Ask For The Truth

“If any man seeks for greatness, let him forget greatness, and ask for the truth – and he will find both.”

-Horace Mann


There’s a blizzard rolling in on the East Coast this morning and they’ll be legally selling pot in Colorado today. Welcome to 2014.


Last year I had a well known pundit tell me I wasn’t being “truthful” about US #GrowthAccelerating. The truth is US growth accelerated from +0.14% in Q412 to +4.12% by Q313. So I thought I’d start with the weather this morning. It’s tougher to obfuscate.


One thought I’ll share with our team in this morning’s New Year’s meeting will be to Breathe and Be Yourself. That’s a subtitle to a solid chapter in Unusually Excellent titled “Being Authentic” where John Hamm reminds us that “authenticity is the first step of leadership… because it is the basis for the kinds of trusting relationships with followers…” (pg 27). Ask yourself for the truth, every day.


Back to the Global Macro Grind


While we may not always be positioned for it, in this game last price is truth. We can argue with it, twist it, call it names – but that won’t change what it is. It’s the score.


Check out some of this morning’s Day 1 of 2014 scores:

  1. Thailand’s stock market -5.2%
  2. South Korea’s stock market -2.2%
  3. India’s stock market -1.3%
  4. Greece’s stock market +2.6%
  5. United Arab Emirates stock market +3.0%

#Fun. We call this a big macro day of #Divergence in Global Equities.


In commodity land, there are some interesting price % moves as well:

  1. Silver +3.2%
  2. Platinum +1.6%
  3. Wheat +0.8%

In other words, 3 of the commodities that experienced the biggest crashes in their 2013 prices are up more than mostly every commodity and stock market in the world today. We call this a nice bounce (to lower-highs).


Then alongside the #PotShops thing in Denver, you have some other social truths to consider in Japan this morning:

  1. Japan’s population growth (lack thereof) showed its largest decline on record in 2013 (-244,000)
  2. Japanese births were -6,000 y/y and deaths were -19,000 y/y in 2013, allegedly (hard for us to get to these #s)

But don’t worry, after opting for the Burning of The People’s Purchasing Power (their hard earned currency was -17% in 2013), the Japanese stock market was +59.3%. So some people crushed it in Japan; some people got crushed.


What do all these truths mean? And are they in fact truths? What if the birth/death calculation in Japan is as suspect as it is here in the US? However suspect the data, our working assumption here @Hedgeye is it’s apples to apples, suspect vs suspect.


Accepting the last market price as truth is a lot easier than taking conflicted and compromised government data at face value. The aforementioned 8 price moves in global equities and commodities, combined with what was already starting to move COUNTER-TREND in December, leads my macro craw to the same potential Global Macro Theme: Inflation Expectations Rising.


Stay tuned for our Q1 2014 Global Macro Themes call in the coming weeks where we’ll try our best to contextualize a developing truth (last price vs. market history) and what it could mean for your asset allocation and positioning.


Our immediate-term Global Macro Risk Ranges are now as follows (bullish or bearish TREND duration in brackets):


UST 10yr yield 2.97-3.07% (bullish)

SPX 1 (bullish)

Gold 1180-1223 (bearish)


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


Ask For The Truth - Chart of the Day


Ask For The Truth - Virtual Portfolio

January 2, 2013

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TODAY’S S&P 500 SET-UP – January 2, 2014

As we look at today's setup for the S&P 500, the range is 28 points or 0.99% downside to 1830 and 0.52% upside to 1858.                                          










THE HEDGEYE DAILY OUTLOOK - 10                                                                                                                                                                  



  • YIELD CURVE: 2.64 from 2.65
  • VIX closed at 13.72 1 day percent change of 1.18%

MACRO DATA POINTS (Bloomberg Estimates):

  • 8:30am: Init. Jobless Claims, Dec. 28, est. 342k (pr 338k)
  • 8:58am: Markit US PMI final, est. 54.7 (prior 54.7)
  • 9:45am: Bloomberg Consumer Comfort, Dec. 29 (prior -27.4)
  • 10am: Freddie Mac mortgage rates
  • 10am: ISM Manufacturing, Dec., est. 56.8 (prior 57.3)
  • 10am: Construction Spending M/m, Nov., est. 0.7% (pr 0.8%)


    • No major events scheduled


  • Fiat to buy full control of Chrysler in $4.35b deal
  • Ford adds SunPower solar cells to recharge electric concept car
  • Macau Dec. casino rev. rises 18.5%, beating est.
  • U.S. Northeast storm threatens travel disruptions
  • U.S., Canada box office set 2013 record
  • U.S. solar battery makers ask for probes into Chinese products
  • Samsung’s Lee urges shift beyond hardware in Apple battle
  • Berkshire seen failing Buffett’s 5-yr test for 1st time
  • Chinese manufacturing indexes fell in Dec.
  • AllThingsD editors unveil technology-news Site called Re/Code
  • Oil impurities, labeling being probed in rail explosions: WSJ
  • ICE said to seek EU1b-1.5b in Euronext IPO, Telegraaf reports
  • Motorola Moto X smartphone now starting at $399
  • Google to shut down Bump, Flock: TechCrunch
  • Snapchat account information of 4.6m said leaked: CNET


    • No earnings scheduled by S&P 500 companies



  • Copper Touches Six-Month High as Inventories Continue to Shrink
  • Cheaper Hanoi Pork Shows Crops Ease World Food Cost: Commodities
  • Brent Trades Near One-Week Low as Libya Oilfield Seen Restarting
  • Gold Rebounds With Silver After Worst Annual Retreats Since 1981
  • U.S. Natural Gas Rebounds From Biggest Drop in Eight Months
  • Wheat Prices Steady in Paris Before Grain Trading Starts on CBOT
  • Rebar Rises First Time in Three Days as Property Prices Advance
  • Cocoa Drops Below 100-Day Moving Average as Robusta Catches Up
  • World’s Biggest Iron-Ore Port Opens as Australia Storm Fades
  • Perth Mint Gold Sales Jump 41% in 2013 on Worst Rout in 32 Years
  • LBMA Says Rene Hochreiter Most Accuarate Gold Forecaster in ’13
  • South African White Corn Rises to 17-Year High on Supply Concern
  • OPEC Oil Output Declines to Lowest Since July 2011: BI Chart
  • Palm Ends Near Three-Week High After First Annual Gain Since ’10


























The Hedgeye Macro Team














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 80.52%
  • SHORT SIGNALS 78.67%

Playing Lucky

This note was originally published at 8am on December 19, 2013 for Hedgeye subscribers.

“The way I feel about music is that there is no right and wrong. Only true and false.”

-Fiona Apple


I was dead wrong on the no-taper call yesterday, and (after covering my US Dollar short position within minutes of the decision) was somehow positioned right (8 LONGS, 0 SHORTS). Where I was brought up, being right for the wrong reasons is called luck.


True or False: Ben Bernanke did the right thing in tapering yesterday? True. Whether or not his obeying the US 2013 #GrowthAccelerating data on a lag (he’s 3 months late in making a decision he should have made in September) proves to be right is up to history.


I think that if most people were intellectually honest about it, they wouldn’t have told you that A) Bernanke was going to taper yesterday AND B) US stocks would rip to all-time highs on that. But they did. That is the only truth that matters this morning.


Back to the Global Macro Grind


So what do we do now? Sticking with the process, that’s actually the easiest call to make. We simply go right back to where we were positioned from December 2012-September 2013:

  1. Long Growth (Equities)
  2. Short Gold, Bonds (and Equities that look like Bonds, like MLPs)


  1. #RatesRising + a USD that isn’t going down in a ball of flames = bad for Gold Bond positions
  2. #Flows (out of Gold Bonds into US Growth Stocks) should dominate well into the new year

That’s why my 1st three moves in #RealTimeAlerts after the taper decision yesterday were:

  1. COVER US Dollar Short
  2. SHORT Pimco’s Total Return Fund (BOND)
  3. SHORT Kinder Morgan (KMI)

It’s one thing to make mistakes in this game. It’s entirely another to make mistake-upon-mistake after making that first mistake. In hockey terms, give away the puck once – feel shame. Give it away again – feel sitting on cold Canadian bench for rest of game.


I could have easily given away the puck post taper yesterday buying something like Gold because it was down. It’s down a lot more this morning (Silver -3.9%, Gold -1.1%) and testing its June 27th YTD closing low of $1200/oz.


True or false: Gold hates #RatesRising?

  1. US Treasury 10yr Yield 2.88% = +17 bps month-over-month and +112 bps YTD
  2. Gold (started the yr at $1675) = still crashing, -28.3% YTD

Another puck I could have given away would have been trying the long Yen “because everyone is short the Yen.”  


True or false: Nikkei loves Burning Yen?

  1. Japanese Yen (vs USD) = crashing, -17% YTD
  2. Nikkei = +1.7% overnight to +54.97% YTD

In other words, as soon as you saw the word “taper” yesterday, you got the Dollar right (up) and that helped you get a lot of other things Global Macro right.


True or false: Dollar Up = Emerging Markets Down?

  1. US Dollar (despite being UP now for 1st wk in 6) = +1.1% YTD
  2. MSCI Emerging Markets Index = down -5.9% YTD

Oh, and despite the epic US Equity market rip to all-time highs (SP500 1810 = +26.9% YTD), Emerging Equity markets in Asia were down overnight (India -0.72%, Philippines -0.64%). Turkeys’ stock market is -0.7% this morning too.


On the taper news yesterday, Argentina, Chile, and Peru all saw their stock markets close down on the day. “Emerging” commodity countries = #EmergingOutflows.


So is it the marketing messages of asset management firms that are perma long Gold, Bonds, and Emerging Markets that are right or wrong in a Dollar Up + #RatesRising environment? Or are the perceptions of their investors simply false?


The truth is always in the balance of your account. It’s there, each and every market day, whether you played lucky or not.


Our immediate-term Global Macro Risk Ranges are now:


SPX 1791-1820

USD 80.15-81.14

Gold 1200-1237


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


Playing Lucky - Chart of the Day


Playing Lucky - Virtual Portfolio

My Top 13 Books of 2013

Takeaway: Hedgeye CEO Keith McCullough offers up his 13 favorite reads over the past year.

Here are (in no particular order) the baker's dozen books that the Hedgeye CEO/puckhead/nerd/market guru read this past year and highly recommends. Click on the book link to see more on Amazon.

My Top 13 Books of 2013 - book9

Knowledge and Power: The Information Theory of Capitalism and How it is Revolutionizing our World

By George Gilder

This is a thought leader’s book. With so many people whining about not having a “solution” to Washington’s economic policies, ask yourself if we’re asking the right leaders for new ideas. This book is the antichrist of broken western-academic-economic-policy group-think. -KM


Volcker: : The Triumph of Persistence

By William L. Silber

An easy read that will educate people on how central planning has become so causal to American Purchasing Power (US Dollar) and inflation/growth expectations. -KM


Antifragile: Things That Gain from Disorder

By Nassim Nicholas Taleb

Buy the book. A must read as we continue to narrow the gap between Chaos Theory and Behavioral Finance. -KM


David and Goliath: Underdogs, Misfits, and the Art of Battling Giants

By Malcolm Gladwell

"The bestselling author behind the inventive Outliers, Blink, and The Tipping Point is back with another thought provoking theory that fascinates, entertains, and informs. He gives underdogs their due this time, challenging everything readers believe about facing-and conquering-life's stumbling blocks, using the 'real' story of David and Goliath and more to make his point." -Celeste Williams, Fort Worth Star-Telegram


The Bully Pulpit: Theodore Roosevelt, William Howard Taft, and the Golden Age of Journalism

By Doris Kearns Goodwin

“If you find the grubby spectacle of today’s Washington cause for shame and despair—and really, how could you not?—then I suggest you turn off the TV and board Doris Kearns Goodwin’s latest time machine. … [Goodwin puts] political intrigues and moral dilemmas and daily lives into rich and elegant language. Imagine ‘The West Wing’ scripted by Henry James.” –Bill Keller, NYT


Economics in One Lesson: The Shortest and Surest Way to Understand Basic Economics

By Henry Hazlitt

A million copy seller, Henry Hazlitt’s Economics in One Lesson is a classic economic primer.


My Top 13 Books of 2013 - books460


Manias, Panics and Crashes: A History of Financial Crises

By Charles P. Kindleberger

"Underneath the hilarious anecdotes, the elegant epigrams, and the graceful turns of phrase, Kindleberger is deadly serious. The manner in which humans beings earn their livings is no laughing matter to him, especially when they attempt to do so at the expense of one another. As he so effectively demonstrates, manias, panics, and crashes are the consequence of an economic environment that cultivates cupidity, chicanery, and rapaciousness rather than a devout belief in the Golden Rule." -Peter L. Bernstein


The Honest Truth About Dishonesty: How We Lie to Everyone--Especially Ourselves

By Dan Ariely

“Through a remarkable series of experiments, Ariely presents a convincing case. . . . Required reading for politicians and Wall Street executives.” (Booklist)


Indian Givers: How Native Americans Transformed the World

By Jack Weatherford

"As entertaining as it is thoughtful....Few contemporary writers have Weatherford's talent for making the deep sweep of history seem vital and immediate." –The Washington Post


Cosmic Evolution : The Rise of Complexity in Nature

By Eric J. Chaisson

“Chaisson conducts an intriguing tour over vast realms of time and space. A lucid and sprightly guide, he brings forth original and provocative observations, while gathering a host of wonders in his cosmic embrace.” -Dudley Herschbach, 1986 Nobel Laureate in Chemistry


The Swerve: How the World Became Modern

By Stephen Greenblatt

The Swerve is one of those brilliant works of non-fiction that's so jam-packed with ideas and stories it literally boggles the mind.” -Maureen Corrigan - NPR/Fresh Air


The History of Money

By Jack Weatherford

“Weatherford brings a cultural anthropologist's wide-angled perspective to this illuminating investigation of money's role in shaping human affairs…Full of forgotten lore and provocative opinions (e.g., harmful inflation is identified as the dominant monetary theme of our century), and sprinkled with allusions to Voltaire, Goethe, L. Frank Baum and Gertrude Stein, this intriguing selective survey will captivate even readers with no particular yen for financial knowledge.” –Publisher’s Weekly


Thinking, Fast and Slow

By Daniel Kahneman

“A tour de force. . . Kahneman’s book is a must read for anyone interested in either human behavior or investing. He clearly shows that while we like to think of ourselves as rational in our decision making, the truth is we are subject to many biases. At least being aware of them will give you a better chance of avoiding them, or at least making fewer of them.”—Larry Swedroe, CBS News


Join the Hedgeye Revolution.

Kingly Government

This note was originally published at 8am on December 18, 2013 for Hedgeye subscribers.

“It will be said that we don’t propose to establish Kings.”

-Benjamin Franklin


But there is a natural inclination in mankind to Kingly Government. It sometimes relieves them from the Aristocratic domination. They had rather have one tyrant than five hundred.” –Benjamin Franklin (The Liberty Amendments, pg 25)


I just love that quote. And how appropriate for a fresh winter’s morning when our central planning overlords are going to speak down to us from upon high. It’s Federal Reserve day, baby! Just like your Founding Fathers planned it.


On tapering, our Kingly Government’s leaky-peaky-media-access-group seems a little confused as of late. Between the WSJ’s Hilsenrath and CNBC’s Liesman flip flopping on what the Fed is going to do today, at a bare minimum it makes for great TV, on mute.


Back to the Global Macro Grind


Did King Bernanke cut these poor peons off? What is up with that by the way? Forcing these dudes to think for themselves during the holiday season is just mean.


In all seriousness, trying to front-run the Fed without inside information isn’t easy. Reading the tea leaves on what Mr. Macro Market expects in real-time is the best we can do. If Bernanke tapers today, he’ll certainly shock me. But that’s not new.


What is new is US equity market volatility. What’s driving an intermediate-term TREND breakout in front-month stock market volatility (VIX) above our 14.91 signaling line is very simple – monetary policy confusion.


And in markets (which trade on expectations, not academic theories), confusion breeds contempt. If you follow the bouncing ball of expectations:


1. MONETARY POLICY: what the Fed should have done in SEP (taper) wasn’t done, so confusion rules

2. CURRENCIES: confusion drives Global FX volatility; most markets are keying off what the US Dollar does

3. EQUITIES: since spoos like no-taper (but worry that there should be a taper) they whip around (on no volume)


One of our biggest subscribers (he runs $18B in equity assets) nailed it in an email to me yesterday. Effectively, he thinks he knows what to do, but he’s not sure – and he definitely doesn’t like the process of discovery:


“I need to take the pulse of the patient everyday and I would really like to take the pulse without a pacemaker attached!”


#Pacemakers. That’s what the Fed should get us Canadian catholic boys for Christmas – we can attach them to a Demark dongle on our Bloomberg machines and any time Hilsy or Liesman whispers another flip to their flopping Fed leaks, we get a little jolt.


In other news…


Economic data in the United Kingdom continues to improve at an accelerating rate. On the heels of a #StrongPound, strengthening purchasing power, and falling consumer prices, the UK unemployment rate just dropped to 7.4% from 7.6%.


This, of course, has the former Keynesian kings of the Bank of England all squirreled up.


After all, they cannot allow the only thing that perpetuates economic recoveries for sustainable periods of time (#StrongCurrency) to threaten their un-elected political power.


Or is that “threatening the recovery”?


I couldn’t make this up if I tried, but after one of the best British runs of positive (think rate of change) economic data since the early Thatcher years (oh did she #timespank those British Keynesian boys publicly!), this is the headline in Europe this morning:




All the while, the Swiss reported an awesome confidence reading for DEC (ZEW index 39.4 vs 31.6 in NOV) after the Germans did yesterday (Germany’s ZEW accelerated to 62 in DEC vs 54.6 NOV).


Damn that #StrongEuro!


How dare economic gravity take hold and the most coincident indicators of economic health (a country’s currency) perpetuate confidence amongst The People?


But there is a natural inclination amongst group-thinkers towards “certainty” in economic forecasting and policy making. It sometimes relieves people who are trying to cover their political bottoms because they don’t have to be accountable to the policies themselves.


They had rather have one central planning god than a free market.


Our immediate-term Risk Ranges are (my Top 12 Daily Macro Risk Ranges are its own product now):


VIX 14.30-17.08

USD 79.79-80.44

Pound 1.63-1.65


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


Kingly Government - Chart of the Day


Kingly Government - Virtual Portfolio

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