“So how was the public weaned off of real money?”
-Mike Maloney
While that’s typical of a quote you’ll find from a Perma Bull on Gold, it’s still a good question! I was reading Maloney’s new book on The Great Gold & Silver yesterday. The month-end markup in Gold was not great. No one is paid to pump it.
Born out of #MOAB (The Mother Of All Bubbles) was #MOAM. It wasn’t the first #MOAM in this marketed “YEAR TO DATE” where, seemingly, EVERYONE on CNBC wasn’t long 2022 YTD but went MAX Long NASDAQ at the DEC 2022 lows…
But, if we’re right on The Cycle To-Date, I’m thinking it could be the last month-end markup that looked like last week’s did. “Why?” A: gravity. Unless it’s different this time, Phase II of The Credit Event is just getting started.
Back to the Global Macro Grind…
Welcome to another Macro Monday @Hedgeye where the Big Lake (Superior) is calm and the fish are biting. Big Knucks to my brother RM who reeled in a Master Walleye here this weekend!
This isn’t the first time I’ve faded uniquely American FOMO from this lake front… and it won’t be the last. I’m blessed to have found peace of mind here. If I didn’t prioritize preserving and protecting my hard-earned capital over the course of the last 24 years playing The Game, I’d be bag-holding in a trailer park with a pond with laser-eyes.
While plenty of Canadians (their markets are closed today – Happy Canada Day to all the Canadian Buds out there, eh!) and Americans won’t be working today, that doesn’t mean The Cycle won’t be cycling. So let’s get on with our weekly review starting with the Global Currency market:
- US Dollar Index continued to signal Bullish TRADE (up for 2 weeks in a row) and Neutral TREND
- EUR/USD was +0.2% last week and continues to signal Bearish TRADE and Neutral TREND
- Japanese Yen was down another -0.6% vs. USD to -8.2% in the last 3 months = Bearish TRADE and TREND
- CAD/USD was -0.3% last week and continued to signal Neutral TREND as well
- Argentina’s Peso continued its #Quad4 Crash, down another -1.4% last week to -18.7% in the last 3 months
- Russia’s Ruble was down, hard, -5.5% vs. USD last week and remains Bearish TRADE and TREND too
“Why the public was weaned off real money” in places like Argentina and Russia is straightforward. The People living in these countries are right screwed now, from a Real Purchasing Power perspective.
As for the “Neutral” Signals in USD vs. Euros and Canadian Dollars (CAD/USD), all those are Consolidation Signals born out of a big breakdown in Global Currency Volatility (which we publish in our stat pack to Macro Show viewers daily).
While #MOAM marked up a bunch of US Equity Indexes, Sector Styles, etc. last week, that wasn’t happening in this underlying Asset Class called Commodities (hence blatant evidence of The Mother Of All Markups):
A) CRB Commodities Index (19 Commodities) was DOWN -0.4% on the week and remains Bearish TREND
B) Dr. Copper was down another -1.2% last week to -8.1% in the last 3 months of #Quad4 Demand Slowing
C) Corn crashed (again) DOWN a big -15.9% on the week alone!
“YTD” compensation and marketing notes aside, what does it mean when both Industrial and Agricultural Commodities are crashing alongside the Yield Curve?
You have to have some serious Narrative Shift & Drift to answer that bullishly. But look at what Commodity Sector Styles did with Commodities DOWN last week:
A) Energy Stocks (XLE) +4.9% to -1.3% in the last 3 months
B) Basic Materials (XLB) +4.0% to +4.4% in the last 3 month
All the while, there was zero “YTD Return” chasing in big Country Exposures:
A) Chinese Stocks (Shanghai Comp) were +0.1% last week to -1.8% in the last 3 months
B) Russian Stocks (RTSI) were down -5.5% to -2.3% in the last 3 months
Back to that Yield Curve point (please send me the Telecom Tom Talking Points on that one):
A) Short-end of The Curve (i.e. Fed Policy) priced in a RATE HIKE in July +12bps to 4.87%
B) Longest-end of The Curve (30yr Yield) was only +3bps last week to a lower-high of 3.85%
This morning, the 10s minus 2s Spread is crashing to a new Cycle Low for #Quad4 of -109 BASIS POINTS. Please, tell me a Perma BS story about how that’s good for Banks (KRE) and those levered to Rising Cost of Capital in Real Estate (XLRE)?
There’s an old joke up here in Thunder Bay about guy’s selling you “tips” on Gold stocks: “a gold mine is a hole in the ground with a liar on top.” Whatever Perma Bulls tell me about the Yield Curve, I won’t believe them anyway.
I do believe that both our India (INDA) and Japan (EWJ, SCJ, JPXN, EWJV) Core Asset Allocations continue to work with their economies accelerating in #Quad1. They’re +13.5% and +19.5%, respectively, in the last 3 months … and they didn’t need to be manipulated by #0DTE SPY Call Options into month-end to get there.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets
UST 30yr Yield 3.76-3.90% (bearish)
UST 10yr Yield 3.66-3.86% (neutral)
UST 2yr Yield 4.65-4.96% (bullish)
High Yield (HYG) 73.95-75.16 (bearish)
SPX 4 (bearish)
NASDAQ 13,290-13,821 (bullish)
RUT 1 (bearish)
Tech (XLK) 166-175 (bullish)
Industrials (XLI) 102.59-107.51 (bearish)
Financials (XLF) 32.41-33.90 (bearish)
Defense (ITA) 113-118 (bullish)
Healthcare (PINK) 25.92-26.80 (bullish)
Shanghai Comp 3130-3261 (bearish)
Nikkei 32,506-33,935 (bullish)
VIX 13.02-18.03 (neutral)
USD 101.78-103.45 (neutral)
EUR/USD 1.083-1.099 (neutral)
USD/YEN 141.54-145.80 (bullish)
GBP/USD 1.259-1.280 (bullish)
CAD/USD 0.751-0.762 (neutral)
Oil (WTI) 67.16-72.23 (bearish)
Oil (Brent) 72.37-76.96 (bearish)
Nat Gas 2.44-2.97 (bullish)
Gold 1 (bullish)
Copper 3.65-3.95 (bearish)
Best of luck out there this week and Happy 4th – God Bless America!
KM
Keith R. McCullough
Chief Executive Officer
