“I began to consider how the same complexity-science approach could be brought to the study of human societies.”
-Peter Turchin
I just finished reading an excellent #history book titled End Times: Elites, Counter-Elites, and The Path of Political Disintegration. The author, Peter Turchin, started his career as an ecologist in the 1980s.
“This was a time when animal ecology was revolutionized by the rapid growth of the processing power of computers. I had never been allergic to mathematics, so I embraced the turn of the field to complexity science…
I began to consider how the same complexity-science approach could be brought to the study of human societies.” Yep, sounds like ye Olde Wall eh? #Not. While they bask in their “YTD Return”, America has become Quad Poor.
Back to the Global Macro Grind…
Welcome to another Macro Monday @Hedgeye where ALL of us on Wall St. 2.0 have a lot to be thankful for.
This recent re-acceleration in inflation (which hasn’t been reported by the “Goldilocks” Elites yet) is going to make a large percentage of the US population Quad Poorer throughout the summer and heading into the fall.
*If you’d like to review the longer-term economic data on that, our recent 162 slide Q3 Macro Themes presentation gets updated for real-time economic data, daily, and is available.
So what’s making the 45% of Americans with no money Quad Poorer? A: a weaker US Dollar, re-accelerating INFLATION in July (Energy prices, in particular), and Old Wall declaring victory on “slowing inflation.”
Remember how “right” the elites and establishment were on “transitory inflation”? I’d LOL that, but it’s too sad and pathetic to waste my EL writing time on that part of American political history…
So you should definitely trust them on their views on both REAL Growth and INFLATION from here…
To start, let’s review this beat-down in the US Dollar last week (on cries for NO MORE HIKES):
- US Dollar Index broke @Hedgeye TREND support with a -2.3% decline on the week (that’s a lot)
- EUR/USD ramped +2.7% on that “rate differentials” view, getting back to Bullish TREND, barely
- Japanese Yen ramped +2.7% but remains Bearish on our intermediate-term TREND duration
- GBP/USD was up another +2.3% last week, reiterating its Bullish TRADE and TREND Signal
- Canadian Dollar was up +1.0% vs. USD and moved back to Bullish TREND, BARELY
- Argentina’s Peso was down another -1.6% vs. USD, taking its FX Crash to -18.9% in the last 3 months
A couple points on those six points:
A) No one in establishment US or Old Wall Media cares about The People in Argentina
B) I used the word BARELY, multiple times, so if you’re having a FX panic attack, breathe…
Yes, this could/should all reverse in fairly short order with the US Dollar Index’s Risk Range still wicked wide this morning and the TOP-end of its Range well above (i.e. not “barely”) @Hedgeye TREND.
So I’ll wait and watch (because I’ve earned the patience I have with my #process), and I’ll do what my signals do from here. One of the big ones, recently, was my immediate-term TRADE breakout signal on Oil:
- CRB Commodities Index was +2.4% last week, moving back to Bullish @Hedgeye TREND, BARELY!
- Oil (WTI) reflated +2.1% last week to +10.2% in the last month, validating my #VASP TRADE Signal
- Copper was +4.0% last week but remains Bearish TREND alongside the Chinese economic data
- Corn reflated +3.9% last week but remains Bearish TREND
- Silver ramped +8.2% last week, breaking out to Bullish TRADE and TREND
I know, I know. All the “YTD” peeps with their NASDAQ ONLY Asset Allocation would never own Silver. But that doesn’t mean that being Long Silver didn’t pound QQQ’s score week-over-week, eh!
As anyone paying attention to the entirety of our risk management process knows, both QQQ and Tech (XLK) continue to signal Bullish TREND @Hedgeye, until they don’t. Therefore, I am not short of them.
I’m not going to write about our longer-term and Diversified Asset Allocations like Gold (which was +1.5% last week) this morning, because some only want to whine about that position WHEN it is at the LOW end of my Risk Range!
Gold and mostly everything was helped higher by the weaponry of DOWN DOLLAR, DOWN BOND YIELDS last week. That’s the Old Wall “meltup” headline they’ve loved since the beginning of Bernanke’s FED COWBELL times.
But, as the Cowbell Tolls, don’t forget the other major side of the societal trade. The people without LONG MAGMANT, Silver, etc., get to eat that real world inflation of Asset Prices. And it’s not pretty.
Down Bond Yields didn’t change the shape of either the Yield Curve (still inverted by -93bps on 10s2s this AM) or America’s K-Shaped Society last week. That’s why our GDP “recovery” is nowhere to be found in our Nowcasts into 2024…
I guess that’ll be another start to another year where they can’t cling to their “YTD” as we re-enter #Quad3 Stagflation, or what The People should know as Quad Poor.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets
UST 30yr Yield 3.82-4.10% (neutral)
UST 10yr Yield 3.71-4.10% (bullish)
UST 2yr Yield 4.60-5.12% (bullish)
High Yield (HYG) 73.45-75.75 (bearish)
SPX 4 (bearish)
NASDAQ 13,489-14,185 (bullish)
RUT 1 (bearish)
Tech (XLK) 169-177 (bullish)
Industrials (XLI) 105.15-109.73 (bearish)
Financials (XLF) 32.99-34.57 (bearish)
Defense (ITA) 115-118 (bullish)
Healthcare (PINK) 25.86-26.66 (bullish)
Shanghai Comp 3160-3255 (bearish)
Nikkei 31,533-33,793 (bullish)
DAX 15,435-16,300 (neutral)
VIX 13.04-16.97 (neutral)
USD 99.01-104.05 (bearish)
EUR/USD 1.078-1.125 (bullish)
USD/YEN 137.70-145.43 (bullish)
GBP/USD 1.265-1.314 (bullish)
CAD/USD 0.749-0.765 (bullish)
Oil (WTI) 69.18-78.10 (bullish)
Oil (Brent) 74.23-82.41 (bullish)
Gold 1 (bullish)
Copper 3.65-3.96 (bearish)
Silver 22.52-25.44 (bullish)
Best of luck out there this week,
KM
Keith R. McCullough
Chief Executive Officer
