This note was originally published at 8am on June 20, 2014 for Hedgeye subscribers.
“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):
- CRB Food Index up another +2.1% this week = +22.8% YTD
- Nickel +2.7% this week = +32.3% YTD
- Gold +3.1% this week = +9.1% YTD
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?
- If we’re right and the inflation-accelerating-slows US growth setup is similar to 2011, Gold can go a lot higher
- From an immediate-term TRADE perspective, the new risk range is $1285-1336/oz
- From an intermediate-term TREND standpoint, $1381 is resistance
Put another way:
- Gold has immediate-term upside of +2.1%
- Gold has intermediate-term upside to +14.9% YTD
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:
- INFLATION stocks like Energy (XLE) +13.43% YTD
- SLOW-GROWTH #YieldChasing stocks like Utilities (XLU) +16.13%
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