Super-High Returns

(Editor's Note: He's back from London. Join Keith live at 8:30am ET on The Macro Show. Click here.)


“The super-high earners have the biggest crashes.”

-Moises Naim


Fair enough, Moises – but they’ve had super-high returns on incremental US Dollar Devaluations by the Federal Reserve going back to 2011. What goes up, doesn’t always have to crash on the way down.


What Naim is referring to is the asset price crash period of 2007-2009 where “the number of Americans making $1M or more fell 40% to 263,883, while their combined incomes fell by nearly 50% - far greater than the less than the 2% drop in total incomes for those making $50,000.” (The End of Power, pg 6)


Love or loathe them, the US stock and bond markets aren’t socialized democracies. These are centrally-planned-markets that are highly sensitive to both the valuation of American currency and the “risk free” rate of capital.

Super-High Returns - Central planning cartoon 03.20.2015


Back to the Global Macro Grind


Did the most recent “surprise” from the Fed matter to the 2011 all-star asset price inflations?


  1. Gold (peaked in 2011 on a nominal basis) = +2.2% yesterday
  2. Utilities (had their biggest relative return year ever in 2011) = +1.3% yesterday


For those of you new to risk managing macro markets within the framework of front-running-probable-central-planning-behavior, note that “expensive” stocks and bonds get more expensive when the market is seeking certain macro exposures.


The two big macro exposures that moved on this recent Fed decision to cut its 2015 GDP forecast closer to ours at 1.8-2.0%:


  1. Down Dollar
  2. Down Rates


Who really cares that the Fed was at 3.1% GDP, then 2.7%, then 2.4%? As you can see in today’s Chart of The Day, the establishment “blue-chip” growth forecasts have started the year high, and ended on the lows, every year since 2010.


In 2011, Gold absolutely loved having exposure to Bernanke devaluing the Dollar to the all-time (post Nixon/Carter/Burns) lows. That’s when long-term rates first tested the mental concept of all-time lows too.


Are we going to see $1900/oz Gold and all-time (which at the time was a long-time) high food prices (2012) again? I doubt it. That’s because the longer-term setup for the US Dollar is to make a series of higher-lows as the Europeans are forced to devalue Euros.


Got 80 cents?


I do. In Euros vs. US Dollars, that is. But that’s my long-term TAIL risk view for both European growth (even worse demographic spending cliffs than the USA, which is saying something) and it’s very immature, but centrally-planned, currency.


If I wanted to just make long-term TAIL risk calls, I’d go up to my lake house in Thunder Bay, fish, and write books. Instead, I choose to travel the world over to help you risk manage the immediate-to-intermediate-term, because I’d get fat fishing.


Never mind this class-warfare crap that politicians from Marx to whoever has driven into the American narrative. We are all responsible and accountable adults. With #process and objective analysis we have super-opportunities to help a lot of people not crash again.


I know. Enough about reminding you about how this ended, long-term risks, etc. Let’s get into the very immediate-term setup so that you can get on with your day:


  1. US Dollar Index immediate-term TRADE oversold on the Fed “news” at $93.81
  2. EUR/USD immediate-term TRADE overbought at $1.14 with a risk range of $1.11-1.14
  3. UST 10yr yield of 2.30% has an immediate-term risk range of 2.15-2.38%, risk manage it
  4. Gold immediate-term TRADE overbought at $1205 on the Down Rates, Down Dollar move
  5. Utilities (XLU) signaled immediate-term TRADE overbought into yesterday’s close


So what would I do from here? Book some gains. This shorter-term macro game of gaming catalyst dates is hard enough as it is. You were either setup for this Federal Reserve move, or you were not.


Another immediate-term move I’d make on the immediate-term oversold signal in USD is:


  1. Re-short some Japanese Yen (FXY)
  2. Buy back the DXJ (Japanese Stocks) we sold pre the Fed decision


Yep. It’s all #timestamped, and I actually sent out that signal to buy DXJ in Real-Time Alerts on red yesterday so apologies if the Early Look reiteration of what I’d do is more like what I already did. Sometimes a great way to not crash is to keep moving.


Our immediate-term Global Macro Risk Ranges are now (with intermediate-term TREND views in brackets):


UST 10yr Yield 2.15-2.38% (bearish)

SPX 2104-2126 (bullish)
RUT 1 (bullish)
Nikkei 199 (bullish)
VIX 12.40-15.91 (bullish)
USD 94.01-95.48 (neutral)
EUR/USD 1.11-1.14 (neutral)
YEN 122.21-125.04 (bearish)
Oil (WTI) 58.51-61.78 (bullish)

Nat Gas 2.69-2.99 (bullish)

Gold 1185-1205 (bullish)
Copper 2.54-2.66 (bearish)


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


Super-High Returns - z 06.19.15 chart

Did the US Economy Just “Collapse”? "Worst Personal Spending Since 2009"?

This is a brief note written by Hedgeye U.S. Macro analyst Christian Drake on 4/28 dispelling media reporting that “US GDP collapses to 0.7%, the lowest number in three years with the worst personal spending since 2009.”

read more

7 Tweets Summing Up What You Need to Know About Today's GDP Report

"There's a tremendous opportunity to educate people in our profession on how GDP is stated and projected," Hedgeye CEO Keith McCullough wrote today. Here's everything you need to know about today's GDP report.

read more

Cartoon of the Day: Crash Test Bear

In the past six months, U.S. stock indices are up between +12% and +18%.

read more

GOLD: A Deep Dive on What’s Next with a Top Commodities Strategist

“If you saved in gold over the past 20 to 25 years rather than any currency anywhere in the world, gold has outperformed all these currencies,” says Stefan Wieler, Vice President of Goldmoney in this edition of Real Conversations.

read more

Exact Sciences Up +24% This Week... What's Next? | $EXAS

We remain long Exact Sciences in the Hedgeye Healthcare Position Monitor.

read more

Inside the Atlanta Fed's Flawed GDP Tracker

"The Atlanta Fed’s GDPNowcast model, while useful at amalgamating investor consensus on one singular GDP estimate for any given quarter, is certainly not the end-all-be-all of forecasting U.S. GDP," writes Hedgeye Senior Macro analyst Darius Dale.

read more

Cartoon of the Day: Acrophobia

"Most people who are making a ton of money right now are focused on growth companies seeing accelerations," Hedgeye CEO Keith McCullough wrote in today's Early Look. "That’s what happens in Quad 1."

read more

People's Bank of China Spins China’s Bad-Loan Data

PBoC Deputy Governor Yi says China's non-performing loan problem has “pretty much stabilized." "Yi is spinning. China’s bad-debt problem remains serious," write Benn Steil and Emma Smith, Council on Foreign Relations.

read more

UnderArmour: 'I Am Much More Bearish Than I Was 3 Hours Ago'

“The consumer has a short memory.” Yes, Plank actually said this," writes Hedgeye Retail analyst Brian McGough. "Last time I heard such arrogance was Ron Johnson."

read more

Buffalo Wild Wings: Complacency & Lack of Leadership (by Howard Penney)

"Buffalo Wild Wings has been plagued by complacency and a continued lack of adequate leadership," writes Hedgeye Restaurants analyst Howard Penney.

read more

Todd Jordan on Las Vegas Sands Earnings

"The quarter actually beat lowered expectations. Overall, the mass segment performed well although base mass lagging is a concern," writes Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan on Las Vegas Sands.

read more

An Update on Defense Spending by Lt. Gen Emo Gardner

"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.

read more