This note was originally published November 08, 2012 at 07:34 in Early Look
“My business is making things.”
-William S. Knudsen, May 28, 1940
That’s a quote from one of America’s finest immigrant business men during a time in this country where business builders and innovators built your military and economy, not politicians. It comes from a book that I started reading as I saw the election results roll in – Freedom’s Forge: “How American Business Produced Victory in World War II.”
Election Day 2012 was the 5 year-anniversary of building My Business. I am not in the business of producing a racial, gender, or class war in this country. I am an immigrant who is in the business of manufacturing innovative research and risk management ideas.
I didn’t ask for a bailout in 2008, and I’m not begging for a solution to a #FiscalCliff situation that the beggars themselves perpetuated. My Business is to fight the winds of government intervention in my life. My Business is to stand up and fight for the core values of a liberal – equality and liberty.
Back to the Global Macro Grind…
How has My Business thrived during one of the worst secular declines in Wall Street trading commissions on record? First, I don’t have a trading desk. More importantly, I started from a place that more should have the opportunity to rise up from – getting fired.
The problem with both our government and many of my sell-side competitors that they’ve bailed out (and paid) is that they get re-hired to do more of what has not worked.
Every mistake I make, either in building My Business or in research ideas, can and should hurt me. I need to wake-up every morning, lick the blood off my paws, and do whatever I can to make up for my mistakes. There is responsibility in recommendation.
To review where we haven’t made mistakes in Q4 of 2012, here are our Top 3 Hedgeye Global Macro Themes:
- Earnings Slowing (worst revenue and EPS slowdown since 2008)
- Bubble #3 (Commodities down -9.3% from Bernanke’s September 14th Top
- Keynesian Cliff (political gridlock perpetuated by the bubble in US politics and the media that supports it)
My Business only works if I have a great team. While I may personally make a lot of short-term mistakes, I think my research and operating team does a great job getting the intermediate-term TRENDS and TAILS right. If they didn’t, we’d fail.
I can’t tell you how rewarding it was to walk into one of the world’s biggest bond manager offices on Election Day and have him tell us that our #GrowthSlowing call in 2012 has helped him buy every dip and have a great year.
That, of course, may sound a little odd to the Equity only clients we have. But, really, that’s the point about what we do. Multi-factor, Multi-Duration Risk Management, across Global Macro Asset Classes.
Yesterday’s down move in the US stock market wasn’t about Germany. It wasn’t about the #KeynesianCliff either. It was about everything that’s been coming to a boil in the US stock market in 2012 as our economic and fiscal reality disconnected from it.
Blow-up days (biggest down day since June 1st, 2012 of -2.46% SP500) are processes, not points. If you don’t think people who chased the top in commodities in September have been blowing up, think again:
- CRB Index -9.2%
- Oil (WTIC) -14.7%
- Copper -10.6%
- Gold -3.2%
Gold isn’t blowing up. But it’s not going up anymore after 2 of the most bearish macro events in US history for the US Dollar either:
- Bernanke Printing to Infinity & Beyond
- Obama getting re-elected
That last point isn’t a political point. It’s a fact. You can’t say Obama has been great for commodity and stock inflation since 2009 and not, at the same time, acknowledge the loose fiscal and monetary policies that Debauched The Dollar all the while.
This isn’t new. Neither is it an Obama or a Democrat thing. Both Nixon/Carter were as bearish for the US Dollar as Bush/Obama have been. Why? Because both Democrats and Republicans went all-in Keynesian in both periods. And it didn’t work. Romney being advised by a hard core Keynesian (Glenn Hubbard) on the key topic of the debate didn’t work either.
What could work – and God help us all if he doesn’t get this – is Obama reaching across the aisle to people like you and me; people running small businesses who have their costs and taxes rising; people who have to meet a payroll before they can start hiring again; people who really want to see Obama succeed inasmuch as patriot Democrat and Republicans wanted Reagan and Clinton to.
You can judge us and you can demagogue us, but you cannot fire us. After all, we are The People too.
Our immediate-term risk ranges for Gold, Oil (Brent), US Dollar, EUR/USD, UST 10yr Yield, and the SP500 are now $1701-1733, $105.46-108.67, $80.22-80.98, $1.27-1.29, 1.64-1.72%, and 1391-1414, respectively.
Best of luck out there today,
Keith R. McCullough
Chief Executive Officer