“I don’t see much evidence of an equity bubble.”
- Ben Bernanke
I know. These central market planning gurus have been nailing it on bubbles and inflation, for a long time. For a bubble bursting US Equity preview, you might want to check out the recent disinflation in the Commodities that we call Crypto.
Back to the Global Macro Grind…
“Bubbles”? How could one have been long bubbles? It’s so “intellectually dishonest” to their “valuation” centric targets!
While I was sufficiently bullish (at this time last year), buying every bubble there was from Bitcoin to whatever Small Cap & SPAC Crap my analysts were pitching me before we hit the Mother of All Perpetuators of Bubbles (i.e. #Quad2 in Q2 of 2021)…
I’m #out of all that.
That’s not new this morning. Unlike the ideologues who HODL, I sell (and sold) anything that breaks my back-tested @Hedgeye TREND Signal. That saved both my family and yours a LOT of moneys in something like Ethereum, btw!
It’s not that everyone’s stock or crypto “ideas” aren’t totally cool. It’s just that they look like complete bs in #Quad4.
The market, of course, has already been discounting this #Quad2 Bubble Exit as we approach a big time #Quad4 in Q2 of 2022. All the while, these brainiacs like Brainard at the Fed, think they can “raise rates” into a pending #Quad4 Slowdown.
Yeah, she’ll be all hawked up in her testimony today. That’s how you become The Vice or head of the Fed, btw. Talk hawkish, get the seat, then coo like a dove anytime SPY drops more than 10%.
“Oh, but KM, I really liked your conviction on that #Quad2 in Q4 view. And the idea of inflation peaking is #Quad1 Goldilocks. I like that too. So aren’t you still bullish?”
- Yep, on Gold (GLD). But not so much on Treasuries (TLT) heading into this Brainard performance. I want better prices.
- Since they aren’t in #Quad4 (they’re in Quads 1 & 2), yep on European and EM Equities (EWL, EWQ, EWM, IDX, etc.)
- And Buying US Dollars (buying a bunch of those this morning as #Quad4 Protection against legit disinflation)
But definitely NOT bullish on things that say BEARISH TREND in my daily Risk Range™ Signal product. Why? BECAUSE THEY ARE SIGNALING BEARISH TREND!
Yeah, had to go ALL CAPS on you again early in the New Year here.
Last time I did that I said BUY Rate Sensitivity. Today I am amending that view to NOT Buying Treasuries again, until:
A) UST 10yr Yield’s SIGNAL changes and/or we see 1.85% (currently the top-end of my Risk Range™ Signal
B) UST 2yr Yield’s SIGNAL changes and/or we see 0.98% = top-end of my Risk Range™ Signal
It’s not my 1st rodeo risk managing a Phase Transition. Every time I do this I learn how to do it less-bad and I #GetBetter, hopefully. Not only are 2s and 10s (yields) SIGNALING Bullish @Hedgeye TREND, Late Cycle Commodities still are too.
You see that on the sheet, right?
A) Bullish TREND for Oil and Gas
B) Bullish TREND for Copper again
And what you don’t see, you’ll have to trust me. Don’t forget that alongside the 30 features in our proprietary Quad Nowcasts for GROWTH and INFLATION, I have 28 signals within a Singular Signal that makes me make all these moves.
Would it be better if I always just had “one easy call” to execute on? You know, like the one I’ve had for 18 months in staying on the RIGHT SIDE of my Quad grid?
What’s on the RIGHT side? A: Quads 2 and 3 where it was easy to be long INFLATION since The Inflation Cycle bottomed in Q2 of 2020. What’s on the LEFT side of my grid? A: Quads 1 and 4 (i.e. either #Quad1 Goldilocks or #Quad4 Disinflation).
Not ironically, it’s The Bernank trained Fed that is the catalyst for disinflation to Phase Transition into DEFLATION.
Yes. I fully intend to make that move when it is signaled. The answer on WHEN is not today (in Bond Yield terms I mean). But in CASH and EQUITY terms, today is the day for me to #execute an Asset Allocation pivot:
A) Raise CASH via the US Dollar (UUP)
B) Sell down my gross exposure to both QQQ and Mega Cap Tech (XLK)
C) Buy US Housing (ITB), Consumer Staples (XLP), and Utes (XLU)
Why? Because The Signals told me to. And since The Signal always front-runs The Quads, I trust The Signals above all else. As for the many Fed perpetuated easy money bubbles that are already popping, short those on bounces.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets:
UST 10yr Yield 1.52-1.85% (bullish)
UST 2yr Yield 0.71-0.98% (bullish)
SPX 4 (bullish)
NASDAQ 14,645-15,915 (bearish)
RUT 2136-2296 (bearish)
Tech (XLK) 162.75-176.48 (bullish)
Housing (ITB) 73.87-84.50 (bullish)
REITS (XLRE) 47.80-52.20 (bullish)
Consumer Staples (XLP) 76.31-77.91 (bullish)
Shanghai Comp 3 (neutral)
Nikkei 28,020-29,301 (bearish)
DAX 15,710-16,283 (bullish)
VIX 15.78-20.92 (bearish)
USD 94.62-96.43 (bullish)
EUR/USD 1.124-1.147 (bearish)
USD/YEN 114.22-116.32 (bullish)
GBP/USD 1.347-1.375 (bullish)
Oil (WTI) 74.01-82.99 (bullish)
Nat Gas 3.44-5.06 (bullish)
Gold 1 (bullish)
Copper 4.30-4.59 (bullish)
MSFT 302-339 (bearish)
AAPL 169-182 (bullish)
AMZN 3191-3401 (bearish)
FB 323-342 (bearish)
GOOGL 2 (bearish)
NFLX 511-584 (bearish)
Bitcoin 39,006-47,617 (bearish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
