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“I shouldn’t say I’m looking forward to leading a normal life, because I don’t know what normal is.”

-Martina Navratilova

In terms of what she is now referring to as the “normalization” of Federal Reserve interest rate policy, Fed Chair Janet Yellen proclaimed her mystery of central-planning faith yesterday, suggesting that it will be “a day we all are looking forward to.”

And US stocks proceeded to go straight down after she said that.

What does “normalization” mean? Is it normal for the head of the Federal Reserve to only answer pre-screened questions (like she did yesterday at The Economic Club of Washington) using cue cards? How about raising rates into a slow-down?

What's Normal? - Yellen cartoon 11.11.2015

Back to the Global Macro Grind

Notwithstanding the lack of credibility in how Yellen characterized the rate of change in recent economic data yesterday, what I found more unnerving was my old boss, David Rubenstein, sitting there nodding his head in exchange for the all-access-gov pass.

In the context of what the Founding Fathers envisioned, what, precisely, is normal about any of this?

While my risk management process is grounded in the opposite of what these ideologues promise (certainty), I am fairly certain that our children (and theirs) will look back on this period in US economic history as one they learned from.

What’s normal about human evolution is learning from all of our mistakes.

What isn’t normal is hanging our every investment decision on the words of a perma-dove pretending to be a hawk. Yellen was grasping for #LateCycle employment reasons to raise rates. Never mind the data – she really wants to hike.

In other news,

  1. The Fed is cutting its GROWTH forecasts (see Atlanta Fed at 1.4% for Q4)
  2. But raising its INFLATION forecasts

For Q4 2015 and for most of 2016, that is.

You see, for the last 18 months, they’ve been calling slowing inflation and crashing oil prices “transitory.” As in, no worries “folks”, even though we had no idea this was going to happen, it’s definitely going to pass. Nothing we failed to forecast can continue.

Meanwhile, inflation expectations continued to crash yesterday – here’s how #Deflation looked, in real-world terms:

  1. Nickel crashing to -44.9% year-over-year
  2. Natural Gas crashing to -44.1% year-over-year
  3. Oil (WTI) crashing to -40.3% year-over-year
  4. Lean Hogs crashing to -33.7% year-over-year
  5. Coffee crashing to -35.4% year-over-year
  6. Copper crashing to -30.4% year-over-year
  7. Aluminum crashing to -27.6% year-over-year
  8. Wheat crashing to -25.3% year-over-year
  9. Cattle crashing to -23.4% year-over-year

Sure, it would be normal to round that off to the Top 10 Crashes in asset inflation bubbles that Bernanke perpetuated in 2011-2012, but I’m having a hard time picking between Emerging Markets, Foreign Currencies, and Junk Debt for my 10th.


Since the Fed’s forecasts on growth and inflation have been wrong 70% of the time since Bernanke’s reign, why isn’t it normal to assume that the Fed will be wrong on US growth by another 25-45% for the next year like they were this year on #Deflation?

I don’t know. I hope someone does.

With both Chicago PMI and ISM Manufacturing PMI at recessionary readings (below 50) in NOV, Janet Yellen should have called the data what it is. But she didn’t. And that’s just sad, partisan, and un-objective – all at once.

If the Fed was audited (i.e. held to account by the taxpayers that fund their rock-star status), many of our frustrations wouldn’t exist. If Yellen was the CFO of a public company, her depiction of the recent “data” would, at a bare minimum, be considered a lie.

That will sound harsh to people who get paid to kowtow to this grand central-planning experiment. But it will sound quite normal to American farmers, miners, and … oh… the entire state of Texas. Who cares about those non-Washington people anyway?

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

UST 10yr Yield 2.15-2.28% (bearish)

SPX 2046-2109 (bearish)
RUT 1163--1209 (bearish)

NASDAQ 5055-5159 (bullish)

Nikkei 191 (bullish)

DAX 101 (bullish)

VIX 14.39-18.45 (bullish)
USD 99.14-100.49 (bullish)
EUR/USD 1.05-1.07 (bearish)
YEN 122.36-123.86 (bearish)
Oil (WTI) 40.02-43.01 (bearish)

Nat Gas 2.14-2.31 (bearish)

Gold 1044-1082 (bearish)
Copper 1.98-2.09 (bearish)

Best of luck out there today,


Keith R. McCullough
Chief Executive Officer

What's Normal? - 12.03.15 EL chart