“Throughout the inhabited world, in all times and under every circumstance, myths of man have flourished.”
- Joseph Campbell
To whoever was chasing Blood, Bath, and Beyond (BBBY) at up +40% on the day yesterday, I’ll channel my inner Joseph Campbell and say “follow your bliss!”
While we can all wake up and whine about the world and what it has “become”, in many storytelling ways it’s always been the same. Campbell contextualized that story through the lens of comparative mythology, religion, etc. in The Hero With A Thousand Faces.
I read a lot of books, because I have a lot to learn. I don’t read Reddit posts and tweets about meme stocks, because I only have so much life and cycle-time left to live.
Back to the Global Macro Grind…
Heading into the Mother of All #Quad2 Cross-Asset Bubbles last year, we were LONG meme and storytelling stocks. Why?
A) Because that’s what we do in #Quad2
B) When both GROWTH and INFLATION are #accelerating at the same time, most REVENUES are #accelerating
C) US GDP accelerating from +0.55% in Q1 2021 to +12.2% year-over-year in Q2 was the fastest of ALL-TIME
As I like to remind new analysts on our #GrowthAccelerating Hedgeye Research team, in ROC (rate of change) terms, ALL-TIME is a very long time. The market discounted that top-down GROWTH acceleration beautifully. It timed its top and bubble pop perfectly too.
Why wouldn’t you follow-your-bliss (Retail chasing charts) or “feelings” (hedge funds covering shorts) in Meme Stocks from here?
A) After re-accelerating into another #Quad2 in Q4 of 2021 to y/y GDP of +5.53% (vs. +4.95% in Q3 of 2021)…
B) US GDP already #slowed to +3.53% in Q1 of 2022… and
C) US GDP #slowed again from +3.53% in Q1 to +1.62% year-over-year (y/y) in Q2 of 2022
Especially for those who were generally Macro Unaware heading into Phase 1 of The Bear Market (in Crypto, Growth, Storytelling Stocks, etc.), on any historical look-back basis, this was both the fastest and largest slow-down in modern US history.
That’s why Crypto, Growth, Storytelling, etc. stocks crashed. If you want to blame the Fed for expediting it, that’s fine by me.
The Question, from here, is where does REAL GROWTH slow to next. Oh, I know - most Macro Tourists need/want to think that Crypto, Equity, Commodity, Credit, etc. markets are going to trade on a 1-factor, 1-duration model of a CPI report tomorrow…
But, as I’ve tried to say in more ways than I can try to communicate at this point, Phase 2 of The Bear Market is going to be more about REAL GDP and PROFIT GROWTH slowing into their respective recessions for the next FOUR QUARTERS of QUAD FOUR.
Yep, soh-ree in the Canadian accent there eh, bud. I went all CAPS on you again this morning.
‘But, but, KM… where could you be wrong?’ A: our GDP recession numbers could easily not be Bearish Enough:
A) We have year-over-year GDP #slowing from +1.62% to +0.07% in the next 4 quarters
B) Sequentially (the way Old Wall reads GDP to you), that ends with 2 back-to-back quarters of -3% GDP Growth!
C) When’s the last time the “great companies” you own had to deal with ZERO GDP?
I know, “no one” owns NVIDIA (NVDA) anymore. AFTER crashing -60% from its #Quad2 in Q4 of 2021 peak, then having a bear market bounce to lower-highs, then getting body bagged on pre-announcing the reality of The Quads yesterday, it still has a $445B cap.
$445 BILLION in MARKET CAP, trading post crash at 48x PEAK (trailing) GROWTH bubble earnings born out of +12.23% GDP.
Unless you have no experience risk managing US Recessions, of course you wouldn’t own NVDA at that “valuation” into the upcoming PROFIT Recession for Tech, Crypto, Comms, etc. That’s why you’d prefer chasing a bad company with no profits and a cool meme?
If yesterday didn’t happen to the Meme Stocks, I wouldn’t be more bearish than I was yesterday.
I’m long Japanese Stocks (DXJ) and the Nikkei corrected -0.9% overnight on the NVDA (and Softbank) #Quad4 update. Does that concern me? Of course it does. Plenty of market cap in Japan is linked to that demand deceleration and it’s not going away.
But, despite the SPY only having had 1 up day so far in August (it was a barn burner 1 for 6 day though for the Goldman “Most Shorted Basket”!), that statement will likely trigger as many inexperienced bears as the “futures being green” pre-open does.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets:
UST 30yr Yield 2.90-3.10% (neutral)
UST 10yr Yield 2.57-2.95% (bearish)
UST 2yr Yield 2.77-3.31% (bullish)
High Yield (HYG) 75.40-78.92 (bearish)
SPX 3 (bearish)
NASDAQ 11,711-12,805 (bearish)
RUT 1 (bearish)
Tech (XLK) 136-149 (bearish)
Utilities (XLU) 70.30-76.01 (bullish)
Shanghai Comp 3141-3276 (bearish)
Nikkei 27,402-28,302 (bullish)
DAX 13,002-13,709 (bearish)
VIX 20.31-25.54 (bullish)
USD 105.20-107.82 (bullish)
Oil (WTI) 86.03-97.51 (bearish)
Gold 1 (bullish)
Bitcoin 20,662-24,698 (bearish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
