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 “We make a living by what we get. We make a life by what we give.”

-Winston Churchill

I’ve been grinding on one steamer of a roady this week (96 degrees in a suit in Dallas yesterday), so now I’m looking for some love. I’m proud to announce that our team’s charity outreach program is hosting its 2nd annual Hedgeye Cares Charity Golf Challenge on Tuesday, July 21st at GlenArbor Golf Club in Bedford, NY. 

For a 2nd straight year we’re honored to be donating 100% of the proceeds from the tournament to support our area’s underprivileged youth through the Bridgeport Caribe Youth Leaders (BCYL), a 501(c)(3) organization. Here’s a short video we put together featuring kids in the program explaining how BCYL has changed their lives and what BCYL has meant to them: https://www.youtube.com/watch?v=t5NgER166I0.

We’re also extremely thankful to The Lincoln Motor Company for its title sponsorship for a second year running.  Lincoln is a great American luxury brand that recognizes the importance of giving back to communities across the country and makes a significant effort to give back.  To learn more and to Check out the All-New 2016 Lincoln MKX and the Continental Concept, visit www.lincoln.com.

Giving Back - Golf Challenge

It’s not too late to support our tournament and donate to BCYL. For more details on how you can contribute please email Josefine Allain at . We still have a few foursomes left (I cannot confirm or deny that there will be NHL hockey talent at the event - so please be aware of errant 315 yard drives).

You can also follow all of the day’s action (from Lincoln test drives before tee-off to photos from the course) on twitter via the handles @LincolnMotorCo and @Hedgeye. Thanks again to all of our event sponsors and participants for their generous donations! 

Back to the Global Macro Grind

Slow --> Halt --> Ramp!

  1. USD – Draghi did the double-whatever-it-takes yesterday and the Euro dove to the low-end of my immediate-term $1.08-1.11 risk range; that finally puts USD Index immediate-term TRADE overbought in what continues to look like a #deflationary redo for certain asset prices, earnings, etc.
  2. #Deflation – most obviously you can see this in both commodities themselves this week and their equity market links – Copper and Russia (stocks) both down -0.5-1% again this morning and a lot of these “inflation expectations” things are close to 3 month lows with USD at 3 month highs
  3. EQUITIES – European and Chinese halts worked (Greece is still halted) and the US Equity ramp came right after SP500 (Index + Emini) net SHORT position (CFTC futures/options contracts) peaked at -162,467 at the July US equity market low! Risk ranges are now as wide as they’ve been all year

What does a widening risk range mean?

It means my risk management model is signaling a wider range of probable immediate-term outcomes. In other words, it usually portends rising volatility (since volatility is the variance of a price series over time) from this VIX 12 level.

There’s also a widening range of consensus opinion (vs. mine) on A) whether the Fed hikes in 2015 or not and B) whether or not moving forward with that would be a good or bad thing.

Here’s the latest Wall Street Journal Poll:

  1. 82% of economists polled see a SEP hike (vs. 72% last month)
  2. 15% of economists polled see a DEC hike (vs. 9% last month)
  3. 71% see it as a “risk” that the Fed hikes “too late”; 29% see it as a risk that they hike “too early”

Wow. Not only are whoever these “economists” are now completely ignoring Mr. Macro Market’s opinion (Fed Fund Futures imply less than a 15% chance of a SEP hike), but they are at complete odds with me on the risk of raising rates into a slowdown.

At least since the last two Wall Street tops (2000 and 2007), the Fed has only eased during slowdowns. Remember the man before Draghi at the ECB helm, Jean-Claude Trichet? He raised rates in 2011 and pretty near blew up the capital market world.

Ah, what do I know about buying cyclicals and/or tightening at the end of a cycle? It’s probably different this time. Post a 6yr equity ramp shouldn’t you pay 351x earnings for Netflix or chase QQQs?

I’m hearing the charts “look good.” They did in 2000 and 2007 too.

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

UST 10yr Yield 2.20-2.46% (bearish)

SPX 2038-2130 (neutral)
RUT 1 (neutral)
Nikkei 20105-20759 (bullish)
VIX 11.01-20.06 (bullish)
USD 96.40-97.91 (bullish)
EUR/USD 1.08-1.11 (bearish)
YEN 122.41-124.56 (bearish)
Oil (WTI) 50.06-53.64 (bearish)

Nat Gas 2.66-2.94 (bearish)

Gold 1140-1161 (bearish)
Copper 2.45-2.59 (bearish)

Best of luck out there today,

KM

Click image to enlarge 

Giving Back - z chart of day 07.17.15 chart