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Is Keith McCullough Right About News Bias at Bloomberg?

It was was originally supposed to be a humorous, little Friday morning poke at billionaire Mike Bloomberg's news organization...

Is Keith McCullough Right About News Bias at Bloomberg? - 45

 

But the polarizing results of this recent Hedgeye/Polstir poll (see below) are startling to say the least. The clear takeaway suggests that a large swath of people don't have a whole lot of confidence in Bloomberg's reporting of U.S. economic news and events.

 

When asked the question, "Do you think Mike Bloomberg's company tells the truth about the U.S. economy?" an unbelievable 75% of respondents voted NO. While the poll sample is obviously small, it certainly raises eyebrows about the perceived veracity of Bloomberg's version of economic events.

 

One is left wondering what it all means... Would the numbers hold up and be in the same ballpark if there was a broader sample survey?

 

Here's the poll:


CHART OF THE DAY: One of the Most Obvious Ways to Play Global #Deflation

CHART OF THE DAY: One of the Most Obvious Ways to Play Global #Deflation - 03.03.15 chart

 

Editor's note: This is an excerpt from today's Morning Newsletter written by Hedgeye CEO Keith McCullough. Click here to subscribe today.

 

To review why I kept these “SELL” ideas on versus others:

 

  1. Copper – down -1.6% this a.m. (-6.4% YTD) remains one of the most obvious ways to play our top theme, Global #Deflation
  2. JPM – down -1.3% YTD is in 1 of the 2 US Equity Sector Styles I like the least (Financials – sector ETF -0.8% YTD in an up tape)
  3. FL – down 2 cents YTD is on our Best Ideas SELL list (Brian McGough is the analyst, ask our team for his deck for details)

 


Shaping Buffett's House

“You shape your houses and then your house shape you.”

-Winston Churchill

 

William Thorndike introduces Warren Buffett in chapter 8 of The Outsiders (pg167) as “The Investor CEO.” He uses the aforementioned (and ironic) Churchill quote then cites Berkshire’s sculptor himself: “being a CEO made me a better investor, and vice versa.”

 

Although I’ve only been a CEO for 7 years (and, at 40 years old, I’m a very young one at that!), I definitely agree. Running a company is a lot different than generating a hedge fund P&L. Both experiences have taught me invaluable lessons about life and investing.

 

While Buffett’s former #1 Rule in Investing was “don’t lose money”, he doesn’t really say that anymore when promoting his positions and politics on CNBC. To be clear though, Buffett became Buffett by selling high and buying low.

 

By 1987, in advance of the October market crash, Buffett had sold all of the stocks in his portfolios, except for his 3 core positions. After his Capital Cities transaction, he did not make another public market investment until 1989” (pg175), when he bought Coke (KO).

 

The house that shapes Buffett’s commentary today is not the See’s Candies he bought in 1972 for $25 million. Buffett, due largely to his brilliant performance and compounded returns, is now the stock market. His #1 Rule now is to protect that house.

 

Shaping Buffett's House - b9

 

Back to the Global Macro Grind

 

I’m calling that out as there’s plenty of video circulating on CNBC’s backslapping network this morning, replaying a fawning Becky Quick with Mr. Chuckles. If you were able to play the mainstream media to your advantage like this, you’d be chuckling too!

 

Here’s my 1 minute video on the matter: https://www.youtube.com/watch?v=60zMHvjybZI

 

Another reason to callout the chart-chasing buy-high-and-hope-to-sell-higher strategy (commonly called momentum and/or performance chasing) is that the US stock market closed at its all-time high of 2117 (+2.8% YTD) yesterday.

 

All-time, as I like to remind time-series fans, is a long time. And you generally don’t want to have the all-time high as your invested cost basis. You can ask some of the private equity firms who bought upstream and/or MLP Energy assets with a $105-120 price deck about that.

 

While it might be nice to avoid Buffett’s advice about having no shorts on “when the tide rolls” out, I did have 3 of them on in Real-Time Alerts yesterday, so it’s worth calling all 3 of them out as things that didn’t work for me, in that product, yesterday:

 

  1. Copper (JJC)
  2. J P Morgan (JPM)
  3. Foot Locker (FL)

 

Yep, while all 3 of these securities have sucked in 2015 YTD (i.e. they have negative returns), I guess I was the one who sucked having them on the short side yesterday. If you’re not sucking sometimes, you don’t have mirrors in your house either.

 

To review why I kept these “SELL” ideas on versus others:

 

  1. Copper – down -1.6% this a.m. (-6.4% YTD) remains one of the most obvious ways to play our top theme, Global #Deflation
  2. JPM – down -1.3% YTD is in 1 of the 2 US Equity Sector Styles I like the least (Financials – sector ETF -0.8% YTD in an up tape)
  3. FL – down 2 cents YTD is on our Best Ideas SELL list (Brian McGough is the analyst, ask our team for his deck for details)

 

The other thing that went wrong for me yesterday was another one of these counter-TREND moves in US (and global) interest rates. While many might quibble with the simple calculation of +10% move in German Bund and Japanese Government Bond Yields (when you devalue to zero, that is the math), the move on the long-end of the US rates curve is where I seem to have the most lovers and loathers.

 

After dropping -12 basis points last week, the 10yr US Treasury Yield bounced +9 beeps (basis points) on the day yesterday. That brought back a whole host of tweeters who have been shorting the Long Bond via TLT for, well, the last 25% of the up move (since January of 2014).

 

One mainstream economic headline that hit the tape was the ISM slowing in FEB to 52.9 versus the initially reported 53.5 for JAN (which was then revised lower). So, other than it not being the worst monthly decline since OCT 2008 (like the PMI was on Friday), I don’t see any fundamental economic reason to be selling Long-duration, low-volatility, high return bonds.

 

That said, we need to risk manage the range, and here’s some time and space to consider:

 

  1. Immediate-term TRADE risk range for the 10yr Yield has widened to 1.84-2.16%
  2. Intermediate-term TREND resistance for the 10yr Yield = 2.39%
  3. US monthly Jobs Report is due out on Friday and that will definitely move the bond market

 

On a jobs miss, I think you test the low-end of that immediate-term risk range. On a jobs beat, I think you test the high end. The house that I built alongside my teammates @Hedgeye won’t make our call any more complicated than that.

 

Our immediate-term Global Macro Risk Ranges are now:

 

UST 10yr Yield 1.84-2.16%
SPX 2096-2122

VIX 12.80-16.39

USD 94.63-95.81

Oil (WTI) 48.04-52.23
Copper 2.55-2.73

 

Best of luck out there today,

KM

 

Keith R. McCullough
Chief Executive Officer

 

Shaping Buffett's House - 03.03.15 chart


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Hedgeye's Macro Show with Keith McCullough

In case you missed it, here is the replay of Hedgeye's Macro Show with CEO Keith McCullough.  

 

 


March 3, 2015

March 3, 2015 - Slide1

 

BULLISH TRENDS

March 3, 2015 - Slide2

March 3, 2015 - Slide3

March 3, 2015 - Slide4

March 3, 2015 - Slide5

March 3, 2015 - Slide6

 

BEARISH TRENDS

March 3, 2015 - Slide7

March 3, 2015 - Slide8

March 3, 2015 - Slide9

March 3, 2015 - Slide10

March 3, 2015 - Slide11
March 3, 2015 - Slide12

March 3, 2015 - Slide13


Mortal and Unsure

This note was originally published at 8am on February 17, 2015 for Hedgeye subscribers.

“Exposing what is mortal and unsure…”

-Hamlet

 

That’s from Act IV, Scene 4 of Hamlet, where Shakespeare goes on to question the motives of Norwegian crown prince, Fortinbras, who was marching his army into Poland to conquer an “eggshell.”

 

Rightly to be great, is not to stir without great argument,

But greatly to find quarrel in a straw

When honor’s at the stake.”

 

That’s also a passage Peter Thiel effectively cites in chapter 4 of Zero To One, titled “The Ideology of Competition.” And I’m reminded of it this morning, after getting beat up by Mr. Macro Market last week.

 

Back to the Global Macro Grind


To be beaten, or not to be beaten (by the market): that is the question. What makes me mortal certainly makes me unsure. And when the market goes against my preferred position, my mind stirs with great argument!

 

What happened in Global Macro last week was more of the same for the month of February to-date – a counter-TREND move. If you did the opposite of what worked in January, you’ve killed it in the last two weeks.

 

After Retail Sales, Jobless Claims, and Consumer Confidence (University of Michigan reading) missed, the US Dollar Index declined, and everything inversely correlated with Down Dollar ripped. Here’s how that looked, in rate of change terms, week-over-week:

 

  1. US Dollar Index -0.6% on the week (-0.7% for FEB to-date) to $94.16
  2. EUR/USD +0.6% week-over-week (still -5.9% YTD)
  3. CRB Commodities Index (-0.97 correlation to USD on a 90-day duration) = +1.9% on the wk
  4. Oil (WTI) was +1.7% wk-over-wk to $52.55 (90-day inverse correlation -0.89)
  5. SP500 +2.0% wk-over-wk, erasing its negative YTD return to +1.9% for 2015
  6. Argentina’s stock market +6.1% on the wk

 

Don’t cry for me Mucker? Or is that Argentina? You’re telling me you weren’t levered long Argentine inflation expectations and/or the Brazilian stock market last week? What is wrong with you?

 

Setting aside what would have been violently wrong with your returns for the last 3-6 months if you were long inflation instead of hedged vs. Global #Deflation, being long commodity levered and debt ridden nations last week was mint:

 

  1. Brazil’s stock market was +3.8% on the wk, erasing 2015 losses, taking it to +1.3% YTD
  2. Greek stocks were +11.3% on wk-over-wk, putting them back in the black at +8.3% YTD
  3. And the Ruskies crushed it, seeing the Russian Trading System Index +10.6% on the wk to +15.6% YTD

 

And, by the looks of it, Consensus Macro positioning (in CFTC non-commercial futures/options terms) got that right too:

 

  1. Crude Oil net LONG positioning was +7,938 contracts last wk to a total net LONG position of +335,998
  2. SP500 (Index + Emini) net LONG position was +7,396 contracts to a total net LONG position of +96,734
  3. Treasuries (10yr) net SHORT position dropped -66,223 contracts to a net SHORT position of -83,800

 

That’s the other thing I got wrong last week – long-term rates went up another 8 basis points wk-over-wk on the 10yr UST Yield to 2.04%. The short-end of the curve (2yr UST Yield) was flat wk-over-wk at 0.64%.

 

But, with the 10yr Yield down -13 basis points YTD, Oil -2.1% YTD, and Dr. Copper -7.9% YTD, what is the #truth about the Global #Deflation TREND vs. the shorter-term FEB to-date TRADE?

 

Was Oil Volatility (OVX) down -8.7% last week a new intermediate-term TREND, or does the +223% ramp in Oil’s emotional state (OVX) in the last 6 months have something to do with what may be pending if Russia doesn’t bailout Greece? Or something like that…

 

“And let all sleep?

The imminent death of twenty thousand men,

That, for a fantasy and trick of fame,

Go to their graves like beds, fight for a plot

Whereon the numbers cannot try the cause?”

 

Though this macro uncertainty may be madness, there is method in’t.

 

Our immediate-term Global Macro Risk Ranges are now:

 

UST 10yr Yield 1.69-2.09%
SPX 2063-2101
DAX 10572-11031
VIX 14.39-19.41
USD 93.45-95.44
Oil (WTI) 48.01-53.90

 

Best of luck out there this week,

KM

 

Keith R. McCullough
Chief Executive Officer

 

Mortal and Unsure - 02.17.15 chart


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