“From the very start of this captivating parable, I found myself relating to the character within.”

-Urban Meyer

That was a 2010 book recommendation from one of the best NCAA coaches of all-time. Urban Meyer is currently 38-3 coaching Ohio State Football and his teams have won 3 National Championships.

The book is called Lead For God’s Sake, by Todd Gongwer. And no, it’s not all about winning. In fact, it’s a repudiation of the win-at-all-costs (including our principles) mentality that some of the more self-centered in our society try to emulate today.

The book is about life and the foundations of all our pursuits. The manic nature of today’s macro markets is making me think about this book this morning. Was there any authentic leadership to begin with? Is there any trust? Where does this all end?

Captivating Parables - z u5

Back to the Global Macro Grind

That might be a little heavy for your morning brew, but economic gravity is getting heavier by the day at this point – and, instead of chasing the futures, we need to be probability-weighing the intermediate-to-long-term outcomes of ideological central planning.

Enter my Macro Team’s Q3 Global Macro Themes Deck. At 1PM EST today we’ll grind 70 slides of what we consider the #truth about the following economic and market risks:

  1. #ConsumerCycle (following our non-consensus #LateCycle call on US employment in Q2, this is a developing risk)
  2. #SecularStagnation (doubling down on our Global Demographic research, we go all secular on the Bernanke camp)
  3. #EuropeSlowing (you can’t print growth – this is the tail wagging the European dog; we’ll explain why)

While a goal is to be right on each of these themes, it’s not the purpose of this firm. I obviously get that achieving goals matters but, as I get more experience, I’m learning not to confuse my principles and purpose with my goals.

Our principles of Transparency, Accountability, and Trust have helped us build an independent research content production process that is repeatable. Every day, rain or shine, we rise and grind on the front-lines of the Global Macro debate.

No, that doesn’t mean we nail everything. Newsflash: neither do you. What it really means is that since we subject ourselves to every basis point in bond yields, every day, we have to test our premise faster than most. We have to fail faster. We have to learn faster.

What are we learning this early in the week?

  1. Burning Euros (down another -0.7% to $1.09) are perpetuating #StrongDollarDeflation risks, across markets
  2. With the US Dollar up again yesterday, the CRB Commodities Index got tagged for a -3% loss in the backfield
  3. With WTI Oil and Copper -7.7% and -3.5% on the day, respectively, both are right back in @Hedgeye TAIL risk mode
  4. Energy Stocks (XLE) led losers -1.3% on that yesterday and are already -2.2% to start July = down -7.1% YTD
  5. Industrial Stocks (XLI) fell to lower-lows yesterday (-4.5% YTD) and continue to signal #deflation in producer pricing
  6. The best defense against #DeflationDays remains the America Long Bond

Oh, and that China needs to pull a Greek-style central-market-planning move and halt trading of any stock that has gravity-based-volatility. Despite 203 tickers halted, the Shanghai Composite lost another -1.3% overnight, taking its crash in the last month to -25.8%.

But these are just immediate-term learnings. What about the intermediate-to-long-term? Having been the firm that initially warned you on volatility, deflation, and the probability of falling bond yields at this time last year, are we still relevant?

Or is it Captain Daily/Weekly Media who has won the day in making our profession a more transparent and accountable place? If Global Bond Yields were really “breaking out on inflation readings” in Q2, what about the #deflation of those inflations in Q3?

With both global growth and inflation expectations falling (again), Fed Fund Futures have dropped the implied probability of a September “rate hike” from over 40% at this time last week to 16% this morning.

But, again, that’s just the immediate-term TRADE. While the immediate-term parable of “free-markets” lost is captivating, from a leadership perspective it’s quite sad to watch. The long-term case for a world that is slower-for-longer is an unfortunate reality too.

Our immediate-term Global Macro Risk Ranges are now:

UST 10yr Yield 2.21-2.39%

SPX 2042-2087
VIX 15.59-20.11
USD 95.68-97.32
EUR/USD 1.09-1.12

Oil (WTI) 51.56-55.36
Copper 2.45-2.65

Best of luck out there today,


Keith R. McCullough
Chief Executive Officer

Captivating Parables - z 07.07.15 chart