“Always my soul hungered for less than it had.”
Suffice it to say, this new book I have been reading (Lawrence in Arabia – War, Deceit, Imperial Folly and the Making of The Modern Middle East) has provided me both timely and profound context for the times in which we live.
In general, that’s why I read so much history. I believe that leadership starts with having an ability to empathize. If you can’t contextualize where people and/or ideas come from, how can you lead them toward the path you’d like them to take?
And what if the path you thought you should take (like devaluing the purchasing power of your people and establishing a perpetual savings rate of 0%) ends up becoming the wrong path? Only the objective and flexible can change their mind. That’s evolution.
Back to the Global Macro Grind…
October is coming. For the US stock and bond markets, that’s not always a good thing. October 1987 is a date that many of you who lead firms today remember. October of 1907 is a date you’ll only respect and remember if you’ve studied economic history.
“In October of 1907, a panic on Wall Street sparked a nationwide run on banks and nearly halved the value of the New York Stock Exchange in a matter of days. Among the hardest hit by the panic was the heavily leveraged William Henry Yale, whose enormous fortune was virtually wiped out.” (Lawrence in Arabia, pg 25)
It wasn’t just the Yale family that got crushed. Many “who were born to tremendous advantage… lost it all in the blink of an eye” (pg 24), and that crisis gave birth to a whole new set of growth opportunities. With no job in NYC, William Yale’s son went on to work for Standard Oil in the Middle East (his office was a backpack and a tent). He’s was one of the first Americans on the ground.
How many of your sons or daughters are prepared for a life where you lost it all?
The America that their United States had back then didn’t have hand-holding socializers of risk. In 1907, they didn’t have the Federal Reserve either. Many self made men and women in this country were frugal and, as Nasim Taleb would say, anti-fragile.
How about the President of the United States? What did he stand for then versus now? If you had to pick between Theodore Roosevelt and Bush or Obama, who would you have lead your son or daughter into “the struggle” that Teddy called life?
William Henry Yale’s son didn’t whine and beg for an un-elected bureaucrat called Burns or Bernanke to bail him out. He sucked up his father’s mistakes and made his own path.
That didn’t just happen. Despite having all the money in the world, Yale believed (like Teddy did) that a “true man… was a rugged individualist, physically fit as well as intellectually cultured” (pg 25).
How many of your sons or daughters are well-read individualists who are prepared to take on the tyranny of a centrally planned USA? Too much to think about this morning. I know. But, please, don’t let the government’s groupthink stop you or your kids from thinking. We don’t live in the great depression Bernanke fear-mongers about. We might, if we keep trying to ban the economic cycle.
Moving on, after 5 straight down days for US stocks, here are some USA levels to consider:
- US Dollar – US Dollar Index long-term TAIL support = $79.11; intermediate-term TREND resistance = $81.35
- US Bonds – US 10yr Treasury Yield intermediate-term TREND support 2.55%; immediate-term TRADE resistance = 2.76%
- US Equity Volatility (VIX) – 12.95 immediate-term TRADE support; 18.98 intermediate-term TREND resistance
- US Equities (SP500) – 1655 intermediate-term TREND support; 1704 immediate-term TRADE resistance
- US Growth Equities (Nasdaq) – 3702 immediate-term TRADE support; 3789 immediate-term TRADE resistance
And here are some risk management questions to consider:
- Will the supposed leaders of this country allow an un-elected man to keep devaluing America’s Currency?
- Will Ben Bernanke and Janet Yellen be allowed to impose a perpetual depression on American Savers?
- Will @FederalReserve’s latest “communication tool” be to drive uncertainty, locking in a YTD VIX low?
- Will the all-time high for the US stock market (SPX 1725) be another Bernanke Bubble top?
- Will there ever be a bull case America believes in that doesn’t include a #StrongDollar and real growth?
I for one am Hungering For Less government intervention in our currency and bond markets. I’m hungering for a life that doesn’t include having to wake up worrying about what sub-regional-anti-dog-eat-dog-federal-reserve-vice-president says on CNBC next.
I’m hungering for what has always reflected the strength and character of any nation – confidence in both the currency and resolve of its people to be the change born out of crisis.
Our immediate-term Global Macro Risk Ranges are now:
UST 10yr Yield 2.57-2.76%
Best of luck out there today,
Keith R. McCullough
Chief Executive Officer
real edge in real-time
This indispensable trading tool is based on a risk management signaling process Hedgeye CEO Keith McCullough developed during his years as a hedge fund manager and continues to refine. Nearly every trading day, you’ll receive Keith’s latest signals - buy, sell, short or cover.
TODAY’S S&P 500 SET-UP – September 26, 2013
As we look at today's setup for the S&P 500, the range is 21 points or 0.58% downside to 1683 and 0.66% upside to 1704.
CREDIT/ECONOMIC MARKET LOOK:
- YIELD CURVE: 2.30 from 2.29
- VIX closed at 14.01 1 day percent change of -0.50%
MACRO DATA POINTS (Bloomberg Estimates):
- 8:30am: Init. Jobless Claims, Sept. 21, est. 325k (pr 309k)
- 8:30am: GDP Annualized Q/q, 2Q revised, est. 2.6% (pr 2.5%)
- 9:30am: Reserve Bank of India’s Rajan speaks in Frankfurt
- 9:45am: Bloomberg Consumer Comfort, Sept. 22
- 10am: Pending Home Sales M/m, Aug., est. -1% (pr -1.3%)
- 10am: Freddie Mac mortgage rates
- 10:10am: Fed’s Stein speaks in Frankfurt
- 10:30am: EIA natural-gas storage change
- 11am: Kansas City Fed Manufacturing, Sept., est. 8 (pr 8)
- 11am: Fed to purchase $1.25b-$1.75b in 2036-2043 sector
- 12:15pm: Fed’s Kocherlakota speaks in Houghton, Mich.
- 12:35pm: Fed’s Pianalto speaks in Cleveland
- 1pm: U.S. to sell $29b 7Y notes
- 6:15pm: ECB’s Coeure speaks in New York
- 9:15pm: Fed’s George speaks in Denver
- Canadian Minister of Intl Trade Ed Fast meets with Sec. of Commerce Penny Pritzker, U.S. Trade Representative Michael Froman to discuss job creation and trade
- 8:30am: Atty General Eric Holder delivers remarks at Justice Dept’s Summit on Preventing Youth Violence
- 10am: Senate Homeland Security Cmte hears testimony on overhauling U.S. Postal Service
- 10am: Senate Commerce Cmte hears from airline industry, manufacturers on jobs
- 10am: House Budget Cmte meets on long-term budget outlook
- 10:55am: President Obama to speak on Affordable Care Act at Prince George’s Community College
- 2pm: Senate (Select) Intelligence Cmte holds hearing on FISA
WHAT TO WATCH:
- JPMorgan said to see possible $11b mortgages settlement
- Citigroup to pay Freddie Mac $395m to end mortgage claims
- Lacker says expanding Fed assets increases costs of any missteps
- U.K. prosecutors said to plan more Libor charges in Oct.
- NYSE, Nasdaq said to weigh plan to collaborate on backups
- Deutsche Bank said to propose creating bond platform w/ rivals
- Icahn-backed Ferrous hires Itau to seek $1.5b in funding
- J.C. Penney seeks to raise $750m-$1b in new equity: Reuters
- U.S. data providers hit with cyber attack: Reuters
- Caesars selling 10m shrs in fresh public offering
- Takeda duped patients, doctors on Actos risks, lawyer says
- U.K. eco. growth accelerates in 2Q as consumer spending rises
- H&M gains most in more than 3 yrs after beating estimates
- Fed monetary policy didn’t leak early, firm’s study finds: FT
- Apple ordered to pay 330m yen in Japan on iPod patent: Kyodo
- Cargill, Bunge study bids for Deoleo, Economista says
- Accenture (ACN) 4:01pm, $1.01
- Cantel Medical (CMN) 8:30am, $0.23
- Ferrellgas Partners (FGP) 7am, $(0.31)
- McCormick (MKC) 6:30am, $0.79
- Nike (NKE) 4:15pm, $0.78
COMMODITY/GROWTH EXPECTATION (HEADLINES FROM BLOOMBERG)
- Commodity Constraints Show ‘Super Cycle’ Endures, McKinsey Says
- U.S. Corn Sales Fall Most Since ’75 as Farmers Reap: Commodities
- WTI Trades Near 12-Week Low; BofA Sees Iran Diplomacy Limited
- Wheat Near One-Month High as U.S. Sales, China Demand May Climb
- Copper Climbs Before Report Seen Showing Stronger U.S. Growth
- Gold Advances for Third Day in London on U.S. Budget Impasse
- Cocoa Swings as Ivory Coast Sells Amid Shortages; Coffee Drops
- Abenomics Peaking for Tocom Volume Means Focus on China, India
- Rebar Declines to 11-Week Low as China Affirms Property Curbs
- China Cotton Use Drops in Switch to Synthetics: Chart of the Day
- China Silver Indicators Lackluster as PC Manufacturing Down 14%
- Russian Gas Lowest Since 2011 Favors Link to Oil: Energy Markets
- Aluminum Shipments by Japan Steady in August, Group Says
- Ivory Coast Offers Cocoa for 2014-15 in a Futures Bull Market
The Hedgeye Macro Team
THE MACAU METRO MONITOR, SEPTEMBER 26, 2013
SANDS EXEC FLAGS RETHINK ON LOCAL-ONLY DEALER RULE Macau Business
Macau’s casinos face “some limit on the availability of people” unless the government changes a rule that only residents can be employed as croupiers, says LVS President and COO Mike Leven. Leven told an investor forum in Las Vegas the Macau government would have to think about the bottleneck the rule has created.
Business Daily says the casinos would need up to 10,000 more dealers in Cotai by 2018 if the government approves all of the 3,366 new gaming tables the operators want to put in the eight new casino-resorts there.
Following four months of down Baccarat drop, August was a winner.
We estimate Las Vegas Strip revenues increased 2-5% YoY in August, assuming normal table hold. Since the month ended on a Saturday, slot hold will be below normal due to State accounting and that is factored into our estimates. Assuming consistent slot hold in both periods, we estimate YoY gaming revenues increased 5-8%. We still expect down slot and non-Baccarat table volume, but our research indicates that Baccarat volume was strong. Remember that Baccarat volumes have fallen 4 straight months – fueling fears of the end of the 5 year Baccarat bull market. Our Baccarat revenue projection of 30% YoY growth could actually prove conservative if our suspicions of high hold prove true.
State gaming figures should be released early next week. Here are our full projections.
The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.
LONG SIGNALS 80.64%
SHORT SIGNALS 78.61%