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Strenuous Life

“We do not admire the man of timid peace. We admire the man who embodies victorious effort.”

-Theodore Roosevelt, 1899


As a Canadian immigrant with both an American made family and firm, Thanksgiving in this country has become a very special time for me. It’s a time to pray, give thanks, and reflect.


There are very few, if any, non-Lincoln American Presidential speeches that have impacted me like Teddy Roosevelt’s speech before the Hamilton Club in Chicago in April of 1899. For those of you who have not read it – it’s called The Strenuous Life.


“In speaking to you, men of the greatest city of the West, men of State which gave to the country Lincoln and Grant, men who preeminently and distinctly embody all that is most American in the American character. I wish to preach, not the doctrine of ignoble ease, but the doctrine of the strenuous life; the life of toil and effort, of labor and strife…”


Back to the Global Macro Grind


Grinding it out in markets, daily, for the last 5 years has been strenuous. But that’s not something to whine about - that’s what I love about this game – the daily grind. As my Dad always used to tell me, “when the going gets tough – the tough get going.”


Whether by indictment, exhaustion, or extinction, one by one we are seeing major players and firms from the #OldWall leave. In many ways, that’s very good news. There are few professions in this country that need to evolve more than this one does. And for this opportunity to be playing on the front lines of change, I am very thankful.


What Americans should also be thankful for this Thanksgiving is deflating in food and oil prices. With 71% of the US economy hinged to the C (Consumption) in the C + I + G + (EX-IM) = GDP calculation, this is where the rubber needs to meet the road back to growth.


While November (and Q412 overall) has been a mess from a US stock market perspective, the US Consumer Discretionary Sector has provided a light at the end of the tunnel that is not another oncoming train. For November to-date, here’s the score on that: 

  1. SP500 (SPY) = down -1.7%
  2. Energy (XLE) = down -2.4%
  3. Consumer Discretionary (XLY) = up +0.7% 

Oil got hammered yesterday (we covered our short position on red) and, to a degree, I think that’s what stopped US stocks from closing on their lows. Strong Dollar and Down Oil is great for US Consumption expectations heading into the holiday season.


Meanwhile, in Bernanke’s speech to one of the Keynesian Clubs yesterday, he implied that he may very well be out of money printing bullets. Most people don’t believe that. And they probably shouldn’t.


But what would the country do if the man just went away? Would the American life of “toil and effort, of labor and strife” change? Or, for the 90% of us who aren’t paid (politically or implicitly) to maintain asset inflation in food/energy prices finally get some relief?


I think the answers to these very simple questions are simple. And, until we have the free-market spine to face the long standing US economic truth that the American consumption economy runs faster and more sustainably when the things we consume fall in price, our lives will remain more strenuous.


Many disagree with me on that. Many think that Bernanke’s Dollar Debauchery and reflexive, short-term, commodity and stock market inflations will magically create economic growth. But they have not. They have slowed real (inflation adjusted) growth.


On CNBC last night, a US economist by the name of Joe Lavorgna (Deutsche Bank) called my economic views “radical.” Joe seems like a nice guy, but his US Growth forecasts at the end of both 2007 and 2011 for 2008 and 2012, respectively, were radically wrong.


Being wrong is fine – it happens to me all of the time. But not learning from my mistakes would render me useless. To change, you need to evolve your process. You may fail, but people will respect you more for showing them how and why you are changing.


I am many things. I have many faults. But I am not a man of timid peace. If I fail in my assumption that a Strong Dollar will create a Stronger America, I will reluctantly, but transparently, throw in my own towel and hold myself to public account.


If I am right, I will have expected to have won. And you’ll be winning too.


“It’s hard to fail, but it is worse to have never tried to succeed.”

-Theodore Roosevelt, 1899 (The Strenuous Life)


Our immediate-term Risk Ranges for Gold, Oil (Brent), Natural Gas, US Dollar, EUR/USD, UST 10yr Yield, and the SP500 are now $1, $108.89-111.48, $3.69-3.91, $80.87-81.37, $1.26-1.28, 1.55-1.68%, and 1, respectively.


Happy Thanksgiving to you and your loved ones,



Keiith R. McCullough
Chief Executive Officer


Strenuous Life - Chart of the Day


Strenuous Life - Virtual Portfolio


TODAY’S S&P 500 SET-UP – November 21, 2012

As we look at today's setup for the S&P 500, the range is 33 points or 1.72% downside to 1364 and 0.66% upside to 1397.     















  • YIELD CURVE: 1.41 from 1.41

MACRO DATA POINTS (Bloomberg Estimates):

  • 7am: MBA Mortgage Applications, Nov. 16 (prior 12.6%)
  • 8:30am: Initial Jobless Claims, Nov. 17 est. 410k (prior 439k)
  • 8:58am: Markit US PMI Preliminary, Nov., est. 51.0 (prior 51.3)
  • 9:45am: Bloomberg Consumer Comfort, Nov. 18 (prior -33.1)
  • 9:55am: U. of Michigan Confidence, Nov. final, est. 84.5 (prior 84.9)
  • 10am: Leading Indicators, Oct. est. 0.1% (prior 0.6%)
  • 10:30am: DOE inventories
  • 11am: Fed to sell $7b-$8b notes due 11/30/15-1/31/16
  • 11am: U.S. to announce plans to sell 2Y, 5Y, 7Y notes
  • 11:30am: U.S. Treasury to sell $13b 10Y TIPS in reopening
  • Noon: EIA natural gas storage change
  • 3pm: Baker Hughes rig count


  • EU finance ministers fail on Greece debt-reduction package
  • FBI said to be looking into HP’s claims over Autonomy accounting
  • Martoma fund used dark pool to keep inside trade quiet, SEC says
  • Hostess aims to shut down permanently after mediation fails
  • Box office releases include “Life of Pi,” “Rise of Guardians”
  • Deutsche Bank’s Jain sees “significant” bank consolidation
  • BoE says unlikely it would cut bank rate in foreseeable future; voted 8-1 to halt bond purchases
  • News Corp., CBS said in talks on Simon & Schuster, WSJ says
  • Japan’s exports reach 3-yr low; Oct. exports down 6.5% Y/y
  • Hillary Clinton seeks to salvage proposed cease-fire in Gaza


    • Donaldson (DCI) 7am, $0.34
    • Deere (DE) 7am, $1.88


COPPER – the Doctor remains ill; no new news, but important to contextualize within the perimeter of the storytelling that is “China has bottomed”; China stopped making new lows last night, but Copper leads metals lower again after failing at my TRADE line of $3.53/lb resistance.

  • Crude Oil Rises on Gaza Conflict Amid Declining U.S. Stockpiles
  • Drought No Obstacle to Record Income for U.S. Farms: Commodities
  • Silver Trade Drops 30% on China Bourse as Industry Use Falls
  • Rubber Imports by India Seen at Record as Demand Tops Production
  • Copper Slides for a Second Day Amid Revived Debt-Crisis Concern
  • Gold Swings Between Gains and Drops on Dollar, Physical Demand
  • Soybeans Drop as Rains in Parts of Brazil Improve Crop Prospects
  • Sugar Drops in London on Signs of Ample Supplies; Cocoa Declines
  • Gas-Oil Price Link in Focus as Exporters Meet in Malabo
  • Natural Gas in New York Falls From Highest in More Than a Year
  • Palm Oil Drops as Falling Malaysian Exports Spur Demand Concern
  • China Grabs Share in Latin America Wind With Cheap Loans: Energy
  • Ivorian Cocoa Grinding Seen Costlier Than Europe’s on Tax Plan
  • China’s Iran Crude Imports Rise to Highest Since Sanctions









DAX – the good news is that the 2-day squeeze in European Equities recaptured the 7116 intermediate-term TREND line for the DAX; the bad news is that the DAX continues to make lower-highs and is broken on an immediate-term TRADE basis (7231 resistance); this is where being Duration Agnostic matters.





JAPAN – island economy, hostage to high cost oil imports in local FX, smothered by Keynesian economic policy enters the death spiral of what didn’t work 15 yrs ago (Krugman: “Print Lots of Money”); OCT Exports -6.5% y/y is a train wreck (3yr lows) and the Yen hits a 7mth low; this remains the most un-talked about risk in Global Macro today.









The Hedgeye Macro Team




Value Trap Trades


Hedgeye CEO Keith McCullough appeared on CNBC's Fast Money this evening to discuss everything from Bernanke's view of the Fiscal Cliff to market performance to the Autonomy scandal at Hewlett-Packard (HP). 


One topic the Fast Money traders discussed were  stocks that were value traps. Keith honed in on Caterpillar (CAT), noting that valuation is NOT a catalyst and that investors need to realize that earnings are slowing.


Watch the above video for Keith's appearance on CNBC.



While much of the EBITDA share movements is due to hold fluctuation, we believe LVS will continue to gain revenue and EBITDA share


  • LVS maintained its industry leading position thanks to a strong performance from the Venetian.  3Q EBITDA share improved 2.8% QoQ to 27.9%.
  • Due to stellar results at Galaxy Macau, Galaxy has surged into 2nd place, a significant rise over the last year.  Galaxy Macau’s EBITDA rose 12% QoQ.
  • MGM continues to hold the rear.  3Q EBITDA was negatively impact by low hold on direct play and rolling chip play.



Following Bernanke's Lead

Since the Federal Reserve first initiated quantitative easing back in November of 2008, the US stock market has shot upward in tandem with each subsequent announcement. However, the law of diminishing returns seems to kick in with each new round of easing as the gains following an announcement quickly become short-lived. Keep in mind that the S&P 500 is down -6% since the September 14 high (aka the Bernanke Top).


Following the Keynesian route of printing money over and over again is clearly unsustainable. Moreover, GDP growth is no longer keeping pace with the equity market as growth and earnings continue to slow. A fix is needed and one thing remains certain: another round of easing is not the solution. Some traders may be set on thanking the Fed for quick pops in the market, but over time, all good things come to an end.


Following Bernanke's Lead - fedgdp

Solid Growth In Macau

Macau average daily table revenue (ADTR) grew 17% year-over-year last week, in line with our expectations and a solid week nonetheless. For the month, we’re predicting year-over-year growth of gross gaming revenue (GGR) of around 5-10%, well above October’s 4% growth. We think that December will improve to the point where it exceeds November; the only reservations we have at the moment are smoking restrictions that may go into effect in early-to-mid January. 


Solid Growth In Macau - image016

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