“If there’s one takeaway, Bear Stearns is not in trouble.”
- Jim Cramer
When I started Hedgeye in 2008, I couldn’t ask for a better Old Wall Media channel to disrupt than CNBC.
While another one of America’s most popular comedies, Seinfeld, was only able to run for 9 seasons, CNBC is still running with a newfound cast of characters who are even worse than Cramer!
On their pretend “Investment Committee” they have this Old Wall Guy, “Farmer Jim” Lebenthal who told people to buy First Republic (FRC) when it was up on Tuesday calling it a “good bank that is lubricating the economy.” I couldn’t make that up if I tried.
Back to the Global Macro Grind…
While it is both sad and comical at the same time, some people who wouldn’t know otherwise still act on the “recommendations” of these people. For all of them, I’ll reiterate my main recommendation for whoever got long (again) 6 weeks ago: prayer.
It’s another busy morning here for the banks with Credit Suisse getting a pseudo bailout and FRC halted again, so here were my Top 3 Things that I just sent out to our Institutional Research clients:
It’s another #BankBailout Day… don’t forget it’s still going to be #Quad4 tomorrow, next week, and next quarter…
1. RATES – 10yr Yields in Europe are up big (+14bps on the 10yr Bund Yield) post the CS Bailout news. Is that good? UST Bond Volatility (MOVE Index = 198) is much higher than where it was at the pandemic highs and that is perpetuating Equity and Cross Asset Class Vol with my UST 2yr Yield Risk Range at its widest ever = 132bps wide ahead of the Fed Rate Hike or Cut?
2. Energy – the Fractal Beauty of The Quads is that you don’t have to know everything about “being long Energy on Supply”; large cap Energy (XLE) got smoked for another -5.4% decline yesterday to -11.6% YTD as Commodities crashed to new #Quad4 Cycle Lows yesterday (CRB Index -23.2% from The Inflation Cycle Peak) – we’re short XOP, PSCE, QAT, UAE, etc.
3. FINS – large caps (XLF) down another -2.7% yesterday to -8.2% YTD is outperforming Energy (XLE)! But both Sector Style disasters are healthy reminders why being long the perception of “cheap” doesn’t work using the wrong numbers in #Quad4; both XLF and KRE are signaling lower-lows and should be sold on all Bear Market bounces
I know, I know, no one on CNBC was long “cheap” Energy and Bank stocks this year. They all moved back to being long NVDA, right at the bottom, after selling it all at The Mother of All Bubble highs in November of 2021 at $315 before it crashed to $115 in 2022.
My Partner and head of Hedgeye Tech Research, Ami Joseph, just went bearish (this week) on NVDA, so stay tuned on that one. He absolutely nailed another widely owned #BubbleCap, Microsoft (MSFT), last year so I am looking forward to his updates.
You know that MSFT, NVDA, etc. crashed as Real US GDP #slowed from +5% year-over-year in that November 2021 period (Q421) to +2% by Q3 of 2022, eh?
What do you think these businesses are going to do as GDP slows from +2% to 0%, never mind -1-2%?
While the super smart dude from NVDA can sell snow to a snowflake (remember that stock?) about “AI”, he has no idea what demand is going to look like if/when the Hedgeye Nowcasts of -2% headline US GDP prints for the next 2 quarters.
And that’s really one of the most important things about being Macro Aware…
You can proactively prepare your Full Investing Cycle portfolio without having to “nail the number” to a decimal point. All you have to do is get the ROC (rate of change) direction right.
What do you think these Energy and Bank stocks are going to do as GDP slows from +2.7% headline to -2.3%?
I can guarantee you one thing: pretend “farmer” guy on CNBC has no idea. As Macro Theme #1 (US Profit Recession = Credit Event) continues to manifest with time and space, I fully expect to see the Macro Unaware make disastrous mistakes like FRC.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets
UST 30yr Yield 3.61-4.01% (bearish)
UST 10yr Yield 3.41-4.08% (bearish)
UST 2yr Yield 3.76-5.08% (bearish)
High Yield (HYG) 72.36-74.16 (bearish)
SPX 3 (bearish)
NASDAQ 11,004-11,580 (bearish)
RUT 1 (bearish)
Tech (XLK) 134-142 (bearish)
Defense (ITA) 110-117 (neutral)
Gold Miners (GDX) 25.98-30.20 (neutral)
Nikkei 26,910-27,998 (bearish)
DAX 14,710-15,303 (bearish)
VIX 21.31-29.38 (bullish)
USD 103.07-106.24 (bullish)
Oil (WTI) 67.04-74.61 (bearish)
Gold 1 (bullish)
Copper 3.74-4.04 (bearish)
Bitcoin 18,703-26,007 (bearish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
