“Yeah, my wife is my cousin or whatever, but it’s not like what you think.”
In The Wolf of Wall Street, Donnie (whose real name is Danny) is a beauty of a storyteller. In real life, Danny was convicted of securities fraud and money laundering. And, yes, he married his cousin.
Jordan Belfort: “Is she like your first cousin?”
Donnie Azoff: “Her father is the brother of my mom… and she grew up hot.”
Back to the Global Macro Grind…
Hot, as in inflation. Yep, but if you ask the sheep at the Fed, it’s not like what you think. Even though commodity inflation accelerated to fresh YTD highs yesterday (CRB 19 component Commodities Index = +11.4% YTD), it’s sort of like the cousin thing.
You see, as long as the Fed doesn’t call it what it is, you and I can keep making money buying it. In the meantime, just don’t tell 80% of Americans that they are getting it “jammed down their throat” (Jordan Belfort told his brokers to do that with Steve Madden’s stock):
I know. I know. You can’t eat Gold. But instead of whining about it on down days in 2014, you can certainly buy it!
Reality is that very few of the world’s savants made Gold one of their top Global Macro LONG positions in 2014. It’s still nowhere in the area code of consensus. And yesterday it broke out above @Hedgeye immediate-term TRADE resistance of $1285/oz.
How high can Gold go?
Put another way:
That sure as heck beats being long something that is going to keep getting eaten by the Fed Policy To Inflate. US Consumer Discretionary stocks (XLY) are down -0.43% YTD. And, all things considered, being levered long to the recent edition of the US #HousingSlowdown pretty much sucks wind right now too.
Where the real pin action has been since the Fed cut its US Growth estimates on Wednesday is in:
But, whatever you do… and no matter what you hear from Consensus Macro… don’t call any of these investment Style Factors inflation’s cousin.
Jordan Belfort: “I heard some stupid $h-t. I … I didn’t even want to bring it up. It’s just stupid.”
Donnie Azoff: “$h-t with me?”
Jordan Belfort: “You know, just… people say $h-t. I don’t even know. I don’t even listen to it…”
Donnie Azoff: “What do they say?”
When an un-elected-central-planner devalues the Dollar, it’s inflation, stupid.
Our immediate-term Global Macro Risk Ranges are now:
UST 10yr Yield 2.47-2.67%
Best of luck out there today and have a great weekend,
Keith R. McCullough
Chief Executive Officer
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TODAY’S S&P 500 SET-UP – June 20, 2014
As we look at today's setup for the S&P 500, the range is 37 points or 1.66% downside to 1927 and 0.23% upside to 1964.
CREDIT/ECONOMIC MARKET LOOK:
MACRO DATA POINTS (Bloomberg Estimates):
• No major economic reports scheduled
• 1pm: Baker Hughes rig count
WHAT TO WATCH:
COMMODITY/GROWTH EXPECTATION (HEADLINES FROM BLOOMBERG)
The Hedgeye Macro Team
We continue to field arguments against the inflationary read-through on the commodity squeeze. Sharp increases in livestock and poultry prices over the last ten years in the face of stagnant wage growth, a decline in savings rates, and a declining U.S. dollar illustrate this reality in staggering fashion.
If Janet Yellen’s commentary yesterday is any indication, the fed will continue to promote yield-chasing from financial intermediaries and those lucky enough to hold equities and fixed assets. The PCE survey from the BLS reports the top quintile of income earners takes 66% of the aggregate income in the basket from interest, dividends, and investment related income. Needless to say, a majority of Americans consume meat.
2013 Meat Consumption Per Capita (KG/Person):
The average consumer we have continuously highlighted is reaching insolvency. Median net income margins have consistently compressed over the last five years to about 1.38% with savings rates decreasing over the same period.
Last Ten Years:
A survey from both the USDA and the University of Oklahoma’s Department of Agricultural Economics this week provide evidence that people are eating the higher price tags (adding to the pain, they drove to the store --> WTI and Brent hovering at 9-month highs).
- Food Demand Survey from the University of Oklahoma’s Department of Agricultural Economics
Last Ten Years:
Disease or not contributing to the advances YTD, this kind of headline inflation is tangibly relevant on the wallet. Unfortunately most people were not granted the opportunity to add to their inflation hedges out of the FOMC statement yesterday where the Fed provided a downward revision to its 2014 GDP estimate for the SEVENTH year in a row:
Takeaway: 75% voted YES; 25% voted NO
Keep doing the same thing we have been saying all year, buy #InflationAccelerating and slow-growth #YieldChasing assets.
Everywhere you look these days, prices are going up. Meats, poultry, eggs and fish prices just hit an all-time high. U.S. rents are at an all-time high. Gas prices are soaring again. Etcetera, etcetera.
We wanted to know if your wallet was feeling it too: Are you personally feeling the ‘pinch’ of higher prices?
At the time of this post, 75% voted YES; 25% voted NO.
Those who voted YES had this to say:
Those who voted NO reasoned:
The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.