“I’m not arguing, I’m just explaining why I’m right.”
-Anonymous
No one’s ever called me argumentative, but I love that quote! It’s from the Introduction of Mehdi Hasan’s new book, Win Every Argument – The Art of Debating, Persuading, and Public Speaking.
Oh, you don’t #like Mehdi because he’s on the left side of MSM? Or is that why you #love him? Personally, I don’t have the time to care about people’s politics. And I like listening to people I don’t like.
Hasan had a great title to Chapter 2: “Feelings, Not (just) Facts”, where he quotes Dale Carnegie… “When dealing with people, let us remember we are not dealing with creatures of logic. We are dealing with creatures of emotion.” (pg 18)
Back to the Global Macro Grind…
I chose this career path… and oh do I have to deal with “feelings”! Some Institutional Clients have a whole vernacular about how things “feel.” KM, it feels like this is “priced in”… or it feels like “the CPI could come in” this or that…
Then we have the feelings in The Macro Show Queue. I’m not going to go off on those, but let’s just say that there is a VERY high #fade Factor on what people vote-up as the top-rated questions.
So, tell me, how do you feel about the following:
A) Goldman telling the Fed not to raise rates
B) Ackman begging the Fed not to raise rates
C) The (bond) Market telling Goldman and Ackman to pound sand
Now, obviously, one could argue that Goldman is the Fed… but let’s not go there this morning. “God’s work” can be too complicated to explain in an Early Look.
Instead of the touchy, hedgie, “feely” thing, let’s look at my definition of “what’s priced in”:
A) After Powell said to expect HIGHER rates in early March, the UST 2yr Yield ramped towards 5.05%
B) Then… Goldman told themselves (i.e. The Fed) to stop it. And cut. UST 2yr Yield went to 3.70%
C) Then… (as in the last 24 hours)… the 2yr UST Yield shot +34 basis points higher to 4.05% as of now
First, for those of you who have friends who are new to this but moonlighting as Bank Analysts:
- The Short-end of the US Treasury Yield Curve (2yr Yield) is what the market expects from The Fed
- The Long-end of the Curve (10, 20, 30yr Yields) reflects The ROC (rate of change) of GROWTH and INFLATION
Back to what’s getting priced in:
A) Fed Fund Futures just ramped the probability of a Fed Hike tomorrow towards 74%
B) That’s the highest it’s been since the proverbial poop hit Ackman’s Alts, SVB, etc.
C) That’s mainly why UST 2yr Yield just tacked on the +34 basis points in 24 hours
And, in summary, you could say that now it’s:
- Either Powell has “credibility” and he delivers his +25 basis point hike (which the market expects)…
- Or, he fades like a Fed Flower, and does what the other Almighty Other Fed (Goldman) told him to do…
Nothing to see here. It only equates to the WIDEST Risk Range™ Signal on the UST 2yr Yield in the 15 year HISTORY of HEDGEYE at +173 basis points wide:
A) The LOW-end of my Risk Range™ Signal = 3.45%
B) The TOP-end of my Risk Range™ Signal = 5.18%
C) If the TOP-end of my Risk Range™ Signal prints, Goldman themselves may need an ‘08 bailout!
In other quantified and non-touchy-feely news, here are some economic gravity and market flow things to think about:
- Amazon (AMZN) just fired another 9,000 people (after firing 18k in JAN), so the economy must be hummin’
- Financials (GICS Sector Level) lost > $450 BILLION in market cap in 7 trading days (GS no likey)
- MAGMA + NVDA #Bubble Caps added around $450 BILLION in cap over the same 7 days
And by this time next week, just inside of 90% of companies in the beloved SPY are going to be “blacked out” from buying back their stock. Interestingly, I didn’t see many of the Bank #BailoutBeggars buying any of their stock lately…
I guess that implies that they “feel” like their stock prices will go lower without another Fed or government bailout! And yes, that’s one feeling common to us all (unless you’re still in moon-shot Luna Coin space): gravity.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets
UST 30yr Yield 3.54-3.94% (bearish)
UST 10yr Yield 3.25-4.04% (bearish)
UST 2yr Yield 3.45-5.18% (bearish)
High Yield (HYG) 72.54-74.20 (bearish)
SPX 3 (bearish)
NASDAQ 11,035-11,812 (bearish)
RUT 1 (bearish)
Tech (XLK) 133-145 (bearish)
VIX 21.69-29.21 (bullish)
USD 102.71-106.02 (bullish)
EUR/USD 1.050-1.078 (bearish)
Oil (WTI) 63.65-71.97 (bearish)
Gold 1 (bullish)
Copper 3.80-4.05 (bearish)
Silver 19.95-23.35 (bullish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
