It Happened

This note was originally published at 8am on December 11, 2012 for Hedgeye subscribers.

“It would all be as if nothing had happened.”

-Michael Sallah & Mitch Weiss

That’s a quote from the end of the book I cited in last week’s Early Look,  Tiger ForceA True Story of Men and War. It’s a true story about American war crimes in Vietnam (Pulitzer Prize, 2004). Sadly, it’s how a lot of cover up stories involving the #PoliticalClass end.

“The Pentagon had decided that is was better to cover up what had happened. Let the country move on… there would be no press conferences. There would be nothing at all… and so it was.” (page 306)

To be fair, maybe our central planning overlords do know what’s best for the country. But maybe they don’t. All I know is that whether it’s Bernanke, Geithner, or Petraeus – as Canadian-American Patriots, it’s our responsibility to keep questioning.

Back to the Global Macro Grind

I’ve been questioning Bernanke and Geithner’s Keynesian Policy To Inflate via US Dollar Debauchery for 6 years. Even if they refuse to acknowledge what has happened publicly, proving this out has been a daily dog fight – and I’m proud to have done the work.

All-time highs in food and energy prices? It Happened in the last 6 years. It all happened under Bernanke and Geithner’s watch. Causality was both fiscal (debt/deficit spending) and monetary (money printing). They both deserve their #FairShare of the blame.

As Bernanke and Paulson promised “shock and awe” rate cuts and bank bailouts, the all-time high in Oil prices happened during the economic crisis (2008). Think about that. Then think about why Gold and Food prices hit their all-time highs in 2011 and 2012, respectively as net long positions in futures & options commodity positions hit all-time highs (twice) in 2012.

All-time is a long-time. It Happened.

Now, deflating these policy mistakes, and popping the bubble in commodity price expectations, perversely, becomes the American and Global consumer’s greatest opportunity to get a real-time tax cut. I like that. If you don’t take car service to D.C. to work every day on US tax moneys and have all your meals bought and paid for, you should too.

From a Global Macro perspective, I also like the following positions:

  1. LONG Consumption
  2. SHORT Commodities

Perma marketers can attempt to label me whatever they want. Our clients only pay us if A) we are helping them avoid blowups and B) we are helping them get things right. Never mistake “negativity” with reality. Reality is that, since we launched our Bernanke’s Bubbles Theme, it started happening – the commodity bubble has started to pop, faster, and louder.

Since Bernanke’s Top (September 14th, 2012 when he decided to print to infinity and beyond), the CRB Commodities Index (19 commodity basket) is down -8.7%. That compares with the SP500 that is now down only -3.8%. Some global equity markets (like Germany’s DAX, which is crushing the Dow YTD) are now up versus their early September highs.

The US Dollar, of course, has been up for 8 of the 11 weeks since Bernanke’s last decision. Tomorrow’s FOMC meeting offers him an opportunity to get out of the way. We’ll see if he has the political spine to do that now that the election is out of the way.

All the while, you have had great buying opportunities presented by the #PoliticalClass and their cliff babbling along the way. Our critics will be the last to remind you that on the Hedgeye Best Ideas Conference Call on November 15, 2012, 6 of our 8 Best Ideas were actually longs. Timing matters. And we have a great deal of pride focusing on it.

To review, our 6 LONG US Equity Ideas have returned, on average, +9.9% (versus SP500 +5% off the lows) during the same period:

  1. International Game Technology (IGT) – Todd Jordan idea = +14.3%
  2. C&J Energy Services (CJES) – Kevin Kaiser idea = +12.4%
  3. Jack in The Box (JACK) – Howard Penney idea = +10.4%
  4. Paccar (PCAR) – Jay Van Sciver idea = +6.5%
  5. Nike (NKE) – Brian McGough idea = +8.0%
  6. TCF Financial (TCB) – Josh Steiner idea = +4.8%

That’s not a victory lap. That’s just the score. In what most would agree is a tough alpha generation environment, It Happened.

And I think, for me at least, it’s really important to highlight all the great work the men and women who grind it out for us every day do. They are both resilient and adaptive. They are also transparent and accountable. And for that, I am thankful to have the opportunity to work alongside them each and every day.

Our immediate-term Risk Ranges (support and resistance) for Gold, Oil (Brent), Copper, US Dollar, EUR/USD, UST 10yr Yield, and the SP500 are now $1684-1719, $105.99-109.26, $3.62-3.72, $80.01-80.51, $1.28-1.30, 1.59-1.65%, and 1405-1421, respectively.

Best of luck out there today,

KM

Keith R. McCullough
Chief Executive Officer

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