“At Bordeaux, you need not be a chateau to be a chateau!”
- Kermit Lynch
If you’re a long-term investor in high-grade wine, as an asset class, you’ve got to read the book I’ve been citing recently, Adventures on The Wine Route – A Wine Buyer’s Tour of France.
It’s both classic and foundational in that it gave me a keen sense of perception vs. reality. Ye Olde Wall type conflicts of interests, falsehoods, and facades remain alive and well in the wine trading community of Old France.
“One could probably accuse me of a tendency to rebel against facades. Bordeaux is a land of facades…” (pg 50)
Back to the Global Macro Grind…
But who really owns France (EWQ)?
Maybe a better question is how much French, German, Dutch, Swiss, Swedish, Finnish, Polish, etc. EQUITY have you OWNED since Europe entered #Quad2?
I’m betting the answer, for many of you, is “not enough.” When something really works out for the right reasons (i.e. you get the Full Investing Cycle right) I almost always look back realizing I could have owned more.
That’s who I am and how I roll though. I wake up every morning, God willing, with two feet on the floor looking to improve both my life and my process because I know I can always do better.
But most people we compete with in macro won’t do better until they have a Go Anywhere Global Macro #process.
Overlay America’s fav AAPL vs. Long Switzerland (EWL) from where #Quad2 in both Swiss Stock Signals and The Eurozone broadly signaled. If you haven’t been long EWL, you might be surprised at “the chart.”
If you’ve missed being Long Europe vs. Short places like China, Hong Kong, etc., today is a good day to buy:
A) Germany’s DAX is signaling immediate-term TRADE #oversold within its Bullish @Hedgeye TREND
B) Switzerland’s Swiss Market Index is signaling immediate-term TRADE #oversold within its Bullish @Hedgeye TREND
If you have never been to Bordeaux or the Swiss Alps and don’t have “access to management” in Berlin, that’s really ok. You just need some fractal Canadian dude like me to issue signals from the gods, eh!
Equity Buyers, like wine buyers, will note that I didn’t say that either France’s CAC40 or Dutch Stocks (EWN) are signaling immediate-term TRADE #oversold, yet. Why? I have no idea and I don’t care why either. They just aren’t.
This may or may not make sense to all players in The Game, but that makes the Dutch Signal stronger, in @Hedgeye Risk Range™ Signal STRENGTH terms, than that of the Germans (EWG). If it was weaker, it would be down more!
Top 4 European Equity Longs re-ranked for Signal Strength = EWN, EWL, EWG, and EWQ.
‘But why KM, why would I buy Europe? It’s already had such a good run and… uh’…
And uh, what? What are we really talking about here when it comes to being Long Europe vs. Short Asia (not ALL Asia, but South Korea is tightening into a #Quad4 slowdown and that short works) if we don’t have a data-driven process?
Look at these Eurozone Real GDP Projections (slide 92 of the current Macro Deck):
- Q3 of 2021 = +3.25% year-over-year growth = #Quad3
- Q4 of 2021 = #acceleration to +5.10% year-over-year growth = #Quad2
- Q1 of 2022 = #acceleration to +6.57% year-over-year growth = #Quad1
Those Hedgeye GIP Nowcasts are obviously ahead of what Old Wall is projecting (sell side), but they aren’t far off from what the market is thinking (because European stocks have relatively low volatility and have had very few buyable corrections).
The main “why” on that #acceleration into Q1 of 2022 is that Europe was, well, Europe, #slowing into a recession before the USA did in early 2020 (see that -3.2% year-over-year GDP print pre the pandemic pounding to -14.4% on the chart).
And yes, of course, Europe will be Europe, slowing again heading into 2023. That’s when I will be shorting it with impunity.
But, until then, these will most likely be the highest levels of sustained Full Cycle real European economic growth I’ll ever see in my career. Your career and/or Asset Allocations are yours, of course.
On Wall Street 2.0, you need not be a master of the hedge fund universe to be a master of your own #process.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets:
UST 10yr Yield 1.26-1.39% (neutral)
UST 2yr Yield 0.19-0.25% (bullish)
SPX 4 (bullish)
RUT 2 (bullish)
NASDAQ 14,990-15,517 (bullish)
REITS (XLRE) 47.16-49.68 (bullish)
Tech (XLK) 156.48-160.73 (bullish)
Utilities (XLU) 67.85-70.45 (bullish)
DAX 15,501-15,995 (bullish)
VIX 15.00-18.98 (bearish)
USD 91.89-93.12 (bearish)
EUR/USD 1.173-1.191 (bullish)
Oil (WTI) 67.34-71.21 (bullish)
Nat Gas 4.23-4.98 (bullish)
Gold 1 (bullish)
AAPL 149-159 (bullish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
