“The glaring contrast between the traditional theories of price and the facts which experience practical men considered as decisive for the determination of prices…”
- Hayek
That’s what one of the best economists in human history observed about his mentor’s (Carl Menger, the Founding Father of Austrian Economics) #process.
No, I’m not an Austrian Economist. I have a BA in what they call “Classical Economics” and I’m no Linear Classical Econ like those who are worshiped at the Fed, BOE, etc. either.
I am who I am. My risk management process is what it is. And whether the world wants to admit it or not, we are all hostage to unelected and unaccountable “economists” who are making the biggest Policy Mistakes in modern history.
Back to the Global Macro Grind…
Welcome to another Macro Monday @Hedgeye, where we’re measuring and mapping what’s happening instead of what Policy Mistake Makers think could or “should” happen.
Tightening into a Global #Quad4 Recession blows up the capital markets bubbles that they perpetuated.
Instead of what someone peacocking on CNBC has to say about that today, let’s listen to what one of the Top Economists in the world thinks – The Global Currency Market:
- US Dollar Index ramped another +3.1% higher last week to new #Quad4 Cycle Highs at +18.3% YTD
- EUR/USD continued to crash, down another -3.3% to -14.8% YTD and remains Bearish TRADE and TREND
- Japan’s Yen intervention didn’t work – it was down -0.3% taking its YTD Currency Crash to -19.7% YTD
- GBP/USD continued to crash, down another -4.9% last week to -19.8% YTD (Bearish TRADE and TREND)
- Swedish Krone got smoked for a -4.9% decline vs. USD last week to -9.9% in the last 3 months
- New Zealand Kiwi got crushed for a -4.1% decline vs. USD last week to -8.4% in the last 3 months
Oh, the bravery of the central bankers in Sweden! They raised by 100 basis points to “fight inflation”… and the world gave The People of Sweden another -5% on the purchasing power of their hard earned currency.
No, they didn’t teach that outcome in America’s Ivy League towers either.
Do you have kids in college? Tell them to ask their Econ Professor what #Quad4 is? Then tell them to tell their classmates what it is – it’s when The ROC (rate of change) of GROWTH and INFLATION slow at the same time.
In a Global #Quad4 Recession, it’s when A) Demand for Commodities goes down and B) the prices go down, in US Dollars:
A) CRB Commodities Index disinflated another -3.7% last week to -19% from its #Quad3 INFLATION Cycle Peak
B) Oil (WTI) continued to crash in #Quad4, down another -7.1% to -36% from its #Quad3 INFLATION Cycle Peak
C) Dr. Copper got crushed for another -4.9% loss, crashing -32% from its #Quad3 INFLATION Cycle Peak
Yes, INFLATION peaked (in June). No, that wasn’t “the bottom” in either CYCLICAL or #BubbleCap Tech GROWTH. That was the beginning of the end for INFLATION and the start of a Global RECESSION.
But no worries on a Global #Quad4 Recession – keep tightening financial conditions into it. It’s going so well so far.
I wasn’t cherry picking Copper and Oil there either. Natural Gas (down -12.1% last week) and Lumber (down another -9.6% last week, crashing -28% in the last 3 months of the Full Investing Cycle in #Quad4) were a LOT worse.
Both US And Global Equities obviously continued to crash (as they do when central banks tighten into #Quad4). The beloved SP500 was down for the 5th week in the last 6, taking its crash to -23.0% from its all-time bubble high.
NASDAQ and Russell 2000 #Quad4 Crashes (from their #Quad2 Cycle Peaks in NOV 2021) are now at -32.3% and -31.2%. During the next bear market bounce to lower-highs, you know what to do. The Fed doesn’t.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets:
UST 10yr Yield 3.32-3.83% (bullish)
UST 2yr Yield 3.66-4.32% (bullish)
High Yield (HYG) 71.75-74.72 (bearish)
SPX 3 (bearish)
NASDAQ 10,760-11,750 (bearish)
RUT 1 (bearish)
Tech (XLK) 120-132 (bearish)
Utilities (XLU) 71.01-74.52 (bearish)
Energy (XLE) 69.38-77.45 (bearish)
Shanghai Comp 3013-3198 (bearish)
Nikkei 26,315-27,994 (bearish)
DAX 12,206-12,952 (bearish)
VIX 25.03-32.12 (bullish)
USD 109.30-113.40 (bullish)
EUR/USD 0.965-0.999 (bearish)
USD/YEN 141.66-144.78 (bullish)
GBP/USD 1.071-1.136 (bearish)
Oil (WTI) 78.22-87.15 (bearish)
Nat Gas 6.45-8.16 (bearish)
Gold 1 (bearish)
Copper 3.29-3.54 (bearish)
Bitcoin 18,109-20,578 (bearish)
Best of luck out there this week,
KM
Keith R. McCullough
Chief Executive Officer
