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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.”




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%

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,



Keith R. McCullough
Chief Executive Officer


Funny Fed - Chart of the Day


Funny Fed - Virtual Portfolio


Takeaway: We are removing Wolverine World Wide (WWW) from Investing Ideas.

With the stock market hovering near all-time highs, we have decided to lock in our gains on Wolverine World Wide. Retail sector head Brian McGough still likes the stock and thinks estimates are too low for 2014. His bullish long-term fundamental outlook for the company has not changed.



investing ideas

Risk Managed Long Term Investing for Pros

Hedgeye CEO Keith McCullough handpicks the “best of the best” long and short ideas delivered to him by our team of over 30 research analysts across myriad sectors.


TODAY’S S&P 500 SET-UP – February 28, 2014

As we look at today's setup for the S&P 500, the range is 30 points or 1.47% downside to 1827 and 0.15% upside to 1857.                               










THE HEDGEYE DAILY OUTLOOK - 10                                                                                                                                                                  



  • YIELD CURVE: 2.33 from 2.32
  • VIX closed at 14.04 1 day percent change of -2.16%

MACRO DATA POINTS (Bloomberg Estimates):

  • 8:30am: Revised GDP q/q, 4Q, est. 2.5% (prior 3.2%)
  • 9:45am: Chicago Purchasing Mgrs, Feb., est. 56.4 (pr 59.6)
  • 9:55am: UofMich. Conf, Feb. final, est. 81.2 (prior 81.2)
  • 10am: Pending Home Sales m/m, Jan., est. 1.8% (prior -8.7%)
  • 10:15am: Fed’s Stein, Kocherlakota, Evans, Plosser speak
  • 1pm: Baker Hughes rig count


    • 4:45pm Obama DNC speech topics may incl mid-term elections, Affordable Care Act, immigration laws


  • Mt. Gox files for bankruptcy in Tokyo with 6.5b yen debt
  • Euro-area February inflation exceeds economists’ forecasts
  • Yuan drops most on record amid band widening speculation
  • Apple wins dismissal of $2.2b patent suit in Germany
  • AT&T said to build Europe case amid silence on Vodafone
  • Jos. A. Bank seeks talks with Men’s Wearhouse on deal
  • Berkshire Hathaway annual report to be posted Saturday
  • United sees rev. cut after 22,500 flights erased by storms
  • IBM begins cutting U.S. jobs in $1b restructuring plan
  • Salesforce projects 1Q rev. that may top ests.
  • Gap profit exceeds estimates as deep discounts draw shoppers
  • Gunmen occupy Crimea airports, Ukraine seeks IMF financial aid
  • U.S. Jobs, Obama’s Budget, Buffett, ECB: Week Ahead March 1-8


    • 3D Systems (DDD) 8am, $0.19
    • Auxilium Pharmaceuticals (AUXL) 7am, $0.21
    • BroadSoft (BSFT) 7am, $0.41
    • Endo Health Solutions (ENDP) 6:32am, $0.93
    • Exelis (XLS) 6:15am, $0.45
    • Golar LNG (GLNG) premkt, ($0.07)
    • Iron Mountain (IRM) 6am, $0.22
    • Isis Pharmaceuticals (ISIS) 8:30am, ($0.16)
    • Lexicon Pharmaceuticals (LXRX) 6am, ($0.05)
    • Liberty Interactive (LINTA) 7:30am, $0.46
    • Liberty Media (LMCA) 7:30am, $0.60
    • Northwest Natural Gas Co (NWN) 6am, $1.03
    • NRG Energy (NRG) 6:49am, $0.23
    • Pepco Holdings (POM) 6:03am, $0.21
    • Vantage Drilling Co (VTG) 7am, $0.08


    • Dyax (DYAX) 4:01pm, ($0.04)


  • WTI Trims Monthly Gain on U.S. Demand, Discount to Brent Narrows
  • Drought Threatens Southeast Asia Food Prices as Haze Worsens
  • Nickel Reaches One-Week High on Speculation Supply to Tighten
  • Gold Declines in London as Traders Book Profits Following Climb
  • Natural Gas Heads for Biggest Weekly Drop in New York Since 1996
  • Wheat Heads for Biggest Monthly Gain Since 2012 on U.S. Concern
  • Coffee Declines as Rally Prompts Brazilian Sales; Cocoa Advances
  • EU Sugar Plans Pit Growers Against Food Makers After Prices Fall
  • Freeport May Declare Force Majeure at Grasberg Mine on New Rules
  • London Gold Fix Study Indicates Decade of Bank Manipulation
  • Afghanistan $3 Trillion Minerals Won’t Go Anywhere Without Rails
  • Frozen East Coast Pays as Law Blocks Cheaper Fuel Flows: Energy
  • Cosan Seeks $4.7 Billion Deal to Streamline Sugar Transportation
  • Rebar in Shanghai Falls a Third Month as China Demand Weakens


























The Hedgeye Macro Team














February 28, 2014

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Valentine's Day Massacre

This note was originally published at 8am on February 14, 2014 for Hedgeye subscribers.

“You must be new to this town, Mister. Only Al Capone kills like that.”

-Bugs Moran


Bugs was a Chicago gangsta, yo. And that’s all I have to say about that. We aren’t making a market call today. Like the entire Connecticut school system (that closes when it drizzles), we’re shutting the office down today for the Valentine’s Day Massacre at Chelsea Piers in Stamford.


Not to be confused with Capone’s made for movies stuff, this is going to be the real deal. At 1PM sharp (attendance is free), we have @HedgeyeRetail analyst (Bugs’ 3rd cousin and former Chicago Blackhawks prospect from Robbinsdale, Minnesota, Alec Richards) between the pipes versus The Dan Holland.


Not to be confused with the 20yr old Holland who you’ll find on HockeyDB.com (who plays for the New Hampshire Monarchs - 5 games played, 8 PIMS, and 1 assist), Hedgeye’s Holland hails from parts unknown. Scouts from Charlestown say he’s a killer. And all he has to do to win is score 1 goal in 10 breakaway tries on Richards. If he does that, he’ll make Big Alberta, Daryl Jones, a lot of dough.


Valentine's Day Massacre - dh wins


Back to the Global Macro Grind


Oh, you don’t care about Hedgeye hockey and want to make some dough in the market do you?


Heyer: “Hello, boys – something I can do for you?”

Gangster: “Yes, you can shut up!”


Ok, be that way.


While this whole attitude thing may not be what you were looking for on Valentine’s Day, that’s just too bad isn’t it.


Despite people on TV getting all lovey-dovey with the US stock market (on no-volume-lower-highs again) yesterday, I don’t like you buying the US stock market today anymore than I didn’t yesterday.



  1. US DOLLAR – down again this morning (-1.5% in the last 2 weeks and bearish on our long-term TAIL risk duration)
  2. US RATES – after failing @Hedgeye TREND resistance of 2.80% this wk, falling again this morning to 2.72%
  3. GOLD – ripping, alongside the CRB Commodities Index, to fresh new YTD highs of $1308 = +8.8% YTD!

Oh, you don’t like the #InflationAccelerating call because you aren’t long inflation?


Capone: “Wanna know something… I like a guy who can use his head for something more than a hatrack.”




Other than the explicit US #GrowthSlowing signal that has always been Dollar Down + Rates Down = Gold Ripping, what else is going on out there today that has me in such a mood?

  1. JAPAN – Yen breaking out now vs USD and the Nikkei is getting crushed (-3.3% in the last 2 days to -12.4% YTD)
  2. RETAIL SALES – reported yesterday as the worst 1 and 2 year growth rate in 2 years (and everyone blames weather)
  3. RISK RANGES – both the SP500 and VIX risk ranges of 1726-1848 and 13.39-20.41, respectively, are wicked wide

And, btw, #InflationAccelerating in the two things I drink/eat for breakfast every morning has me surly too:

  1. COFFEE = +25.7% YTD
  2. OATS = +17.8% YTD

But, whatever you do, don’t tell me there’s never going to be inflation in this world, ever.


Just don’t.


Don’t go there because, as the Interrogator in the Valentine’s Day Massacre told Franky Gusenberg, “I’ve got to tell you Frank, you’re not going to make it. Want me to call a preacher?”


Yep. For Danny Holland versus one of the best goalies in Yale Hockey history, I am officially recommending prayer.


Happy Valentines.


Our immediate-term Risk Ranges are now:


UST 10yr Yield 2.60-2.80%

SPX 1726-1848

Brent Oil 107.69-110.41 (

NatGas 4.76-5.41

Gold 1272-1311


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


Valentine's Day Massacre - Chart of the Day


Valentine's Day Massacre - Virtual Portfolio

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