“Fear is just a feeling! We should all learn what we are running from and why. Fear makes us take the easiest path in life. It takes us on routes that only focus on the known never the unknown.”
– David Goggins
Let’s talk anxiety. Although probably not like most people talk about it.
I’m in the middle of David Goggins’ new book called “Never Finished” and, like his first book, the messaging is clear. No one is going to come save you. The only person that will save you is yourself. Which means buckle up and get ready for a grind. Or in finance talk, no one is going to make you a better trader other than holding yourself to account and working every day to get better.
So, let’s ask ourselves some questions: did you get short squeezed last week? Were you in fear that your positioning could be wrong? Did you panic cover? What was your net positioning on 12/28? Did you cover some and buy some yesterday with the Vix in the chop?
Now finally, what can we do better? How can we improve our processes to preserve and protect our capital?
Like I said on The Macro Show last Friday we learn the most about ourselves during the tough times.
Back to the Global Macro Grind…
I ask those questions because we introduced an anxiety meter yesterday based on Hedgeye Data. The data showed that this most recent bear market rally had a significant spike in Hedgeye subscriber anxiety. Today’s chart of the day shows part of the historical look back for the meter which follows the SPX very closely... So yes, we finally have data to show that your emotions track the price of SPX!
The meter has come off a bit now that the market has had a couple down days. But that doesn’t mean that it is time to get lazy. It means now more than ever it’s time to execute on the process as this game never ends.
Looking at the current set up from an upside to downside potential: Bitcoin 4.4% : 39.6%, TSLA 5.4% : 21.1%, Google 0% : 9.5%, AAPL 1.3% : 9.1%, ITA 5.1% : 0.4%, XLP 5.3% : 0%, Crude Oil 0.7% : 13.1%, UST2Y 29.6% : 0.5%, Gold 0.6% : 4.4%, GBP/USD 0% : 3.3%, HYG 1.2% : 3.8%.
What does this all mean? The highest risk assets (Bitcoin and TSLA) have tremendous potential to the downside (Bitcoin could be down 39.6%). Certain Mega caps are giving better downside potential than others. Yesterday was the day to be buying some ITA and XLP. Crude Oil is at the top end of the risk range. UST2Y is at the low end of the risk range (a proxy for fed expectations). Said another way, Fed expectations for rate hikes are at the low end of the risk range (meeting 2/1). Yesterday was the day to sell SOME Gold.
I personally go for higher beta plays, I guess I’m young and dumb. But I’m looking at Crude Oil this morning. It’s up +0.7% with Russia -0.55%, UAE -0.16% and Saudi Arabia -0.59%. Which means on The Macro Show my questions are going to be about Brazil $EWZ, Energy Exploration $PXE, and Qatar $QAT.
Also important to note is VIX remains in the Chop at 20.39 with Upside : Downside of 19.3% : 13.1%. Vix in the chop means you can have those longs in your portfolio and will have to trade the chop. We can’t get complacent after having 3 down days in a row.
Have you ever heard of the accountability mirror (a concept from Goggins)? It’s a mirror that you stand in front of every morning and take time to hold yourself to account (a reality check). Why? “When you look in the mirror, that’s the one person that you cannot lie to.” (Goggins) Why do I bring this up?
Well, some people don’t hold themselves to account, but their day comes in time. What am I talking about? Earnings. Earnings is the accountability mirror in our industry. It’s the day management looks in the mirror and has to tell the truth. So, who has earnings next? MSFT 1/24, RTX 1/24, TSLA 1/25, BX 1/26, ROKU 2/17, AAPL 2/2, AMZN 2/2, EXAS 2/22, COIN 2/24, RIOT 3/16, BITF 3/28 and Europe 2/1.
ROKU, EXAS, RIOT, and BITF were included above because they are large positions in the ARK funds or Bitcoin related ETFs.
Next on China. It has made it so that we can’t simply short every country on every bounce. Especially in the greater Asian area. Specifically, my questions today on The Macro Show are going to be on Philippines $EPHE, Australia $EWA, Malaysia $EWM and South Korea $EWY. The Quad setups for these are not good over the next 2Qs but let’s see what the signal says.
On global interest rates here is what we have implied by the market. Canada $EWC is expected to have its last hike on 1/25 and keeping rates flat for the next 7m. Eurozone $IEV and GB $EWU are expected to raise rates into May. Australia $EWA is expected to have ~1 rate hike and then an extended period of flat rates. New Zealand $ENZL is diverging from Australia on this front. Lastly, after Japan’s $EWJ latest meeting the market took out the rate hikes they were expecting over the course of this year.
What we are not seeing in the data is rate cuts anytime soon. We will see when MSM (main stream media) picks up on the news, but in order to keep front running them, the topic in ~3M should be on international mortgage rates. Specifically, how will the consumer afford a jump in mortgage rates after their real earnings have decelerated since 2021? It’s a good question… #quad4. Using New Zealand as the proxy (they have the most detailed data on the topic). Most fixed rate mortgages are set to be repriced from Jun-Nov with 24% of fixed rate mortgages getting repriced by May. Not helpful for today’s trade, but a competing thought when thinking of the general trend.
Let’s get into the data of this morning:
- IVOL Discount Callouts: Brazil $EWZ, Turkey $TUR, Jets $JETS, Treasuries ($TLT, $IEF, $SHY)
- IVOL Premium Callouts: Netherlands $EWN, Greece $GREK, Colombia $GXG, Chile $ECH, Malaysia $EWM, Singapore $EWS, India $INDA, Uranium $URA, Timber $WOOD, Gamin $BJK, Homebuilder $XHB, Online Retail $IBUY, Artificial Intelligence $AIQ, Internet $PNQI, Cloud Computing $SKYY, Healthcare ($PJP, $IHF, $IHI), Convertibles $CWB
- Current 2-10 spread -73 bps, forward 2-10 spread -16 bps
- International 2-10 Spreads, there is so much going on here that I’m just going to give you the chart and you can take from it what you will.
- I’m seeing a broad deceleration MoM with the WoW on a country-by-country basis
- Indonesia $IDX raised interest rates yesterday by 25 bps with inflation remaining above its range
- Turkey $TUR held its interest rate flat yesterday
- China $FXI holds its prime rate flat
- Countries with Central Bank Total Assets YoY going negative in respective local currency: US, ECB, Ireland $EIRL, BoE, Belgium $EWK, Italy $EWI, Switzerland $EWL, Germany $EWG, Austria $EWO, Canada, Chile $ECH, Japan, Philippines, Thailand $THD, Australia, and India $INDA
- South Korea PPI (Dec) decelerated for the 6th consecutive month
- Japan Inflation (Dec) accelerated for the 4th consecutive month (Highest since 1991)
- Germany PPI (Dec) decelerates for the 3rd consecutive month
- UK housing data (Dec) continued to come in as sharp decelerations (UK RICS House Price Balance)
- UK consumer confidence (Jan) decelerates after accelerating for 3 months
- UK retail sales (Dec) decelerate to -5.8% YoY from -5.7% YoY
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets:
UST 30yr Yield 3.50-3.80% (bearish)
UST 10yr Yield 3.35-3.70% (bearish)
UST 2yr Yield 4.07-4.35% (bullish)
High Yield (HYG) 73.98-76.91 (bearish)
SPX 3 (bearish)
NASDAQ 10,219-11,101 (bearish)
RUT 1 (bearish)
Tech (XLK) 121-131 (bearish)
Consumer Staples (XLP) 71.90-75.88 (bullish)
Shanghai Comp 3129-3277 (bullish)
Nikkei 25,700-26,815 (bearish)
DAX 14,145-15,297 (bullish)
VIX 18.23-24.26 (bullish)
USD 101.61-105.76 (bullish)
Oil (WTI) 72.07-81.99 (bearish)
Nat Gas 3.16-3.98 (bearish)
Gold 1 (bullish)
Copper 3.83-4.38 (bullish)
Silver 23.28-24.68 (bullish)
TSLA 108-135 (bearish)
Bitcoin 15,104-21,866 (bearish)
Ryan Ricci
Macro Analyst
