This note was originally published at 8am on July 27, 2011. INVESTOR and RISK MANAGER SUBSCRIBERS have access to the EARLY LOOK (published by 8am every trading day) and PORTFOLIO IDEAS in real-time.
“If we get jammed up, we're holding court on the street.”
-Jimmy Coughlin, “The Town” (2010)
Just when I thought the biggest tail risk to whatever remains of our free-market lives (Congress) couldn’t find lower-lows, the Republicans redefined the ridiculous yesterday.
In a must read section of a Bloomberg News article by Julie Hirschfeld Davis this morning, Republican Congressman Kevin McCarthy of California gets YouTubed for playing a clip from “The Town” to inspire the Republican troops at their party headquarters yesterday.
I don’t think Julie could have made up this scene if she tried. To put this movie in context (in case you haven’t seen it, it’s an outstanding movie directed in 2010 by Ben Affleck with a 4.5 star rating on Netflix), this is a Boston bank robber movie where the aforementioned character that I quoted (“Jim”, played by Jeremy Renner) is as emotionally unglued as the VIX.
Back to the Global Macro Grind…
The VIX (the Volatility Index) is up +15.6% in a straight line this week as Congress Holds Court, watches gangster movies, and does their best to implode the US Dollar (down another -0.9% yesterday, taking its cumulative losses to -2.2% in the last 7 trading days).
This is not only a national embarrassment for the country, but a professional embarrassment for each and every one of these morons who don’t realize that the entire world is watching them – real-time.
Did I call them morons? Sorry, I meant Market Morons. Not all of them, some of them, couldn’t tell you what a EUR/USD currency trade in swap means or where to execute it. All the while the entire world’s globally interconnected risk trades off of their unawareness. Nice.
Domestically, this analytical incompetence isn’t lost on people. Actually, it isn’t Internationally either. In terms of scoring the Fiat Fools globally, consider the following polls:
- USA – Congress hits new low in yesterday’s Rasmussen reading; only 6% of Americans think Congress is doing a good job
- JAPAN – Japanese PM Naoto Kan’s approval rating hit a fresh new low yesterday of 17.1% (that’s lower than Obama’s!)
- ITALY – Embattled hot-tubing Prime Minister, Silvio Berlusconi’s approval ratings are dropping 1000 basis points a month
What do all of these countries and their said/sad leadership have in common? Print LOTS OF MONEY!
Yeah baby, print it – and if you get jammed up with a 17 year-old while swimming naked or swilling with some Republicans in de Club, just bust out some fear-mongering and hold court on the manic media’s streets. They need content.
If you didn’t know this is all ending the way that gravity predicted it would, now you know. Thank God for that.
What to do with your hard earned money?
I’ve actually taken this gong show as an opportunity to get invested. Yesterday, on weakness, I bought the US Dollar (UUP) and Indian Equities (INP), taking my Cash position in the Hedgeye Asset Allocation Model down to its 2nd lowest level of the year (37%).
This doesn’t make me a raging bull. This simply makes me a buyer on red and a seller on green. As we outlined in our Q3 Macro Themes call a few weeks ago, as the Fiat Fools of our world play “Policy Pong” with our markets, we should stop getting frustrated by it – and just trade it. Be a “Risk Ranger” (another Q3 Theme) and trade risk around the range.
Yes, buy-and-hold fans, trading is a required exercise in modern day risk management. Doesn’t that make me a “short-termist” when our longest of long-term views have been what has really led us to being right on 2011 Growth Slowing As Inflation Accelerates? The Fiat Fools and their policies do 2 very specific things to your economies and markets:
1. They shorten economic cycles
2. They amplify market volatility
And on that note about volatility, I’ll end this morning’s missive where I began – with a preview of the next episode of “The Town’s” Debt Ceiling from our squirrely friend Jimmy, who so seemingly inspired Republican Congressman McCarthy yesterday: “Secrets with this one.”
My immediate-term support and resistance ranges for Gold, Oil, and the SP500 are now $1599-1624, $98.06-100.81, and 1326-1353, respectively. Buy low. Sell high.
Best of luck out there today and enjoy the show,
Keith R. McCullough
Chief Executive Officer