Cold Chill: A Russian bail out facility for Iceland

Why does Island, a nation of 300,000 with a GDP of only $20 B matter? As the son of the former commander of the army of Iceland -a ceremonial title formerly assigned to the highest ranking NATO army commander on the Island at any given moment , I have some quick insights:

• Iceland is the only member of NATO that does not have a military.
• Through a long standing treaty the United Stated is bound to defend the sovereignty of the tiny island nation against any aggressor.
• The US shut down our cold war base at Keflavik in 2006 and no longer hold a lease for permanent facility there.
• Iceland holds a critical a strategic position in the North Atlantic, overlooking Russia’s only outlet into that sea.

Apart from the absurdity of the level at which the Icelandic government are attempting to peg their currency at the level they have chosen (the chart attached below show the official exchange rates, dealer banks have reportedly shown levels as much as 30% lower than the lowest level quoted here over the past 2 days) the Russian bailout also has to be leaving EU and NATO leader with knots in their stomachs: with Putin employing the Chavez method of diplomacy through distressed lending they must now consider the formerly unthinkable possibility of a Russian presence in the North Atlantic.

Andrew Barber
Research Edge LLC

TYPO: SP500 Levels

1022 was the 3pm price, and 1004.33 is our buy/cover for a "Trade" line.

My typo, appologies.

Refreshing Our SP500 Trading levels for the close...

As our business grows and we move to more tailored Macro relationships with our core constituency of RE Macro clients, we need to continue to improve how we express our investment process.

See the chart below. The code is simple: red is bad, green is good.

Our overhead "Trend" line for the SPX is 1196.04.
Our buy/cover for a "Trade" line for the SPX is 1104.33.
Our sell/short the bounce line for the SPX is 1127.55.

Our quant models refresh every 90 minutes. These levels incorporate a cash price in the SPX of 1222 at 3PM.

Be patient, but realize that there is plenty of performance to pick up if you trade this volatility well. Process trumps emotion.

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Morgan Stanley down -31% right now; but where are the evil doers?

At $16/share, this is a lower low than the price we saw when John Mack had his Braveheart call to arms (and meeting with Chris Cox) against his prime brokerage clients and short sellers at large...

Could institutions who are long the stock be selling it? Shhh... don’t tell anyone.

As MLK said, "a lie cannot live".

Helicopter Ben flies again...

Ben Bernanke remains boxed in by the politicized nature of his role. The Fed Funds Futures market is begging for rate cuts, so he is shamelessly signaling that he will deliver on those market expectations. Hence the “Helicopter Ben” nickname. He is who he is. History will not look back on his legacy kindly.

Bernanke is finally right, the domestic “inflation outlook has improved somewhat”, but do not mistake this for Bernanke being early with that call. He has been calling for an inflation slowdown since 2006. In this speech, he is also moving back to the rhetoric that “risks to downside growth have risen.” Combined, these messages on inflation and growth, in English, mean that Bernanke is definitely going to cut interest rates on October 29th, 2008.

In the end, I think the only way out of this mess is to raise rates.

I understand that's not consensus, but I also understand that my macro calls haven't been for the last nine months. I am not making this call for the sake of being contrarian. I am making it because the only way for a capitalist who is flush with cash to earn a return is to give him/her a rate of real return. Cutting nominal interest rates below 2%, effectively re-creates the Greenspan scenario of 2001-2003, which gave birth to this mess of a leverage cycle to begin with.


This Australian Banker Gets It

This morning's move by Aussi central bank chief, Glenn Stevens, to cut interest rates by 100 basis points was one that should be applauded, globally. Not only was he the most objective in taking his target rate up during the global asset inflation mania (see chart, he raised rates since 2001), he is now one of the few who can proactively manage global asset deflation from a position of strength.

Here are 2 charts: CPI & Target Rates for the past 10 years; and the ASX 200 (AUD&USD).

Keith McCullough and Andrew Barber
Research Edge LLC

Hedgeye Statistics

The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

  • LONG SIGNALS 80.52%
  • SHORT SIGNALS 78.68%