This note was originally published at 8am on September 09, 2013 for Hedgeye subscribers.
“For God’s sake declare the colonies independent at once, and save us from ruin.”
That’s what Page said to Thomas Jefferson in the Spring of 1776. By September (on this day in fact), the Continental Congress officially named its union of independent states, the Unites States.
And the rest is history (sort of). We’re a long way from Patrick Henry’s “give me liberty, or give me death” speech from Virginia (March of 1775). At this point, Congress is the butt of most jokes. But in these Unites States, anything can happen – there’s always a chance!
Imagine Congress saves us from seeing $6 at the pump? My simpleton read-through of Obama’s QA from St Petersburg last week is that he’ll respect Congress’ wishes if he can’t sell action in Syria. A no-action vote could save the American Consumer from ruin.
Back to the Global Macro Grind…
There is no greater threat to this country than empowering both the almighty petro-dollar and/or the conflicted and compromised overlords who get paid by it. One of the most misunderstood realities of the 2008 crisis was $150 oil. Never forget that.
Since they are now front-running Obama with weapons of manic media, do you think Putin or Assad (or any of these whack jobs in Latin America or the Middle East) would stand a chance if the President of the United States started pulverizing them with a Weapon of Mass Currency Appreciation?
Both Reagan and Clinton seemed a lot stronger versus the Ruskies than Bush or Obama have been. Have you ever thought to yourself whether or not $20 oil had anything to do with that? How about the +4% US GDP growth rips of 1983-89 and 1993-99? Both were #StrongDollar, Strong America periods for both our Presidents and people.
“Our” – I keep saying our – and I am Canadian! For God’s sake Americans, stand up to this.
While both the US Dollar and US stock market seem to be sniffing out a no-action vote on Syria, they haven’t gone after the price of oil, yet. Check out last week’s most speculative lines on Middle Eastern conflict (commodities):
- Crude Oil’s net long position (futures and options contracts) just off its all-time high to +386,982 contracts
- Gold’s net long position was up another +3.6% w/w to +101,396 contracts = highest since January
That’s right Sons of Washington, when Wall Street wants to roll the bones on geo-political risk, they opt for the asset class with the highest beta, and then lever up those bets with options contracts. That’s why they’re great contra-indicators as they peak.
Gold peaked when speculation peaked that the USA would use the only other weapon of mass currency destruction that’s more dangerous than the Taliban – The Federal Reserve’s Dollar Debauchery campaign. That was 2011-2012.
So when will oil peak? (*hint, it already did in 2008)
If we don’t do Syria, oil prices have plenty of intermediate-term downside – and, as a result, the US Consumer has plenty of intermediate-term upside.
Across our core risk management durations, here are the lines of support for WTI and Brent Oil that matter to me most:
- BRENT: immediate-term TRADE resistance = $117.98; intermediate-term TREND support = $108.35
- WTI: immediate-term TRADE resistance = $110.86; intermediate-term TREND support = $102.89
In other words, the opportunity for Obama here is to back off Syria and give Americans a 7-8% back-to-school tax cut (to TREND support) at the pump.
God forbid he drives a #StrongDollar move above and beyond a no-action call on Syria (i.e. hires Summers to taper and tighten). Oil prices could crash.
That’s what I’m talking about! Oh yeah – a little more red, white, and blue pin action for the only community of investors who are killing it in 2013 YTD – Growth Investors.
Last week’s Hedgeye Risk Management Style Factors were screaming growth:
- Top 25% (SP500 Quartile data) EPS Growers = +24% YTD (vs +15.5% YTD for the bottom 25% quartile)
- Low Yield (i.e. higher growth) Stocks = +26.4% YTD (vs +11.0% for High Dividend Yielding stocks)
- Consumer Discretionary (XLY) = +1.7% SEP and +23.6% YTD vs Utilities (XLU) -0.9% SEP and +5.9% YTD
“Screaming” – yes, Patrick Henry style - keep screaming at the government to strengthen the Dollar. That includes cutting defense spending from the all-time USA high Obama established in 2011.
Never, ever, forget that the government of these United States works for you – not the other way around.
Our immediate-term Global Macro Risk Ranges are now:
UST 10yr Yield 2.83-3.01%
Best of luck out there this week,
Keith R. McCullough
Chief Executive Officer