“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity…”
- Charles Dickens
If that quote doesn’t speak to the days of our lives right now, I don’t know what does. It’s a powerful quote about long-term secular cycles as they are undergoing Phase Transitions. Our Chief Demographer, Neil Howe, calls this one The Fourth Turning.
It’s also the quote that Hungarian-American geopolitical strategist, George Friedman, uses in his latest book: The Storm Before The Calm – America’s Discord, The Coming Crisis of The 2020s, and The Triumph Beyond.
Is the crisis of “cheap” corporate leverage and levered long investing “over” because it allegedly “bottomed” in March?
Ha! Hardly. This isn’t a short-term “chart” or quarterly performance chasing thing. This is a generational Boomer thing.
From Real Estate and Banksters last time to Corporate Credit, Profitless Stahks, and Private Equity this time, they’ve tried to resuscitate everything other than what really matters, not to Wall Street, but to The People: the purchasing power of the Dollars they earn and the prospects of having a job to earn them.
Back to the Global Macro Grind…
If you’d like to debate me on that, give me a buzz. In the meantime, the great leaders of the Old Wall are living large this summer but in silence about the many tectonic plates that are shifting underneath the tapestry of American Liberty.
Take their boy PE Powell’s FOMC comments yesterday as a glaring example of obfuscating what’s really going on here – a short-term and epic stock and junk bond market bailout for the few, in exchange for a generational indebtedness and higher cost of living for the many.
Since the questions Powell got were an embarrassment to American Journalism, I asked him 3 questions (on Twitter) that may not be asked and most certainly will not be specifically answered:
- Doesn’t your Dollar Devaluation policy raise the cost of living?
- Why are you creating and perpetuating asset bubbles?
- How does buying Junk Bonds support your policy mandate?
While a standing head of the US Federal Reserve getting away with not mentioning (never mind discussing) what he’s doing to America’s currency is amazing, it’s consistent.
Ben Bernanke never mentioned the US Dollar’s impact on either Gold or Commodity prices hitting all-time highs in 2011 as he was devaluing the Dollar to a 40-year low.
As a reminder, this morning’s short-term, Fed (and Fiscal Deficit Spending) fueled, US Dollar Devaluation (read: print money and inflate the Old Wall’s assets) correlations are:
- SP500 -0.81 vs. USD on a 30-day inverse correlation
- Commodities (CRB Index) -0.97 on a 30-day inverse correlation
- Gold -0.97 on a 30-day inverse correlation
Now if you want to tell me that PE Powell doesn’t understand The Machine of the modern day market and why 1-month price momentum, correlations, etc. matter, then fine…
But that only amplifies my point. Whether the Fed is knowingly obfuscating the truth about its Macro market impact or it is willfully blind doesn’t matter at this point. The People get what being lied to means.
What PE Powell didn’t lie about yesterday was The ROC (rate of change) of the US economy here in July. He, said “the pace of the recovery has slowed.” He didn’t talk about how the pace of Dollar Devaluation perpetuated the stagflation part of that.
‘So, KM, do we buy stahks?’
Yep. But don’t be a 1 navel gazer at the Dow in points, bros. Widen your investment Hedgeyes and buy Treasuries (across the curve), Gold, Silver, Miners, Bitcoins, Commodities, Emerging Markets and Tech, Utilities, Real Estate Stahks!
But definitely don’t walk the real American Main Streets with a Fed-Eating-Grin on your face while you see an accelerating number of your fellow Americans homeless and/or without food and medical care. Those real life costs are ripping.
And… most definitely don’t blame the Fed or another $1-1.5 TRILLION in taxpayer funded fiscal “spending” for any of the cost of living inflation at the particular point of the US Recession when a significant number of The People can afford it the least.
If our institutions and the establishment were transparent, accountable, and honest about that, the next great generational American Triumph might just be defined by The People, for the people.
For now, unelected people like Powell have unlimited power to drive an inequality wedge between them.
Immediate-term @Hedgeye Risk Range with TREND signal in brackets:
UST 10yr Yield 0.55-0.64% (bearish)
UST 2yr Yield 0.12-0.16% (bearish)
SPX 3182-3282 (bullish)
RUT 1 (bearish)
NASDAQ 10,278-10,815 (bullish)
Tech (XLK) 104.17-110.16 (bullish)
REITS (XLRE) 34.02-36.96 (bullish)
Utilities (XLU) 58.53-61.38 (bullish)
Financials (XLF) 22.92-24.59 (bearish)
Shanghai Comp 3160-3380 (bullish)
VIX 23.30-30.71 (bearish)
USD 92.78-94.79 (bearish)
Oil (WTI) 40.04-42.20 (bullish)
Nat Gas 1.60-1.99 (bullish)
Gold 1 (bullish)
Copper 2.86-2.97 (bullish)
Bitcoin 9866-11,433 (bullish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
