Demographic trends are radically reshaping the U.S. economy.
Here's some key short-term trading advice via our Macro team:
"... Gold is up ~19% for the year, the USD going up and interest rates going up could cause gold to fall. Around 1,225 is an interesting spot to buy more gold but we are going to be a little more patient in the face of all the rate rise commentary. The immediate-term risk range for gold is 1225-1279."
Hedgeye CEO Keith McCullough sent out a key signal in Real-Time Alerts Monday warning subscribers about inherent risks to gold given current macro trading.
Check out McCullough's recent interview with bestselling author Jim Rickards, "Why Gold Is Going To $10,000."
Takeaway: What to watch on the election 2016 campaign trail.
Below is a brief excerpt from Potomac Research Group Chief Political Strategist JT Taylor's Morning Bullets sent to institutional clients each morning.
The attacks in Brussels will revive terrorism and national security as premier issues in the presidential campaign, likely displacing economic and social issues. All of the candidates will now focus their strategies and resolve to combat terror, and will play heavily into Donald Trump's game plan. Trump called practically every major news network yesterday morning, highlighting his views on the importance of border control and echoed his previous statements regarding Muslims -- that our country should shut down our borders until we "know exactly what is going on." Not wasting any time, Cruz trumped him with his call for the policing of Muslim neighborhoods and treating them like gang areas... hmmm
Cruz's team understands the only he can defeat Trump is to beat him on the second ballot at the convention -- when delegates are no longer bound to any one candidate. Cruz would have access to all of Marco Rubio and Jeb Bush's supporters -- while also making a play to steal Trump's and Kasich's delegates. His campaign has been stealthy in targeting Republican kingmakers and state convention delegates well before they pack their bags for Cleveland, looking to secure their support on the second ballot.
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In this excerpt from The Macro Show this morning, Hedgeye CEO Keith McCullough takes a page out of American patriot Patrick Henry’s playbook on the anniversary of his "Give me liberty, or give me death!" speech. He also addresses critics of his current bearish stance on equities.
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Takeaway: We think the hawkish tone from policymakers sets up a potential April policy mistake. Watch out.
Are the omnipotent central planners at the Fed losing touch with economic reality?
Hedgeye CEO Keith McCullough offered his thoughts in a Real-Time Alerts note to subscribers earlier this morning:
"... I am officially concerned the Fed makes yet another Policy Mistake (either raising rates in April or signaling they're raising in June in the April statement).
The US Dollar has done nothing but go up this week post multiple Fed heads making hawkish statements, and there's obviously a lot of market risk in that (see "reflation" on Down Dollar trades for details!).
While the Fed shouldn't be raising rates into a slow-down (remember what happened to markets post the DEC hike), that doesn't mean they won't. One of the biggest markets risks has always been the Fed's forecasts."
In short... post-rate hike stocks tumbled and Long Bonds (TLT) rallied...
With the recent stock market rally and hawkish commentary from the Fed, markets are standing on the precipice of yet another precarious setup.
Here's a brief recap of (head-scratching) Fed president statements this week that (we think) raises the specter of a policy blunder:
Consider our Macro team's insights from a note sent to subscribers earlier this morning:
"Federal Reserve Bank of Chicago President Charles Evans said yesterday that economic fundamentals are “really quite good.” We aren’t sure if he said this immediately after existing home sales was reported being down -7% month-over-month or what he was precisely talking about.
People who have no idea what is going on are preparing to do something that they already did that didn’t work…RAISING RATES. What has led the market higher is USD dollar down and reflation, so what happens in April if the Fed raises rates or indicates that they will raise in June?
That will be a destabilizer in markets."
Investors can choose to double-down on the Fed's wrongheaded economic projections. But two words of advice .. remember December.
Takeaway: Feb New Home Sales mark the second consecutive month of negative Y/Y growth, mirroring the trend seen in Existing Home Sales. Up next: HPI.
Our Hedgeye Housing Compendium table (below) aspires to present the state of the housing market in a visually-friendly format that takes about 30 seconds to consume.
Today’s Focus: New Home Sales for February
The NHS data is volatile and subject to significant error and revision which is why we don’t take an overly convicted view of any given month in isolation, giving deference to the larger trend. This morning’s New Home Sales data for February wasn’t good in isolation and continued the broader trend toward decelerating activity. The 1st three charts below capture that prevailing trend.
A few highlights:
As an aside, the WSJ reported yesterday (HERE) that the GSE’s (Fannie Mae and Freddie Mac) – after years of back & forth on the issue - are set to announce a principal forgiveness program for a select group of ~50K underwater homeowner’s.
There was little in terms of hard details on the proposal but the program, as it was described, carries a couple of notables:
About New Home Sales:
Each month the Census Department releases the New Home Sales report, which measures the number of newly constructed homes that have been sold in the month. The difference between the New Home Sales report and the Starts and Permits report is that New Home Sales only includes single family spec homes built and sold by builders, and does not include condos, apartments, or owner-built units. This is why New Home Sales typically run at roughly half the rate of Starts.
Joshua Steiner, CFA
Christian B. Drake
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