The Economic Data calendar for the week of the 10th of February through the 14th is full of critical releases and events. Attached below is a snapshot of some (though far from all) of the headline numbers that we will be focused on.
“Everything is the same, until it is not.”
-Dr. Ellen Langer
Love that quote in chapter 3, “Variability”, in Langer’s #behavioral beauty, Counterclockwise. “People aren’t all that observant, although we think we are. We see what we expect to see, even to the point that we don’t notice things that others clearly do” (pg 33).
Growth investors want to see growth, Gold Bond investors want to see slow-growth, and I want to see Canada win medals at the Olympics. It is what it is – it’s called confirmation bias. And, on some level, most of us have it in us.
(Can you see both women in the picture below?)
So how do we become more objectively observant? How do we force ourselves to see what we don’t want to see? Since I’m talking about markets, I think you know where I wash out on this. Mr. Macro Market usually shows us the way.
Back to the Global Macro Grind…
If you were looking to rekindle 2013’s bull market in US stocks, all you’d have to have done is look at the Dow on Friday. It was +165 points (+1.1%) on the second straight jobs report miss. Everything is the same as last year, right?
Nope. Including Friday’s low-volume rally (the Top 5 Volume days of 2014 have been down days), the Dow and SP500 are down -4.7% and -2.8%, respectively. And they’ll probably be down again today.
This is not 2013 (when inflation was falling and US consumption and employment growth were accelerating). This is 2014 and with #InflationAccelerating again last week, US consumption growth is slowing, faster.
Got Hedgeye Macro Theme #1 for Q114?
In other words, as the US economic data slows, Mr. Macro Market is starting to front-run proactively predictable behavior that Janet Yellen will back off on the tapering and/or change the goal posts again on the Fed’s dual mandate.
Everything that matters in macro happens on the margin, so don’t forget that last year the Fed got incrementally tighter – anything less would be dovish on the margin, including Yellen moving toward what print-money-forever PhDs call “forward rate guidance.”
Not to be confused with something that will work in getting early 2011-style #InflationAccelerating off the US consumer’s back, “forward rate guidance” is basically what Japan did decades ago in telling the world its rates would never go up.
Guess what, they didn’t.
With the 10yr yield on Japanese Government Bonds at 0.60% this morning, the US Treasury 10yr yield of 2.66% has a long way to go; if the USA wants to let an un-elected-central-planning-bureaucrat at the Fed make it like Japan, that is…
Who gets paid on Down Dollar, Down Rates, and #InflationAccelerating again?
Forget the lessons of 2011. In response to inflation expectations rising, we need the Fed to tell us we “need more inflation”… so that we can slow real-inflation-adjusted-growth more!
There’s “inequality” in America, so we definitely need to ramp up those prices at the grocery store and at the pump again. Definitely. No question. We need to re-ramp some asset prices and pulverize the purchasing power of the poor.
Captain Keynesian textbook will be quick to read this and say:
After deflating a small part of the mother of all inflations (Global Inflation’s all-time highs of 2011-2012), anyone who thinks there’s A) no inflation and B) no problem with inflation doubling sequentially from 1% to 2% needs their head examined.
If inflation expectations rise, commodities, wages, household debt levels, and breakevens rise (US 5yr Breakevens up another +4bps last wk to 1.93%); the 10yr bond yield won’t.
Why? Because the Fed has 0% credibility in fighting real world INFLATION. That’s why over 80% of the movement in the long-end of the yield curve can be explained by rising and falling GROWTH expectations.
In other news this morning:
No I didn’t buy the bounce last week (the Russell2000 actually didn’t bounce, it was down another -1.3% to -4% YTD – another growth slowing on the margin signal). Sorry, this is not 2013. Everything is the same until it isn’t.
Our immediate-term Global Macro Risk Ranges are now:
Best of luck out there today,
Keith R. McCullough
Chief Executive Officer
Hosted by Hedgeye CEO Keith McCullough at 9:00am ET, this special online broadcast offers smart investors and traders of all stripes the sharpest insights and clearest market analysis available on Wall Street.
THE MACAU METRO MONITOR, FEBRUARY 10, 2014
CASINOS RECORD A BRIGHT MOP8.3-BLN START TO MONTH Macau Business
Casino revenue for the first six days of this month reached MOP8.3 billion (US$1.04 billion), a run rate was MOP1.39 billion. In the first seven days of the Lunar New Year holidays last year revenue was MOP7.2 billion. Credit Suisse says mass-market gaming revenue in the first five days of the holidays was up to 25% YoY.
HOTEL STATS Macau Business
The Macau Government Tourist Office said the average occupancy rate of three-, four- and five-star hotels was 94.4%, 5.4% points higher than last year. Five-star hotels saw the biggest increase in their average occupancy, which rose by 6.3% points to 97.2%. The average room rate in three- to five-star hotels climbed by 17.5% to MOP2,387 (US$298).
SANDS RECORDS 1.8 MILLION VISITS DURING HOLIDAYS Macau Business
There were 1.8 million visitors to Sands China Ltd’s casino-resorts between January 31 and last Thursday. Its resorts had an average of around 260,000 visitors a day during the first week of the lunar year.
CHIMELONG RESORT DRAWS 500,000 IN FIRST 10 DAYS Macau Business
The Chimelong International Ocean Resort on Hengqin Island drew about 500,000 visitors during its first 10 days in business. A spokesman for the owners said the resort had up to 80,000 visitors a day during the Lunar New Year holidays, and that most were independent travellers from Zhuhai and elsewhere in the Pearl River Delta region. He said about 500,000 people had visited the resort between January 28 and last Thursday.
TAIPA FERRY TERMINAL TO BE OPERABLE IN Q2 OF 2014 Macau Daily TImes
After an almost five-year delay, the Infrastructure Development Office (GDI) finally confirmed that the first and second stages of construction of the Pac On Ferry Terminal in Taipa will finish in 2Q.
TODAY’S S&P 500 SET-UP – February 10, 2014
As we look at today's setup for the S&P 500, the range is 75 points or 3.45% downside to 1735 and 0.72% upside to 1810.
CREDIT/ECONOMIC MARKET LOOK:
MACRO DATA POINTS (Bloomberg Estimates):
WHAT TO WATCH:
COMMODITY/GROWTH EXPECTATION (HEADLINES FROM BLOOMBERG)
The Hedgeye Macro Team
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