“What is wanted is a history.”
- Michael Knox Beran
Biden met with Powell yesterday. His summary of the meeting was that “Jerome has a laser-like focus on inflation.” From the creators of the word “transitory”, thank goodness for that!
My opening volley isn’t a political one. It’s one about the privileged. It’s also one about the incompetence of the Federal Reserve. Per Knox Beran’s point, everyone wants a history. Not everyone wants the non-fiction version.
The aforementioned quote comes from one of the most controversial #history books that I have read in years: WASPS – The Splendors and Miseries of an American Aristocracy. Don’t get excited or triggered. I only cited the title of a book.
Back to the Global Macro Grind…
How do you write about the people pulling the political puppet strings at an unelected and powerful pillar of the establishment like the Fed? What is The Fourth Turning? Who is John Galt?
Important questions that I don’t care to answer this morning. But on the history of it all, I agree with Knox Beran on one thing: “Most accounts of elite establishments are ponderously genealogical, narrowly sociological, or romantically embellished.”
And on with our non-elite-establishment day, The Hedgeye goes…
The thing about The Hedgeye is that it has eyes. It can see the truth. It can see right through bullshit. It’s one of the few places you can look to each and every morning for important life principles like Transparency, Accountability, and Trust.
Do you trust that The Hedgeye is going to nail every single macro market move?
A: I certainly hope not.
Do you trust that The Hedgeye is going to measure and map all Global Macro Economic data, daily, and contextualize that ROC (Rate of Change) data with its #VASP (Volatility Adjusted Signaling Process), in real-time? A: many of you do.
Where I grew up, I wasn’t part of a “class” that Karl Marx would like to pigeon hole me in.
I was part of a family of Irish and French Canadian Grinders. That’s why they call us Muckers, eh! And in case you didn’t notice, I couldn’t care less about what the establishment thinks about me.
What I really care about is how many Bonds I am going to buy today!
First, what does my #VASP front-runner of both establishment-Econs and consensus market positioning say this morning?
A) Treasury Bond Volatility (the MOVE Index) recently broke to Bearish @Hedgeye TREND and remains there this AM
B) When Bond Market Volatility breaks down, the TOP-end of my Risk Ranges for Bond Yields starts to breakdown
C) When the TOP-end of Bond Yields come DOWN, the BOTTOM-end of my Risk Range for Gold goes Up
Ok brothers and sisters of The Hedgeye Class, now we have ourselves a #Quad4 Buy List:
- I signaled BUY on European Government Bonds (BNDX) in Real-Time (Coaching) Alerts yesterday
- I will signal buy on both the short-end (SHY) and long-end (TLT) of Treasuries when my Risk Ranges do
- I will signal buy on Gold (GLD) when my Risk Ranges do (i.e. when GLD approaches the LOW-end of my Range)
What else would we like to buy-MORE of if the prices of those things probe the LOW-end of my Risk Ranges:
- US Dollars (UUP)
- Taxable Munis (BAB)
- International Gov Bonds (IGOV)
- Utilities (XLU)
- MLPs (AMLP)
- Wheat (WEAT)
Wheat? Yes, as Boris (played by Woody Allen) said “wheat… lots of wheat… fields of wheat…”
But back to the double-dipping on European Gov Bonds (BNDX and IGOV), there’s a difference between the two. In IGOV, you’re longer of the Nordic Countries + Ireland. BNDX is long of Southern Europe + Germany.
But, but, how can you buy The Bonds when the establishment’s Econ from Austria (Holzmann) says there’s so much inflation and so little wheat… winter wheat?
Haha. The same way that we were shorting both Sovereign Bonds and Gold when these guys said inflation was “transitory”!
What’s the next catalyst for Government Bonds? A: the Labor market. Instead of every Linear Econ talking about yesterday’s news (Eurozone headline INFLATION for May hit an all-time high at +8.1% year-over-year vs. +7.4% in April)…
We’re going to start to see both a US Corporate Profit recession and a proper European Recession find its way into firings. If you don’t believe in that narrative, that’s fine. The Fed doesn’t either. But The People do.
Plug the word “layoffs” into Google Trends Search.
That’s a lot closer to The ROC truth than any narrative or book you’ll read today.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets:
UST 10yr Yield 2.69-2.93% (bullish)
UST 2yr Yield 2.39-2.74% (bullish)
High Yield (HYG) 74.76-80.40 (bearish)
SPX 3811-4181 (bearish)
NASDAQ 10,990-12,199 (bearish)
RUT 1 (bearish)
Tech (XLK) 127-142 (bearish)
Utilities (XLU) 70.60-75.98 (bullish)
VIX 25.32-32.55 (bullish)
USD 101.01-104.56 (bullish)
EUR/USD 1.041-1.084 (bearish)
Oil (WTI) 108.37-117.38 (bullish)
Nat Gas 7.90-9.25 (bullish)
Gold 1 (bullish)
Copper 4.14-4.36 (bearish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
