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CHART OF THE DAY: Pushing the #Dots | $TLT

Editor's Note: The chart and excerpt below are from today's Morning Newsletter written by Hedgeye CEO Keith McCullough. Click here if you would like more info on how you can subscribe.

 

CHART OF THE DAY: Pushing the #Dots | $TLT - z 06.18.15 chart

 

...In terms of levels (they matter):

 

    1. The 10yr US Treasury Yield has just made yet another epic long-term-lower-high (we’re 18 months into this)
    2. The 2yr US Treasury Yield has now failed to “breakout” from the 0.75% level for the 3rd time since December
    3. My Risk Range model (which I use to front-run volatility) is signaling a narrowing (rather than widening) range

 


Look At That Dot

“Look again at that dot. That’s here. That’s home. That’s us.”

-Carl Sagan

 

And, Sagan, the American astro-everything-ist, went on to write about that Pale Blue Dot:

 

“On it everyone you love, everyone you know, everyone you ever heard of, every human being who ever was…”

 

This is your market life too. And unless you can show me that dot – as in the one that has the data to support a rate hike, you are going to be subject to the risks associated with one of Sagan’s most basic teachings – gravity.

Look At That Dot - Central banker cartoon 03.03.2015

 

Back to the Global Macro Grind

 

Where is your dot?

 

  1. 6-12 months ago, was it June 2015?
  2. Before yesterday’s Fed announcement, was it September?
  3. Where is it now? December, 2016, or 2017?

 

After pounding a serious amount of caffeine (and air miles) into my system, I can assure you that the Institutional Investor community’s answer on when, precisely, we are going to get that interest rate “liftoff” is imprecise.

 

Why the confusion?

 

  1. Some anchor on what has been an inaccurate forecasting process (The Fed’s)
  2. Some hem and haw about what Hatzius and Hyman are saying (after the Fed changes its forecast)
  3. Some don’t have a process (and/or use the Fed’s/Wall Street’s) at all – they just react

 

So, please, allow me to direct-your-dot this morning to December with a rising probability for another push to 2016, and a misunderstood rising (not declining) probability of 2017 or 2018 and beyond.

 

“Blah, ha, ha!”

 

You crazy Mucker (that’s my hockey nickname and please use an M). I had more than one group in California laugh at me out loud as the 10yr US Treasury Yield was testing 2.54% last week when I submitted the scenario analysis for 2016 and beyond…

 

One PM said “Dude, I am buying TBT (UltraShort 20yr Treasury) and the Financials (KRE) right here #charts look great – don’t you think?” … and I responded (group meeting) that I was going to short both of those right after the meeting.

 

No it wasn’t a head-bobbing-for-voting-commissions moment. I wasn’t trying to be a mean Mucker either. I have my dot – and it’s not the one that chased those charts (or have chased any “rate hike” fear since I was bullish on #RatesRising in early 2013).

 

Yes, this is a competitive game – and you’re darn right I like to win. From London, I’m happy to report that I stayed with my #process and did not capitulate. I remain long TLT and would still short the Financials and Industrials (XLI) on up days.

 

In other news – post the dovish Fed announcement yesterday:

 

  1. Dollar Down
  2. Rates Down
  3. Bonds (and stocks that look like bonds) Up

 

Oh, but not all “stocks” are up (going all Global on you now), because:

 

  1. Japanese stocks get Dollar Down, Yen Up, Nikkei Down
  2. European stocks get Dollar Down, Euro up, DAX Down

 

Not surprisingly, amidst all of the “blah, ha, ha”, that ole Doctor Dollar did me good. He was signaling a dovish Fed throughout the Global Bond Yield ramp (which wasn’t US economic data driven – it was a technical-liquidity move)… and I thank him for that.

 

The German DAX is actually -1.4% this morning and -6.7% in the last month on what some of Bloomberg’s Editorial/Advertising department has been saying is all about “Greece.”

 

Thanks for coming out guys. Please get back to interconnected macro markets and redo the headlines this morning to:

 

  1. Dovish Fed Pushes Out Dots
  2. Dollar and Rates Fall
  3. Global FX Volatility Drives Global Equity Declines

 

In terms of levels (they matter):

 

  1. The 10yr US Treasury Yield has just made yet another epic long-term-lower-high (we’re 18 months into this)
  2. The 2yr US Treasury Yield has now failed to “breakout” from the 0.75% level for the 3rd time since December
  3. My Risk Range model (which I use to front-run volatility) is signaling a narrowing (rather than widening) range

 

When the risk range widens, the “dot” scenarios are widening – and confusion breeds some bid/ask spread contempt. When my risk ranges are narrowing though, the Fed is usually toning down bond market volatility by telling you where the dot is not.

 

They showed you their dot yesterday. And I’ll show you mine again this morning – it’s called Slower-For-Longer on US growth as the #LatecCycle slow-down becomes evident. My catalyst for more of that data is called time.

 

Look again at that cyclical slow-down within the framework of a longer-term TAIL risk of secular demographic headwinds for US consumption growth. That’s here. That’s the baby boom generation slowing. That’s the US growth problem. That’s us.

 

Our immediate-term Global Macro Risk Ranges are now:

 

UST 10yr Yield 2.15-2.39%

SPX 2072-2114
USD 93.51-95.49
EUR/USD 1.11-1.14
YEN 122.21-124.98
Oil (WTI) 58.11-61.72

Gold 1172-1199

 

Best of luck out there today,

KM

 

Keith R. McCullough
Chief Executive Officer

 

Click image to enlarge

Look At That Dot - z 06.18.15 chart


The Macro Show Replay | June 18, 2015

Please note that we experienced some technical difficulties during today’s show. Hedgeye CEO Keith McCullough called in live to The Macro Show from London and the connection was compromised. We apologize for the inconvenience.

 

 


Early Look

daily macro intelligence

Relied upon by big institutional and individual investors across the world, this granular morning newsletter distills the latest and most vital market developments and insures that you are always in the know.

June 18, 2015

June 18, 2015 - Slide1

 

BULLISH TRENDS

June 18, 2015 - Slide2

June 18, 2015 - Slide3

June 18, 2015 - Slide4

June 18, 2015 - Slide5

June 18, 2015 - Slide6

June 18, 2015 - Slide7 

BEARISH TRENDS

 

June 18, 2015 - Slide8

June 18, 2015 - Slide9

June 18, 2015 - Slide10


Dale on the Fed: 'This Won't End Well'

Takeaway: Short the FOMC's "dot plot."

The Fed has cut its growth forecast by ~40% in the past six months, yet officials still expect two rate hikes in 2015.

 

This won't end well.

 

The FOMC's growth forecasts have been consistently too optimistic by 90 basis points on average over the past 5 years. 2015 looks like more of the same.

 

Click to enlarge 

Dale on the Fed: 'This Won't End Well' - z dale gdp

 

It is unlikely that the trend in domestic economic data will support hiking interest rates at any point in the next 6-9 months.

 

Dale on the Fed: 'This Won't End Well' - z dale forecasting

 

My best long-term investment idea? Short the FOMC's "dot plot." Is there a futures market for that?

 

As an investor, you shouldn't let the Fed set your monetary policy expectations. Do your own work on the economy and beat them to the punch.


McCullough: "We’re One Bad Jobs Report Away From No September Or December Rate Hike"

Takeaway: This [FOMC Decision] is more dovish than expectations.

Editor’s Note: Below is an abridged reaction on Twitter from Hedgeye CEO Keith McCullough to today’s FOMC announcement. McCullough was tweeting live from London where he is visiting institutional customers.

*  *  *  *  *  *  *

This [FOMC Decision] is more dovish than expectations.

McCullough: "We’re One Bad Jobs Report Away From No September Or December Rate Hike" - Yellen dove 09.17.2014

 

Mr. Market's analysis of this matter is crystal clear: USD devaluation  … on the lows of the day… Stocks, Bonds, Commodities are off their lows.

 

We are one bad jobs report away from no September or December rate hike.

 

The Fed doesn't target a date - that means data dependence.

 

No Dissent = #data dependent - so you better damn well have a data forecast that's accurate. These Fed estimates are completely back end loaded - if the data slows, push out dots.

 

And to all my friends in London, I bid you good pub time (and good night).


Hedgeye Statistics

The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

  • LONG SIGNALS 80.33%
  • SHORT SIGNALS 78.51%
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