Cartoon of the Day: Stampede!

Cartoon of the Day: Stampede! - Wells Fargo cartoon 09.30.2016


Wells Fargo CEO John Stumpf was grilled by Washington lawmakers earlier this week after the bank paid a $185 million settlement and entered into an enforcement action for allegedly “widespread illegal” sales tactics. The bank opened as many as two million fabricated or unauthorized customer accounts. 

Guest Contributor | Stockman: The Fed’s Monetary Politburo Is Finally Catching Some Flack

Editor's Note: The piece below was written by best-selling author David Stockman whose new book, Trumped! A Nation on the Brink of Ruin... And How to Bring It Back is now available. Stockman was formerly Director of the Office of Management and Budget under President Reagan and an original partner at private equity firm Blackstone. This piece was originally published on David Stockman's Contra Corner and does not necessarily reflect the opinion of Hedgeye.


Guest Contributor | Stockman: The Fed’s Monetary Politburo Is Finally Catching Some Flack - Yellen cartoon 03.31.2016

Now that’s more like it.


Echoing Donald Trump’s Monday night bull’s-eye regarding the Fed’s thoroughly political essence, Rep. Scott Garrett put more wood to Janet Yellen during yesterday’s hearing:


Rep. Scott Garrett, R-N.J., seized Trump’s mantle during Wednesday’s hearing, saying “the Fed has an unacceptable cozy relationship” with the Obama administration and Democrats.


“As the saying goes, perception is reality,” Garrett told Yellen. “Whether you like it or not, the public increasingly believes that the Fed’s independence is nothing more than a myth.”


Of course it’s a myth, and a dangerous one at that. The truth is, Keynesian monetary central planning is inherently, massively and irremediably “political”.


That’s because it interjects the state deeply into the money and capital markets—-the very heart of capitalism—-and thereby in plenary fashion manipulates, rigs and falsifies the prices of all financial assets.


So doing, it supersedes governance by the many via continuous auction and free market processes of financial valuation and allocation with governance by the few, who rule arbitrarily and often secretly via ideological whims and shibboleths that they are pleased to call “policy”.


Worse still, the Eccles Building politicians who rule the financial markets directly—and through them much of the balance of capitalism indirectly—- are unelected and are accountable to no democratic oversight and control whatsoever. They have essentially seized great power in the manner of a coup d’ etat, and have then added insult to injury by proclaiming the utterly spurious doctrine of Fed “independence”.


The cover story, of course, is that central banking is such a complex, arcane and intellectually demanding business that only a tiny elite of the best and brightest are capable of manning the monetary dials.


Guest Contributor | Stockman: The Fed’s Monetary Politburo Is Finally Catching Some Flack - stockman callout


Indeed, it is claimed that the job of keeping capitalism on the straight and narrow path toward the Keynesian nirvana of full-employment—-and off the shoals of underperformance, recessionary lapse and depressionary crisis, where it is otherwise inclined—-can only be accomplished by an elite politburo; and one that is accountable only to itself and its esoteric econometric models.


Folks, that is self-serving bunkum and poppycock.


If you want to have financial rule by politicians rather than markets, the FOMC has absolutely no more competence than the House Financial Services Committee. In fact, if you want to set the money market rate by essentially throwing a dart at the wall, you could pick the FOMC by lot from the phone book!


After all, the so-called science of Keynesian central banking amounts to nothing more than deciding by how much you want to falsify the market price of money and financial assets——-along with how frequently you want to change the “fix” and which components of the yield curve and tradable assets you want to rig.


Since the purported geniuses who occupy the 12 chairs at the FOMC have essentially not changed the peg for 94 months running, the job can’t be all that hard. Does it really take an economics PhD or ex-banker to figure this out or, for that matter, to ascertain that Wall Street gamblers prefer free money, as opposed to expensive money, to fund their speculations?


Guest Contributor | Stockman: The Fed’s Monetary Politburo Is Finally Catching Some Flack - Yellen cart 06.07.2016

In fact, it all boils down to...


... The very kind of binary decisions that both elected politicians and average voters excel at making. To wit, if you are rigging the financial markets, who do you want to help and who do you want to hurt?


That is, borrowers or savers, speculators or entrepreneurs, money shufflers or wage earners, bankers or depositors, the risk-prone or the risk-averse, day-traders or business-builders, etc. It’s really not all that hard to rig markets if you have a printing press and plenary authority to redistribute economic gain and pain and societal income and wealth by political fiat, and without the inconvenience of periodic elections.


Needless to say, there is one hell of an argument in favor of market-based price discovery by capital providers and capital users in their tens of millions as opposed to a tiny posse of politicians in the Eccles Building or in the Rayburn Building or from the phone book. But until very recently, the choice between financial rule by politicians versus markets wasn’t even on the radar screen of public discussion.


No more. Donald Trump deserves the nation’s eternal gratitude for finally raising the topic—even if his point was narrowly partisan and electoral. But politics is politics, and now that Flyover America has been reminded that the Fed is knee deep in it, hopefully the drumbeat will grow louder.


Fortunately, the obtuse arrogance of the monetary politburo itself is helping to screw-up the courage of politicians like Rep. Garrett. He has apparently come out of the monetary closet and hopefully has provided an example for his Capitol Hill colleagues.


In this instance, Hillary Clinton’s Treasury Secretary designate, and lifelong financial apparatchik, Lael Brainard, made it easy. She’s been an in-your-face contributor to the Clinton campaign, and has been visibly lobbying for the high office that Jack Lew, Tim Geithner and Hank Paulson have recently so thoroughly defiled with their bailouts and booty:


Federal Reserve Chair Janet Yellen’s defense of the central bank as non-partisan came under attack on Wednesday, as a Republican congressman cornered her on whether a key policy maker would have a conflict of interest in discussing a post in the next U.S. president’s administration.


Fed Governor Lael Brainard has donated to Clinton’s campaign and is widely viewed as a potential Clinton pick for Treasury secretary. Yellen hesitated and then demurred when Representative Scott Garrett of New Jersey asked whether Brainard would have a conflict of interest if she were indeed in talks with Democratic nominee Hillary Clinton’s campaign about a position. The election takes place Nov. 8.


As it happened, this isn’t the first time. Our Wall Street/Washington financial rulers have become so brazen in their political machinations that Tim Geithner actually confessed to lobbying Obama for the Treasury job in the white heat of the October 2008 meltdown.


That is, when as the President of the New York Fed he was supposedly helping to administer the secret ministrations by which the best and brightest go about saving capitalism from itself, he actually had his head far up the Democratic candidate’s keister in pursuit of politics:


In his memoir, Timothy Geithner recalls meeting with then-Senator Obama in his room at the W Hotel in midtown Manhattan before the 2008 election, where the future president suggested that he might ask Geithner — then head of the New York Fed — to come to Washington as Treasury secretary. That meeting was in mid-October; Geithner voted at the next Fed meeting, at the end of the month, to cut interest rates by a half percentage point amid the deepening financial crisis.


The process of defrocking the high priests of the monetary temple might even become contagious. This morning one Ruchir Sharma, who is chief global strategist at Morgan Stanley Investment Management, let loose a real stunner. Excerpts from his Wall Street Journal piece are highlighted below.


But first let’s cut to the chase. Approximately 3,200 days have elapsed since January 2008 and on 70 of those days, or 2% of the time, the monetary politburo was in session at the Eccles Building. Yet, mirabile dictu, (wonderful to relate) 60% of the entire stock market gain during that nearly nine-year period occurred on exactly those 2% of days.


Can you say, rigged!


Donald Trump did. Scott Garrett did. Now even the Morgan Stanley guy has let the cat out of the bag.


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((Crickets)) In My Inbox

Takeaway: If you get growth right (like we have), you'll get the bond market right.

((Crickets)) In My Inbox - Yield cartoon 06.14.2016


My inbox went from chock-full of “Why rates are gonna rip!” email (2-4 weeks ago) to crickets as the entire complex of long-term global yields falls alongside GDP growth expectations.


Take a look:


  • UST 10yr 1.54%
  • Swiss 10yr -0.60%
  • 10yr Bund -0.16%;
  • even Dutch 10s go negative this am -3bps to -0.03%

((Crickets)) In My Inbox - z tlt


In related news, it's still rainbows and puppy dogs for Old Wall Consensus and its media enablers.


We'll stick with what's working.

Early Look

daily macro intelligence

Relied upon by big institutional and individual investors across the world, this granular morning newsletter distills the latest and most vital market developments and insures that you are always in the know.

Currency Wars: Who Wins, Who Loses & What To Buy

Takeaway: As Europe heads into protracted recession, Gold will be the biggest winner.

Currency Wars: Who Wins, Who Loses & What To Buy - currency wars large  1


Last day of the quarter is a good one to reiterate that one of our Top 3 Macro Themes for Q3 and beyond remains #EuropeImploding – a protracted recession in the South of Europe looks like a high probability outcome; it should manifest in reported GDP throughout 2017 – Draghi and European Banks will have to react in kind.


Since it’s going to be one of the big winners of the Currency War (devalued currencies and the credibility of central bankers lose), Gold will end the month and quarter on a strong note, +0.5% = +25.1% year-to-date with an immediate-term risk range of $1311-1352/oz.



Editor's Note: The snippet above is from a note written by Hedgeye CEO Keith McCullough and sent to subscribers this morning. Click here to learn more.

CHART OF THE DAY: Is The Eurozone Entering Its Modern Dark Age?

Editor's Note: Below is a brief excerpt and chart from today's Early Look written by Hedgeye CEO Keith McCullough. Click here to learn more.


"As you can see in today’s Chart of The Day (slide 88 of our current Macro Themes deck), private sector deleveraging should continue as the Eurozone economy ages alongside a projected contraction in organic demand for as far as the eye can see.


Put another way, the Eurozone is entering its modern dark age of demand (population growth of the 35-54 yr old population going more negative, at an accelerating rate). And there isn’t a damn thing a central-market-planner can do to stop that."


CHART OF THE DAY: Is The Eurozone Entering Its Modern Dark Age? - 09.30.16 EL Chart

Peterson: How Investor Emotion Influences Oil Prices

Dr. Richard Peterson, a board-certified psychiatrist and CEO of MarketPsych, is among the foremost leaders in the area of applied behavioral finance. His team has developed an algorithm that crunches data from more than 2,000 media outlets and 800 social media sites to interpret investor sentiment and suggest trading opportunities. Based on that data, they put together a market-neutral social media-based hedge fund that beat the S&P 500 by more than twenty-four percent—through the 2008 financial crisis.


In this excerpt from that broader interview with Hedgeye CEO Keith McCullough, Peterson explains how his algorithm has been “almost 100% accurate in catching every major monthly move” in oil prices. He explains why “people talking their book” and “investor chatter” influences where oil prices are headed in the future. Given Peterson’s unique distinctions as psychiatrist and market practitioner, his insights are always thought-provoking. It’s must-see TV for investors looking to become more disciplined traders.


Want more?


Watch this edition of “Real Conversations” in its entirety below.

Hedgeye Statistics

The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

  • LONG SIGNALS 80.52%
  • SHORT SIGNALS 78.68%