“He was never going to get handed a cold cup of coffee.”
- David Fubini
That was a good quote from a good chapter in Hidden Truths that Fubini titled “Avoid Half Truths and Misperceptions.”
“A senior admiral in the US Navy related that, when he came onto the bridge of a major aircraft carrier, he knew 2 things with absolute certainty: he was never going to get handed a cold cup of coffee, and he was never going to hear the whole truth.” (pg 23)
While he’s unelected and unaccountable to being fact checked, I still think Jay Powell could use some real world leadership lessons like this. He’s either being willfully blind to the data or the people feeding him the information are biased and/or incompetent.
Back to the Global Macro Grind…
Remember the time the Old Wall told you to “buy stocks” for the month and quarter-end “re-balance”? My Independent Research team and I gave Powell a good re-balance in yesterday's Q3 Macro Themes deck! If you’d like access to the replay and/or slide deck, ping .
Slide 28: “Overall Economic Activity Appears To Have Picked Up After Edging Down In The First Quarter.” -FOMC 6/15/22
Slide 29: US Retail Sales #slowed hard in Q2
Slide 30: The Fed’s own “Service Sector Survey” got smoked in Q2
Slide 31: The Fed’s own “Regional Manufacturing Survey Composite” crashed in Q2
And a certain Establishment-loving community of Linear Economists wants me to be more “polite to Mr. Powell” while he tightens into a #Quad4 slowdown AND lies about The ROC (rate of change) of the US economic data?
As my Dad liked to say when dealing with government “leaders” (and being polite), “they can go fly a kite.”
If only on a lag to the actual data being reported, let’s give Powell the benefit of doubt … and assume that, like on inflation not being “transitory”, he’ll eventually change his mind to what the data is actually doing.
When speaking in Europe yesterday, did he do that?
- “We’re not worried about the shape of the Yield Curve”
- “We hope growth stays positive”
- “We think the biggest risk is failing to restore price stability”
My response:
- Are you fn kidding me?
- Hope is not a risk management process
- The biggest risk is the price instability of both Equity and Credit markets
Since the Yield Curve is signaling that the probability of a pending recession is rising, Powell and his brilliant Fed Heads “aren’t worried about that”, but markets are?
I don’t get paid to bank or broker. I get paid to provide apolitical and non-conflict of interest ROC (rate of change) research to Institutional Clients who manage TRILLIONS in Assets under management.
That’s a lot of money and LOTS of experienced clients. I don’t know ONE of them that would agree on the Yield Curve.
So let’s get real here, Jay. You need to stop with towing the line of incompetent forecasters and get with the real world economics and markets program. If you don’t, selfishly, I am just going to keep making more and more money on the short side.
If you do, well, less people will lose more of their net worth in a very short period of their life and Cycle Time.
If you do not “understand” the impact of the Wealth Effect on the US economy, it’s time you start learning about that. “Learning about inflation” way too late doesn’t do it for me. That’s yesterday’s news.
Tomorrow’s news is about a US profit (and proper) recession that is perpetuated by Equity, Credit, and Crypto markets crashing.
In other Global Macro news:
- China’s Manufacturing PMI #accelerated to 50.2 in JUN vs. 49.6 in MAY
- China’s Services PMI #accelerated, big time, to 54.7 in JUN vs. 47.8 in MAY
- China’s Shanghai Comp Index was up another +1.1% overnight and we remain long of it
- France’s stock market is down another -2.2% this morning to -8.8% in the last month
- Germany’s stock market is down another -2.3% this morning to -11.6% in the last month
- Italy’s stock market is down another -2.0% this morning to -13.0% in the last month
We remain Short of France, Germany, and Italy in EWQ, DAX, and EWI terms vs. Long China (KWEB, KBA, EWH).
China is expanding its Money Supply while Europe is shrinking theirs. The last time Europe decreased its Money Supply this quickly was from JAN 2009 to MAR of 2010. The European Crisis followed in 2011.
I could give the guys and gals at the ECB a re-balance this morning too. But I have to go make some money for the fam.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets
UST 10yr Yield 3.01-3.39% (bullish)
UST 2yr Yield 2.92-3.32% (bullish)
High Yield (HYG) 72.51-75.12 (bearish)
SPX 3 (bearish)
NASDAQ 10,465-11,499 (bearish)
RUT 1 (bearish)
Tech (XLK) 120-133 (bearish)
Shanghai Comp 3 (bullish)
DAX 12,660-13,363 (bearish)
VIX 26.16-33.89 (bullish)
USD 103.12-105.66 (bullish)
EUR/USD 1.039-1.061 (bearish)
Oil (WTI) 102.91-114.81 (bullish)
Nat Gas 5.89-7.42 (bearish)
Gold 1 (bullish)
Copper 3.53-4.02 (bearish)
Bitcoin 18,003-21,991 (bearish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
