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Got Yen?

We hope you have less of this compromised socialist currency, if any of it whatsoever. While we covered our short position in the Yen (via the FXY etf) yesterday, that certainly doesn’t mean we like it here. I will be looking for an entry point to re-short it on strength.

The October-December squeeze in the Yen was an output of one of the great levered long investor unwinds – the Yen carry trade. This also occurred in the time period of global asset class rotation where the safety of cash became king. Now that both the US and Japanese governments are cutting interest rates to zero, it inspires the capitalist in me to hold less and less of a currency that earns no rate of return on my hard earned savings.

As the “liquidity crisis” continues to burn itself away from consensus, look for both the US Dollar and the Yen to underperform as they have been doing for the last month.

We remain short the US$ via the UUP etf.
KM

Keith R. McCullough
CEO & Chief Investment Officer

Eye on Taiwan: Another Rate Cut Today

This morning’s rate cut was Taiwan’s 6th since September!

See the chart below. While growth falling off a cliff from September to November is now a fact for the revisionist historians to chew on, the reality is that both the Chinese and Taiwanese stock markets proactively predicted the growth slowdown for the 6-9 months prior to the news hitting the tape.

Now what? Well, that answer is fairly straightforward for Asian governments – jus copy Greenspan – cut rates to zero, cut taxes, and create stimulus.

We remain long Taiwan via the EWT etf.

Keith R. McCullough
CEO & Chief Investment Officer

Quote Of The Day: Byron Wien

You have to love this man - he is one of the all time great Gentlemen in this business.

Right now I am watching him do a Bloomberg interview, and when asked about Madoff, this was the straight shooter response (paraphrased):

"It was peer pressure... as we get older, we do less due diligence..."

Unfortunately, in this business at least, that is the process of some. Thankfully not all.
KM

Daily Trading Ranges

20 Proprietary Risk Ranges

Daily Trading Ranges is designed to help you understand where you’re buying and selling within the risk range and help you make better sales at the top end of the range and purchases at the low end.

Obama Having A Rougher Day...

Undoubtedly, expectations mount on his shoulders alongside the US market's latest "re-flation"... which ultimately means that Obama can underperform more readily vs. those expectations given a higher level of prices.

Today's Obama press conference (that just ended) was the first in weeks where I noticed a more difficult dialogue between him and his adoring media.

From Israel to the economy, this just is what it is... not easy. I have an important support line developing for the SP500 at 901.
KM

Beware Of Congress...

Pelosi is on the tape here effectively pushing out expectations on the Obamerica jobs package to mid-February. She doesn't understand markets and how they move, never mind the impact of expected duration surprises on those of us proactively managing this market’s risk.

Look for any Congressional changes in rhetoric that push out expected Obama inauguration announcements (positive catalysts) to have a dampening effect on the stock market. Everything has a time and a price. We must respect that this market’s “re-flation” has moved too far, too fast.
KM

Looking for The LOW Beta Shift...

After global equity markets put on the kind of “re-flation” move that they have, the masses tend to crowd the call, coming into the game late, chasing beta.

This is when I think you should be shifting to low beta because 1. low beta outperforms on down days and 2. it's what a risk adjusted return demands.

We bought WMT yesterday using our "low beta shift" call. Other low beta positions that we like on the long side are BMY and TIP.

Keith R. McCullough
CEO & Chief Investment Officer

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 80.30%
  • SHORT SIGNALS 78.51%
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