Birdies and Bogeys

“Their only fault is that they give no possible excuse for a missed putt.”

-Bobby Jones


Today is the final day of The Open Championship at St. Andrews in Scotland where 22 year old Irish amateur Paul Dunne is going to put his best foot forward to be the 1st amateur to win the event since Bobby Jones did it in 1930.


Birdies and Bogeys - Bobby Jones Hoylake 450 341


At that level of golf (or competing at these levels in Global Macro markets), trying your best is rarely enough. On that score, I think Jack Nicklaus put it best after losing “The Duel In The Sun” to Tom Watson @Turnberry at the 1977 Open:


“I’m tired of giving my best and not having it be good enough.”


Back to the Global Macro Grind


Nicklaus’ was just being moody. His best was enough in 1978 when he won his 3rd Open Championship (also at St. Andrews, by 2 strokes), cementing himself as one of the all-time greats of the game.


I’m personally awestruck by greatness. It’s something we don’t see in our profession every day, but it’s certainly something we can find both in ourselves and the company we keep.


Whether it’s at the beach with your loved ones or in running your respective responsibilities at work today, give it your best to be the best that you can be. It’s not always going to be good enough, but it’s always worth the effort.


Last week’s US Dollar victory didn’t make winners of everything inversely correlated to it:


  1. US Dollar Index up another +1.9% on the week, taking it to +3.8% in the last month
  2. The Euro (vs. USD) was devalued by Draghi for another -3% weekly loss (-4.5% month-over-month)
  3. Canadian Loonies lost another -2.4% of their value, falling to -10.4% YTD
  4. Commodities (CRB Index) deflated another -1.7% (-4% in the last month, and -6.7% YTD)
  5. Oil (WTI) continued to get crushed by #StrongDollar (-3.5% on the wk, -15.7% month-over-month)
  6. Gold deflated another -2.2% taking its month-over-month loss to -3.8%


When I woke up this morning Gold was getting triple-bogey’d to its lowest level since February of 2010, reminding perma-Gold Bulls that #StrongDollar is nothing less than formidable as a #deflationary headwind.


But what if you just like being long things like Gold and Copper (the Doctor was down another -1.6% last week, taking its YTD loss to -11.7%) irrespective of 2-3 club wind? Mr. Macro Market will be happy to mark your score for you on that. Respect the wind.


And while it’s too bad there is no central-planning committee to #halt the entire commodities complex and their respective asset price links, there are plenty of bears still making money on inflation expectations gone bad.


In case you’re keeping score on the “inflation is back” trade, it’s not:


  1. US 5-year Forward Break-Evens dropped another 7 basis points last week to 1.56% (-18bps in the last month)
  2. Lumber and Paladium prices got pounded for -5.1% and -4.8% weekly losses (-8% and -14% respectively mth/mth)
  3. Energy (XLE) and Basic Materials (XLB) stocks were -1.4% and -0.1%, respectively, in an up US Equity tape


The “tape” wasn’t just up last week, for “New Tech” it was straight up! What Google (GOOGL +17%) did on the day on Friday was the equivalent of being -10 under (on the day) @TheOpenChampionship, in #alpha terms.


Our congratulations to anyone who A) had that position on in size (before the move) and/or B) who bought the Nasdaq the whole way down (as it was down 6 of the 7 weeks prior!). In sharp contrast to being long anything #CommodityDeflation:


  1. S&P Tech ETF (XLK) was +4.8% on the week, taking it back up to +5.1% YTD (after going flat on the 6 week correction)
  2. Nasdaq (QQQ) was +4.3% week-over-week to a healthy +10.1% for 2015 YTD


Since we missed the cut both ways on that (we didn’t have a call on Tech, either way) we’ll salute whoever did. That was just an awesome week of returns. We still like Healthcare stocks (XLV +12.6% YTD) and re-issued the buy signal in Housing (ITB) too.


With rates down last week (-5 basis points for the US 10yr Yield to 2.35% last week on slowing top-down growth and inflation data) and costs for both builders and consumers deflating, I like ITB (US Housing) into the following catalysts this week:


  1. Existing Home Sales (June) on Wednesday
  2. New Home Sales (June) on Friday


Against the long Housing birdie putts, I still like short the Financials (which I had dead wrong last week – double bogey in spite of the rates call being right) and short the Industrials (XLI), which continue to be par for the 2015 US equity course.


Will give it our best this week and maintain a 0% net asset allocation to Commodities. Thanks to all of you who are giving so generously to the Hedgeye Cares Charity Golf Challenge (tomorrow) sponsored by The Lincoln Motor Company too.


Our immediate-term Global Macro Risk Ranges are now:


UST 10yr Yield 2.20-2.46%

SPX 2091-2130
USD 97.04-98.25
EUR/USD 1.07-1.10
Oil (WTI) 50.09-53.68

Nat Gas 2.65-2.95

Gold 1111-1151


Best of luck out there this week,



Keith R. McCullough
Chief Executive Officer


Birdies and Bogeys - ZZ 07.20.15 chart

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