This note was originally published
at 8am on July 23, 2013 for Hedgeye subscribers.
“The greatest barrier to success is the fear of failure.”
-Sven Goran Eriksson
I was in Kansas City, Missouri then Denver, Colorado yesterday before flying into Aspen last night for the 2013 Fortune Brainstorm Tech Conference (ping me if you are here!). Cabs, planes, and bad coffee - just another busy day in the life of building a business.
But what is it that gives us the confidence in building our own businesses? With all of the politics, fear-mongering, and central planning, why do we care to carry on? In moments of weakness, I admit to asking myself these questions every once in a while. Then something inspires me to rise above all of that. It’s either in your gut, or it is not.
There’s a great passage in a novel I just finished (Out Stealing Horses, by Per Peterson) that reminded me of who taught me to be this way (my Dad): “he had so much self-confidence he could take on almost anything and believe he would succeed” (pg 51). But don’t kid yourself; having role models in your life isn’t enough – you have to be the change, and break confidence barriers yourself.
Back to the Global Macro Grind…
How many people have been confident enough to be invested in US growth stocks in 2013? Of the non-consensus bulls you know, how many of them are bullish because of #RatesRising?
I won’t hear it at this innovator’s conference in Colorado today, but I hear it a ton in institutional investor meetings - lots of doubt, fear, and concern. The lack of self-confidence out there is born out of a lot of 2008 baggage. I don’t get bogged down by that.
Both the SP500 and Russell2000 clocked fresh all-time highs again yesterday of +18.9% and +24%, respectively for 2013 YTD. #StrongDollar and #RatesRising isn’t something to be feared; it’s a pro-growth signal that needs to be understood.
By our risk management process scorecard, this morning is almost perfect for US stocks. Here’s the big 3 things to have confidence in:
1. #StrongDollar – after correcting -0.5% last week (Bernanke wasn’t giving anyone anything but things to fear, which is just a shame at this point) and falling again yesterday, today the US Dollar Index holds both our immediate-term TRADE ($82.07) and intermediate-term TREND ($81.53) lines of support
2. #RatesRising – after falling 10 basis points last week to 2.48% (Bernanke policy to have you fear failure), the 10yr yield held our immediate-term TRADE line of 2.45% support yesterday (TREND support underpins that at 2.21%) and is backing up again this morning to 2.51%; higher-lows and higher-highs for bond yields is a bullish growth signal supported by employment gains
3. #CommodityDeflation – with the USD -0.5% last week, Commodities were +1.5% (CRB Index) – that’s not new; the intermediate-term correlation between USD and Commodities = -0.71. Why? That’s simple – the entire base of futures/options buyers in Gold, Oil, Food, etc. is still trying to front-run Bernanke’s “tone” on tapering
Like they were in the summer of 2008 (when Bernanke was whispering to the #OldWall that he was going to cut to 0%, too early), Oil prices are once again the biggest threat to US Consumption.
If you want fear, I’ll give you something to fear – it’s called Dollar Devaluation. Just reverse all of the aforementioned 3 things and the USD will weaken, interest rates will fall, and commodity reflation will slow growth.
Who wants that? And, moreover, if 95-99% of Americans don’t want that, who stands in the way of tapping Bernanke on the shoulder and telling him to taper?
If Reagan or Clinton were in office, they’d be perfectly fine with that. Bush and Obama have been so scared of their own economic shadow that it’s their fears that have manifested into the conflicted power of Bernanke’s Bubbles (Commodities, Gold, Treasuries, etc.).
I don’t fear the politicized not liking my advice. I fear that a lot of Americans are going to get blown up by this bond bubble. I also fear that the only fear left, is a fear-mongering anti-growth government policy itself.
The greatest barrier to #StrongDollar and #RatesRising is self-evident. It’s time to get this old-boy, crony-whispering, and un-elected policy out of our way. It’s time to let free-market prices clear. The inability to evolve is as very credible threat. Confidence is the answer.
Our immediate-term Risk Ranges are now:
UST 10yr 2.45-2.70%
Brent Oil 107.11-109.08
Best of luck out there today,
Keith R. McCullough
Chief Executive Officer