“The obstacle in the path becomes the path.”
- Ryan Holiday
If there’s one thing you remember about being stoically positioned for a Global #Quad4 Recession in 2022, go with that quote from The Obstacle Is The Way.
“There’s an old Zen story about a king whose people had grown soft and entitled (see my Twitter haters for a live shot of that). Dissatisfied with the state of affairs, he hoped to teach them a lesson (and stop printing moneys)…
His plan was simple: he would place a large boulder in the middle of the main road, completely blocking entry into the city… with growing disappointment, the king watched as subject after subject came and turned away…” (pg 6)
Back to the Global Macro Grind…
Now let’s say the Old Wall king’s name is Jamie. For all of those noobs to markets, he just put a sign on the boulder that says “the next 20% of the stock market crash is going to be more painful than the first.”
And what will many people do today? They’ll keep begging for a Fed Pivot and the boulder to go away.
Newsflash: like the gravity that backstops it, The Cycle doesn’t just go away. There’s time and space in both an economic cycle’s #acceleration and #deceleration. This one is decelerating faster because the Fed is the boulder.
“Never forget, within every obstacle is an opportunity to improve our condition.”
- Ryan Holiday
The problem, of course, is that The People have had more than 9 months to improve their positioning. And the king is just warning them now that we will have a recession in 6-9 months (while we’re already in one).
I’ve never been big on bowing to kings or people who win Nobel Prizes for creating a market system of expectations that made Wall Street grow soft and entitled to easy money.
Congrats to The Bernank on winning a prize for that.
I obviously struggle with respecting an establishment that puts itself above The People. If what Taleb calls “arrogance up” (speaking truth to people “above” you who don’t want to hear it) is what I have, I won’t apologize for that.
Consider the alternative: “arrogance down” (where you speak down to The People you govern).
Yep, that’s why someone like me exists. It’s because all of you exist. We’re not going to sit idle and watch our hard-earned capital burn at the stake of central-market-planners that have become the boulder.
If you want to let them govern the next cycle, beg for another Fed pivot and more central banking power.
Back to the Global #Quad4 Recession, #Quad4 got nastier, faster, last night:
A) South Korean EXPORTS have crashed -20% year-over-year in the first 10 days of October
B) The Hang Seng was down another -2.2%, taking its Full Investing Cycle Crash to -46% since Q121
C) Australia reported a recessionary Services PMI of 48 in SEP vs. 53 in AUG
What do A, B, and C imply?
A) If you didn’t know why Semis (SMH) crashed to lower-lows yesterday, now you know (TSMC -8% overnight)
B) If you didn’t know what the time & space of a bear market that started in early 2021 looks like, now you do
C) If you didn’t know why Australia already tried the “Dovish Pivot”, now you know
Do you think the NASDAQ crashes from some Demark signal’s “oversold” levels, randomly?
Obviously not. In every single bear market that I’ve helped you risk manage since 2008, LOTS of people try the stinky business of trying to pick bottoms. Lots of them are “technician” types. Lots of them blowup into lower-lows.
For many, the obstacle is that they do not have a risk management #process.
They have Old Wall talking points, narratives, and “calls.” Those didn’t work in October of 2008 (when even Warren Buffett made the big “call” to buy stocks). They aren’t working now.
What’s working is having the humility to understand that their obstacles are becoming your path. Stay on it.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets:
UST 10yr Yield 3.57-4.01% (bullish)
UST 2yr Yield 4.02-4.36% (bullish)
High Yield (HYG) 69.97-73.07 (bearish)
SPX 3 (bearish)
NASDAQ 10,368-10,963 (bearish)
RUT 1 (bearish)
Tech (XLK) 116-126 (bearish)
Utilities (XLU) 62.38-67.47 (bearish)
Energy (XLE) 69.05-85.50 (bullish) `
Shanghai Comp 2 (bearish)
Nikkei 25,701-27,437 (bearish)
DAX 11,819-12,596 (bearish)
VIX 28.41-34.09 (bullish)
USD 110.26-114.11 (bullish)
Oil (WTI) 77.12-93.48 (bearish)
Copper 3.20-3.54 (bearish)
TSLA 206-250 (bearish)
Bitcoin 18,438-20,301 (bearish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
