Funny Fed

“To me being a gangster was better than being President of The United States.”

-Henry Hill

 

While I’m not sure if one of New York City’s most infamous mobsters (1) said it that way, Ray Liotta did in Goodfellas. So that’s good enough for me. Great flick. Just like the Bernanke and Yellen Fed... really funny.

 

Henry: “You’re a pistol! You’re really funny. You’re really funny!”

Tommy: “What do you mean I’m funny?”

Henry: “It’s funny, you know. It’s a good story; it’s funny, you’re a funny guy!”

Tommy: “What do you mean? The way I talk? What?” (everyone becomes quiet)

Henry: “It’s just, you know, you’re just funny – the way you tell the story and everything.”

 

Funny Fed - good

 

Janet "Mother of All Doves" Yellen is funny too.

 

She had us all right cracked up on the @Hedgeye HQ floor yesterday. The best part about her is that she actually believes what she said. On CNBC, Anthony, The Mooch, Scaramucci (not a character in the movie) called her an “intellectual stud.”

 

Huh?

 

Back to the Global Macro Grind

 

But Janet, seriously, just get the heck out of here already. While it was fun buying everything other than US Dollars as you were outlining your qualitative policy to passively inflate, we have to go out there on the Street today and live in the real world.

 

Here’s what happened in the market yesterday as the Fed’s price fixing policy (“rate guidance”) took hold:

  1. Dollar Down
  2. Rates Down
  3. Stocks Up (sort of  - consumer and financial stocks still weak and down YTD)

This is very Q1 2011. The Dollar Down part isn’t funny because it’s an explicit #InflationAccelerating signal:

  1. Inverse correlation between USD and SPX (6 weeks) is now -0.85
  2. Inverse correlation between USD and CRB Commodities Index (6 weeks) is now -0.83
  3. Inverse correlation between USD and WTIC and Brent Oil (6 weeks) are now -0.85 and -0.90!
  4. Inverse correlation between USD and Gasoline (6 weeks) is now -0.92!
  5. Inverse correlation between USD and Gold (6 weeks) is now -0.93!

In other words, while she might look and sound like a crazy lady on TV, she actually has more power than the President of the United States at this point on the cost of living for Americans. This is plainly a Policy To Inflate. And it’s very dangerous, on many levels.

 

But don’t worry about the Dollar DOWN = Food, Gas, and Gold UP thing, because the “US stock market is up.” Yep, a whole +0.3% for 2014 to-date vs. the CRB Commodities Index and Gold +7.9% and +10.6% YTD, respectively.

 

After being “up” (in Burning Peso terms) +460% last year, Venezuela’s stock market was up +1.9% yesterday too. But Chavez was funny. Tommy: “Funny how? I mean, what’s funny about it?” (Goodfellas).

 

As John Allison states plainly in The Financial Crisis and The Free Market Cure, “countries do not go bankrupt the way businesses do. They typically hyperinflate – that is, print valueless money – and move to some form of authoritarian government.” (pg 8)

 

Authoritarian government? Think that’s funny? Or should we just take this un-elected lady’s word for it?

 

While the 80% of America who can’t invest in inflation gets jacked with it, we can make money (not funny for the “inequality” pitch). So protect yourself against US Currency Devaluation (new YTD lows this morning) and buy other countries’ currencies!

 

As you can see in the Hedgeye Asset Allocation Model:

  1. At 21%, Foreign Currency is back to my biggest weight (we’re long Euros and Pounds vs Burning Bucks)
  2. Commodities are 2nd at 18% (buy more Gold, Natural Gas, Oil, and Food Inflation on all pullbacks)
  3. Fixed Income and International Equities would be my 3rd favorite option

In other words, while the funny lady was cracking us all up yesterday, we didn’t jump into the market and buy things exposed to ~71% of the US economy (CONSUMPTION). We just ramped the #InflationAcccelerating position.

 

While it’s both comical and counter-intuitive to the Keynesian economist contingent that you buy bonds when inflation starts to breakout, the fact is that’s precisely what you do when the entire world knows the Fed has 0% credibility in fighting real-world inflation.

 

You buy commodities to own inflation. You buy bonds because you know that inflation slows growth. #InflationAccelerating to all-time bubble highs in 2011-2012 drove bond yields (growth expectations) to all-time lows (bonds to all-time highs) in late 2012 too.

 

Anthony: “Tommy, no, you got it all wrong”

Tommy: “You mean, let me understand this… ‘cause, ya know maybe its just me, I’m a little f’d up maybe, but I’m funny how?”

Henry: “Just… you know, how you tell the story”

 

Ben, Janet, and Tommy are Gangsta though – ask Cramer and The Mooch.

 

Our immediate-term Risk Ranges are now:

 

UST 10yr Yield 2.64-2.79%
SPX 1

USD 79.77-80.31

EUR/USD 1.36-1.38

Pound 1.66-1.68

Brent Oil 108.05-110.71

Natural Gas 4.23-5.14

Gold 1

 

Best of luck out there today,

KM

 

Keith R. McCullough
Chief Executive Officer

 

Funny Fed - Chart of the Day

 

Funny Fed - Virtual Portfolio


Did the US Economy Just “Collapse”? "Worst Personal Spending Since 2009"?

This is a brief note written by Hedgeye U.S. Macro analyst Christian Drake on 4/28 dispelling media reporting that “US GDP collapses to 0.7%, the lowest number in three years with the worst personal spending since 2009.”

read more

7 Tweets Summing Up What You Need to Know About Today's GDP Report

"There's a tremendous opportunity to educate people in our profession on how GDP is stated and projected," Hedgeye CEO Keith McCullough wrote today. Here's everything you need to know about today's GDP report.

read more

Cartoon of the Day: Crash Test Bear

In the past six months, U.S. stock indices are up between +12% and +18%.

read more

GOLD: A Deep Dive on What’s Next with a Top Commodities Strategist

“If you saved in gold over the past 20 to 25 years rather than any currency anywhere in the world, gold has outperformed all these currencies,” says Stefan Wieler, Vice President of Goldmoney in this edition of Real Conversations.

read more

Exact Sciences Up +24% This Week... What's Next? | $EXAS

We remain long Exact Sciences in the Hedgeye Healthcare Position Monitor.

read more

Inside the Atlanta Fed's Flawed GDP Tracker

"The Atlanta Fed’s GDPNowcast model, while useful at amalgamating investor consensus on one singular GDP estimate for any given quarter, is certainly not the end-all-be-all of forecasting U.S. GDP," writes Hedgeye Senior Macro analyst Darius Dale.

read more

Cartoon of the Day: Acrophobia

"Most people who are making a ton of money right now are focused on growth companies seeing accelerations," Hedgeye CEO Keith McCullough wrote in today's Early Look. "That’s what happens in Quad 1."

read more

People's Bank of China Spins China’s Bad-Loan Data

PBoC Deputy Governor Yi says China's non-performing loan problem has “pretty much stabilized." "Yi is spinning. China’s bad-debt problem remains serious," write Benn Steil and Emma Smith, Council on Foreign Relations.

read more

UnderArmour: 'I Am Much More Bearish Than I Was 3 Hours Ago'

“The consumer has a short memory.” Yes, Plank actually said this," writes Hedgeye Retail analyst Brian McGough. "Last time I heard such arrogance was Ron Johnson."

read more

Buffalo Wild Wings: Complacency & Lack of Leadership (by Howard Penney)

"Buffalo Wild Wings has been plagued by complacency and a continued lack of adequate leadership," writes Hedgeye Restaurants analyst Howard Penney.

read more

Todd Jordan on Las Vegas Sands Earnings

"The quarter actually beat lowered expectations. Overall, the mass segment performed well although base mass lagging is a concern," writes Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan on Las Vegas Sands.

read more

An Update on Defense Spending by Lt. Gen Emo Gardner

"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.

read more