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Is Eric Sprott Right on Gold?

Takeaway: Monetary policy and not perceived supply and demand is the driver of the price of gold.

This note was originally published October 23, 2013 at 17:00 in Macro

Is Eric Sprott Right on Gold? - sprott

As many of you know, one of the most esteemed gold bugs of our generation is the venerable Eric Sprott of Sprott Asset Management in Toronto.  Since 2000, he has obviously been spot on in his bullish call on gold, although this year has obviously been not quite so shiny (so to speak) for the gold bulls.


Yesterday, Sprott wrote a note to the World Gold Council effectively questioning their projections for short term supply and demand for physical gold.  Admittedly, he actually raises some interesting points, in particular the idea that even though physical gold in ETFs has been in free fall this year, it appears unlikely to go much lower from current levels.


On a higher level, Sprott’s point that the available statistics on gold are misleading to the extent that they may be overstating the available supply of and thus negatively impacting the price of gold is an interesting one and worth investigating further.  In the chart below, we’ve re-created Sprott’s table that was attached in his letter to the World Gold Council.


Is Eric Sprott Right on Gold? - jones1


The table shows that demand for gold, according to Sprott, is clearly out stripping supply.  In his analysis, Sprott nets out both Chinese and Russian domestic production from the world market, which he argues never leave the country and are consumed directly internally.  He also excludes about 400 tonnes a year in technology demand, which he believes is double counted.  On the flip side, Sprott excludes what the GFMS dubs “OTC investment and stock flows”, which is a name for a plug of sorts that represents the gold traded in the OTC market.


In summary, based on Sprott’s analysis there will be a deficit of supply this year of more than 780 tonnes.  If he is correct, and if gold in fact trades off of supply and demand, then the sell-off in gold this year is truly because the consensus misunderstands the global supply and demand dynamics.  Or, alternatively, there are other key factors driving the price of gold, which we will touch on shortly.


The counterpoint to Sprott’s case is that aggregate gold demand is down based on the World Gold Council’s numbers for the year-to-date.   According to the World Gold Council, demand actually fell by 12% in Q2 2013 from Q2 1012 to 856.3 tonnes.  This is just about 20% below the 5-year average quarterly demand for gold.  Clearly, this is a very different story than Sprott’s numbers outline.  In fact, as we show in the table below, the world gold council shows an over-supply of gold in the year-to-date. 


Is Eric Sprott Right on Gold? - WGC Table


Sprott’s full year estimates vary from the World Gold Council’s annualized numbers by 1,215 tonnes in aggregate.  On a notional basis, the supply and demand difference between the two sets of estimates is $52 billion.  This is a difference that is big enough to drive a very large truck through.  So, who is right?  Well, simply, the market seems to be saying the World Gold Council has nailed this one. 


One point both groups agree on, which is very transparent data, is that the financial demand for gold via ETFs has fallen dramatically this year.  Through the first two quarters of the year, the gold held by ETFs has declined by 579 tonnes.


But given the clear opacity in global supply and demand numbers for gold, we would actually posit another thesis, which is that perceived supply and demand is not the key driver of the price of gold at all and both sets of estimates are merely noise.  In the chart below, we show one of the strongest correlations we’ve seen over the last five years, which is the gold price versus the Federal Reserve balance sheet.


Is Eric Sprott Right on Gold? - Gold vs Fed BS 102313


From 2008 – 2012, this correlation was about as tight as we’ve seen in our factoring models with a r-squared of 0.90.  The chart also shows that in 2013, this relationship broke down in emphatic fashion.  Investors began to sell gold as economic data accelerated and in effect began front running a change in policy course from loosening to tightening.


The largest decline in demand for gold this year has come from a decline in demand from ETFs, or the financial markets.    As the chart below highlights, the price of gold and value of gold in ETFs has increased in lockstep for the last decade and declined in lock step starting about a year ago with the initial correction in the price of gold leading the exit of physical gold from ETFs.


Is Eric Sprott Right on Gold? - Gold   Total ETF Holdings


Ultimately, the true supply and demand dynamics for gold are difficult to determine, but we would argue that on some level they should likely be ignored.  The best predictor of gold prices will continue to be the direction of monetary policy both in the United States.  Loose monetary policy and a subsequent weak dollar, will create monetary inflation and inflate both the price of gold in real terms and lead to increased demand for gold as a store of value.


In the long term chart below, we see this relationship play out in spades going back to 1969.   Consistently, a protracted increase in the value of the dollar has lead to a commensurate decline in the value of gold and vice versa.  Interestingly, the recent spike we have seen in the value of gold in the last ten years coincides nicely with the advent of financial demand for gold via ETFs.  But undoubtedly just as ETFs have created a multiplier on the way up, they have potential for creating a multiplier on the way down.


Is Eric Sprott Right on Gold? -  USD vs Gold 


Daryl G. Jones

Hedgeye Risk Management Director of Research



CARTER'S: DON'T Build A Position Here

Takeaway: There are a lot of warning signs right now with CRI. The company has been executing, but PLEASE, don't build a position here.

This note was originally published October 24, 2013 at 16:40 in Retail

Editor's note: This is a complimentary research report from Hedgeye Retail Sector Head Brian McGough. Click here for more information on how to subscribe to our research.


CARTER'S: DON'T Build A Position Here - carters


We didn't like Carter's (CRI) quarter one bit.


In fact, with the exception of good growth in e-commerce, there wasn't a single thing we liked.   To be clear, we were negative on this name last year,  and though we were mostly right on the model, we couldn’t have been more wrong on the stock.  Though we continued to have a serious bias against the sustainability of the business model, we kept our discipline and (painfully) threw in the towel on our short. Congratulations to all of you that rode this horse from $50 to $75 over the past year.  Lesson learned for HedgeyeRetail.


All of that said, there's no shortage of reasons for selling your position today. Consider the following…


1. Here's the elephant in the room: CRI  borrowed an extra $400mm in debt to repo $454mm stock (thus far). We ordinarily would give a company credit for such a buyback, but to execute on such a big program when Margins are at peak, your stores are comping down, inventory is building, and your stock is at an all-time high???   We're sure it went through an exhaustive corporate governance process, but quite frankly, we're surprised that any board let it get past the goalie.


2. At face value, the growth algorithm looks good -- until you get to SG&A. On a GAAP basis, earnings were down for the second quarter in a row. We know no one cares about GAAP anymore, but hey, it's the REAL earnings of the company.  Even excluding all special charges, earnings only grewby 9.5% -- well below the rate of revenue.


3.  Wholesale Carters was the star. Kinda.


4.  Carter's Retail put up slammin' revenue numbers as well -- up 16% in aggregate, but 8.9% when we exclude e-commerce.  The comp was up only 0.5%. But get this…they're on track to open 66 new stores for the year. Can someone explain to me why a company is growing 14.5% square footage while its stores are not comping. This is a little reminiscent of Coach (but not as pathetic).


5.  As good as a 15% retail top line number is, it's hard to get excited about it when EBIT grows 500bp slower.


6.  Dot com looked really good for CRI, but keep in mind that its still only 7% of brand sales. Other premium brands are 2x that rate. The good news for CRI is that the new DC in Atlanta will help keep this growth rate in gear.


7.  In wholesale Carters, the Brand printed 6.4% EBIT growth on a whopping 15.6% top line performance.  Clearly it did not play the promotional game wisely this quarter. The company noted an ad shift into the quarter, as well as some air freight expense. If we assume that all of this  a) actually happened, and b) was about $7mm, then margins were about flat versus last year.


8.  Osh Kosh Wholesale: Down double digits for the fourth quarter in a row, with operating profit clocking in at a whopping $2mm. In fact, if you add up all the EBIT generated by Osh Kosh Wholesale over the past five ears, you come up with an embarrassingly low number -- $15mm. It's not getting better.


9.  Retail Osh Kosh put a better foot forward by NOT shrinking its revenue base for the first time in 8 quarters.  That said, it was entirely due to e-commerce, as the base stores comped down by 4.3%.


10.  Here's a comment we don't get...

Management: "We continue to see strong demand for our brands in international markets. Our growth in the quarter was largely driven by our business in Canada. The decline in earnings reflects the start-up costs in Japan."

Hedgeye: Why don't we get it!  Comps were -3.6% in Canada, -6.4% for Bonnie Togs, and -1.3% in the co-branded stores (the latter is billed as CRI's saving grace in Canada).



CARTER'S: DON'T Build A Position Here - brian1

 CARTER'S: DON'T Build A Position Here - CRI Sigma


October 29, 2013

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Hedgeye Statistics

The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

  • LONG SIGNALS 80.51%
  • SHORT SIGNALS 78.32%

Hats Off To India

Client Talking Points


Hats off to India's central bank. Governor Raghuram Rajan says too bad on the Bernanke model and RAISES rates for the second time in two months. Get this: India’s stock market loved it! Witness the +1.65% move on the Sensex as a credible central banker (one that goes both ways) protects the purchasing power of The People. India is back to bullish TREND here at Hedgeye, and should be on #StrongRupee.


Some of the French bureaucrats are whining about #StrongEuro’s impact on “exports.” Meanwhile, Mr. Market says that’s a complete crock. European stocks are loving it. Italy is up another +1.4% as business confidence recovers alongside a stronger currency. Bank of England Governor Mark Carney is driving the bull case for the Pound too. #EuroBulls remains a Top-3 Macro Theme for Hedgeye here in Q4.


Can you say D-O-G? That’s how the Financials act with Bernanke leaning on the long-end of the curve. The XLF was down in a market up week last week, and were down again yesterday as consensus is forced to chase slow-growth (Consumer Staples +1.2% yesterday). The Yield Spread (10year – 2year) compresses again this morning to 219 basis points wide. It's a bearish U.S. Growth signal versus bullish Europe. 

Asset Allocation


Top Long Ideas

Company Ticker Sector Duration

In line with our #EuroBulls Q4 theme, we’re long the German DAX via the etf EWG. With European fundamentals showing improvement off low levels, we expect outperformance from Germany, and in turn for the region’s largest economy to pull the rest of the region higher. ECB policy remains highly accommodative and prepared to aid any of its sovereign members to preserve the Union. Inflation remains moderate and fundamentals are positive: confidence readings and PMIs are up since June, with factory orders trending higher and retail sales inflecting to push the trade balance higher. Finally, the unemployment rate has held steady at the low level of 6.9%, all of which signals to us that Germany’s economic climate is ramping up.


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.


Financials sector senior analyst Jonathan Casteleyn continues to carry T. Rowe Price as his highest-conviction long call, based on the long-range reallocation out of bonds with investors continuing to move into stocks.  T Rowe is one of the fastest growing equity asset managers and has consistently had the best performing stock funds over the past ten years.

Three for the Road


Thanking the good Lord the rest of the pseudo free-world isn’t adopting the Bernanke dogma this morning #India #UK @KeithMcCullough


“Whenever you find yourself on the side of the majority, it is time to pause and reflect.” -Mark Twain


Twitter currently has 218 million active monthly users, with 169 million of these users coming from outside the U.S, posting roughly 58 million tweets a day. 135,000 Twitter accounts are registered every day. 

What's New Today in Retail (10/29)

Takeaway: Retail sales lackluster for the week. SHLD closes Canadian stores, while TGT opens. Sharp slowdown in UK retail. Classic quote from JCP.



WMT - Investor Meeting (Sao Paulo): Tuesday 10/29

JNY - Earnings Call: Wednesday 10/30 8:30 am

TGT - Financial Community Meeting: Wednesday 10/30 1:00 pm




ICSC - Chain Store Sales Index


Takeaway: After a flash of brilliance last week, retail sales numbers per ICSC (survey of 80 retailers) dipped below the growth rate seen in the prior two years. While we're still not in the holiday spending frenzy, these numbers are getting increasingly important as each week passes. The retail industry better see them pick up in very short order, otherwise the holiday shopping season will start out as highly promotional.


What's New Today in Retail (10/29) - chart1 10 29

What's New Today in Retail (10/29) - chart2 10 29


UK retailers suffer sharp slowdown in sales, says CBI



  • "Retailers suffered a sharp slowdown in sales this month, according to an industry survey that has cast doubt on the pace of the wider UK economic recovery. After a strong run of growth, sales ground to a halt at the start of October and came in well below City forecasts, the CBI business group said."
  • "The main sales balance in its monthly survey came in at +2, down sharply from +34 recorded in September and much lower than +33 forecast by economists in a Reuters poll. The balance, which is the difference between the percentage of retailers reporting an increase and those reporting a decrease in sales, was the weakest since June and breaks a three-month run of strong sales growth."


Takeaway: While CBI has had mixed accuracy in the past. Such a strong directional move can't be ignored. Where there's smoke, there's fire.




JCP - Penney again says sales trends are improving



  • "J.C. Penney Co Inc told investors for the third time in less than five weeks that sales trends are improving and reaffirmed its forecast calling for positive comparable-store sales results coming out of the third quarter."
  • "'I told lenders it would be one thing if we had two things wrong and they couldn't be fixed. We have 30 things wrong and they can all be fixed,' Ullman said on Monday morning."


Takeaway: We're no fan of Ullman. But his quote is classic. He's absolutely right. There's nothing JCP has on its plate that cannot be fixed.


TGT - Target Set to Complete Canadian Store Openings for 2013



  • "...Target is pleased to announce the opening dates for 33 additional Canadian store locations spanning across nine provinces, including its first stores in New Brunswick, Prince Edward Island and Newfoundland. Thirty-one store locations are scheduled to open on November 13, and the remaining two locations will open on November 22, completing Target's Canadian store openings for 2013. Additional stores opening beyond 2013 will be announced at a later date."


Takeaway: Sears closes more Canadian stores on the same day Target announces it's opening 33 stores. Go figure.


KORS - Michael Kors to join S&P 500, replaces NYSE owner



  • "Michael Kors Holdings Ltd.  will join the S&P 500 after the close of trade Friday, S&P Dow Jones Indices said late Monday. The jewelry retailer will replace stock-exchange operator NYSE Euronext, which is being acquired by IntercontinentalExchange Inc.in a deal expected to be completed on or about that date, the index publisher said."


Takeaway: Completely appropriate move. If Coach is in the S&P, KORS definitely should be.


SHLD - Sears Holdings Provides Update On Actions To Transform Business And Third Quarter Performance



  • "Today, we...are announcing a number of actions intended to improve our financial flexibility and accelerate our transformation into a leading Integrated Retailer that fosters relationships with members through our Shop Your Way platform. We also are providing an update on our third quarter operating performance."
  • "First, Sears Canada announced today the sale of five store leases to Cadillac Fairview Corporation Limited for total consideration of $400 million Canadian.  The transaction is expected to close in the next ten business days."
  • "Second...we will continue to evaluate our stores in the context of our Integrated Retail strategy. ...we will review each location, including leased locations that are set to expire, and decide whether or not to renew such leases. We expect to improve our financial performance by removing unprofitable locations, and redeploying the capital tied up in those locations…"
  • "Third...We are evaluating separating both our Lands' End business and Sears Auto Center ('SAC') business.  We believe separating the management of these two businesses from Sears Holdings would allow them to pursue their own strategic opportunities, optimize their capital structures, attract talent, and allocate capital in a more focused manner while bringing our business unit structure to life outside of the Sears Holdings portfolio."
  • "Finally, Sears Holdings announced an update regarding its operating performance for the third quarter ending November 2, 2013.  Comparable store sales for the twelve-week period ended October 26, 2013 declined 3.7%, with a decline of 4.8% for Sears Domestic stores and 2.6% for Kmart stores."


Takeaway: The monetization of Canadian stores, and the exploration of a sale of Land's End and Auto are all massive moves for SHLD. And they're probably the right ones. The only problem with selling such assets, is that the ones that are worth something to someone else are also the ones that are worth keeping.


MW - Men's Wearhouse Outlines Stand-alone Strategy



  • "On Monday, the specialty store retailer released a 39-page investor update that detailed the reasons why 'Men’s Wearhouse’s stand-alone value proposition is superior to Jos. A. Bank’s proposal.'" 
  • "The company reiterated that position Monday, saying its sales of $2.5 billion are more than double those of Jos. A. Bank’s, and it is in a position 'to deliver outsized growth' as an independent business."
  • "It is projecting total comparable-store sales growth of 4 to 5 percent in the core Men’s Wearhouse division, driven by an increasing penetration of its newly acquired and higher-margin Joseph Abboud brand. The retailer also plans to add 100 new Men’s Wearhouse stores to its stable, and anticipates 'sales growth and margin improvement as a result of new and upscale proprietary brand initiatives' such as the introduction of higher-priced Joseph Abboud rental tuxedos, and the opportunity to build the Joseph Abboud brand to a $300 million to $400 million business."


Takeaway: The reality is that MW is probably right. It is evolving itself into a house of high-end brands (recent purchase of Joseph Aboud, and rumors that it is looking to buy Allen Edmonds).  In effect, it is transforming itself into a place where Men actually want to shop. Go figure. It's rare in retail to find a concept that successfully migrates UP the food chain. MW appears to be doing it. That's why JOSB wants it -- and it's trying to buy it on the cheap. Good luck with that...


TGT, RSH, M - Retailers take print ads digital to entice you to shop — at their stores



  • "Starting Monday, you can find online weekly print ads for retailers such as Target Corp.,RadioShack Corp. and Macy’s Inc. not just on their respective websites, but also via a one-stop shop app and website called Retale, which will feature up to 25 major retailers’ weekly circulars by Black Friday."
  • "The digital version will include such features as a web video to provide additional details about a product."
  • "About 290 billion print circulars reportedly are distributed each year."


LVMH - LVMH’s DFS Group Plans To Open First Europe Shop in 2016



  • "DFS Group, an operator of duty-free shops controlled by LVMH...said it plans to open its first stores in Europe to cater to Chinese consumers who travel more frequently to the region."
  • "The company plans to add 'a few' outlets in Europe in 2016 and is looking at prime destinations for Chinese tourists, such as France, Italy and Switzerland, Chief Operating Officer Michael Schriver said. DFS, which gets more than half of its global sales from Chinese shoppers, currently has no outlets in Europe."


Takeaway: Smart. Upwards of 30% of shopping in Western Europe is driven by Chinese tourists. Don't ignore them.




China and Vietnam Remain Clear U.S. Apparel Leaders So Far This Year



  • "Apparel imports from Vietnam have totaled $5.3 billion year-to-date, and have grown 4 times faster than those from China so far this year on a dollar basis, though the total volume is less than one-third the size of China’s."
  • "U.S. apparel imports from China totaled $3.4 billion in August, bringing the year-to-date total to $19 billion. Year-to-date units (on a square meter equivalent basis) rose 5.9%, driving the cost per unit down by a higher-than-average 2.8%."
  • "Total apparel imports have grown 3.8% on a dollar basis through August compared to the same period last year, according to the most recent data published by the US Department of Commerce’s Office of Textiles and Apparel (OTEXA). Total unit volume, measured on a square meter equivalent basis, has increased 5.8% in the year-to-date period, driving the average cost per SME down by almost 2%."


What's New Today in Retail (10/29) - chart3 10 29

What's New Today in Retail (10/29) - chart4 10 29


Altagamma Study Points to Slowdown in Luxury



  • "The luxury goods sector is expected to log only a 2 percent gain in 2013 revenues to 217 billion euros, or $299.5 billion at current exchange, hurt by second- and third-quarter results that are 'close to stagnation' and by currency headwinds, according to the most recent study by Bain & Co. and Fondazione Altagamma, the Italian luxury goods association, presented on Monday morning... "
  • "Upturning a recent trend in the past few years, the Americas grew faster than Mainland China, showing a 4 percent gain, compared with the latter’s 2.5 percent increase. This reflects the increasing number of Chinese tourists visiting cities such as Las Vegas and Los Angeles. A number of stores that opened in secondary U.S. cities also helped drive the growth. In 2013, the Americas are expected to post sales of 69 billion euros, or $95.2 billion, in 2013."


Retailers adds 15,200 jobs in September – NRF



  • "The National Retail Federation calculated retail industry job gains at 15,200 in September, and 289,000 jobs year-over-year, a 2.4 percent increase over the same month last year and 2.0 percent higher than total private sector jobs over the past year."









Are You on Twitter?

This note was originally published at 8am on October 15, 2013 for Hedgeye subscribers.

“The most dangerous leadership myth is that leaders are born - that there is a genetic factor to leadership.  That’s nonsense; in fact, the opposite is true.  Leaders are made rather than born.”

-Warren Bennis


We’ve started our work for our October 31st IPO Blackbook on Twitter and digging into a company that was founded in 2006 and already has 215 million monthly users. Talking about going viral in a hurry!


Similar to Facebook, Twitter has that little problem of how to make money.   That attribute aside, the companies are very different, even if much of the conventional media puts them in the same category.   Facebook is a true social network and, as such, is largely closed and limited in terms of how large a network it can become.  On the other hand, Twitter is open, transparent, real-time and has scale.


Twitter is actually a true network in that it creates the network effect.  As an example, when President Obama announce his victory in the 2012 election on Twitter, that Tweet was re-tweeted more than 25 million times.  The most I’ve ever had a tweet re-tweeted was a couple of hundred times, but even there you get the point.  Twitter amplifies your communication.


Analyzing Twitter has also made me consider the importance of leadership in corporate America.  This weekend The New York Times Magazine had an article written by Nick Bilton that was titled, “All Is Fair in Love and Twitter.”  It is one version of the power and leadership struggles that have occurred within Twitter.


Twitter is also a little bit about the American dream.  Take this excerpt from the article for example:


“In 2005, Jack Dorsey was a 29-year-old New York University dropout who sometimes wore a T-shirt with his phone number on the front and a nose ring. After a three-month stint writing code for an Alcatraz boat-tour outfit, he was living in a tiny San Francisco apartment. He had recently been turned down for a job at Camper, the shoe store.”


Dorsey and his co-founders have been largely pushed out of Twitter, though many of them will obviously profit handsomely on the IPO.  Time will tell whether current CEO Dick Costolo is the right man to monetize the Twitter network, but his experience at Andersen Consulting, founding and running Feed Burner (among other start-ups), and working at Google have allowed him to acquire learned leadership assets, to Bennis’ point, that will be critical for Twitter’s future.


Now, from Silicon Valley back to the global macro grind . . .


Front and center this morning is once again the U.S. debt ceiling.  Thankfully, Bloomberg is no longer alluding to a Nazi Germany like default this morning and the reality is, as we’ve been predicting, that a deal gets done is becoming increasingly accepted.  If the deal that is purportedly on the table gets done, then the government will get funded through January 15th and the debt ceiling will get pushed to early February.


Setting aside an actual default, which was of course always highly unlikely, a short term deal is actually one of the worse scenarios.  As we show in the Chart of the Day today, economic confidence, according to the Gallup Daily tracking poll has fallen off a cliff in the last month due to the government shutdown and looming debt ceiling.  Delaying an outcome by three or four months is unlikely to be much of a catalyst to improve confidence in the short run.


We are certainly seeing these trends reflected in the real economy.  One example is the casual dining sector where weakness has been pervasive.  While certainly there are some sector specific trends at play, with the majority of the stocks missing estimates and comparable same-store-sales declining -1.9% in September according to Black Box, the decline in consumer confidence is having its impact.


All is not bad for the consumer, though, and one positive to highlight is the price of gasoline.  Even as oil remains stubbornly above the $100 bound for WTI and $110 for Brent, the price of gasoline in the U.S. is actually down. According to the Energy Information Administration, a government agency that is still open, the price of gas in the U.S. is $3.37 per gallon, which is down $0.48 from a year ago and down $0.06 from last week.  Maybe consumers are spending more time on Twitter and less time driving?


Speaking of Twitter, for those of you that answered no to the question in the title, one great reason to join Twitter is the intellectual exchange that comes from meeting new people in your expanded network.  One example of a person that I’ve met on Twitter is a gentleman named Doug Kass, who is a financial blogger for the Street.com and works out of his basement in Florida.


Even if not always correct, Kass certainly makes us think.  One example was that last night he went old school on us and sent an email indicating that based on his analysis over the long run of twenty years, the U.S. dollar has no identifiable correlation to U.S. equities.   While an interesting point, we would certainly caution any of you to invest on 20-year historical correlations.  But if you want to, we also have a bridge in Brooklyn for sale . . .


The fact is correlations influence our intermediate term view of markets.  Correlations aren’t perpetual, and correlation strength builds and decays.  At times and price levels they matter and at others they do not.  We get that.  But over the last three years the correlation between the U.S. dollar and SP500 has been 0.60.  But as Maynard Keynes said, when the facts change, we will.


Our immediate-term Risk Ranges are now:


UST 10yr yield 2.66-2.73%

SPX 1685-1725

VIX 15.21-17.63

USD 80.11-80.67

Brent 110.01-112.05

Gold 1265-1303


Keep your head up and stick on the ice,


Daryl G. Jones

Director of Research


Are You on Twitter? - Gallup Confidence


Are You on Twitter? - zz. vp 10 15

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