“The group cohered around a shared opposition to both Keynesian economics and New Deal liberalism.”
-Jennifer Burns
Sadly, if only for an attempt at having some balance, that wouldn’t be a group that’s around and/or relevant, politically, on the topics of US economics today. That was The OG Band from Chicago of Friedman, Wallis, Stigler, etc. who were a “different set of intellectuals, set upon constraining the constraints government put on market forces.”
As Burns goes on to explain in Milton Friedman The Last Conservative, the “Chicago School” stood in sharp and powerful contrast vs. “East Coast Universities like Harvard, MIT, and Yale that fed a steady stream of economists into government positions and policy work.” (pg 199)
As you can probably tell by my rants and writings, I am the furthest thing you can find from an “economics intellectual.” It requires no intellect whatsoever (beyond a 6th grader’s) at this point to see what both Democrats and Republican governments have done to both reckless DEFICIT spending and your children’s future US DEBT liabilities.
Back to the Global Macro Grind…
So, who wants to read a white paper from a Big Government guy who damn near blew up Harvard’s endowment? While that’s not easy to do, it’s a lot easier to opine on what could happen with their beloved “Rate Cuts.”
Again, I’m not the intellectual guy. I’m the guy who does what both market prices and data are actually doing. And, the fact of the matter is that during the recent correction in Bond Yields, US INFLATION ramped higher, faster!
Still don’t “see” it because you know about seasonal adjustments to PCE?
A) NASDAQ just inflated to an ATH
B) Natty Gas just inflated to new INFLATION Re-Accelerating highs
*ATH = All-time High
And, as far as this market #history guy can tell, all-time remains a very long time.
Now let’s do a little more ROC (rate of change) #math for the Market Practitioner guys and gals out there:
A) When Bond Yields go down, #NazVol go down, and NASDAQ go up
B) When Bond Yields go down, Natty Gas inflated to a new Cycle High = +67% since March
Yep. If you A) played hockey and B) do both fractal math and #history, you’re going to be dangerous to the establishment’s Linear Econs. Let’s look at Energy Prices as a leading indicator for future INFLATION:
A) Today’s Chart Of The Day is slide 109 of the Q2 Macro Themes Update we presented last week
B) It shows you how Energy Prices will flow through to the May INFLATION report (CPI)
Notice how the BLUE line in the chart peaked in JUNE of 2022? Why should you note that #history?
A) JUNE of 2022 was The Cycle PEAK of US headline INFLATION (CPI) = +9.06%
B) JUNE of 2023 was The Cycle LOW of US headline INFLATION (CPI) = +2.97%
And what has US INFLATION done since June of 2023? A: Go Up.
The critical point here is that the BASE EFFECTS for the US Energy Prices in our proprietary US INFLATION Nowcast Model (Crude Oil, Diesel, and Natural Gas) only EASE from here into year-end 2024.
Math = when BASE EFFECTS ease and underlying prices in our model inflate, INFLATION Go Up.
Never mind Larry Summers (who will never impact a decision I make with my hard-earned capital), if Jesus Christ himself told me Rate Cuts would reverse the math on what I just wrote, I wouldn’t believe him.
Yes, I am a non-intellectual Catholic. Please don’t cancel! There’s no religion or high priests from the Ivy League Towers of Economics in my Full Cycle Investing #process.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets
UST 30yr Yield 4.49-4.69% (bullish)
UST 10yr Yield 4.34-4.57% (bullish)
UST 2yr Yield 4.75-4.94% (bullish)
SPX 5181-5349 (bullish)
NASDAQ 16,246-16,915 (bullish)
RUT 2053-2125 (bullish)
Tech (XLK) 205-216 (bullish)
Insurance (IAK) 114.62-117.94 (bullish)
Energy (XLE) 92.71-95.70 (bullish)
Basic Materials (XLB) 90.74-93.05 (bullish)
Shanghai Comp 3113-3179 (bullish)
Nikkei 37,762-39,161 (bullish)
BSE Sensex (India) 72,494-74,306 (bullish)
DAX 18,503-18,919 (bullish)
VIX 11.57-13.95 (bearish)
USD 104.11-105.42 (bullish)
Oil (WTI) 77.90-80.39 (bullish)
Nat Gas 2.20-2.86 (bullish)
Gold 2 (bullish)
Copper 4.60-5.20 (bullish)
Silver (SLV) 28.23-32.50 (bullish)
NVDA 877-964 (bullish)
Bitcoin 61,408-72,707 (bullish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
