• It's Here!

    Etf Pro

    Get the big financial market moves right, bullish or bearish with Hedgeye’s ETF Pro.

  • It's Here


    Identify global risks and opportunities with essential macro intel using Hedgeye’s Market Edges.

“It is a simple but sometimes forgotten truth that the greatest enemy to present joy and high hopes is the cultivation of retrospective bitterness.”

-Robert Menzies

Retrospective bitterness might be the last way to describe how Australians have regarded their former leader. Born in 1894, Sir Robert Menzies founded the Liberal Party of Australia and, after winning his second election in 1949, he went on to become the longest serving Prime Minister in Australian history.

In 1942, Menzies delivered one of the most important speeches of his career. It was called “The Forgotten People.” Current Australian Prime Minister, Kevin Rudd, often referenced this generation of Australians ahead of the 2007 federal election. Here’s an excerpt from that historical Menzies speech:

“I do not believe that the real life of this nation is to be found either in great luxury hotels and the petty gossip of so-called fashionable suburbs, or in the officialdom of the organized masses. It is to be found in the homes of people who are nameless and unadvertised, and who, whatever their individual religious conviction or dogma, see in their children their greatest contribution to the immortality of their race.”


Nameless and unadvertised, officialdom in America today is not. If we didn’t reach the record heights of political hubris in 2007, we are going to blow up this Bubble in US Politics as big as we can here in 2010. Unfortunately, Crocodile Dundee himself may not have a knife large enough to pop it, until it’s too late.

Today, we are going to grope around for answers as to whether or not this stock market rally is sustainable and whether failed politicians continue to perpetuate our long term issues. Our problems don’t start with asking ourselves whether American capitalism is dead, but where our principles went in trying to define it.

Australian central bank Chief, Glenn Stevens, isn’t going to win a popularity contest at the G-whatever meetings. Nor does he care. He is a realist  and a risk manager who reminds the people of Australia that “present joy and high hopes” for their country shouldn’t be solely measured by the ticks of their stock market. To have sustainable prosperity, everything starts with  The Forgotten Truth that inflation crushes the forgotten people.

Between new  home sales exploding to the upside for the month of March (+23.8% year-over year growth) and US Producer Prices (PPI) for March coming in at new sequential high of +6% year-over-year, last week’s growth and inflation data in the US was a lot higher than the “double-dip” crowd has been forecasting. When money is free, it’s amazing how much higher demand for things you can buy with those moneys can go.

Although this was March data, the real-time price data for April continues to inflate as well. Never mind that the SP500 has inflated +80% from its March 9th, 2009 low. This stock market is still -22.2% cheaper than the most levered up price (based on the most levered up domestic consumption and housing numbers), in US history. What a deflation deal!

There isn’t an inflation chart in my entire global macro playbook that hasn’t V-bottomed at this point, so I guess if you are going to be bullish and dovish all at the same time up here, you better be taking the government’s word for it because the forgotten people of America don’t buy it. Despite the SP500 being up a monstrous +15.1% since February the 8th, last week’s ABC/Washington Post consumer confidence reading registered a new low at minus 50. Oh damn that Forgotten Truth.

For those of you who believe that some levels of inflation are marked-to-market in the commodities that you either pump into your cars or children’s mouths, you saw the leading indicator for anything that needs to be moved around in this world shoot up another +3.2% week-over-week to close Friday’s trading to $85.12/barrel. At the same time, Gold is starting to bust an inflationary move to the upside again, adding another +1.5% week-over-week as well.

All the while, US Treasury bond yields continued higher last week with the short end of the curve moving up to 1.07% on 2-year yields. As much as Ben Bernanke wants you to believe that he’ll never raise interest rates, Mr. Macro Market is seemingly trying his best to move rates higher on his own.

There is only 1 week left in April and we are on the record with a call for April Flowers bringing May Showers to the US stock market. While that might irritate the odd perma-bull who still truly believes in buy and hope (that the Fed never stops purging its citizenry’s savings for the sake of the selected ones), I’m ok with that. My topside intermediate term overbought target for the SP500 is 1214, so I will be shorting the SP500 (if it’s up) sometime in the coming days.

That doesn’t mean I don’t love America. It just means I love my family, my firm, and the capital I have preserved for them. I am proud to be part of “The Forgotten People” who never had to fire anyone, point fingers, or ask for a bailout. We were the bears turned bulls of 2008-2009 who won’t chase the SP500 up here. We are now more comfortable being long Germany, Oil, and Aussi dollars.

The last time the bearish side of the US Institutional Investor sentiment survey was this low (17%) was 1987. I guess that means The Forgotten Truth is only another one of those days that “no one could see coming” away - except from New Haven and Australia.

My immediate term support and resistance lines for the SP500 are now 1205 and 1220, respectively.

Best of luck out there today,


The Forgotten Truth - new home sales