Witness the textbook bounce off our first line of support (immediate-term TRADE support is 2.69%) as the 10-year makes yet another higher-low. Both the US currency and growth side of the US stock market like that this morning. Gold? Not so much. We re-shorted Gold for the first time since July 12th on Tuesday. We also re-shorted TLT there too. The Queen Mary has turned.
One of the biggest risk management questions in my notebook was whether or not the US Dollar Index would hold its higher-lows versus the June lows. It did. And it’s having a good morning again here vs the Yen too (USD/YEN held 96.59 TREND support). If these FX levels hold, some of the recent counter TREND commodity reflation pressure should abate. That would be a good thing for growth.
Finally! A country does what a serial currency debaucher at the Federal Reserve wouldn’t dare – they actually raised rates to protect the purchasing power of their people. Surprise, surprise... both the foreign exchange and equity markets liked that move (as they should). Indonesia gains +1.6% on the news. Bravo to the Indonesian Hawks.
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WWW is one of the best managed and most consistent companies in retail. We’re rarely fans of acquisitions, but the recent addition of Sperry, Saucony, Keds and Stride Rite (known as PLG) gives WWW a multi-year platform from which to grow. We think that the prevailing bearish view is very backward looking and leaves out a big piece of the WWW story, which is that integration of these brands into the WWW portfolio will allow the former PLG group to achieve what it could not under its former owner (most notably – international growth, and leverage a more diverse selling infrastructure in the US). Furthermore it will grow without needing to add the capital we’d otherwise expect as a stand-alone company – especially given WWW’s consolidation from four divisions into three -- which improves asset turns and financial returns.
Gaming, Leisure & Lodging sector head Todd Jordan says Melco International Entertainment stands to benefit from a major new European casino rollout. An MPEL controlling entity, Melco International Development, is eyeing participation in a US$1 billion gaming project in Barcelona. The new project, to be called “BCN World,” will start with a single resort with 1,100 hotel beds, a casino, and a theater. Longer term, the objective is for BCN World to have six resorts. The first property is scheduled to open for business in 2016.
Health Care sector head Tom Tobin has identified a number of tailwinds in the near and longer term that act as tailwinds to the hospital industry, and HCA in particular. This includes: Utilization, Maternity Trends as well as Pent-Up Demand and Acuity. The demographic shift towards more health care – driven by a gradually improving economy, improving employment trends, and accelerating new household formation and births – is a meaningful Macro factor and likely to lead to improving revenue and volume trends moving forward. Near-term market mayhem should not hamper this trend, even if it means slightly higher borrowing costs for hospitals down the road.
GOLD: which we re-shorted for the 1st time since July 12, is in the $; hate mail pending @KeithMcCullough
"When you expect things to happen - strangely enough - they do happen." - J.P. Morgan
Fast food workers in 50 cities across the U.S. are walking off the job today to protest for higher wages. Currently, the median pay for the fast food workers is just over $9 an hour, or about $18,500 a year. (CNN)
TODAY’S S&P 500 SET-UP – August 29, 2013
As we look at today's setup for the S&P 500, the range is 37 points or 0.43% downside to 1628 and 1.84% upside to 1665.
CREDIT/ECONOMIC MARKET LOOK:
MACRO DATA POINTS (Bloomberg Estimates):
WHAT TO WATCH:
COMMODITY/GROWTH EXPECTATION (HEADLINES FROM BLOOMBERG)
The Hedgeye Macro Team
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“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):
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:
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:
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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