“The physicists have known sin; and this is a knowledge which they cannot lose.”
Got introspective accountability? After he (quickly) realized the capacity of the nuclear weapons he helped create, Robert Oppenheimer became very unpopular with the State – primarily because he held both himself and the government to account.
Can you imagine a central planner of the Bernanke epoch holding themselves accountable to the highest levels of food, energy, education, etc. inflation in world history? Nah. That would require un-spinning the truth.
And the truth is that American political scientists who engaged in devaluing the purchasing power of the American people to 40 year lows in Q2 of 2011 know that sin. This is a market knowledge that history will not lose.
Back to the Global Macro Grind…
If you’ve sat across the table from me and my macro research team in the last few years, you’ll know that I refuse to have a debate about mean reversion risks without contextualizing the post Nixon low in the world’s reserve currency (see chart):
- Got Causality? Of course, when a country cuts rates to zero then whispers to everyone front-running their next move that zero really isn’t zero (for Bernanke 0 = 0 minus 1, 2, 3, 4? QE5?), its currency goes down, hard
- Post Nixon (i.e. post his devaluing the Dollar by abandoning the Gold Standard in 1971, purely for political gain), the US Dollar Index has never seen a lower-low versus the 2011 low; that’s also when Gold hit its all-time high
Since most global commodities settle in Dollars, why there’s been raging inverse correlation (Dollar Down = Commodities Inflation Up) alongside causality in this relationship is trivial to everyone other than the people who should be held responsible for it.
What is less trivial is all of the unintended consequences associated with the ultimate central planning sin (an un-elected overlord confiscating the purchasing power of The People). Here are some of the big ones:
- Commodity Bubble
- Bond Bubble
- Emerging Market Bubble
Yep, that’s going to be a lot for Bernanke’s children (and their children) to noodle over for the next century. That is, of course, unless the next guy or gal running the un-elected agency does what no modern Federal Reserve Chairman has ever not done – raise rates.
For the last 6-12 months, I’ve spent a lot of time ranting about these Global Macro Themes:
These are relatively easy long-term TAIL risk calls to make because all 3 of them are basically about unwinding all 3 of the aforementioned bubbles. Once prices stop making all-time highs (commodities, bonds, or currencies), there’s this big little risk management critter Bernanke has never mentioned under oath called asymmetry.
So, alongside an English major who has never traded a macro market in his life being the chief Keynesian access “economist” @CNBC, at this stage of the cycle this is what you get:
- US Dollar making a series of intermediate-term TREND higher-lows (off her all-time lows in 2011)
- US Interest Rates making a series of intermediate-term TREND higher-lows (off their all-time lows in 2012)
- Gold and food prices making a series of intermediate-term TREND lower-highs (off their all-time highs of 2011-2012)
All the while, what we still get from the consensus TV circus that is government #AccessMedia is a bunch of uninformed people begging for more of the drugs that the political scientists got rich selling us.
If I am not clear on my long-term policy view, let me state it plainly – stop devaluing the Dollar and trying to smooth economic gravity. If you ever want to see US growth expectations come back, you have to let the US Dollar come back (and let rates rise alongside her).
Why am I going off on this today? Well America, we’re at The Crossroad. Unwinding the sin embedded in Bernanke’s post 2012 Jackson Hole policy is what markets have been doing for 10 months.
Collectively, we either have the responsibility within all of us to rise up against the tyranny of easy money and currency debauchery, or we do not. At this point, I can only hope the people who voted for this government hold it to account.
Our immediate-term Risk Ranges across 6 Big Macros are now as follows:
UST 10yr Yield 2.72-2.93%
Best of luck out there today,
Keith R. McCullough
Chief Executive Officer
THE MACAU METRO MONITOR, AUGUST 29, 2013
MBS SCORES LANDMARK VICTORY IN CASINO DEBT COLLECTION CASE Business Times
The High Court has handed Marina Bay Sands a decisive victory in Singapore's first casino debt collection trial over an unpaid debt that a patron, Lester Ong Boon Lin, had sought to avoid on technical grounds. Justice Lai Siu Chiu awarded $240,868 - the unpaid debt - plus default interest and costs to MBS after finding in favor of the casino on two pivotal issues.
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Takeaway: Reminder that today we're hosting a conference call at 11am to discuss our consumer survey on JCP, and it's implication on on liquidity.
Please join us for a conference call titled "JCP: Where is The Consumer and The Cash?" later this morning at 11:00am EDT.The call will take an in-depth look at consumer trends and analyze J.C. Penney's (JCP) current liquidity situation.
CALL DETAILS WILL INCLUDE:
- We'll debut the results of our extensive consumer survey of JCP shoppers to gain insight into the following:
- Why consumers left JCP (or spent less while they were there).
- If they left, where did they take their business (KSS, M, GPS, Other, or Nowhere?)
- Are they gone forever, or can JCP win them back?
- What does JCP need to do to win back the business? Are they doing it under Ullman?
- What do consumers think of redesigned stores, and does it impact their decision to return to JCP?
- We will present our liquidity sensitivity analysis, and while JCP will cut it close at times, we don't think it is at risk of a material liquidity event.
- Discuss how liquidity ties in to the timing of a shift to a permanent CEO.
- Take a detailed look at Gross Margin, which is the one line on the P&L that we think could improve sooner than later.
- Toll Free Number:
- Direct Dial Number:
- Conference Code: 173225#
- Materials: CLICK HERE (Slides will download approximately one hour prior to the start of the call)
So. How does yesterday's -1.6% drop in the S&P 500 look within the context of the Top-3 drops since April? It ranks as #3 (June 20th = -2.5% and April 15th = -2.3%).
The reality is you haven’t had many opportunities to buy US growth stocks in 2013. This one is a shallower correction (on less volume). Meanwhile, S&P 500 TREND support is literally right where it closed yesterday.
Incidentally, the II Bull/Bear Spread just tanked to a 6-month low. Only 38% in the survey admit to being bullish. That's a fresh year-to-date low. It has crashed 56% in less than a month. It's also an uber-bullish signal.
It's time to make some decisions.
This note was originally published August 23, 2013 at 10:40 in Consumer Staples
Yesterday the Wall Street Journal reported that the FDA is considering a ban on online sales of e-cigs as part of broader regulatory restrictions that are expected to be announced in October.
What’s Our Take?
- It wouldn’t be a huge surprise to see online sales of e-cigs banned. The FDA is well aware how easy it is for consumers to purchase e-cigs online– one simply has to put in a birth date of at least 18 years of age
- The FDA is also concerned with the appeal of flavored e-cig offerings (like bubble gum or coffee) that may attract a younger demographic
- Estimates suggest the online e-cig market to be worth ~$500MM of the total $1-1.5B category
- We expect any restrictions on online sales to favor Lorillard’s Blu e-cig and NJOY (private), the two companies with the greatest retail market share and nationwide presence. [Blu is estimated to have under 20% of its total sale online]
- Additionally, as RAI (Vuse) and MO (Mark-Ten) expand distribution (they’ve rolled out brands in the last two months across test markets in one state each), we’d expect an online ban to benefit big tobacco due to their retail leverage over smaller e-cig players
- We expect future FDA regulatory restrictions to include at least advertising (same or more similar standards to traditional tobacco) and nicotine levels (at most equivalence with traditional tobacco)
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