This note was originally published at 8am on May 09, 2014 for Hedgeye subscribers.
“Your job is to coach the team I give you.”
-Sonny Weaver Jr.
That’s a Kevin Costner quote from the new NFL movie my wife and I went to see on date night a few weeks back called Draft Day. The movie is somewhat contrived but, at the same time, somewhat real. Sort of like a nickname.
Imagine your nickname was the Muscle Hamster? As I was watching the actual NFL Draft last night with some of Hedgeye’s former college football boys (Casey Flavin, Darius Dale, and Ryan Fodor), they were trying to explain to me why they call him the hamster.
Like most things in life, I don’t totally get it until I see it. One pic of #22 RB for the Tampa Bay Bucs, Doug Martin, says 1,000 words. The dude is 5’9 and weighs 215lbs. He might not like the nickname, but he definitely looks like it.
Back to the Global Macro Grind…
If you’re a levered long high-multiple-growth-momentum-chaser, you may not like the complexion of the US stock market this year, but that doesn’t change what it’s become – a slow-growth-yield-chaser.
If we’ve shown you this pic 100 times in 2014, it probably feels like 1,000:
- Utilities (XLU) are +13% YTD
- Consumer Discretionary (XLY) stocks are -5% YTD
If you don’t like the Sector Variance that’s developing out there, here’s another pic:
- Russell2000 is -9.1% from its all-time-bubble-peak in March…
- Whereas the SP500 is only -0.8% from her all-time-twitter-muscles-but-but-the-market-isn’t-down-yet peak
Or you can #SnapChat some of the dirtier growth pics:
- Twitter (TWTR) -49%
- FireEye (FEYE) -37%
- Amazon (AMZN) -28%
- Yelp (YELP) -23%
- Zulily (ZU) -20%
No one likes to be called dirty. I know. I am sorry. But the truth is that some of these charts are filthy.
In reviewing all the tapes, the Draft Day Hedgeye Playbook remains the same:
- A Down Dollar Policy To Inflate ultimately drives #InflationAccelerating
- As real-world inflation accelerates, real (inflation adjusted) consumption growth slows
- And, as 71% of GDP (consumption) slows, US growth slows
“So”, if you want to win this year, you’re chasing the muscle-hamster-wheel that the Fed has trained you on and praying that no one knocks the entire cage of interconnected risk over. That would suck; especially since we’re all in this #YieldChasing thing together.
Yep, we’re all out in the open doing things we naturally wouldn’t do (hamsters are crepuscular, which means that if they weren’t centrally planned to run around in a cage, they’d stay underground in order to avoid being eaten).
And since doing what you shouldn’t naturally do only works if you genuinely believe that this time is different (try buying the company with no earnings at 15x sales again), you just have to get on that damn performance chasing wheel and run!
Run, muscle hamsters, run!
Because, as long as you can outrun the 80% of funds that can’t beat a bloated SP500 beta anymore, you will live to pay peak cost of living in America for another day!
Our immediate-term Global Macro Risk Ranges are now (today, in brackets I have our intermediate-term TREND signal as well):
UST 10yr Yield 2.56-2.64% (bearish)
SPX 1861-1888 (bullish)
RUT 1087-1118 (bearish)
Nikkei 14004-14348 (bearish)
VIX 12.96-14.52 (neutral)
USD 79.01-79.74 (bearish)
EUR/USD 1.37-1.39 (bullish)
Pound 1.68-1.70 (bullish)
WTIC oil 98.99-102.27 (bullish)
NatGas 4.52-4.81 (bullish)
Gold 1280-1315 (bullish)
Corn 5.05-5.25 (bullish)
Best of luck out there today,
KM
