“You are, nonetheless, full of it.”
-Tom Phillips
That pretty much sums up what I think about Powell’s economic forecasts. Just like he did on calling inflation “transitory”, on the recession the USA is entering, I think he’s going to get pounded.
That quote is from a funny #behavorial and #history book I recently read called Truth – A Brief History of Total Bullsh!t. It’s not just Powell who is going to get pounded politically, it’s whoever believes him!
We all get things wrong. “You’re almost certainly wrong in hundreds of ways, large and small, about the world you live in. As humans we spend our everyday lives swimming in a sea of nonsense, half-truths, and outright falsehoods.” -Truth, pg 3
Back to the Global Macro Grind…
So what? The guy is an unelected lawyer who “reads the papers” when he gets up every morning. What do you expect of the poor Old Wall guy? Everyone gets things wrong, right?
Yep. But everyone isn’t the head of the Federal Reserve. If Powell didn’t get “transitory” inflation so wrong, he A) wouldn’t have had to raise rates so late in The Cycle, B) do multiple panic-hikes of +50bps, and C) stay with it.
Consider the alternative (i.e. imagine he used the Hedgeye Inflation Nowcasts and got it right). Nope. Old Wall doesn’t evolve. It compounds its mistakes. Instead of pre-emptive hikes, he perpetuated #MOAB (The Mother of All Bubbles) with more cowbell.
Worst part: none of it can be undone.
None of Policy Mistake history, that is. Policy perpetuated the multiple asset bubbles. And now policy is popping them. Up next, both Barry Sternlicht and Bill Ackman are going to cry it out together on CNBC.
I feel so bad for them. They just want their bubbles back.
Moving along to the goal that Barry, Bill, and I all have in common: making money:
A) I don’t make money the same way that Barry and Bill do
B) I’ll make lots of money, as will many of you, with my current Asset Allocations
C) I’ve already made a lot of money shorting Barry (STWD), Bill, and Blackstone (BX) stocks too
Oh, Barry, you didn’t like reading that? I feel so bad for you. Personally, I don’t like what the Blackstone boys have done to The People with BREIT. So let’s start with doing the right thing and giving The People in SREIT, BREIT, etc. their money back.
Imagine how much money The People would have already made by getting out of the Liquidity Traps that were built on ZIRP?
If you promise me annual liquidity in BREIT and I take all my money out of it when #Quad4 hits and put it in a 4.75% Savings account, you get the compounding math of a Go Anywhere Asset Allocation Strategy, right?
Voila Leverage Boys, that’s how our community makes moarrr money!
On that score, my LONG Only Asset Allocation Model hit an all-time high for the last 3 days. What up with that?
A) US Stocks were down for the last 3 days
B) But my Gold (and Precious Metal) Asset Allocations went straight up
C) And my latest Asset Allocation to Duration (TLT, IEF, IIGD, etc.) crushed it
Crush or be crushed, Barry and Bill. That’s The Game you got rich playing. The People want to play it too.
And that’s the part about Powell that I appreciate. While he couldn’t forecast rain accurately in the middle of a hurricane, I do appreciate that he appreciates that there should be a non-zero “risk free” rate on The People’s hard-earned capital.
These other guys (and yes, they’re all Wall Street guys) do not appreciate that. It conflicts with their ZIRP business models.
And you know what, it’s not just them. I can assure you that many guys and gals who read this today will either #like it or support it. They’ll blame me for whatever Liquidity Trap they’re invested in. By the end of it imploding they’ll blame Powell too.
It is what it is. This isn’t a social studies profession or a popularity contest. This is The Fourth Turning on Wall Street.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets
UST 10yr Yield 3.31-3.59% (bearish)
UST 2yr Yield 3.80-4.26% (bullish)
High Yield (HYG) 74.31-75.11 (bearish)
SPX 4037-4160 (bearish)
NASDAQ 11,729-12,214 (bearish)
RUT 1 (bearish)
Tech (XLK) 142-152 (bearish)
Gold Miners (GDX) 32.80-34.96 (bullish)
Utilities (XLU) 67.58-70.40 (bullish)
Nikkei 28,218-29,206 (bullish)
VIX 15.94-20.98 (bullish)
USD 100.78-101.99 (neutral)
EUR/USD 1.094-1.109 (neutral)
USD/YEN 132.20-137.55 (bullish)
CAD/USD 0.730-0.743 (bearish)
Oil (WTI) 67.98-76.05 (bearish)
Oil (Brent) 71.37-80.34 (bearish)
Nat Gas 2.10-2.55 (bearish)
Gold 1 (bullish)
Copper 3.78-3.97 (bearish)
Silver 24.58-25.96 (bullish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
