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Materials & Dial-in Information for Expert Call with John Taylor

Materials & Dial-in Information for Expert Call with John Taylor - taylorcallNEW


We will be hosting an expert conference call today, December 18th, at 1:30pm EST featuring Professor John B. Taylor of Stanford University. Professor Taylor is a highly regarded scholar known for his research on the foundations of modern monetary theory and policy, which has been applied by central banks and financial market analysts around the world. In the call entitled, Will Monetary Policy Take Us Over the Fiscal Cliff?, Professor Taylor will discuss our nation's current fiscal situation and the policy actions that are essential to augment our economy.


Please CLICK HERE to obtain a copy of the presentation and dial in 5-10 minutes prior to the 1:30pm EST start time using the number provided below. If you have any further questions email .

  • Toll Free Number:
  • Direct Dial Number:
  • Conference Code: 485213#



  • Economic problems still remain detrimental to the nation's economic stability following the Presidential Election    
  • Continued policy to not deleverage has hindered economic growth
    • Fiscal, regulatory, and monetary
    • A drag will continue even if the fiscal cliff is avoided
  • Risks are two sided
  • A change in policy will bring back strong growth and stability



  • Currently a Professor of Economics at Stanford University and a Senior Fellow in Economics at the Hoover Institution
  • Formerly served on the President's Council of Economic Advisers and as a member of the Congressional Budget Office's Panel of Economic Advisers
  • Served as Under Secretary of Treasury for International Affairs from 2001- 2005
  • Oversight of the International Monetary Fund and the World Bank
  • Responsible for coordinating financial policy with the G-7 countries
  • Accredited author, his latest the winner of the 2012 Hayek Prize, entitled: "First Principles: Five Keys to Restoring Americas' Prosperity"
  • Received numerous awards for his work as a researcher, public servant, and teacher
    • Awarded the Alexander Hamilton Award for his overall leadership at the U.S. Treasury, the Treasury Distinguished Service Award for designing and implementing the currency reforms in Iraq, and the Medal of the Republic of Uruguay for his work in resolving the 2002 financial crisis 



TODAY’S S&P 500 SET-UP – December 18, 2012

As we look at today's setup for the S&P 500, the range is 17 points or 0.79% downside to 1419 and 0.39% upside to 1436.       















  • YIELD CURVE: 1.52 from 1.52
  • VIX closed at 16.34 1 day percent change of -3.88%
  • BONDS – our global growth model moved from #GrowthSlowing to #GrowthStabilizing in the last few weeks; that’s why I sold all our Fixed Income positions and even bought AAPL yesterday. UST 10yr yield shoots higher again this morn to 1.78%, comfortably above my TREND level of 1.69%; immediate term oversold on bonds = 1.80%; immediate-term TRADE overbought in US stocks = 1436 SP500.

MACRO DATA POINTS (Bloomberg Estimates):

  • 7:45am/8:55am: ICSC/Redbook weekly retail sales
  • 8:30am: Current Acct Bal, 3Q, est. -$103.0b (prior -$117.4b)
  • 10am: NAHB Housing Market Index, Dec., est 47 (prior 46)
  • 11am: Fed to purchase $1.5b-$2.25b notes in 2036-2042 sector
  • 11:30am: U.S. Treasury to sell 4-wk bills
  • 1pm: U.S. Treasury to sell $35b 5-yr notes
  • 2pm: Fed to sell $7b-$8b notes in 2015 sector
  • 4:30pm: API inventories


    • House, Senate in session
    • Hawaii Sen. Daniel Inouye dies at 88
    • Executives from NYSE, Euronext, NASDAQ, Credit Suisse testify at Senate Banking panel hearing on computerized trading
    • Commerce Dept. expected to announce final countervailing duties on wind-tower imports from China, Vietnam delegation led by Chinese Vice Premier Wang Qishan for talks
    • NRC staff meets officials from Southern California Edison on restart of San Onofre nuclear plant near San Diego, 1pm


  • Obama tax concessions signal potential bipartisan budget deal with Boehner
  • Apple loses bid for sales ban on Samsung devices in U.S.
  • Cerberus to sell gunmaker Freedom stake after school massacre
  • U.S. retail gasoline hit lowest price in a yr on supply gain
  • AIG raises $6.45b as AIA shrs priced in top half of range
  • Wal-Mart probes Mexico license issue as NYT reports bribery
  • Amgen expected to plead guilty to federal charges, U.S. says
  • Morgan Stanley fined $5m by Massachusetts on Facebook IPO
  • Hedge fund managers convicted by jury of insider-trading scheme
  • Google’s Android in office fails to match wider mkt traction
  • China said to set growth target at 7.5% for 2nd yr
  • UBS Libor settlement, charges may be announced
  • Spain Oct. bad loans ratio 11.23% vs 10.71% in Sept.
  • U.K. Nov. inflation remains at 2.7% on utility costs, food prices


    • Sanderson Farms (SAFM) 6:30am, $0.32
    • FactSet Research (FDS) 7am, $1.23
    • Jefferies (JEF) 8am, $0.32
    • Oracle (ORCL) 4pm, $0.61
    • Heico (HEI) 4:10pm, $0.43



  • Gold Advances as U.S. Budget-Deal Optimism Spurs Commodities
  • Goldman Bullish With Hedge Funds Amid Citi Warning: Commodities
  • Oil Advances a Third Day After Progress on U.S. Budget Agreement
  • Swaps Diverge from Stock Analysts Seeing Rally in Ships: Freight
  • EU Rapeseed Growers Eye Output Gain as Germany Boosts Planting
  • Copper Falls in London Amid U.S. Budget Talks, Rising Stockpiles
  • Japan Seeks Least Milling Wheat in 11 Weeks From U.S., Canada
  • Palm Oil Drops as Falling Malaysian Exports Signal Weak Demand
  • Rebar Advances to Five-Month High as Lending in China to Climb
  • Essar May Stop Diesel Exports at Second-Largest Indian Plant
  • Polymetal Sees Platinum Attractive Amid South African Strikes
  • Sugar Production in India Climbs 2% to 4.9 Million Metric Tons
  • China to Start Agricultural Product Futures Price Index: Xinhua
  • China Tin Consumption, Output Seen Rebounding in 2013 by ITRI










CHINA – day 2 of follow through in Chinese A-share buying after the +4.3% melt-up that got the Shanghai Comp back to bullish TREND (2096 is now support), but the Chinese data overnight is a reminder that there’s a big difference b/t #GrowthStabilizing (reality) and growth ripping (not happening), so just keep that in mind – Foreign Direct Investment (FDI) dropped -5.4% y/y in NOV in China.


SINGAPORE – the Straits Times Index (STI) didn’t make higher-highs on one of the more surprising fundamental bearish data points I have seen in weeks on the global economy – Singapore non-oil exports dropped -2.5% y/y in NOV (versus recovering +7.9% y/y in OCT). With everything Asia moving to immediate-term TRADE overbought, good spot to book some gains.








The Hedgeye Macro Team




investing ideas

Risk Managed Long Term Investing for Pros

Hedgeye CEO Keith McCullough handpicks the “best of the best” long and short ideas delivered to him by our team of over 30 research analysts across myriad sectors.

Animal Kingdom

“In the animal kingdom, the rule is eat or be eaten; in the human kingdom, define or be defined.”

-Thomas Szasz


If 2012 has driven you right batty, I highly recommend reading the Classical Liberal work of the late psychologist, Thomas Szasz. Particularly in our profession, you have to be proactive in defining your process.


Make no mistake, on #OldWall there was a big business in being perma. There were Perma-Bulls and Perma-Bears. Now, on #WallSt2.0, there are Perma-Risk Managers who understand risk isn’t “on or off.”


Risk is always on. And it moves both up and down, fast.


Back to the Global Macro Grind


In the animal kingdom (Canadian Junior Hockey), I learned the rule of taking a punch square in the face, fast. In the human kingdom (Wall Street), I’m re-learning the rules every day. Define your process, and evolve it as the game does. The rules are always changing.


In the last week, I hope I’ve been crystal clear in both communicating and acting on what our Global Macro Process has been signaling on global growth. To review 2012:

  1. #GrowthAccelerating = our call until January 24th when Bernanke imposed his Policy To Inflate (JAN25)
  2. #GrowthSlowing = our call starting in late-Feb, early March as food and oil prices ripped consumers, globally
  3. #GrowthStabilizing = mid-Nov to early-Dec, as commodity deflation takes hold, consumption stabilizes

I use hash-tags on #Twitter to hold myself accountable to the #TimeStamps implied by both our Research and Risk Management views. If you follow the Perma-Bull and Perma-Bear guys closely, you’ll notice that they are constantly changing their thesis.


Top down, our Global Macro Process has 3 big factors (our GIP model):


The aforementioned shifts in GROWTH are happening faster right now because that’s what Big Government Intervention does:


A)     It shortens economic cycles

B)      It amplifies market volatilities


All the while, Keynesian government policy makers are trying their very best to ramp #2 (asset INFLATION) via #3 (POLICY to inflate via currency devaluation).


Japanese bureaucrats are so impressed by what Bernanke appeared to have achieved at the September 2012 highs (3% higher in the SP500 at 1474, where inflation slowed growth), that they just convinced their people to burn their currency at the stake. For that, the Nikkei is +14.6% in the last month, but real (inflation adjusted) Japanese growth is slowing.


If POLICY makers of the Keynesian Kingdom want to really get this party started, they should go full Krugman/Chavez on these markets. Then Perma-Bulls will really be right for all the wrong reasons (after torching their currency, Venezuela’s stock market is up +305% YTD).


Back to the process, the asset allocation, net exposure, and sector moves we have made in the last month are as follows:

  1. We’re net short commodities and commodity related equities
  2. We’re net long consumption and consumer related companies profiting from commodity deflation
  3. We cut out asset allocation to Fixed Income to 0% on Friday

To be clear, before I rile up pension funds, this is how I think about asset allocation with my own money. Since I can (and often do) go to cash, I have no problem selling something down to 0% if I think the asset class and/or security has a rising probability of a draw-down.


Always remember Rule #1 – don’t lose money (Buffett, pre being politicized).


From a Risk Management Process perspective, this is where my multi-duration signals play a huge role. When something signals bearish TRADE and TREND (like US Treasury Bond Yields did last week), and the Global Macro Research Process confirms it, I sell.


I also buy things when they are immediate-term TRADE oversold (bought AAPL $502.50 yesterday), but that’s a different risk management strategy, on a shorter-term duration. Our longer-term risk management decision was to sell APPL on September 28th.


In a profession where I see less and less people who actually know what it is that they do, I think there is a tremendous opportunity for all of us to evolve and attempt to explain what it is that we do. People want to trust us – and we don’t need animals eating us.


Our immediate-term Risk Ranges for Gold, Oil (Brent), Copper, US Dollar, EUR/USD, UST 10yr Yield, AAPL, and the SP500 are now, $1, $105.95-108.94, $3.64-3.71, $79.36-79.99, $1.29-1.31, 1.69-1.80%, $501-532, and 1, respectively.


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


Animal Kingdom - Chart of the Day


Animal Kingdom - Virtual Portfolio

Liberty's Bells

This note was originally published at 8am on December 04, 2012 for Hedgeye subscribers.

“It is seldom that liberty of any kind is lost all at once.”

-David Hume


If alarm bells aren’t going off in your head this holiday season, they should be. Don’t confuse our 2012 Global Macro call for #GrowthSlowing as regressive. Being a realist is progressive. So is standing on the front lines of change.


While he had a tough time marketing his progressive free-market ideas in the 1930s and 1940s, Hayek’s lessons lived on. The aforementioned quote from Hume stands like a rock alongside one from de Tocqueville at the beginning of The Road To Serfdom. Hayek addressed his book “to socialists of all parties.”


I’m not suggesting you become a hard core Hayekian. Neither am I telling you what and/or how to think. I am just a man in a room. I’m fighting for free-market liberties like many men and women who have come before me. During this generational debate about debt, spending, and taxes, all that we ask is that you educate yourself. Liberty’s Bells are ringing.


Back to the Global Macro Grind


After another Monday morning littered with Greek bailout headlines, Global Equities backed off their early morning highs and closed on their lows (SP500 -0.5%). Across durations in our risk management model, Risk Ranges are getting pretty tight.


Tight can be trade-able. That’s a good thing. In Hedgeye-speak we are always talking to clients about managing the Risk Range. Once you have a repeatable process to calculate it, it’s trivial. Risk Ranges are at the bottom of the Early Look note, every day.


Risk Ranges provide us with a quantitative, probability-weighted, framework to contextualize the storytelling in the marketplace. Most stories are qualitative in nature, so having some math wrapped around what’s happening out there is helpful.


We tell stories too. We call them our Hedgeye Global Macro Quarterly Themes. For Q4, they remain as follows:


1.   #EarningsSlowing

2.   Bubble#3 (Commodities)

3.   #KeynesianCliff

For accountability purposes, I use the hash-tag to provide you an archive of high-frequency macro data on Twitter. Being early doesn’t always make us right – but it will make you think outside the government’s centrally planned box.


While the #KeynesianCliff is annoying you, here’s an update on what used to matter to markets (#EarningsSlowing):

  1. For Q4 2012 so far, 78 companies have issued negative EPS guidance (29 companies have issued positive EPS guidance)
  2. That means 73% (78 out of 107) of the companies that have said something, said something negative, on the margin
  3. 73% = 2nd highest percentage of companies issuing negative EPS guidance since FactSet began tracking the data in Q1 2006

Per the lynx-eyed (and some say exotic) Darius Dale, I guess the perma-bulls would say that only 73% of companies guiding down is bullish! Relative to the worst quarter on recent record, that is (i.e. the one just reported with Q3 of 2012 = 74%).


I know, I know – since very few bulls called for both global and earnings growth to slow in Q1, blame everyone and everything but the forecasters in 2012. It’s all the government’s fault. So what we really need to do now is beg for more government.


Or do we?


The best thing that can happen to both the US and Global Consumption economy is more of Theme #2. Popping Bernanke’s Bubbles in food and energy prices would be wildly stimulative to the 71% (that’s US Consumption as a % of total US GDP).


Get consumption right, you’ll get global growth right.


That’s why I got bullish in 2009. That’s why I was bullish until January 25th of 2012 (until Bernanke decided to move 0% rates out to 2014 with more Policy To Inflate asset prices). Inflation is not growth.


We are now so conditioned by permanent price inflation that the idea of prices falling every year is difficult to grasp. And, yet, prices generally fell every year from the beginning of the Industrial Revolution in the latter part of the eighteenth century until 1940, with the exception of periods of major war when governments inflated the money supply radically and drove up prices.” -Rothbard


The only war I see now is between the #PoliticalClass and the rest of us.


At tomorrow’s NYC Analyst Day one of the greatest innovators in America will be talking up asset price deflation in commodities. The Brooklyn born grinder (Starbucks CEO, Howard Schultz) knows how to make a buck and then hire someone with it. Now he’s staring down a futures price in coffee that’s down 50% since topping in May (see Chart of The Day).


That may not be the kind of change you are hearing from Marxist price controllers and debt/deficit spending Keynesians. That’s simply called the Fed getting out of the way for a few months. Cheers to that. Liberty’s Bells are ringing.


Our immediate-term Risk Ranges for Gold, Oil (Brent), Copper, US Dollar, EUR/USD, UST 10yr Yield, and the SP500 are now $1704-1727, $109.42-111.76, $3.54-3.66, $79.59-80.27, $1.29-1.31, 1.58-1.67%, and 1404-1419, respectively.


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


Liberty's Bells - Chart of the Day


Liberty's Bells - Virtual Portfolio

TRADE OF THE DAY: Apple Picking

Takeaway: Keith’s multi-factor, multi-duration model produced another winning trade in Apple stock.

We don’t believe there is a single authority on Apple (AAPL) or its stock price, but we do believe that you can risk manage a trade in Apple. That’s exactly what Hedgeye CEO Keith McCullough did today in our Real-Time Alerts, and it’s our Trade of the Day.


Here’s what happened: Keith’s models flashed an immediate-term oversold signal, and he bought AAPL at 10:27am today at $502.50, just above the low of the day when the stock briefly traded below $500 for the first time in ten months. The stock fell in part because of another downgrade by a sell-side analyst.  However, AAPL rallied to close the day at $518.83, thanks in part to word that the company’s IPhone 5 sales in China  topped two million handsets.


Keith’s trading record in AAPL is stellar due to his multi-factor, multi-duration model that manages risk in real-time. Keith sold AAPL on September 28 at $677.74, just ten days after the stock broached the $700 level.