Chart Of The Week: The Free Money Chart

This is the chart that the so called “free market” economists like Larry Kudlow hold so dear to their hearts. The only part of this that’s “free” is the politicization of American capital. There is nothing “free market” about screaming bloody red murder for “shock and awe” government sponsored rate cutting every time your banking friends and network producers aren’t getting paid.

Andrew Barber and I have put together 2 charts and 1 picture to amplify this point:

  1. Top Chart (2008-2009) - the widest that the US Treasury yield curve has EVER been was in June of 2009.
  2. Bottom Chart (1) – shows you the Greenspan (1993, 2003) and Bernanke (2009) inspired love bubbles.

EVER, of course, is a long time by any economic measure. Into Friday’s US market close, the US Dollar was getting tagged and the yield curve (10’s to 2’s) had expanded to +265 basis points wide, challenging it’s all time high in terms of its spread (+271bps).

For the immediate term REFLATION trade, it’s all good and fine to trumpet this as a positive for both credit and equity markets. It is positive and, in the moment, pigging out at the trough of a fat yield curve provides a bounty for the bankers belly.

The longer term question remains however – how will this all end?

My answer: higher long term cost of capital with tighter/re-regulated access to it. Reflation will morph into reported inflation in Q4, and Bernanke will be left chasing his own tail alongside the long end of the yield curve (which isn’t as politicized as the short end and has already left the barn).

Beware of modern economic theory’s groupthink.

KM

Keith R. McCullough
Chief Executive Officer

Chart Of The Week: The Free Money Chart - km12


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

Got Process? Zero Hedge Sells Fear, Not Truth

Fear sells. Always has. Look no further than Zero Hedge.

read more

REPLAY: Review of $EXAS Earnings Call (A Hedgeye Best Idea Long)

Our Healthcare Team made a monster call to be long EXAS - hear their updated thoughts.

read more

Capital Brief: 5 Things to Watch Right Now In Washington

Here's a quick look at some key issues investors should keep an eye on from Hedgeye's JT Taylor and our team of Washington Policy analysts in D.C.

read more

Premium insight

[UNLOCKED] Today's Daily Trading Ranges

“If I could only have one thing of the many things we have it would be my daily ranges." Hedgeye CEO Keith McCullough said recently.

read more