This note was originally published at 8am on September 19, 2013 for Hedgeye subscribers.
“Insanity: doing the same thing over and over again, and expecting different results.”
Is it over?
Well, it depends on what you think it is.
Is it the US Constitution? Is it the US Dollar? Is it US Growth?
Back to the Global Macro Grind…
I’ll keep it tight this morning, because if I rant about what I really think about what Ben Bernanke did yesterday, I might lose some clients and have the NSA parked outside of my house.
While it was a great day for those of us who have been US stock market bulls in 2013, it was a very sad day for America.
Basically, Bernanke eviscerated almost my entire bull case for US growth accelerating from here, so it's a good thing he cut his GDP forecast. The best way to slow real (inflation adjusted) economic growth is by burning your currency.
To review the 3 core components of our 2013 bullish thesis for US #GrowthAccelerating:
- American Purchasing Power (US Dollar) stabilizes and strengthens by arresting policies to devalue the Dollar
- As purchasing power rises, American confidence, hiring, and spending does – rates rise too (it’s called a cycle)
- Economic cycles are reflexive – they feed on themselves, so the Fed needs to get out of this one’s way
None of that happened yesterday, because an un-elected central planner decided so. #perfect
Exactly what Jefferson and Franklin had in mind.
- After snapping my intermediate-term TREND line of $81.34, Bernanke smoked the US Dollar to a 6 month low
- Everything slow-growth went ape (to the upside); Gold, Bonds, Utilities, etc, – everything we don’t want to see
- And Emerging Markets went haywire (Turkey +7.6%, Indonesia +4.7%, India +3.7%, etc)
I have no doubt that everyone who is in the business of being long every recipient of the US Dollar devaluation had a great day. But that doesn’t do jack for the hard working American who will be taking this one in the pump and/or the conservative American saver who was actually getting something more than 0% for the last few months.
Bernanke should have respected Mr. Market’s long-standing American pro-growth signal of #StrongDollar, #CommodityDeflation, and #RatesRising – and he did not. Period. For that, he should feel shame.
So you tell me, is it over? And over for whom? Who is going to hold Bernanke accountable for:
- Renewing the American Tax at the pump (Dollar Down, Oil up on Bernanke is as potent as Assad)
- Cutting risk-free income on savings accounts (2yr yield just dropped 36% to 0.33%)
- Causing US GDP growth to go from 2.5% real to 1.5-2% (the GDP Deflator goes up when the Dollar goes down)
Is this all part of the class warfare thing Obama likes to talk about? Other than the political class, who, precisely, Mr. President, got paid by Bernanke’s un-objective and un-elected decision yesterday? Or did all those “folks” you’ve been standing up for refi whatever they have left on their house and buy Gold futures with it yesterday?
I clearly don’t get what Bernanke is trying to achieve by banning things like gravity, consumption tax cuts, and the economic cycle. But my gut says no one in America who doesn’t get paid to say they get it gets it either.
Unlike the US Federal Reserve who has been behind the curve using broken forecasting models, my research team will continue to respect both the data and markets as leading indicators. That part of what we do isn’t over this morning. Neither will changing our mind as circumstances do.
Our immediate-term Risk Ranges are now:
UST 10yr Yield 2.58-2.81
Best of luck out there with your centrally planned day,
Keith R. McCullough
Chief Executive Officer