The Economic Data calendar for the week of the 23rd of June through the 27th of June is full of critical releases and events. Attached below is a snapshot of some of the headline numbers that we will be focused on.
Takeaway: Takeaway: Gold broke out of @Hedgeye’s immediate-term TRADE resistance level of $1285 on Thursday
Gold's refreshed immediate-term TRADE risk range is $1285-$1336 with intermediate-term upside to TREND resistance at $1381.
With the +3.4% gain week-over-week the consumer is lucky he won't be eating gold at the dinner table this weekend. Unfortunately, the CRB food index appreciated +3.10% to +22.8% YTD.
The repetitive call to front-run the Fed’s response to worse-than expected data undoubtedly manifest this week:
- 2.1-2.3% from 3.0% (predictable response)
- 2015 estimates held constant (possibly foreshadowing an 8th year?)
As inflation accelerates, and growth expectations decrease, the likelihood of an easier fed increases. We believe Thursday’s session was anything but coincidental:
Divergences in the equity market between consumer-based growth and inflationary sectors continues:
American consumption habits remain the driving force in our economy. Open-ended discussions on the flow through from fed policy, to credit growth, to spending are regularities on our team. We are continuously stuck with the assumptions from central planners:
Last ten Years:
Unfortunately U.S. dollar devaluation and commodity inflation require fiscal subsidization when the wealth effect does not flow-through in the assumed capacity. Sure, the top 20% with the opportunity to own fixed assets and chase inflation in stock and commodity markets continue to take a larger portion of the total "wealth creation" from interest, dividends and property related income. This increase in wealth would arguably induce more spending. Reiterating the aforementioned point, exploring the validity of the central government’s assumptions on the trickle-down effect of a monetary increase is paramount to understanding the state of the consumer. Our analysis suggests the assumptions are much too high. More easily observed is the basket of goods we consume everyday:
Despite the Fed’s revision yesterday, consensus expectations for growth in 2H remain comparatively optimistic in our opinion. We continue to like utilities, treasuries, and commodities on the long-side.
Takeaway: 73% believe Gold is headed to $1500; 27% see downside towards $1100.
How high can gold go? If we’re right and the inflation-accelerating-slows U.S. growth setup is similar to 2011, gold can go a lot higher.
“Reality is that very few of the world’s savants made Gold one of their top Global Macro LONG positions in 2014,” Hedgeye CEO Keith McCullough wrote in today’s Morning Newsletter. “It’s still nowhere in the area code of consensus. And yesterday it broke out above @Hedgeye immediate-term TRADE resistance of $1285/oz.”
In the video below Keith discusses the key catalysts for continued momentum in Gold and what the breakout line will be important for further upside.
In the poll we asked: Whats the next stop for gold? $1100 or $1500
At the time of this post, 73% believe Gold is headed to $1500; 27% see downside towards $1100.
Those who see Gold heading higher to $1500 had this to say:
Those who believe Gold is moving lower to $1100 reasoned:
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Takeaway: U.S. consumers are feeling the food inflation heat.
Editor's note: This is an excerpt from a research report released by Hedgeye Macro on 6/19.
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 earlier this week 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:
The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.