Central Planners With Attitude







Sometimes when you begin to examine the market, you see a pattern or movements that remind you of years past. For instance, back in 2008 when the crisis was in full swing, a lot of people brought up dates like 1987 and 2001. Those were big events where the market took a turn for the worse and made a lot of people feel sick to their stomachs. To us, this market feels somewhat similar to the aforementioned years. It’s toppy. The S&P 500 can’t seem to keep it together above 1438 (we went short SPY at 1437). If you’re still playing the game of saying stocks are up year-to-date, it’s time to cut that out. Even after the crash of ’87 stocks were still up year-to-date despite a -23% down day.




Central planners are popping caffeine pills and getting to work these days. There is no rest for the wicked. Bernanke is busy pushing 0% rates out until 2015 and will probably push them even further should he need to appease market participants even further. The argument is still the same: “Let me drop some QE into this market and you’ll have stocks and commodities rally!” The short-term stock gains don’t seem worth the pain at the pump and grocery store that the rest of America has to face. $150 oil just perpetuates slowing growth and that’s not something anyone wants, is it? 






Cash:                UP


U.S. Equities:   Flat


Int'l Equities:   Flat   


Commodities: Flat


Fixed Income:  DOWN


Int'l Currencies: Flat








Nike’s challenges are well-telegraphed. But the reality is that its top line is extremely strong, and the Olympics has just given Nike all the ammo it needs to marry product with marketing and grow in the 10% range for the next 2 years. With margin pressures easing, and Cole Haan and Umbro soon to be divested, the model is getting more focused and profitable.

  • TAIL:      LONG            



Emissions regulations in the US focusing on greenhouse gases should end the disruptive pre-buy cycle and allow PCAR to improve margins. Improved capacity utilization, truck fleet aging, and less volatile used truck prices all should support higher long-run profitability. In the near-term, Paccar may benefit from engine certification issues at Navistar, allowing it to gain market share. Longer-term, Paccar enjos a strong position in a structurally advantaged industry and an attractive valuation.

  • TAIL:      LONG



LVS finally reached and has maintained its 20% Macau gaming share, thanks to Sands Cotai Central (SCC). With SCC continuing to ramp up, we expect that level to hold and maybe, even improve. Macau sentiment has reached a yearly low but we see improvement ahead.

  • TAIL:      NEUTRAL







“Another nail to the heart of Not that's it's needed.#EMH has been dead for a long time” -@JamesGRickards




“A thought is often original, though you have uttered it a hundred times.” –Oliver Wendell Holmes




$104 million. The payout for a former whistleblower at UBS who altered US authorities to the firm’s tax evasion practices.





The Macau Metro Monitor, September 12, 2012




SJM CEO Ambrose So said, “The new arrangements (relaxation on entry permits by six cities) will bring additional visitors; I think the city can handle 30 million visitors. After 10 days of implementation, we see a slight increase of visitors, which benefits both the mass market and VIP sectors. But we need to see a more long-term trend to see the effects, we can't judge by a few days. It’s hard to find a formula to calculate the [relation between] visitor numbers and the increase in gaming revenues. There may be fewer people coming but they may be spending more. There’s no rush to see the impact of the single-digit growth (in visitor arrivals) forecast. We should get a better picture after one quarter."


Regarding the Sheraton opening next Thursday at SCC, So said it was only natural that Sands China’s market share would grow.  “Concern is one thing, but we have our own strategies,” So said, explaining that since the peninsula was more gaming-focused and Cotai was more resort-oriented, there was no direct competition between the two areas.  However, he admitted that SJM would have to “reposition” itself to meet the changes in customers’ expectations and gaming behavior when the company will have its property up and running in Cotai, possibly in three years’ time. 


So also thinks that China's 12th Five-Year Plan will bring more diversification to Macau.  “The Hengqin Island will bring an important support for the development of Macau’s non-gaming sectors so that tourists can stay longer,” he remarked.  With the construction of the Guangzhou-Macau train and the Hong Kong-Zhuhai-Macau bridge, he expects Macau to definitively become a center for world tourism. 


“We always have interests in parcels seven and eight in Taipa, but Sands is having some legal arrangements with the government now over the land”. He stated that within the gaming sector, “we have great advantages, because we know the market. We have close relationships with the government, we are local. Most tourists are from China, we know their taste. We can reposition ourselves when we build a new property in Cotai.”  However, he denied obtaining any advantages from the Las Vegas Sands’ lawsuit: “The only advantage that we have is not having any lawsuit.”  As to the planned casino in Taipa, he explained, “it will take at least two to three years before SJM's casino is built in Taipa; we're waiting for the details.”  So also sees no urgent need to employ foreign labor, mentioning that SJM has the highest rate of local employees in Macau at 95%.  



Resorts World Sentosa has been fined S$600,000, the highest single financial penalty imposed to date by the Casino Regulatory Authority (CRA), for partially reimbursing local casino patrons their annual entry levy.  TODAY first reported the CRA's probe against RWS over illegal reimbursements in July.  The CRA said in a statement today it received information from members of the public that they had received complimentary Universal Studios Singapore (USS) tickets when they renewed their annual entry levies.  CRA has referred the matter to the police's white collar crime unit, as the cases involved possible forgery, it said



MGM China co-chairwoman, Pansy Ho, said the company’s application for a piece of land in Cotai continues to go “smoothly”.  Ho added that MGM Cotai will have more non-gaming areas than MGM Macau.  Ho also admitted that, as other Asian jurisdictions legalize gaming or reinforce their bet on the industry, Macau is poised to face more regional competition.


TODAY’S S&P 500 SET-UP – September 12, 2012

As we look at today’s set up for the S&P 500, the range is 27 points or -1.02% downside to 1419 and 0.87% upside to 1446. 











  • ADVANCE/DECLINE LINE: on 09/11 NYSE 1030
    • Increase versus the prior day’s trading of -613
  • VOLUME: on 09/11 NYSE 666.98
    • Increase versus prior day’s trading of 8.26%
  • VIX:  as of 09/11 was at 16.41
    • Increase versus most recent day’s trading of 0.80%
    • Year-to-date decrease of -29.87%
  • SPX PUT/CALL RATIO: as of 09/11 closed at 1.64
    • Up  from the day prior at 1.61 


  • TED SPREAD: as of this morning 30.22
  • 3-MONTH T-BILL YIELD: as of this morning 0.10%
  • 10-Year: as of this morning 1.74%
    • Increase from prior day’s trading of 1.70%
  • YIELD CURVE: as of this morning 1.50
    • Up from prior day’s trading at 1.46 

MACRO DATA POINTS (Bloomberg Estimates)

  • 7am: MBA Mortgage Applications, Sept. 7 (prior -2.50%)
  • 8:30am: Import Price Index M/m, Aug., est. 1.5% (prior -0.6%)
  • 8:30am: WASDE report on corn, soybean, others - Preview
  • 10am: Wholesale Inventories, July, est. 0.3% (prior -0.2%)
  • 10:30am: DoE Inventories
  • 11am: Fed to sell $7-$8b notes due 4/15/2014-11/30/2014
  • 1pm: U.S. to sell $21b 10-yr notes
  • FOMC starts two-day meeting 


    • House, Senate in session
    • Senate Committee on Homeland Security and Governmental Affairs will hold a hearing on the GSA; Acting Director Dan Tangherlini scheduled to testify on progress since the scandal over its Las Vegas conference
    • EPA, Energy Dept. sponsor conference on improving fuel efficiency of internal combustion engines
    • Acting Chairman Martin Gruenberg delivers opening remarks at FDIC meeting on national survey of “unbanked, under-banked” households, 8:45am
    • Better Markets Inc. releases report on cost of financial crisis, including lost wealth due to unemployment, stock market losses and housing value declines, reduced GDP, government bailouts and economic hardship, 1pm
    • U.S. International Trade Commission holds hearing on economic effects of Trans-Pacific Partnership trade agreement being negotiated in Leesburg, Va., 9am
    • Tim Hughes, general counsel for Space Exploration Technologies and former astronaut Garrett Reisman hold briefing on Space-X and privatization, 1:30pm
    • House Transportation subcommittee reviews FAA efforts to revamp U.S. aviation system with satellite-based tracking of aircraft instead of radar, known as NextGen, 10am
    • Census Bureau announces findings from “Income, Poverty, and Health Insurance Coverage in the United States: 2011” report, which contains official national findings from the Current Population Survey, 10am


  • German court allows European bailout fund to go ahead
  • Apple unveils new version of iPhone today
  • Fed seen likely to announce 3rd round of bond purchases tomorrow
  • GE may sell $2.1b stake in Bank of Ayudhya in Thailand
  • Texas Instrument raises lower end of 3Q EPS view
  • Facebook CEO says co. to address benefits of mobile advertising
  • Spain may not need bailout after ECB’s bond-buying offer
  • Italy sells 1yr bills at lowest rate since March
  • Japan machinery orders in July rise more than forecast
  • Indian industrial output misses estimates as economy falters
  • DoubleLine considers adding stock funds to firm’s investments
  • Visa planning for CEO Saunders’ ‘impending retirement’
  • U.S. holiday sales may rise on first store visit gain since 2007
  • Google to offer fastest U.S. internet service in Kansas City
  • U.K. jobless claims fall most in 2yrs, defying recession


    • Dollarama (DOL CN) 7:30am, C$0.64
    • Pall (PLL) 5pm, $0.77



OIL - $116 and ramping; this will be Bernanke’s legacy, so we hope he’s comfortable with that. Don’t forget how ridiculous this is at this point; expectations for 0% int rates only went to 2013 in mid Jan; then he jacked Gold/Oil/Stocks on the 2014 move (that was Qe3 on Jan25; commodities peaked in Feb); now he’s going to 2015 and beyond…

  • Zinc Glut Diminishing as China Cuts Most Since ’04: Commodities
  • Brent-WTI Gap Sliding as North Sea Output Jumps: Energy Markets
  • Glencore Nears Xstrata Deal Prize as Qatar Takes Back Seat
  • Gold Jumps to Six-Month High as German Court Allows Bailout Fund
  • Copper Rises a Fourth Day as German Court Approves Bailout Fund
  • Oil Extends Gain After German Court Allows For ESM Ratification
  • Cocoa Falls on Price Gains as Ivorian Rains Return; Sugar Rises
  • Iron Ore Swaps Extend Retreat on Concern About Chinese Demand
  • Wheat Falls in Chicago Trading Before U.S. Crop Report
  • Cooking-Oil Imports by India to Jump as Local Supplies Decline
  • IEA Boosts Oil Demand Forecast, Sees ‘Comfortable’ Supply Levels
  • Coffee Market Doubts Colombia Bumper Crop: Chart of the Day
  • Platinum Holdings Poised for Record on Mining Disruptions
  • Lonmin Strike Talks Fail as South African Mine Unrest Grows
  • India Must End Sugar-Import Duty to Curb Prices, ED&F Man Says
  • Iberdrola to Keep Dividend as Galan Resists Atomic Tax: Energy









GERMANY – its amazing, but true – the DAX has now shot the moon, trading well above its March highs; everything is fine now other than the economy. German, French, and Spanish CPI all tracking higher sequentially this morn (AUG numbers) as growth slows.


SPAIN – all of economic gravity is not yet lost as both Spain’s IBEX and Italy’s MIB haven’t made higher-highs vs March closing highs of 8591 and 17,133, respectively. Germany says there are conditions to the short squeeze; Spain says they don’t like conditions.














The Hedgeye Macro Team

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Weak Dollar Crowd

This note was originally published at 8am on August 29, 2012 for Hedgeye subscribers.

“The fact that this policy failed spectacularly in 1973 did not deter the weak-dollar crowd.”

-Jim Rickards


If my sell-side competition thinks I am going to back down on how Dollar Debauchery has perpetuated the US and Global Economic slowdown via commodity inflation in 2012, they better think again.


The Weak Dollar Crowd’s case for “strong exports” and an “up market” (on no volume or fund flows) is weakening. The Strong Dollar, Strong America solution I introduced in December 2011 (when I was bullish on US growth and stocks) is strengthening.


Make no mistake, I am at war with the Keynesians – it’s what Jim Rickards has coined the Currency War, “The Making of The Next Global Crisis.” Jim will be doing a conference call with our Global Macro Team today at 11AM EST (email for access).


Back to the Global Macro Grind


With a Navajo chant, shots were fired from New Haven on August 16th, 2012. That’s when we said sell stocks and buy bonds. If the Weak Dollar Crowd bought stocks at 1426 SPX and sold bonds with the 10yr US Treasury yield at 1.89%, they should feel shame.


But they don’t. In fact, some of these strategists and economists from the Old Wall are shameless. That’s not being rude – that’s the truth. How else should I describe their March 2012 consensus US and Global GDP estimates being off by 45-70%?


Oh, but “stocks are up” for the YTD, so you don’t have to get anything fundamental right about growth or how money printing infects it to take a half-baked victory lap in this business at short-term tops, right?


That’s ending folks. The People don’t trust broken sources. Market volumes speak louder than their words.


Got data to support the Weak Dollar Crowd weakening?

  1. GROWTH: this morning you’ll get Q2 2012 US GDP growth reported down at least 60% from where it was in Q4 2011 (4.10%)
  2. INFLATION: real-time inflation that drives down real (inflation adjusted) Consumption Growth is ripping, sequentially, in August
  3. CONFIDENCE: yesterday’s US Consumer Confidence number for August was down -8% month-over-month vs July’s 65.9 reading

That’s right “stocks are up” fans, the US stock market is up over +2% for August… and the American People don’t care. That’s because of the math – when Growth Slows and Inflation Accelerates, real consumers get squeezed.


Pardon? What happened? Why didn’t people forget about needing to be up +13% (from here in the SP500) to get their 401k super stock market allocations back to break-even? Didn’t they make a 100% equity allocation to the AAPL ETF?


This isn’t funny anymore. Neither were the 1970s.


In the 1970s you had a less politicized version of Ben Bernanke (Fed Chief Arthur Burns, who didn’t do the TV and print thing) work towards Dollar Debauchery and Debt Monetization under both a Republican and Democrat boss (Nixon and Carter).


Today, it’s worse – and not because Bernanke did the same for Bush/Obama – more so because the Europeans have their own currency this time and are trying to do precisely what the Japanese did.


Overlay those conflicted and compromised political policy “plans” driving the Dollar, Yen, and Euro with what #BailoutBeggars are asking the Chinese to do next (“PRINT LOTS OF MONEY” – Paul Krugman to Japan 1997), and the weakness of the weak is looking weaker.


It’s not different this time. Currency Wars have always been global. Rickards will expand on that with us today.


In other news this morning:

  1. Chinese stocks fell another -1% last night, right back down to their YTD lows (-16.5% since May)
  2. Indian and Indonesian stocks both snapped their immediate-term TRADE lines of support, down -0.6% and -1.4%, respectively
  3. EuroStoxx50 finally broke its immediate-term TRADE (squeeze) line of 2466
  4. Germany’s DAX and Spain’s IBEX sliced through their respective TRADE lines of 7016 and 7416 as well
  5. Russian stocks lead decliners, down -1% this morning (down -19% from the March #GrowthSlowing top), with Oil down
  6. Spain’s 5yr CDS just peeked its head back over the 500 line (1st time since August 13th)
  7. Gold failed at its long-term TAIL risk line of 1679 resistance, again, and continues to make lower-highs
  8. 10yr US Treasury Yields have effectively collapsed (-14% in less than 2wks) back down to 1.62%
  9. US Treasury Yield Spread (10yr – 2yr) is down 18bps since our call on August 16th to buy bonds (that’s a lot)
  10. Draghi wrote an Op-Ed about something I can’t understand

This globally interconnected gong show of central planning rumors still looks Too Big To Bail to me. Weak (failed) policy makers are looking weaker. Strong real-time risk management processes are getting stronger.


My immediate-term risk ranges for Gold, Oil (Brent), US Dollar Index, EUR/USD, 10yr UST yield, and the SP500 are now $1648-1679, $111.54-113.98, $81.11-81.96, $1.24-1.26, 1.58-1.65%, and 1402-1419, respectively.


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


Weak Dollar Crowd - Chart of the Day


Weak Dollar Crowd - Virtual Portfolio

Rhyming 2008

“History doesn’t repeat itself, but it does rhyme.”

-Mark Twain


Some prominent Western academic economists (Keynesians) tend to go with the “feel” thing on US and Global GDP growth. It “feels like 3-4%” is something that we’ve heard almost every year since 2006.


So how does it feel to you? To me, if I had to make a call on it, it definitely feels like it’s September. It feels like the sun probably rises in the East this morning too. On the year-to-date thing, I’m not sure if it feels like 1987, 2007, or 2008.


In September of all those years, something was different. In September 2007, growth slowed and companies started to miss. In September 2008, expectations ramped for a bigger and bigger Paulson bazooka bailout. And for those of you who remember what came after September 1987 (October 19th, down 23% in a day), it was just a blip, because stocks did close “up year-to-date.”


Back to the Global Macro Grind


If you boil down all 3 of those periods, in terms of isolating central planning expectations, it’s tough to not feel anything that rhymes more than 2008. For Hank Paulson, TARP was supposed to be $250B, then $500B, then $800B (by October Paulson was bent over his garbage can). For Bernanke, 0% rates were supposed to run until 2012, then 2013, then on January 25th he had to move the goal posts to 2014.


Now what? Will Buzz Lightyear Bernanke go to 2015, then infinity, and beyond?


Apparently the Europeans will do “whatever it takes”, so why not? It’s only going to get us $130-150 Oil and an even faster Global Growth Slowdown than when Bernanke pushed Oil to $125 (Brent) in February.


Expectations matter. And these central planners will be held accountable for it this time – that’s not different. On that score, here are 3 top headlines (expectations) from this morning:


1.       “Fed Seen Starting Qe3 While Extending Rate Pledge to 2015”

2.       “Stimulus to Reverse Commodity Bull to Bear Fastest Since 2008”

3.       “China’s Stocks Advance After Premier Wen Signals Stimulus”

Isn’t this centrally planned market thing exciting! If I’ve written this 100s of times this year, I may as well have written it 1000s and then walked right up close to you in March and yelled it in your ear with a government manufactured mega-phone:




Whatever the Europeans promised this morning might matter to where the last bottom-up turned macro hedgie capitulates on his European shorts, but it will not change the only thing that will change any of this – economic growth.


Across the board, August inflation data in Europe was as follows:

  1. France CPI +2.4% (vs 2.2% in JUL)
  2. German CPI +2.2% (vs 1.9% in JUL)
  3. Spain CPI +2.7% (vs 2.7% in JUL)

Now, remember, the Spanish government just admitted to making up their GDP growth numbers for the last few years, so don’t think for a New York day traded minute that they aren’t suppressing real-life inflation on a reported basis like Bernanke does.


What you have now in Europe is called stagflation (growth slows to flat/negative year-over-year while inflation accelerates sequentially month-over-month). Anyone who tells you $116 oil, $7 corn, and $60,000/yr to go to Yale is “deflationary” needs their head read.


To review the core components of our Global Macro Model and why we have had Growth right in 2012:

  1. Growth is either slowing or rising, sequentially (quarter over quarter)
  2. Inflation is either slowing or rising, sequentially (month-over-month)
  3. Policies to Inflate expectations are either rising or falling which, in turn, perpetuates 1 and 2

If you need to know why people who didn’t blow up in 2008 keep flowing out of Equity Funds intuitively get this, look no further than the broken sources perpetuating policy expectations: forecasters at the US Federal Reserve.


In our Chart of The Day, you can see team Bernanke’s forecasting track record on US GDP:

  1. Pre having to do QE2 at 2010’s low (he thought QE1 was the elixir for growth), he was certain US Growth was going to be 4%
  2. Post being wrong on what QE2 would do for US employment and economic growth, he kept dropping his estimates
  3. Currently, he’s been  wrong on what QE3 (the January 25th push of 0% to 2014) would do for US Growth by a lot

So, is Ben Bernanke a credible source? Are his academic cronies? Does he have any business perpetuating policy expectations that are built on his forecasted expectations? Or is he just doing more and more of what has not worked, hoping he gets something right?


I don’t know the answer to that last question. But it certainly rhymes with how a lot of bad managers, coaches, and players approach playing at the highest level too. Maybe this time is different, but for those guys it never ends well either.


My immediate-term support and resistance risk ranges for Gold, Oil (Brent), US Dollar Index, EUR/USD, US Treasury 10yr Yield, Russell2000 and the SP500 are now $1, $113.92-116.48, $79.74-80.97, $1.26-1.29, 1.68-1.74%, 827-846, and 1, respectively.


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


Rhyming 2008 - Chart of the Day


Rhyming 2008 - Virtual Portfolio


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