This note was originally published at 8am on June 04, 2012. INVESTOR and RISK MANAGER SUBSCRIBERS have access to the EARLY LOOK (published by 8am every trading day) and PORTFOLIO IDEAS in real-time.
“The first thing you have to know is yourself.”
-George Goodman, The Money Game
Chapter 2 of The Money Game is about ‘You: Identity, Anxiety, and Money.’ It walks through some very basic training leadership lessons from “Mister Johnson” (as in Ned Johnson, the Founder of Fidelity Investments) on how to make it in this business.
“A man who knows himself can step outside of himself and watch his own reactions like an observer… With the good men, you can see the learning juices churning around every mistake. You learn from mistakes. When I look back, my life seems to be an endless chain of mistakes.” (pages 26-27)
If only America’s economic pundits and politicians had the humility to reflect upon all of the forecasting and policy mistakes we have been making in this country for the last 6 years… if only we had the kind of accountable leadership that The People could trust…
Back to the Global Macro Grind…
At the end of the day, you need to know yourself and your process, or your time in this profession will be relatively short. This is a profession that is in the middle of a revolution. We all need to Re-Think and Re-do what has not been working.
What is it that you do? Why did you do it that way? Is your risk management process malleable and repeatable?
Credible Sources and Accountable Leadership – find both and you’ll weather this Globally Interconnected economic storm just fine. Today is not a day to be freaking out and selling low. Friday was a Shorting Covering Opportunity. Today is a wait and watch day.
Know yourself; know your position:
- Cash = 82%
- International Currencies = 9% (US Dollar – UUP)
- US Equities = 9% (Utilities and Apple – XLU and AAPL)
- Fixed Income = 0%
- International Equities = 0%
- Commodities = 0%
That’s the Hedgeye Asset Allocation Model that we #TimeStamp each and every day. We update these positions daily because we believe strongly that there should be responsibility in recommendation.
Not being long anything Commodities in Q2 has been a choice. Not being long anything big beta (Basic Materials, Energy, or Financial stocks) was also a choice. So was not chasing Treasuries higher on Friday.
While Growth Slowing and Deflating The Inflation of Bernanke’s Bubbles (Commodities) remains our Q2 Global Macro Theme, that doesn’t mean we short-and-hold. From a time and price, almost everything that ticks is interesting.
So is the ongoing Macro Catalyst Calendar – here’s how that looks to us this week:
- Monday – capitulation selling on Asia’s Equity market open (despite Asian Equities being red since Feb-Mar)
- Tuesday – ISM non-Manufacturing data in the US, where #GrowthSlowing will remain a consensus concern
- Wednesday – ECB decision on rates, money printings, bailouts, etc.
- Thursday – Fed musings about whatever it is that they can/cannot do as Bernanke gives his economic “outlook”
- Friday – Chinese inflation data for May (CPI and PPI), which should slow as we see continued Deflating of The Inflation
Overall, the news-flow will get more policy-centric as we move into the belly of the week. Begging for Bernanke was already the focus of this weekend’s media coverage. So expect more of that – i.e. more of the same that slowed growth to begin with after Bernanke independently opted to debauch the Dollar on January 25thwith another Policy To Inflate.
A perpetual policy to inflate is only as good as its economic outcomes. Most people are figuring this out. In addition to their policy mistakes, The Fed has failed miserably on the two scores that matter most within their mandate:
- Price Stability
- Full Employment
So, rather than hoping for him to do more of the same, I think the best scenario for the 71% (i.e. US Consumption as a % of US GDP) is to fire Ben Bernanke.
Either Obama figures this out and shows that he is an executive leader who makes mistakes, understands them, and has the mental flexibility to change – or, Romney will run on it and state plainly that he’ll fire Bernanke himself.
Fire Bernanke? Yes. Just like you would any other Coach or Executive who is failing. If we fire Bernanke, I think whatever is left of Oil’s iQe4 upgrade speculation would go away, Gold would crash, and the US Dollar would remind the world who is going to wear the pants in this fiat world of European and Japanese policy makers threatening to blow us all up.
I know myself. And I know real people who will celebrate the only way out of this – and that’s by growing the 71% of US GDP by giving this country a monster $2/gallon tax cut at the pump. If you want that, you want a Strong Dollar. If you want a Strong Dollar, you want to get rid of Ben Bernanke too.
My immediate-term support and resistance ranges for Gold, Oil (WTIC), US Dollar, EUR/USD, and the SP500 are now $1601-1622, $81.29-89.43, $82.42-83.19, $1.22-1.25, and 1268-1300, respectively.
Best of luck out there today,
Keith R. McCullough
Chief Executive Officer