The World As It Will Be

“No sensible decision can be made any longer without taking into account not only the world as it is, but the world as it will be.”

-Isaac Asimov


Isaac Asimov was a Hedgeye type of thinker: multi-factor + multi-duration, and ample storytelling to synthesize both.


Asimov was a Russian-American scientist (professor of biochemistry at Boston University) but also a renowned science fiction writer. He built a base of understanding in the accepted sciences of the world before he stepped out onto the edge to consider the “world as it will be.”


“The world as it is” perceived to be isn’t very difficult to discern this morning. Everyone with a market quote is hanging on whether or not the US unemployment rate will be terrible or toxic. Goldman got everyone hopped up intraday yesterday that we won’t see a 10% handle on the unemployment rate – isn’t that comforting.


Unfortunately, “the world as it will be” after a cyclically adjusted (for census workers) employment report won’t change. Like Japan, America has laid down the structural trolley tracks for what our healthcare analyst, Christian Drake, calls Destitution’s Duration. That is, the percent of unemployed in America for 27 weeks or more which continues to make higher all-time highs. At the same time, the percentage of Americans living on food stamps continues to push to higher-highs as well.


The bulls may very well enjoy the headline of a 9-percent-something unemployment rate that gets trumpeted by the willfully blind. However, after the first hour of trading, every prop desk in America will have sucked what they could have out of our Government Sponsored Game of Volatility and will prepare for the weekend. No sensible intermediate term decision can be made without considering this world’s debt, deficit, and employment problems as they will continue to be.


Because CNBC is mesmerized by a made for American TV 830AM manic countdown, what’s going on in the rest of the world this morning certainly doesn’t cease to exist. So let’s strap on the global macro pants and take a walk down that path:


1. Japan – After becoming the 5th said leader of Japan since 2006 (how embarrassing is that?), newly elected PM Kan said: “First and foremost we must gain the public’s trust. I want to help the party break through Japan’s frustrations.” Isn’t that inspirational? Japan remains the precedent that Ben Bernanke and the Fiat Fools continue to be willfully blind to. “The world as it will be” with Japanese style monetary policy in America and Europe will not be good.


2. China – After making a fresh YTD low yesterday, the Shanghai Composite rallies a whole 4 basis points last night. Instead of being down -22.1% year-to-date, China’s stock market is down 0.04% less than that. “The world as it will be” according to this major economic leading indicator is one of slowing global growth.


3. Spain – After attempting to convince its citizenry that austerity measures are good, the professional politicians in the land of the 20% unemployment rate are looking forward to massive demonstrations early next week. Spain’s IBEX index is flashing a negative divergence versus European equity markets again this morning, trading down another -0.58% to -22.8% YTD. “The world as it will be” when you plug your social net with wage cuts and taxes will not be good.


4. Hungary – After hoping that no one in Europe would notice, finally the President of the European Commission, Jose Manuel Barroso, who presides over 26 other political professionals (commissioners of 3 hour lunches) in the European Union, called Hungary’s burgeoning deficit/GDP “a very delicate situation.” At least these guys are starting to see what they are no longer allowed to ignore. “The world as it will be” is one with a long term sovereign debt default cycle.


5. Copper – Dr. Copper has been making a series of lower-lows as global equity markets Buy-And-Hope ahead of this employment report. Iron ore inventories ramped another +2.1% week over week in China and copper’s price has broken our long term TAIL of support line of $3.03/lb. At $2.97/lb this morning, copper prices are down -4.5% week-over-week. “The world as it will be” according to this major global macro leading indicator is one of slowing industrial demand.


6. Fed’s Balance Sheet – After telling Ron Paul that he was going to “cut the Fed’s balance sheet to $1 Trillion dollars”, ole Heli-Ben has done nothing but Pile Debt Upon Debt. This week, the Fed’s balance sheet expanded by another $2.2B to $2.34 TRILLION DOLLARS. Bernanke continues to buy the toxic waste that is US mortgage backed securities. Watch what this man does, not what he says. “The world as it will be” with the US as the Global Debtor nation will not be good.


On that cheery note, enjoy the manic media’s coverage of the US employment report and have a great weekend.


My immediate term support and resistance levels for the SP500 are now 1077 and 1111, respectively. We invested 3% of our bulging cash position in gold yesterday (gold was down), taking the cash position in the Hedgeye Asset Allocation Model down from 76% to 73%.


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


The World As It Will Be - Unemployment Fed Funds Rate

Did the US Economy Just “Collapse”? "Worst Personal Spending Since 2009"?

This is a brief note written by Hedgeye U.S. Macro analyst Christian Drake on 4/28 dispelling media reporting that “US GDP collapses to 0.7%, the lowest number in three years with the worst personal spending since 2009.”

read more

7 Tweets Summing Up What You Need to Know About Today's GDP Report

"There's a tremendous opportunity to educate people in our profession on how GDP is stated and projected," Hedgeye CEO Keith McCullough wrote today. Here's everything you need to know about today's GDP report.

read more

Cartoon of the Day: Crash Test Bear

In the past six months, U.S. stock indices are up between +12% and +18%.

read more

GOLD: A Deep Dive on What’s Next with a Top Commodities Strategist

“If you saved in gold over the past 20 to 25 years rather than any currency anywhere in the world, gold has outperformed all these currencies,” says Stefan Wieler, Vice President of Goldmoney in this edition of Real Conversations.

read more

Exact Sciences Up +24% This Week... What's Next? | $EXAS

We remain long Exact Sciences in the Hedgeye Healthcare Position Monitor.

read more

Inside the Atlanta Fed's Flawed GDP Tracker

"The Atlanta Fed’s GDPNowcast model, while useful at amalgamating investor consensus on one singular GDP estimate for any given quarter, is certainly not the end-all-be-all of forecasting U.S. GDP," writes Hedgeye Senior Macro analyst Darius Dale.

read more

Cartoon of the Day: Acrophobia

"Most people who are making a ton of money right now are focused on growth companies seeing accelerations," Hedgeye CEO Keith McCullough wrote in today's Early Look. "That’s what happens in Quad 1."

read more

People's Bank of China Spins China’s Bad-Loan Data

PBoC Deputy Governor Yi says China's non-performing loan problem has “pretty much stabilized." "Yi is spinning. China’s bad-debt problem remains serious," write Benn Steil and Emma Smith, Council on Foreign Relations.

read more

UnderArmour: 'I Am Much More Bearish Than I Was 3 Hours Ago'

“The consumer has a short memory.” Yes, Plank actually said this," writes Hedgeye Retail analyst Brian McGough. "Last time I heard such arrogance was Ron Johnson."

read more

Buffalo Wild Wings: Complacency & Lack of Leadership (by Howard Penney)

"Buffalo Wild Wings has been plagued by complacency and a continued lack of adequate leadership," writes Hedgeye Restaurants analyst Howard Penney.

read more

Todd Jordan on Las Vegas Sands Earnings

"The quarter actually beat lowered expectations. Overall, the mass segment performed well although base mass lagging is a concern," writes Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan on Las Vegas Sands.

read more

An Update on Defense Spending by Lt. Gen Emo Gardner

"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.

read more