“The Fed is simply making it up as it goes along.”
In his new book, The New Case For Gold, that’s what my friend Jim Rickards had to say about the US Federal Reserve. If you haven’t seen it yet, Jim and I had a good conversation about US #GrowthSlowing, Gold, etc. on @HedgeyeTV that has close to 100,000 views: https://www.youtube.com/watch?v=70xBQ2lL_pE
“Forward guidance is only credible if you actually believe it. Still, considering the fact that the Fed has had 15 different policies since 2008, it is difficult to know what to believe anymore… this is not a disciplined experiment… 15 policies in 7 years? That’s clear evidence of improvisation.” (pg 77)
Why does the Fed have to keep making up new policies? That’s simple. It’s because they keep getting their growth and inflation forecasts wrong. Since the Fed is un-elected and un-accountable, they tend to corroborate a view from the highest office in the land, where Obama was allowed to call people like me “peddlers of economic fiction” in his State of The Union Address.
Back to the Global Macro Grind…
In other real-world news, despite some of the warmest winter weather that the US has ever seen (and ever is still a long time), US GDP slowed to 0.5% for the 1st quarter of 2016. #Peddle that.
As my bi-partisan economic #truth seeking partner @Hedgeye, Darius Dale, wrote to our Institutional Subscribers yesterday, our forecast for the 1st half of 2016 represents the slowest pace of US domestic economic growth since the back half of 2012.
Having popularized broken sources that completely missed this, it’s no wonder that the Old Wall’s Media (CNBC, Bloomberg, WSJ, etc.) has reverted to some of the most absurd comments I’ve read about US GDP in the last 20 years. Check this one out:
“Near zero GDP growth has become somewhat common… and may not be an indicator of pending recession risk as it once was.” -Bloomberg
And people in our profession wonder why The American People don’t trust us…
Yes, whether people like me or not, we are all in this profession together. I’m not some blogger who has been banned by the industry for insider trading. I’m not hiding behind a pseudonym either. I’m right here, running it right up the middle, every day.
Until politicians (elected and un-elected) completely blow up markets again, we still have a chance to start-over by telling one another the truth about the economic, profit, and credit cycle.
Since it’s clearly slowing, the Fed is trying to do what the Bernanke/Yellen Feds have always done:
Devalue the Dollar (erode the purchasing power of the American people – higher rent, gas prices, etc.) in a last gasp effort to “reflate” the stock market before #Recession replaces ISIS as the most important topic in the US Election.
*note: Bloomberg supports Obama and the Clintons
So, no worries, as long as Oil/Gas prices keep ramping (into month-end portfolio performance reporting), the SP500 isn’t going to go down much more than it did yesterday (-0.92%). The “Ex-Energy” Nasdaq will (-1.20%)!
Obviously Dollar Devaluation trades are getting some people paid (not The People). But, with the SP500 barely “up” for the YTD, the low-beta alpha is being made in being long those big liquid Macro positions that thrive during US #GrowthSlowing periods:
- Long-term Treasury Bonds (TLT) = +7.1% YTD
- Utilities (XLU) = +11.2% YTD
- Gold (GLD) = +20.1% YTD
That’s right. The peddlers of “the US economy is great” narrative don’t talk about Mr. Macro Market nailing GDP slowing from 3% to 1.4% to 0.5% in Gold +20.1% YTD terms, do they? Maybe that’s why our Gold video is going to hit 100,000 views.
While I may be accused of being “terrible” (for 2 months) for not changing my mind on the SP500 and loading up on MLPs when the TRENDING US economic data didn’t change, I’ve had much worse things happen to me in my career.
And when it’s all said and done, I’ll go to my grave resting peacefully, knowing that I helped build a firm that is independent of Washington and Wall St. conflicts of interest – a firm that didn’t have to make things up in order to get paid.
Our immediate-term Global Macro Risk Ranges (with intermediate-term TREND research views in brackets) are now:
UST 10yr Yield 1.70-1.90% (bearish)
SPX 2060-2093 (bearish)
RUT 1115-1155 (bearish)
NASDAQ 4 (bearish)
Nikkei 16101-17602 (bearish)
DAX 98 (bearish)
VIX 13.69-17.94 (bullish)
USD 93.43-95.11 (bullish)
EUR/USD 1.12-1.14 (neutral)
YEN 107.01-110.59 (bullish)
Oil (WTI) 41.24-46.60 (bearish)
Nat Gas 1.88-2.30 (bearish)
Gold 1230--1277 (bullish)
Copper 2.13-2.31 (bearish)
AAPL 93-103 (bearish)
MCD 125-130 (bullish)
XLU 46.43-49.90 (bullish)
Best of luck out there today,
Keith R. McCullough
Chief Executive Officer