislation. And so thin margins make it really difficult to pass legislation because there's so much ideology within the parties. I've got Elizabeth Warren way the hell over here (on the far left) and she's got to find a piece of legislation that Mark Kelly, a kind of a moderate (democrat) from Arizona likes. That's the hard part of legislating when you control the chamber, just getting your own party in line.
So, here's where we're going to end up. We're probably going to end up with everybody declaring victory. Democrats will probably take the House and they'll claim they were given a certain mandate. The Republicans will say, well, you should clobber us but you only got 13 seats. Clearly, you don't have a mandate. You underperformed history.
What I’m saying is that everyone's going to be able to declare victory. But here's what you end up on the top chart is the light blue line, extend margins of leadership. The dark blue bar is what Congress got done? And if you look, the 119th Congress got 41 pieces of legislation done. That is the least amount of legislation done since the Congress in World War II.
So chances are in December, we're looking at a world that feels pretty dysfunctional. No different then today. And the bottom chart shows that means if the President doesn't have a functional Congress, they will operate in the world of executive order and executive action.
So, President Trump in his first year has executed, I think, 221 executive orders. These are not laws. These are enforcements or lack of enforcement policies for existing laws. They all end up in court. Half of them get thrown out.”
Here is the chart Tousley referenced:
Source: X, @RayDalio
The great Abraham Lincoln! On gold, he sees a compelling multi-year case driven by central bank diversification, persistent deficits, and diminished confidence in bonds as volatility hedges. Though he cautions the asset remains inherently volatile.
Where he becomes far less sanguine is government debt. I raised my hand and asked directly about government budget deficits of $1.9 trillion, debt exceeding $38 trillion, Social Security running out of money in 2032, and the prospect of forever money printing. And what does this all mean in terms of inflation and the long end of the yield curve?
He answered bluntly: “Bad, bad, bad, bad and bad.”
Adding:
“So, all right, this chart is brutal to look at, and I just need you to give me a minute because of what we worry about. So, if I was to say the books on the shelf that we worry about, I worry about the labor market because the labor market is absolute. And we could stay right where we are. I would use the analogy with the edge of the cliff and we can see where we are and enjoy the view and be just fine. But the next leg lower, if we see a material drop in the demand for labor, whether that's AI or just uncertainty or a global event, the next leg lower in the labor market, there's no more cushion in the economy to absorb it. I start to see the unemployment rate really go up.”
“So we're precarious.
The other area we worry about is things: recessions, financial events, and financial bubbles. So, the second book on the shelf is: Do we have a financial bubble? And this next chart measures financial bubbles. The further out your dot, the more risk you have from 12 o'clock at the top, where it's government, to 4 o'clock, which is the amount of leverage in the system.”
SB here: The light blue boxes (lines) are our current conditions. The problem areas are government debt and equity valuations.
Rising interest costs crowd out productive investment and represent a long-term drag on growth. Yet he does not foresee an imminent crisis. And this is where he made me think deeply about my own forward thesis. He does not see an imminent crisis because of the unique position of the U.S. dollar.
The Dollar: “Secretariat by 31 Lengths”
Tousley compared the dollar’s dominance to Secretariat’s legendary Belmont Stakes victory, winning by 31 lengths with no rival even visible down the stretch. When crossing the finish line, Secretariat’s jockey, Ron Turcotte, looked back and saw no other horse in sight.
Despite frequent discussions of “de-dollarization,” global reserve allocations have shifted only modestly:
Central bank balance sheets’ dollar reserves have fallen from ~58% to 56% over 3+ years.
The Euro is just ~16%, and
The Renminbi is ~2%
In other words, the world may want alternatives, but there is no other horse in sight.
Reserve currencies require not just economic size but deep, liquid capital markets and fully convertible financial systems. No other country currently offers a bond market capable of absorbing global savings at scale. As Tousley put it, it’s an interesting conversation but not a practical transition anytime soon.
Tousley said,
“The dollar is the reserve currency because we are, it doesn't feel like it, but we are the most politically stable country on the planet. We are the largest economy. We are the best growing economy. So not only are we the largest, but we’re also more dynamic, we're more diversified, we are strong. We're less cyclical. It's harder to put our economy in recessions. But here's the stem of sauce to the dollar. There are few challenges. If you want to be the reserve currency. President Xi of China two weeks ago said, hey, we want to become more plus the dollar, and we'll become a reserve currency. Oh, will you? Well, you better be fully convertible. You better let everybody on the planet come in and out of your currency without any cost or regulation whatsoever. You want to do that in China. Xi will say, whoa, we don't want that. And if you were fully convertible, the remedy goes to $11, not $7. And their manufacturing competitiveness completely disappears.”
He added,
“This structural reality allows the U.S. to sustain deficits far longer than other nations without triggering a funding crisis.”
My view has been and remains that we are on a path towards more money printing and the by product is inflation. On paper, very good for certain asset holders. The wealthy will get wealthier. An awful result for the majority of the population. The very large BUT in the equation is AI. As AI may likely prove to be a massively deflationary force.
As an aside: If you missed the movie, it’s fantastic. It was about Secretariat’s legendary 31-length Belmont Stakes victory in 1973 was ridden by jockey Ron Turcotte, whose calm, hands-low style allowed the great horse to run freely in what remains one of the most dominant performances in sports history.
Debt: Tousley vs. Dalio Stage 6 vs. Blumenthal
The divergence in macro thinking is striking.
Tousley: Sees a Long-Term Problem, Not an Immediate Crisis. The system bends but does not break, at least not yet.
Debt trajectory is unsustainable but manageable for now
Dollar dominance provides extraordinary funding capacity
Lack of credible alternatives limits risk of sudden crisis
Productivity gains (especially AI) may offset fiscal drag
Systemic financial imbalances are currently limited
Dalio: Stage 6, Late-Cycle Warning
I wrote about Ray Dalio last week in OMR: Big Cycle Stage 6
sees the debt problem as central to the transition into Stage 6 of the Big Cycle:
Debt levels approaching limits of sustainability
Rising interest burdens constrain policy flexibility
Increasing reliance on monetary financing
Risk of currency debasement, internal and geopolitical conflict
Potential restructuring of the global monetary order
Core view: Debt dynamics ultimately drive regime change.
Blumenthal View: Fiscal Dominance & Structural Risk
My framework tends to bridge the two:
Debt service costs increasingly crowd out productive spending
Persistent deficits risk entrenching higher inflation and rates
Fiscal dominance limits central bank independence
Long-term real returns may suffer even without crisis
Market stability today does not negate future instability
I see irresponsible legislators, future interest rate controls, continued money printing, and waves of inflation
What struck a light in me about Tousley’s presentation was the dollar’s dominance. Secretariat by 31 lengths. I think he is right. We’ll have events but no collaspe and we are more likely to see a prolonged era of fiscal dominance, financial repression for the masses, higher volatility, and lower real growth. The wild card is AI - a legitimate game changer.
Bottom Line
Tousley offers a compelling counterweight to the dominant doom narrative. The global system faces serious long-term challenges, particularly around debt, demographics, and geopolitics. But in the near term, the forces actually driving markets like growth, earnings, Fed policy, and seemingly unending liquidity, remain positive. Buy good businesses with low debt, high free cash flow, and high and growing dividends. Gold, copper, commodities, infrastructure, and energy look attractive to me.
Ray Dalio warns the world order is fracturing. Tousley argues the engine has a few kinks, but it is still running smoothly. For now, both can be true at the same time.
The lesson for investors is not to ignore risks but to distinguish between what is possible and what is already unfolding.
For now, the books remain on the shelf. Keep your eye on the 10-year Treasury. If the bond vigilantes revolt, this is a book pusher.
You can find John Tousley’s presentation deck here. Worth your review.
Follow me on X @SBlumenthalCMG
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Trade Signals: February 26, 2026 Update
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Personal Note: Photo’s From the Back Country
“A pair of skis are the ultimate transportation to freedom.” The late great, Warren Miller
Andy began the conference with a Ted Talk presentation about life, giving, and enjoying the path. If you are reading this missive, you are likely successful and driven. His message is to make sure you stop, reflect, and spend time with your loved ones and friends. His bigger advice is, “remeber to be an advocate and a champion for the people in your life.”
The following are a few pictures from the back country.
What a playground!
Snow cat, powder skiing team, Andy… great friends.
Steve and Andy
Max C and Steve
Brian S on left
Will and Clayton
Park City Snow Cats - also Retts Cabin from Yellowstone. Team on steps with cold beer!
Learned a lot, had great fun - checking in filled up and happy. Hope you are doing something that lifts you as well!
Thank you for spending time with me each week.
Warm regards,
Steve
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Stephen B. Blumenthal
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Stephen Blumenthal founded CMG Capital Management Group in 1992 and serves today as its Executive Chairman and CIO. Steve authors a free weekly e-letter entitled, “On My Radar.” Steve shares his views on macroeconomic research, valuations, portfolio construction, asset allocation and risk management. Author of Forbes Book: On My Radar, Navigating Stock Market Cycles.
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