Bear Bangers

“Bear banger is a slang or colloquial term sometimes used to describe exploding projectile wildlife deterrents.”

-Ursus International

 

Bear spray or bear banger? When you go for a run down by the McCullough Lake House in Northwestern Ontario, what do you use? Inquiring Risk Manager minds want to know.

 

After running up to a bear during our family vacation last week, my wife Laura asked the original Thunder Bay Bear (my Dad) for some reinforcements. Instead of the go-to bear mace that most locals use, he opted to buy her something that makes noise.

 

The twist on the noisemaking part is that Bear Bangers sound more like a shotgun than a firecracker. I wouldn’t put a loaded one in your running shorts.

 

Back to the Global Macro Grind

 

Running from your US or European Equity shorts at last week’s short covering highs was not a good risk management idea. Neither was selling your Fixed Income exposures at last week’s lows. Bear Banging works, but your timing matters.

 

Last week’s intra-week high for the SP500 was 1426. The intra-week low for 10-year US Treasury Bonds was close to 1.90%. However, those weren’t closing highs and lows. And it’s closing prices that matter most in our globally interconnected macro model.

 

From those no-volume intraday levels to the other side of the risk management trade:

  1. SP500 dropped a full -2% to 1398 intraday on Friday morning
  2. 10yr US Treasury Yields dropped just over -10% to close the week at 1.69%

So, I covered all but 4 shorts in the Hedgeye Portfolio at 1398 and sold almost 50% of our Fixed Income Exposure in the Hedgeye Asset Allocation Model week-over-week.

 

For those of you who are new to what we do, the Hedgeye Portfolio and the Hedgeye Asset Allocation Model are 2 mutually exclusive risk management products.

 

The Hedgeye Portfolio is simply a real-time idea list of risk managed long/short ideas that focuses on Rule #1 (don’t lose money), whereas the Asset Allocation Model attempts to be more dynamic than the Old Wall’s 60/40 stocks/bonds thing.

 

As time and prices change, we do.

 

When confronted with a live bull or bear, sometimes you have to move fast; sometimes you don’t have to move at all. If you’ve survived the last 5 years of this whipsaw, you get that the only perma you need to be is permanently flexible.

 

To be clear, I wouldn’t dare set foot in the Shuniah dump pit with a baby black bear (and no mama bear in sight) inasmuch as I’d short-and-hold stocks into a central planning event at Jackson Hole…

 

Being bearish on bonds at last week’s bottom was as bad a decision as buying last week’s 1426 top in US stocks. Being bearish on bonds means you believe growth isn’t slowing. Being bullish on stocks, at any price, just means you don’t sell on green.

 

Being bullish on commodities up here is something that I am not. While Bernanke claims “price stability and full employment”, what’s really happening here is that people are front-running him, getting all lathered up in what slows real (inflation adjusted) consumption growth (rising commodity prices).

 

Got causality? Last week’s CFTC (Commodities Futures Trading Commission) data revealed an all-time high in outstanding futures and options contracts:

  1. Week-over-week gain in total contracts of +10% to 1.32 million (eclipsing the Feb/Mar 2012 highs)
  2. Gold contracts were up a stunning +35% wk-over-wk to 110,623
  3. Oil contracts were up another +18% wk-over-wk to 179,526

Fed inspired (US Dollar Debauchery) commodity inflation is not growth. It slows growth. And when this entire centrally planned game of Bailout Begging ends, the 3rd of the Greenspan/Bernanke asset bubbles (commodities) will be in for one heck of a Bear Banger.

 

Our immediate-term risk ranges for Gold, Oil (Brent), US Dollar, EUR/USD, 10yr UST Yields, and the SP500 are now $1, $112.31-115.87, $81.16-82.11, $1.23-1.25, 1.65-1.76%, and 1, respectively.

 

Best of luck out there this week,

KM

 

Keith R. McCullough
Chief Executive Officer

 

Bear Bangers - Chart of the Day

 

Bear Bangers - Virtual Portfolio


Another French Revolution?

"Don't be complacent," writes Hedgeye Managing Director Neil Howe. "Tectonic shifts are underway in France. Is there the prospect of the new Sixth Republic? C'est vraiment possible."

read more

Cartoon of the Day: The Trend is Your Friend

"All of the key trending macro data suggests the U.S. economy is accelerating," Hedgeye CEO Keith McCullough says.

read more

A Sneak Peek At Hedgeye's 2017 GDP Estimates

Here's an inside look at our GDP estimates versus Wall Street consensus.

read more

Cartoon of the Day: Green Thumb

So far, 64 of 498 companies in the S&P 500 have reported aggregate sales and earnings growth of 6.1% and 16.8% respectively.

read more

Europe's Battles Against Apple, Google, Innovation & Jobs

"“I am very concerned the E.U. maintains a battle against the American giants while doing everything possible to sustain so-called national champions," writes economist Daniel Lacalle. "Attacking innovation doesn’t create jobs.”

read more

An Open Letter to Pandora Management...

"Please stop leaking information to the press," writes Hedgeye Internet & Media analyst Hesham Shaaban. "You are getting in your own way, and blowing up your shareholders in the process."

read more

A 'Toxic Cocktail' Brewing for A Best Idea Short

The first quarter earnings pre-announcement today is not the end of the story for Mednax (MD). Rising labor costs and slowing volume is a toxic cocktail...

read more

Energy Stocks: Time to Buy? Here's What You Need to Know

If you're heavily-invested in Energy stocks it's been a heck of a year. Energy is the worst-performing sector in the S&P 500 year-to-date and value investors are now hunting for bargains in the oil patch. Before you buy, here's what you need to know.

read more

McCullough: ‘My 1-Minute Summary of My Institutional Meetings in NYC Yesterday’

What are even some of the smartest investors in the world missing right now?

read more

Cartoon of the Day: Political Portfolio Positioning

Leave your politics out of your portfolio.

read more

Jim Rickards Answers the Hedgeye 21

Bestselling author Jim Rickards says if he could be any animal he’d be a T-Rex. He also loves bonds and hates equities. Check out all of his answers to the Hedgeye 21.

read more

Amazon's New 'Big Idea': Ignore It At Your Own Peril

"We all see another ‘big idea’ out of Amazon (or the press making one up) just about every day," writes Retail Sector Head Brian McGough. "But whatever you do, DON’T ignore this one!"

read more