POSITIONS: short the US Dollar (UUP) and short the SP500 (SPY)
You’d think, with all of the academic-dogma-nites out there parroting how “good” a Debauched Dollar is “for US Exports”, that QE would have these kinds of charts spiking up into the right. Not so much…
While this morning’s US Industrial Production report for September may very well have stoked further hope that we’ll have QE3, it won’t change the prospects that matter to 99% of non-Wall Street types in this country who see the writing on the wall - Industrial Production in America is slowing.
Notwithstanding that September’s IP report missed the sell-side’s hopeful expectations, what matters most to our macro model here at Hedgeye is the slope of this line. Since the peak of this cyclical recovery in US IP (June’s reading of +8.3% y/y) to September’s report of +5.4%, there is a fairly obvious gravitational force (math) that is going to draw this line towards flat year-over-year growth in the next 3-6 months.
January is when the “comps” (comparisons) for Industrial Production growth get very difficult. By summer-time of next year, the Keynesians might be begging Bernanke for QE6.
QE is only perpetuating US style Jobless Stagflation via a Debauched Dollar and hope is not an investment process.
Keith R. McCullough
Chief Executive Officer