“That is what John Wooden teaches: the ability to learn how to learn.”
-Bill Walton
That’s timeless #behavioral player perspective from a Hall of Famer in a great book called They Call Me Coach.
“He taught life at UCLA for 27 years before officially retiring in 1975, establishing records that will never be touched. He teaches by creating an environment that people want to be part of, where we want what he has to give.”
“He provided something special: the opportunity to train your mind, to learn how to think.” -Bill Walton
Back to the Global Macro Grind…
Compared to John Wooden, I am but an ant on a hill mucking it up with Twitter trolls. As an aspiring Coach who is trying to get you to play The Game at the highest level, that means I have nothing but upside from here!
Today is Game 40 of year 24 for me playing The Game. As I think about that for another second, the following words come out of my hands: that’s a lot of games.
By the end of this year, I’ll have played over 6,000 games and shown you upwards of 9,000 #timestamps. The best part about every one of those bloody things is the lessons I’ve learned from making mistakes.
I’ve made many over the years. But I have not made the mistake of missing either a Cycle Top or a Recession.
Coaching you through a recession hasn’t been easy. Some don’t want to be coached. Some of you do (but don’t want to tell anyone who coached you). Some of you actually do enjoy what I have to give. And I appreciate that.
I appreciate the coaching opportunity. I appreciate training my mind while battle-testing and challenging yours.
Learning how to think is one of the most critical parts of The Game. Thinking like a lemming (i.e. chasing NVDA into last week’s highs before the AI Storyteller sells $10 BILLION worth of stock into your yap) doesn’t win championships.
Neither does thinking like a Macro Tourist who will have a TOUGH time differentiating China vs. the USA today. China just reported what we call another Economic Data #Divergence.
So let’s start with that. If you’ve learned how to think in ROC (rate of change) terms, this should be straight forward:
A) China’s economic data continues to #accelerate into what we call #Quad1
B) #Quad1 is when The ROC of Real Growth is #accelerating
C) China’s PMI for FEB #accelerated to 52.6 from 50.1 in JAN
China’s main local stock exchange (Shanghai Composite Index) was up another +1.0% overnight towards new Cycle Highs after making new Cycle Highs in the middle of last week.
That’s called a Market Return #Divergence vs. our Short NASDAQ position in FEB.
Now let’s look at the latest US Economic data update:
A) February U.S. Chicago PMI slowed to 43.6, versus 44.3 in January
- This is the second straight monthly deceleration and the second lowest month since the pandemic
- This regional report has also been contractionary (sub-50) for six straight months
B) Similarly, the February Richmond Fed Index fell to -16, the lowest reading since May 2020
C) February U.S. Consumer Confidence fell sharply to 102.9, versus +106.0 (downwardly revised) in January
- Interestingly, within the report the spread between “expectations” and “present situation” fell to -83.1 -> lowest since March 2021
USA’s main local GROWTH index (NASDAQ) has crashed -28.7% from its #Quad2 (i.e. when GROWTH, INFLATION, and PROFITS are #accelerating, at the same time) Cycle Peak.
Coaching you through a recession largely centers on measuring and mapping The TRENDING ROC (rate of change) so that you know where the aforementioned (or any other) economic data point lands on The Sine Curve.
If you do not know where every Chinese and American economic data point lands on The Sine Curve, my team and the players I coach want to play against you for the rest of our careers.
Moreover, if you do know where our current -2.03% Q1 q/q US GDP number sits on The Sine Curve (i.e. no landing, yet), that’s not enough. Knowing where leading indicators are relative to Prior Cycles & Sine Curves is critical.
For example, the shape of the Yield Curve is a Top 10 leading indicator in my #VASP (Volatility Adjusted Signaling Process), and this morning’s bone-chilling reading of MINUS 91 (as in -91bps) on the 10yr minus the 2yr, rivals 1981.
Is the US Recession of 2023 going to be as bad or worse than 1981? We’ll have to see what Games 41 to 250 bring!
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets
UST 10yr Yield 3.77-4.01% (bullish)
UST 2yr Yield 4.56-4.87% (bullish)
High Yield (HYG) 73.28-75.25 (bearish)
SPX 3 (bearish)
NASDAQ 11,163-11,743 (bearish)
RUT 1 (bearish)
Tech (XLK) 132-139 (bearish)
Defense (ITA) 114-117 (bullish)
Utilities (XLU) 64.55-67.78 (bearish)
Gold Miners (GDX) 26.39-29.46 (neutral)
Shanghai Comp 3 (bullish)
VIX 19.32-23.87 (bullish)
USD 103.22-105.39 (bullish)
Oil (WTI) 73.37-77.91 (bearish)
Gold 1811-1891 (bullish)
Copper 3.93-4.27 (bullish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
