“And in this corner, still undefeated, Frank’s long-held beliefs!”
- Ellis Rosen
For those of you who haven’t seen that Rosen cartoon from The New Yorker, it’s a #behavioral beauty! My man and in-house cartoonist, Bob Rich, continues to build a cartoon bank of inflation cartoons that are making doves cry with laughter too.
Back to the Global Macro Grind…
If your 2021 belief was that inflation was going to be “transitory” and that bond yields were done going up on their initial #Quad2 economic spike, you were dead wrong.
Getting the TRENDING ROC (rate of change) of either GROWTH or INFLATION wrong is just about the worst mistake that someone who is running either their own or other people’s money can make.
Therefore, if you’re like Frank, you’re better off running your mouth and/or a newsletter.
The Frank Cartoon wasn’t just something I stumbled upon (newsflash: I don’t read The New Yorker). It was in the #behavioral book I’ve been citing as of late: Think Again, by Adam Grant, who also reminded me of the great George Costanza quote:
“It’s not a lie if you believe it.”
Grant went on to remind me that “it doesn’t become the truth just because you believe it. It’s a sign of wisdom to avoid believing every thought that enters your mind. It’s a sign of emotional intelligence…” (pg 68)
Most people who run money are, on paper, “intelligent”… but they don’t achieve the same scores on Wall Street that they did in static-test-taking schools. So here’s a real-time and dynamic Top 3 Question test from brofessor Mucker this morning:
- Did you believe US headline inflation was going to ramp towards 6% by year end?
- Did you believe that bond yields were going to breakout to Bullish @Hedgeye TREND again in Q4?
- Did you believe that the US Consumer was going to slow in September after #slowing in August?
On both US & Global Inflation’s #Acceleration (Macro Theme #2 on the Q4 Macro Themes call):
A) If you believed in TRENDING #Inflation, you kept a core Asset Allocation to Commodities and crushed it
B) If you believed in TRENDING #Inflation, you sold your Deflation/Duration positions (like Gold and Treasuries)
C) If you believed the US Consumer #slowed in SEP (I did), you got that wrong too
On that last part, since the Delta Variant didn’t peak until SEP, I figured the US data was going to #slow to a sequential #Quad3 in Q3 low in SEP and then re-accelerate with the inverse of covid case counts in OCT and NOV – that was wrong:
A) USA’s ISM Consumer Services report #accelerated to 61.9 in SEP vs. 61.7 in AUG
B) USA’s ISM Services Business Activity #accelerrated to 62.3 in SEP vs. 60.1 in AUG
C) The Cycle peaks (pre Delta hammering USA in AUG) were in JULY
The aforementioned economic report is partly what drove the SP500 back to down -4.2% from its all-time closing high yesterday. But that’s so yesterday’s Old Wall “news” (like the #Quad2 Capex report last week, they didn’t even mention it)…
This morning it’s all about bringing back the panic about an Atlanta Fed Forecast for #slowing US GDP Growth (boys in Hotlanta, if you’re stochastically nowcasting instead of day trading, your GDP # should have gone UP post the ISM).
But back to non-emotionally-triggered #process point, what do you believe this morning? I can tell you what I believe:
- I made money on my China (FXI), Hong Kong (EWH), South Korea (EWY) and Australia (EWA) shorts again overnight
- I’m getting pounded on my Germany (EWG) and Swiss (EWL) longs, again, this morning
- I’m too right on inflation at this point with Commodities (specifically Oil, Gas, and Bitcoin) signaling overbought
On my Asia Shorts signaling immediate-term TRADE #oversold (that means COVER SOME again), is that signaling “Global Contagion.” A: No. My new Long Indonesia (IDX) position was +2.1% overnight to +4.6% in the last month… and…
If you look at our Systemic Contagion Risk Tracker (see Chart of The Day with all of that data) this morning, measures of perceived risks remain sedated.
Did I believe that my Yankees were going to beat the Red Sox last night? A: Yes. Was that the right position to have bet on? As Adam Grant likes to say, “the joy of being wrong” is that you get to learn something about your beliefs every day.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets:
UST 10yr Yield 1.41-1.61% (bullish)
UST 2yr Yield 0.24-0.33% (bullish)
SPX 4 (bullish)
RUT 2193-2290 (bullish)
NASDAQ 14,090-15,226 (bullish)
Tech (XLK) 145.95-158.29 (bullish)
Utilities (XLU) 63.04-65.88 (bearish)
Energy (XLE) 49.96-55.97 (bullish)
Financials (XLF) 36.99-39.20 (bullish)
Shanghai Comp 3 (bearish)
DAX 14,842-15,736 (bullish)
VIX 15.99-25.13 (bearish)
USD 92.83-94.61 (neutral)
Oil (WTI) 72.81-78.97 (bullish)
Nat Gas 5.16-6.47 (bullish)
Gold 1 (bearish)
Bitcoin 43,205-51,038 (bullish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
