“Yellen says markets functioning well, conditions not disorderly.”
- Bloomberg.com
LOL.
Back to the Global Macro Grind…
I guess she either doesn’t have a Bloomberg machine anymore or she’s still focused on climate change.
My lol isn’t funny. It’s actually scary and sad all at the same time. When I moved to America in 1995, I would have never thought that central-market-and-economic-planners would have the power to perpetuate market crashes like the ones we are seeing today.
The establishment (Foreign Central Banks, The Fed, US Treasury, Old Wall Econs, CNBC, etc.) perpetuates crashes through both their actions and ignorance:
A) ACTIONS: Powell and Foreign Central Banks tightening into a Global #Quad4 Recession
B) IGNORANCE: whether Yellen is being willfully/politically blind or not
Then there’s the other kind of ignorance. The “really smart” guys like Larry Summers who are encouraging Powell to stay tight based on the same linear-modelling assumptions that he had when he blew up the Harvard Endowment.
I’m not book-smart like Larry. I don’t blow people up for 40-60% drawdowns.
If you think the most expedited Currency Crashes in modern history are “orderly” you need your head read. The entire world’s capital markets (including the Crypto Bubble that these guys blew up with easy money) correlate and crash inverse to the US Dollar.
We publish “KEY USD CORRELATIONS” to the #HedgeyeNation Community, daily:
- Immediate-term TRADE Correlation between USD and SPX = -0.94 this morning
- Immediate-term TRADE Correlation between USD and Oil = -0.95 this morning
- Immediate-term TRADE Correlation between USD and CRB Commodities Index = -0.94 this morning
- Immediate-term TRADE Correlation between USD and Gold = -0.92 this morning
I could obviously go on and on (showing you the Core 27 Factors on my Global Macro #VASP dashboard), but I don’t have time to do that this morning. Summary: it’s the definition of Global #Quad4 Recession/Crash risk.
Oh, they don’t “see” that? Maybe beam them up into the clouds above Tampa today and let them tell you it’s “orderly” too.
If you’re seeking a smart-sounding narrative, you can go read what the Old Wall Journal’s latest Yes-Man (Nick Timiroas) wrote about his super-fascinating-and-intellectual conversation he had with Summers yesterday.
I don’t do intellectual narratives. I do The ROC (rate of change) of The Cycle’s numbers. My job is to land the plane.
When Summers was blowing up at Harvard, I was watching our Credit Guys blowup (2007) at Carlyle. There are two words that describe all of these guys (yes, they were mostly guys), the entire way down: Cognitive Dissonance.
In their own minds, they weren’t wrong. To this day, I don’t think Larry has ever said he was dead wrong.
So now we move onto the next part of the Scary Global #Quad4 Recession Movie where the ROC of Corporate PROFITS goes into a P&L Recession (i.e. negative year-over-year GROWTH) and Corporate CREDIT markets freeze up.
Not my 1st rodeo calling this part of The Cycle. I started Hedgeye making this Cycle call in 2008.
The biggest problem with this happening at the PARTICULAR point in Cycle or (game) Clock Time is that we’re heading into the month of October when:
A) Corporates are “blacked out” from buying back their stock … as
B) They pre-announce earnings misses (was AAPL a “one off” like FDX, NVDA, etc.?)
C) And Credit bids leave like Yellen probably will post the midterms
Yellen doesn’t #PayAttention to the particulars like we do. The irony of the timing of her comments on “markets functioning well” is that she made them on a particular day when PUT buying in US listed “Credit” ETFs went vertical.
Why would one aggressively buy PUTS on Credit ETFs (BKLN, LQD, HYG, etc.)? Street smart answer: because the holders of the underlying Credits can’t get out of long positions!
And this is only after hitting the 1st of FOUR STRAIGHT #Quad4s for Corporate Profits.
You go “rate hike” and brave-inflation-fighter academic pros, you go!
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets:
UST 10yr Yield 3.40-4.03% (bullish)
UST 2yr Yield 3.75-4.39% (bullish)
High Yield (HYG) 70.09-73.25 (bearish)
SPX 3 (bearish)
NASDAQ 10,601-11,322 (bearish)
RUT 1 (bearish)
Tech (XLK) 120-129 (bearish)
Energy (XLE) 67.01-75.98 (bearish) `
Shanghai Comp 3021-3175 (bearish)
Nikkei 26,003-27,488 (bearish)
DAX 11,854-12,575 (bearish)
VIX 26.40-34.28 (bullish)
USD 109.99-114.94 (bullish)
EUR/USD 0.951-0.985 (bearish)
GBP/USD 1.056-1.116 (bearish)
Oil (WTI) 75.89-83.17 (bearish)
Nat Gas 6.39-7.90 (bearish)
Gold 1 (bearish)
Copper 3.21-3.45 (bearish)
MSFT 231-246 (bearish)
AAPL 145-155 (bearish)
Bitcoin 18,004-20,391 (bearish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
