“Facing a personal financial crisis, Kiam decided to sell the team.”
- Jeff Benedict
If you haven’t risk managed one yet, the thing about recessions is that lots of companies blow up in them. Former New England Patriots owner, Victor Kiam, blew up during the 1991 US recession and was forced to sell the team in 1992.
Interestingly, in 1984, another bad business family (The Sullivans) that didn’t understand leverage and/or The Cycle blew up and had to sell the Patriots too. The Sullivans “made the Jackson’s (as in Michael Jackson) an offer they couldn’t refuse – an upfront advance of $41M and 75% of anticipated revenues from ticket sales. Those numbers were naively outlandish.” -The Dynasty
It’s obviously not 1982, 1984, or 1992. It’s 2022. And we’re in the midst of the biggest asset bubble in human history running head on into a Global #Quad4 Recession.
Back to the Global Macro Grind…
Did you know that INVENTORIES in yesterday’s US ISM report were the highest in 38 years? That happened in 1984 too.
While Macro Tourists, CNBC pundits, etc. were panic-buying at yesterday’s intraday-lower-cycle-highs, my teammates and I were reading the numbers in what was easily one of the worst ROC US ISM Manufacturing reports in the last 50 years:
- The headline ISM print of 52.8 #slowed for the 5th straight month (as it does when #slowing into a recession)
- NEW ORDERS #slowed, big time, to a 27-month low
- INVENTORIES #accelerated, big time, to their highest level in 38 years
‘But, but… Prices Paid dropped by more than anytime since the pandemic… and that’s bullish… because…’
Stop it. In what world is crashing demand bullish for either companies levered to those selling prices or The Quads?
While the consensus narratives have always completely missed what The #Quad4 Numbers imply (i.e. that both Corporate REVENUES and CASH FLOWS are #slowing at the same time), I just have to repeat what China did overnight for the US crowd.
China? Yep. These guys (they’re all guys) can’t even make up GDP numbers at this point. And Chinese Equity markets got that message from their government guys loud and clear last night:
A) Shanghai Composite Index was down another -2.3% overnight to -5.9% in the last month
B) That confirms the #VASP (Volatility Adjusted Signaling Process) view of a Bearish @Hedgeye TREND reversal
C) That’s REALLY bearish given China has the easiest comps (Base Effects) of any major economy right now
‘But, but… in 1982…’
Stop it. Where was (pre WTO) China and the Eurozone in your Global Macro model in 1982? These are massive (Secular and Cyclical Slowing) components of the Global #Quad4 Recession view that only a certified macro moron would ignore.
Part II of The 2022 Bear Market started yesterday and it has some very easy numbers to understand:
A) Ex-China (which is signaling it’s going for make it 20/20), EVERY country in the G-20 is going to be in #Quad3 or #Quad4
B) Ex-India, Japan, and Argentina, 17 of 20 countries in the G-20 are going to be in a #Quad4 Recession
That’s why you’ve sold ALL your #Quad2 and #Quad3 (i.e. Inflation Accelerating) Commodities Asset Allocations and:
A) The CRB Commodities Index failed Hedgeye TRADE and TREND resistance yesterday alongside Copper, Oil, Ag, etc.
B) Oil (WTI) is in the midst of a -24% crash from its Inflation Cycle peak
That’s also why the Yield Curve is:
A) Seeing fresh new CYCLE LOWS in terms of INVERSION this morning at -30 basis points on 10s minus 2s
B) The 2yr Yield is signal signaling BULLISH @Hedgeye TREND whereas the 10yr and 30yr are signaling Bearish TRENDs
That’s why it’s not 1982 or 1984.
It’s not like anything other than 2022; fully loaded with Crypto, SPAC, and profitless GROWTH crashes. The Fed is still TIGHTENING into this (hence the #VASP Signal on the 2yr) and inverting the curve like it was in 1.
By the time the Fed is actually easing (i.e. cutting rates like Greenspan did in 2001) there will be no Cycle-Time left on the clock.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets:
UST 30yr Yield 2.87-3.14% (bearish)
UST 10yr Yield 2.53-3.01% (bearish)
UST 2yr Yield 2.75-3.25% (bullish)
High Yield (HYG) 74.76-78.44 (bearish)
SPX 3 (bearish)
NASDAQ 11,395-12,514 (bearish)
RUT 1 (bearish)
Tech (XLK) 132-145 (bearish)
Utilities (XLU) 69.45-75.29 (bullish)
Shanghai Comp 3151-3285 (bearish)
DAX 12,933-13,532 (bearish)
VIX 21.22-27.13 (bullish)
USD 105.11-108.13 (bullish)
USD/YEN 130.55-139.10 (neutral)
GBP/USD 1.189-1.227 (bearish)
Oil (WTI) 92.65-100.02 (bearish)
Gold 1 (bullish)
Copper 3.20-3.59 (bearish)
Bitcoin 20,005-24,741 (bearish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
