“Thus began the largest manhunt in post-communist Eastern Europe’s history.”
-Julian Rubinstein
If you thought catching all of these Crypto frauds in the Caribbean was tough, try catching Bad Boy Atilla Ambrus in Hungary! The aforementioned quote comes from a hilarious #history book I’m reading titled Ballad of The Whiskey Robber.
Silvergate (SI) capital still did what they did with these Crypto Frauds… and Hungary is still Hungary this morning. Whoever thinks Europe isn’t entering a #Quad4 Recession should go to Eastern Europe this summer and check it out.
On the heels of horrendous US and European Manufacturing data yesterday, I re-entered the Short Side of Europe for the first time in a while via Poland (EPOL).
Back to the Global Macro Grind…
While I love my Polish friends (especially the one hockey family that makes me fresh blueberry pierogis!), I have no problem re-shorting that country now that it’s -1.4% this morning after breaking bad to Bearish @Hedgeye TREND.
I also love The Game. Playing out the Go Anywhere Long/Short Macro Strategy is my passion!
What about that #slowing European economic data? While Macro Tourists get whiplash from their China chase yesterday (they chased European stocks on China #accelerating), keep it with the Macro Pros here this morning:
A) Both European GROWTH and INFLATION are going to slow in BOTH Q1 and Q2 of 2023
B) Our proprietary Nowcasts have INFLATION #slowing at a lesser rate than the bulls need to see
C) Our Nowcasts have GROWTH #slowing faster than the bulls want to see
Peak Cycle Inflation is 6-9 month old news. By the time EVERYONE knows that both Europe and the USA are in a recession, The Whiskey Robber will have robbed 25 banks and it will be too late for the Old Wall Narrative peeps to recover their cash.
For those of you who haven’t reviewed this with me, here are those #Quad4 European Nowcasts:
A) Eurozone INFLATION to #slow from +9.97% headline CPI in Q422 to +8.02% in Q123 and 6.67% in Q223
B) Eurozone GROWTH to #slow from +1.90% Real y/y GDP in Q422 to +1.19% in Q123 and +0.09% in Q223
I know, what’s dropping -189 basis points of GDP out of Europe in 6 months amongst your Macro Unaware friends!
To give them the Pro-Cyclical (i.e. super Late Cycle) credit they want to receive, European Bank and Industrial Stocks reported “great quarters” most recently because:
A) It was Q4 when Real GDP was still up almost +2%
B) It was Q4 when European Rates were still breaking out (good for Bank Earnings)
C) It was Q4 when European Industrials actually had Peak Cycle Pricing in their Earnings!
If you have Macro Unaware friends who buy Cyclicals (like Industrials) when Pricing, Margins, and Earnings are at PEAK Cycle (and probably sell them when they look “expensive” at TROUGH Cycle), please thank them for me.
My teammates and all of #HedgeyeNation want to play against those players.
So, now what? Let’s do the next 3-6 months of our Macro Aware ABC’s on that:
A) Eurozone GDP is going to slow from +2% to 0%
B) Europe is going to RAISE RATES into a Recession like they did during the last 2!
C) European Industrials are going to see both Pods 1 and 2 (REVS and EPS) #Slow from Cycle Peak
“Oh, but on the conference call, the European CEO was so bullish… and the ECB doesn’t see a recession.” Yeah, and Atilla Ambrus told multiple Hungarian hookers that he was a goalie that could play in the NHL.
So, you’re saying that when GROWTH, INFLATION, and PROFITS are slowing at the same time that bad is bad?
A) France’s Manufacturing PMI #slowed to 47.4 in FEB vs. 50.5 in JAN (its 1st contraction report in 3 months)
B) USA’s Manufacturing ISM was squarely in contraction/recession (again) yesterday at 47.7 in FEB
But Elon tried to manufacture the latest round of bs at his analyst day yesterday instead of new models of cars!
Obviously with US Manufacturing ISM printing its 4th STRAIGHT MONTH of contraction and Industrial Production Growth (which no FEB 2nd, 2023 USA Bull wants to talk about) slowing from +5% in Q3 to +2% in Q4 to +0.79% in the most recent print… we have ourselves what we thought this would be:
A) A #Quad4 Recession where bad news is bad for markets (and good for our US Growth and Junk Bond Shorts)
B) An ongoing education for everyone who’s never risk managed a recession from Cycle Peak to Trough
Oh what a difference 1-month of Cycle Time just made. Stay #VASP Signal and data dependent, my friends.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets
UST 30yr Yield 3.84-4.01% (bullish)
UST 10yr Yield 3.79-4.04% (bullish)
UST 2yr Yield 4.58-4.92% (bullish)
High Yield (HYG) 73.16-74.75 (bearish)
SPX 3 (bearish)
NASDAQ 11,211-11,764 (bearish)
RUT 1 (bearish)
Tech (XLK) 132-138 (bearish)
Defense (ITA) 114-117 (bullish)
Utilities (XLU) 63.47-66.72 (bearish)
Shanghai Comp 3 (bullish)
DAX 15,160-15,557 (neutral)
VIX 19.45-23.96 (bullish)
USD 103.26-105.40 (bullish)
EUR/USD 1.052-1.071 (bearish)
Oil (WTI) 73.52-78.80 (bearish)
Nat Gas 2.05-2.93 (bearish)
Gold 1 (bullish)
Copper 3.92-4.24 (bullish)
Silver 20.40-22.10 (bearish)
TSLA 184-212 (bearish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
