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This note was originally published at 8am this morning, November 19, 2010. INVESTOR and RISK MANAGER SUBSCRIBERS have access to the EARLY LOOK (published by 8am every trading day) and PORTFOLIO IDEAS in real-time.

“When you cease to exist, then who will you blame.”

-Bob Dylan

For a global macro analyst, the early morning grind is usually bland. It’s always dark and now it’s getting cold. This morning, however, fired me up! At 530AM EST, Ben Bernanke and his Fiat Friends were holding an academic groupthink session on live TV from Europe.

Before I get into Bernanke’s proactively predictable opening remarks, here’s your morning go-juice:

  1. Bernanke said that calling what the Fed is doing “Quantitative Easing” is “inappropriate”!
  2. As Bernanke was speaking, the Chinese raised rates on their reserve requirements by another 50 basis points (5th time this year)

It’s actually pretty funny. These academic Fiat Fools obviously take themselves quite seriously and while their god of Big Keynesian Government Intervention was speaking, the Chinese poked him again.

At 533AM, the play-by-play hitting the newswires looked like this:

  1. Bernanke says “inflation is expected to be subdued for some time… and the FOMC remains committed to price stability…”
  2. China raises rates again on “global inflation concerns”

You’ll never know what World War III looks likes until it’s staring you in the face, but this war may very well be in motion – a global economic war of both rhetoric and action between the Fiats and the Chinese.

While we wholeheartedly agree with Bernanke that calling Quantitative Guessing (QG) by any other name is “inappropriate”, what we completely disagree with this morning is Bernanke effectively joining the political arms race of blaming the Chinese for American economic problems.

Canadians will remember a South Park song titled “Blame Canada” (it was actually nominated for the Academy Award for Best Song in 1999). For whatever reason the lyrics of this damn song started playing in my head while I was watching Bernanke chirp the Chinese:

                “We must blame them and cause a fuss

                  Before somebody thinks of blaming us!”

It’s really pathetic and sad altogether that the 2010 equivalent of a South Park video has turned out to be the best explanation of what’s really going on here. Xtranormal’s cartoon “Quantitative Easing Explained” video (http://www.youtube.com/watch?v=PTUY16CkS-k) has been spreading to the world’s inboxes like wildfire in the last few weeks – last count as of this morning = 1,796,284 views.

Being at the hub of the Hedgeye exclusive network certainly has its privileges. I get to see what we call “the heat” in terms of what serious people care about on a real-time basis. Serious people aren’t just money managers. We have plenty of upstanding people around the world who work in a variety of professions who are sick and tired of being lied to. We offer them a platform to share their voice.

Washington has abused the global privilege of being the world’s fiduciary of the global reserve currency. Everyone who isn’t paid to be willfully blind gets that by now. The days of conflicted and compromised politicians and financiers living in the shadow inventory of American opacity are ending. If it takes a cartoon to expose the truth, sorry Heli-Ben, YouTube is going to smoke your academic dogma out of its hole.

In a roundabout way, this is all very good news. I don’t think I can handle watching American capitalism fold into the hands of crony-socialism for much longer. Plenty of foreign-born entrepreneurs hiring in the American business community feel the same. This isn’t the country that I came to in 1995.

I’m game to play American Capitalist against the socialists. I’ll even wear the red, white, and blue jerseys instead of my homeland’s. While The Ber-nank’s broken promises have perpetuated nothing but JOBLESS STAGFLATION and a global blame game against America’s #1 client (China), I’ve gone about bootstrapping my own American small business, hired 43 Americans, sucked up Obamacare costs like a slurpee, and liked it.

Back to the data, the lastest Nielson survey shows 89% of rural Chinese citizens expecting to see inflation in the next 12 months. Chinese consumer confidence just fell for the 1st quarter in the last 6 and the #1 concern was, take a wild guess blame gamers – inflation. Meanwhile German producer prices (PPI) came in higher again sequentially (month-over-month) this morning at +4.3% year-over-year growth.

Chairman Bernanke, it’s time to think outside of your Great Depression box and strap on some of global macro and accountability pants. If you don’t start seeing the data as it’s reported real time, “when you cease to exist, who will you blame?”

My immediate term support and resistance levels for the SP500 are now 1191 and 1203, respectively. I sold our entire US Equity position (6% position in the Hedgeye Asset Allocation Model) on yesterday’s fleeting US stock market strength. I don’t buy-and-hold what I don’t trust.

Best of luck out there today and have a great weekend,

KM

Keith R. McCullough
Chief Executive Officer

The Ber-nank Blame - 1