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This note was originally published at 8am on April 01, 2013 for Hedgeye subscribers.

“Well, I understand that you are to beat me in this contest.”

-John Adams

That, of course, is what Adams told Thomas Jefferson when it became clear to him in 1800 that Jefferson was going to replace him and become the 3rd President of the United States.

Mr. Adams, this is no personal contest between you and me… Two systems of principles on the subject of government divide our fellow-citizens into two parties. With one of these you concur, and I with the other.” –Thomas Jefferson (The Art of Power, page 327-328)

In all great contests, there are two competitors, teams, and/or ideas. In all great contests, someone wins and someone loses. In the greatest of contests, the winner is gracious in victory – and the loser learns from defeat.

Back to the Global Macro Grind

Let us, then, fellow-citizens, unite with one heart and one mind” (Jefferson during his inaugural address of 1801), and become Yale Hockey fans as they head to the Frozen Four, for the first time since 1952!

(I had to find a way to slip that in there)

In other news, crisis-mongering remains in crisis and US stocks hit an all-time high last week.

As we like to say here at Hedgeye Risk Management – all-time is a long time, and this all-time high was driven by the fulcrum point of our bull case for US (and Chinese) Consumption Growth – a Strong US Dollar.

With the US Dollar up for the 7th week in the last 8 (+0.74% to 83.14 on the US Dollar Index):

  1. Down -3% in the last 2 months, Brent Oil Prices stopped going down last wk (+2.2% to close the wk at $110.02/barrel)
  2. Food Prices continued to get pulverized week-over-week (Wheat -5.8%, Corn -4.3%, and Soy -2.5%, last wk alone)

And the net long positions in commodities (futures and options contracts) continue to go squirrely:

  1. Gold – net long positions fell another -14% on the wk after Gold’s price fell -0.7% (net long position -41% YTD)
  2. Silver – net long position continued to crash (-77% on the wk!) to its lowest level since 2007
  3. Copper – built a record net short position of -30,036 contracts

The thing about shiny metals is that (after Gold went up for 12 years in a row) a lot of people own them now in lieu of what were Burning Bernanke Bucks. That (and all those Gold commercials you still hear on the radio) is a rear-view looking thesis. So is the end of the world.

As the great USA Olympic Hockey Coach, Herb Brooks, might say about this morning’s metals update – “Again!”:

  1. Gold is flattish around $1598/oz (down -4.6% YTD)
  2. Silver is down another -0.9% to $28.04/oz (down -13% from its early 2013 high)
  3. Copper leads losers in Global Macro trading this morning, down another -1.3% to $3.35/lb

All the while, The Great Contest between #PTCs (professional top callers) and those of us who change as the game does rages on. Are Food, Energy, and Metals prices deflating a good or a bad thing for the global consumption economy?

What do we know, but the last time our models were this bullish on US economic growth prospects relative to consensus was in 2009 when many of these same factors rhymed. The Dollar rose from its ashes and Commodity prices kept crashing well into Q209.

But if you sold in May of 2009 and went away, was that a good decision or a bad one? What if you sold in April of 2009? My keen sense from my latest institutional client meetings is that a lot of people are still looking for a big Q2 correction. What if it doesn’t come?

Risk obviously happens fast, so we’ll be sure to let you know if anything changes in terms of our intermediate-term TREND view (bullish on Asian and US stocks; bearish on Commodities, Yens, Treasuries). In the meantime, may the great contest between bulls and bears continue!

Our immediate-term Risk Ranges for Gold, Oil (Brent), Copper, US Dollar, USD/YEN, UST 10yr Yield, VIX, Russell2000, and the SP500 are now $1592-1605, $106.75-110.39, $3.34-3.44, $82.61-83.49, 93.44-96.35, 1.84-1.95%, 12.13-14.26, 947-955, and 1556-1572, respectively.

Best of luck out there this week,

KM

Keith R. McCullough
Chief Executive Officer

The Great Contest - Chart of the Day

The Great Contest - Virtual Portfolio