Is Dick Cheney's portfolio an impeachable offense?

The dollar just keeps hitting new lows.  Bad news, except for perhaps a few U.S. exporters… and Dick Cheney.

With the dollar index in 75 territory and the national debt having just passed $9 trillion, it's worth revisiting the financial disclosure forms he and wife Lynne filed last year, and analyzed by Kiplinger's magazine with the bold headline "Cheneys Betting on Bad News?"

Vice President Dick Cheney's financial advisers are apparently betting on a rise in inflation and interest rates and on a decline in the value of the dollar against foreign currencies.

Let's examine just that first sentence in light of recent events.  The Vice President's own investment portfolio is structured in a way to benefit from the rampant inflation and precipitous drop in the dollar brought about in part by his own stated economic philosophy that "deficits don't matter."

It's enough to raise the question of whether it's an impeachable offense.

So let's burrow into the particulars:

As of the end of last year, Cheney and his wife, Lynne, held between $10 million and $25 million in Vanguard Short-Term Tax-Exempt fund (it's impossible to be more precise because the disclosure form lists holdings within ranges). The fund's holdings of tax-free municipal bonds mature, on average, in a little more than a year — meaning that the fund should hold up well if rates rise.

This fund's one-year performance is no great shakes — up 0.4%.  Sure, there are some tax advantages, but there are far better ways to bet on rising inflation and a falling dollar than this.

The Cheneys held another $1 million to $5 million in Vanguard Tax-Exempt Money Market fund, which is practically risk-free and could benefit from continued increases in short-term interest rates. And the couple had between $2 million and $10 million in Vanguard Inflation-Protected Securities fund. The principal and interest payments of inflation-protected bonds rise along with consumer prices, making them good inflation hedges.

The latter fund is up 2.8% over the last year.  That doesn't even equal CPI, much less the real inflation rate of over 10% as calculated by the intrepid John Williams.

The Cheneys also had between $10 million and $25 million in American Century International Bond. The fund buys mainly high-quality foreign bonds (predominantly in Europe) and rarely hedges against possible increases in the value of the dollar. Indeed, its prospectus limits dollar exposure to 25% of assets and the fund currently has only 6% of assets in dollars, according to an American Century spokesman.

This fund has done somewhat better — up 7.4% in the last 12 months.  But curiously, its top holding — nearly 13% worth — is in U.S. Treasury notes.  The veep could have had higher returns in a couple of funds that explcitly bet on a falling dollar.

Conclusion:  Cheney may be betting on rising inflation and a falling dollar, but the way he's going about it is either so conservative or so stupid that it absolves him of the charge that he's purposely profiting from his own policies.  If he had a portfolio chock full of precious metals and oil services companies (the latter being a business he knows rather well from his days at Halliburton), it would be another matter altogether.  (It's the sort of portfolio Byron King has constructed for Outstanding Investments subscribers that has delivered an average 118% gain on all open positions.)

Verdict:  Cheney's portfolio is not an impeachable offense.

And really… Isn't it enough that he's subverted the Constitution in the name of a looney-tunes philosophy of "unitary executive" power that would have horrified even Alexander Hamilton?

The Daily Reckoning