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Ironic Inflation?

“Irony is just honesty with the volume cranked up.”

-George Saunders


Since I won’t see any of our competitors on the Old Wall write about anemic stock market volume or US #ConsumerSlowing today, I stretched and cited an American short story writer from Texas. Since you don’t have a lot of time this morning, I’ll keep it tight.


“When I’m explaining something to you, if I’m being long-winded, and twisty… I could make you feel vaguely insulted. And you’d have a right to be.”

-George Saunders


Back to the Global Macro Grind

Ironic Inflation? - Sell in May 05.05.2014

The irony in talking about the truth on Wall Street today is that more and more people agree with it. If they didn’t, there wouldn’t be a net short position in the SP500 (Index + Emini futures and options contracts = net short position of 10,057 contracts coming into the open yesterday).


If buy-side pros weren’t getting real on #InflationAccelerating slowing US growth, you wouldn’t be seeing every hedge fund in America that was running +60-80% net long on January 1 tightening up their net exposures to the growth side of the US stock market either.


Yesterday’s no-volume +0.19% bounce to lower-highs on the SP500 (Russell2000 was -0.3% on the day) had the following volume readings:

  1. Total US Equity Volume was DOWN -26% versus the 1-month average yesterday
  2. Total US Equity Volume was DOWN -40% versus the 3-months average yesterday

In other words, next to Easter Monday, it was the lowest volume Monday we have witnessed all year (and it wasn’t Easter Monday!). So what was it? Was it the weather? When the weather is nice on the East Coast, does everyone take Monday’s off?


You’d be hard pressed to convince me that as a country socializes its downside (and in doing so limits its upside) that its people don’t get lazier. Before you know it, it’ll be cool to work less than they do in France. Ah, la belle Providence, RI!


Enough of my opinion on this no-trust-no-volume-rally-to-all-time-bubble-highs. I’m sure everyone will be able to get out, at the same time. Here’s what else was happening in the real-world of #InflationAccelerating yesterday:

  1. Wheat prices up another +1.9% to +18% YTD
  2. Corn prices up another +1.9% to +16% YTD
  3. Coffee prices up another +0.9% to +77% YTD

I know, I know. If you back all this stuff out, there’s no inflation. Got it. If you can find me an employer who dynamically adjusts your paycheck to real-time food, shelter, and energy, let me know. I’ll short his stock.


BREAKING:Ruble Plunge Hitting Russians” –Bloomberg


Unlike some of Mike’s inflationary Big Government Intervention policies in NYC, that headline from his mother ship of market storytelling is economically accurate. When a government burns the purchasing power of its people (its currency), its poor people get hit, hard.


BREAKING: “US Dollar Hits Fresh YTD Lows, Hammering Americans” –NY Times



The NY Times, CNBC, and/or any of its government access offspring wouldn’t dare put what helped JFK get elected (“Strong Dollar, Strong America” on the cover of the NY Times #1960s). That would incriminate Obama for having a Down Dollar policy that is pulverizing America’s poor.


With the US Dollar Down for the 3rd consecutive week:

  1. The Euro is punching a fresh YTD high up at $1.39 (vs USD)
  2. The British Pound continues to crush it (+6% vs USD in the last 6 months) to a fresh YTD high of $1.69
  3. The Yen continues to signal bullish TREND in our model (vs USD) at +3% YTD

And that’s with these Japanese dudes printing what, 60-70 TRILLION Yens a year? Hooowah! Gotta love the irony in America’s domestic currency policy when compared to that.


In our government PIG model (our GIP – Growth, Inflation, Policy model, bass-ackwards), using the weapon of mass inflation (P – Policy) there are 2 big things the government can use to drive the value of your hard earned currency:

  1. FISCAL policy (to spend moarrr, or not, remains the question)
  2. MONETARY policy (to print, print, print, or to tighten, remains the question)

On the fiscal side, as US growth slows, you can bet your Madoff that Obama is going to spend. On the monetary side, as Janet realizes it’s not just the weather that the US Consumer is eating this summer, I think she’ll get easier (or rhetorically un-taper).


That’s Dollar Bearish, Rates Bearish, and real US Growth Bearish. Since the Policy To Inflate cranks up your cost of living. There’s no irony in that.


Ironic Inflation? - Chart of the Day


Our immediate-term Global Macro Risk Ranges are now as follows:


UST 10yr Yield 2.56-2.67%


RUT 1099-1140

USD 79.05-79.74

EUR/USD 1.37-1.39

Pound 1.67-1.69

Natural Gas 4.59-4.85

Gold 1

Corn 5.01-5.31


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer

April 6, 2014

April 6, 2014 - 1



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April 6, 2014 - Slide10

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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 80.46%
  • SHORT SIGNALS 78.35%


TODAY’S S&P 500 SET-UP – May 6, 2014

As we look at today's setup for the S&P 500, the range is 34 points or 1.52% downside to 1856 and 0.28% upside to 1890.                                                       













  • YIELD CURVE: 2.20 from 2.19
  • VIX closed at 13.29 1 day percent change of 2.94%

MACRO DATA POINTS (Bloomberg Estimates):

  • 7:45am: ICSC weekly sales
  • 8:30am: Trade Balance, March, est. -$40b (prior -$42.3b)
  • 8:55am: Redbook weekly sales
  • 10am: IBD/TIPP Economic Optimism, May, est. 47.9 (prior 48)
  • 11:30am: U.S. to sell $35b 4W bills
  • Noon: DOE short-term energy outlook
  • 1:00pm: U.S. to sell $29b 3Y notes
  • 4:30pm: API inventories
  • 7pm: Discussion with Fed in St. Louis


    • Primaries today in Indiana, North Carolina, Ohio
    • 9:30am: Attorney General Eric Holder delivers remarks at Correctional Workers Week Memorial Service
    • 9:30am: Senate Armed Services Cmte hears from Joint Chiefs Chairman Martin Dempsey and services’ chiefs of staff on military pay
    • 10am: Senate Finance Cmte holds hearing on highway trust fund
    • 10am: Hillary Clinton speaks at Nat’l Council Behavioral Health
    • 1pm: Statoil CEO Helge Lund discusses his strategy at CSIS
    • 3pm: Senate Foreign Relations Cmte hears from Asst. Sec. of State Victoria Nuland on Russia
    • 7pm: Federal Reserve Gov. Jeremy Stein speaks at dinner held by Money Marketeers of New York Univ.
    • U.S. ELECTION WRAP: May Primaries; Buffett on Hillary


  • French President Hollande says GE bid undervalues Alstom
  • Barclays 1Q profit declines more than est. on fixed income
  • Ukraine unrest intensifies as toll rises from East offensive
  • Google to ask U.S. appeals court to throw out $30m Vringo jury verdict
  • Samsung says will challenge Apple patent infringement verdict
  • AstraZeneca chairman asks Cameron to stay bid-neutral: FT
  • Pfizer CEO willing to walk away from AstraZeneca bid: WSJ
  • Investors pushing U.S. banks for cash returns, special divs.
  • Credit Suisse put business probed by U.S. into separate unit
  • Fiat said to start Alfa Romeo model expansion with own funds
  • Sprint matches T-Mobile’s prepaid plan in Son’s price war
  • Coke, Pepsi to remove vegetable oil derivative from drinks
  • N.D. Sen. Hoeven says 3 votes short of Keystone cloture
  • Senate Foreign Relations Cmte meets on Russia, Ukraine
  • Fed Gov. Jeremy Stein speaks at 7pm NYU dinner


    • Akorn (AKRX) 6:00am, $0.15
    • AMETEK (AME) 7am, $0.56 - Preview
    • Arcos Dorados Holdings (ARCO)  8am, $0.02
    • Ares Capital (ARCC) 8am, $0.39
    • Arrow Electronics (ARW) 8am, $1.21
    • BCE (BCE CN) 7am, C$0.76 - Preview
    • Carrizo Oil & Gas (CRZO) 6:30am, $0.40
    • CBOE Holdings (CBOE) 7:30am, $0.56
    • Denbury Resources (DNR) 7:30am, $0.25
    • Dentsply International (XRAY) 7am, $0.56
    • Discovery Communications (DISCA) 7am, $0.71
    • Emerson Electric Co (EMR) 6:30am, $0.81 -Preview
    • FirstEnergy (FE) 8:30am, $0.42
    • George Weston (WN CN) 8am, $0.76
    • GNC Holdings (GNC) 8am, $0.76
    • Henry Schein (HSIC) 7am, $1.13
    • Hillshire Brands (HSH) 7:30am, $0.36
    • HollyFrontier (HFC) 7am, $0.77
    • Intl. Flavors & Fragrances (IFF) 7am, $1.25
    • Isis Pharmaceuticals (ISIS) 8:30am, ($0.24)
    • Magellan Midstream Partners LP (MMP)  8:30am, $0.68
    • Mosaic (MOS) 7am, $0.59  - Preview
    • NRG Energy (NRG) 6:49am, ($0.13)
    • Nu Skin Enterprises (NUS) 7:30am, $0.94
    • Office Depot (ODP) 7am, $0.03
    • Quicksilver Resources (KWK) 7:30am, ($0.07)
    • Radian Group (RDN) 7am, $0.22
    • Rowan Cos Plc (RDC) 8:00am, $0.20
    • Semafo (SMF CN) 8:23am, ($0.02)
    • Towers Watson & Co (TW) 6:00am, $1.48
    • Vantage Drilling Co (VTG) 7am, $0.08
    • Vishay Intertechnology (VSH) 7:30am, $0.18
    • Vulcan Materials (VMC)  8am, ($0.33)
    • Western Refining (WNR) 6:00am, $0.40
    • WestJet Airlines (WJA CN) 6:30am, C$0.63 -Preview
    • Zoetis (ZTS) 7am, $0.37 - Preview


    • Acadia Pharmaceuticals (ACAD) 4:01pm, ($0.13)
    • Activision Blizzard (ATVI) 4:05pm, $0.10
    • Agrium (AGU CN) 6:45pm, C$0.04 - Preview
    • Allstate (ALL) 4:05pm, $1.20
    • Electronic Arts (EA) 4:03pm, $0.11 - Preview
    • FireEye (FEYE) 4:05pm, ($0.53)
    • First Solar (FSLR) 4:05pm, $0.52
    • FMC (FMC) 4:15pm, $0.95
    • Forest Oil (FST) 4:22pm, ($0.02)
    • Frontier Communications (FTR) 4:01pm, $0.06
    • Groupon (GRPN) 4pm, ($0.03) - Preview
    • Iamgold (IMG CN) 5:04pm, $0.02
    • Liberty Global PLC (LBTYA) 5:40pm, ($0.08)
    • Marathon Oil (MRO) 4:03pm, $0.72
    • Matador Resources Co (MTDR) 4:05pm, $0.28
    • Microchip Technology (MCHP) 4:15pm, $0.62
    • Myriad Genetics (MYGN) 4:05pm, $0.45 - Preview
    • Oneok (OKE) 4:05pm, $0.37
    • Pioneer Natural Resources Co (PXD) 4:05pm, $1.06
    • Prospect Capital (PSEC) 4pm, $0.32
    • Qiagen NV (QGEN) 4pm, $0.22
    • Sun Life Financial (SLF CN) 5:10pm, C$0.66 - Preview
    • Trimble Navigation (TRMB) 4:02pm, $0.42
    • TripAdvisor (TRIP) 4:02pm, $0.54
    • Veresen (VSN CN) 4:22pm, C$0.05
    • W&T Offshore (WTI) 5:20pm, $0.21
    • Walt Disney (DIS) 4:15pm, $0.95 - Preview
    • Whole Foods Market (WFM) 4:03pm, $0.41
    • Zulily (ZU) 4:05pm, $0.00



  • Brent Rises as Russia and Europe Discuss Ukraine; WTI Advances
  • El Nino Alert Signals Drought, Flood Risks for World’s Farmers
  • Crop ETFs See 27% Surge in Assets on Weather Risks: Commodities
  • Nickel Advances as Ukraine Fuels Concern Supply Might Run Short
  • Corn to Soybeans Slip as U.S. Weather Outlook Favors Planting
  • Gold Near Three-Week High as Ukraine Weighed With U.S. Economy
  • Sugar Rises Amid El Nino Alert Update; Arabica Coffee Also Gains
  • Nickel to Rally 20% Further Amid Indonesia Ban, Survey Shows
  • G-7 ‘Determined’ to Cut Russian Energy Dependence, U.K. Says
  • British Coins Pass Test in 800-Year-Old Rite as Osborne Watches
  • Cushing Oil Storage Area May Empty in Weeks: Morgan Stanley
  • Oseberg Crude Exports Said to Jump to Seven Cargoes in June
  • Copper Supply Additions May Peak in 2014, Plunge 79% by 2020
  • No Petroleum No Problem for Pipelines Backed by Private Equity

























The Hedgeye Macro Team














Did the 10-Year U.S. Treasury Go Over the Waterfall?

Takeaway: Everything that matters in macro happens on the margin.

Editor's note: This research excerpt from CEO Keith McCullough was originally written before this morning's market open. For more information on how you can subscribe to Hedgeye please click here.


Did the 10-Year U.S. Treasury Go Over the Waterfall?  - niag1


So, did the 10-year US Treasury Yield just go over the waterfall of interconnected risk?


After one of the more epic 2 hour moves I’ve ever seen for the 10-year yield (between 8:30-10:30am on Friday), my long-term TAIL risk line of 2.60% broke (2.58% this morning).


Did the 10-Year U.S. Treasury Go Over the Waterfall?  - 05.05.14 10 year yield post nfp


Gold is breaking out again and European stocks don’t like it inasmuch as high multiple US Growth Stocks won’t.


After frustrating people who missed the rip higher to $1380 in early March, Gold has been consolidating and finally broke out above my immediate-term TRADE momentum line of $1292 on Friday.


There is 0% coincidence in that after the 10-year yield gave it direction. Gold loves falling bond yields.


Did the 10-Year U.S. Treasury Go Over the Waterfall?  - 05.05.14 UST vs. Gold

Cartoon of the Day: Monsters

Takeaway: Buy in May and pray or just go away?

Cartoon of the Day: Monsters - Sell in May 05.05.2014

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