“What ails the truth is that it is mainly uncomfortable, and often dull.”
-H.L. Mencken
Who wants to hear about US GDP #Slowing from where we had it slowing towards in Q2 (around 1.7% year-over-year) towards our GDP Nowcast of 0.44% by Q4 of this year … when they can talk about rainbows, pumps, and AI?
The aforementioned quote from Mencken was from 1926 (i.e. in the midst of another American Storytelling Bubble #ASB that ended in a depression, not a recession) and he went on to write, “the human mind seeks something more caressing.”
In a great #behavioral & #history book titled Truth: A Brief History of Total BS, Tom Phillips explains that Mencken’s words were a “fairly bitter reflection of the business of journalism generally, but also hit on the central point that falsehood has an inherent advantage over truth, simply because it’s unconstrained by the tedious stranglehold of reality.” (pg 109)
Back to the Global Macro Grind…
I’ve been doing a bunch of Institutional Client zooms this week and one of our longest standing clients (the CIO from an awesome American Insurance company) asked me: “So Keith, we appreciate the data – it’s all there – but how do you think about everyone else believing the narrative that everything isn’t really slowing or that bad, yet?”
A: That’s easy. I just don’t believe them. I believe the ROC (rate of change) of the reported economic data.
That said, I also believe I need to risk manage what they believe. If they didn’t want/need to believe in all of this AI BS, it wouldn’t be #MOAB (The Mother of All Bubbles), eh?
Fully loaded with our new Tier 1 Alpha (US Equity Flows, Options, Gamma, etc. data) partnership, I haven’t sat on my hands dogmatically about risk managing a Fourth Turning Belief Bubble #FTBB.
Above all else, for the last 20 months, we know the crowd will chase. We also know that Institutional Money Managers are then forced to chase their “YTD” compensation benchmarks.
But that doesn’t change what the economic gravity will be in 1-2 quarters from now or, god forbid, when the next “YTD” calendar problem presents itself with not only US Inflation Re-Accelerating against easy Q1 and Q2 2023 comps…
But with peak #MOAB Multiples on an AI narrative that just doesn’t play out on time.
I know, I know. So many of you have friends who just know about AI. I still have a lot of friends who were employed by Dot Bomb folks over 20 years ago. I know a bunch of peeps who told me a bunch of BS about “blockchain” at the highs of 2021 too…
And now we have the actual companies not only telling you AI is going to be “gradual” (MSFT) but the ones we are LONG like META telling you that they’re going to have to start spending (again) like they did on the “Metaverse” on AI!
Taking a big step back, many stayed Long Mega Cap Tech (after blowing up in it last year) because:
A) The Fed was allegedly “done raising rates” – newsflash, they aren’t
B) The Profitless Tech companies “found religion on spending” – now they have to start spending to chase
C) They think the economy isn’t really slowing and we’re going to have a “soft” or my fav “no” landing
Have you ever been on a plane that didn’t land? How about one that lands “softly”, but can’t take off again?
As you can see in today’s Chart of The Day (slide 28 in the Macro Deck):
A) AI “news” mentions already went vertical alongside company transcript & conference call mentions
B) SPX Call Volume hit ATH (all-time highs) into that mid-June OPEX on that …
C) And, of course, this all happened before ANY company other than NVDA reported anything of AI consequence
So, as I wrote in this morning’s Top 3 Things, I think this might be it. With META’s outright pump last night, that is:
All our Long META (Freedman, great call!) mgt had to do was talk up AI, and voila! We are long of #MOAB here too!
- OIL – major problem now is that US stock market pumps coincide with price at the pump re-flating! WTI up another +1.1% this morning as our Bullish @Hedgeye TRADE and TREND Signals (4 weeks old now) are just hummin’ with the TOP-end of my WTI Range ramping towards $80.45; I was buying more Uranium (URA) on red yesterday too
- RATES – The Bond Market gets US Inflation Re-Accelerating (and the Equity Bulls hope it doesn’t!) so we get some BIG #VASP (Vol Adjusted Signaling Process) Signals this morning with A) Treasury Bond Vol (MOVE Index) breaking TREND support and B) my Risk Ranges, across the curve, consolidating with #BHL (big higher lows) at 4.65% on 2s, 3.73% on 10s = SEP rate hike probability rising
- VOL – really important US Equity open for Vol because A) there was a bunch of SHORT-DATED Vol (protection) consensus was buying ahead of the Fed meeting that’s now played out as a no vol event, B) Vol Control Funds have to pile in here (Tie1 1 Alpha saying +$12B in flows), and C) #NazVol (VXN) is getting compressed on the META AI pump to THE Spot where you sell QQQ (i.e. VXN = 18) on green
On that last point in my Top 3 Things (which you can get by 6AM ET on most days that I’m doing my job instead of dreaming about BS or reading the Old Wall Media articles that perpetuate it), that Vol Control Implied Notional Flows chart is a #MOAB too!
Think about it. If you believe that everyone else will believe something (i.e. that volatility can’t go up because stocks don’t go down), then you stay with it right until the music stops (queue 2007). Then you get out – because you believe you’re better.
I get it. That’s why I haven’t shorted QQQ in a LONG time. But that doesn’t mean I won’t re-load on that bubble today or next week. My patience and #process doesn’t lie – Perma Bulls and their Old Wall clickbait “journalists” do.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets:
UST 30yr Yield 3.86-3.99% (bullish)
UST 10yr Yield 3.73-3.95% (bullish)
UST 2yr Yield 4.65-5.01% (bullish)
High Yield (HYG) 74.21-75.69 (bearish)
SPX 4 (bearish)
NASDAQ 13,835-14,398 (bullish)
RUT 1 (bearish)
Tech (XLK) 173-181 (bullish)
Financials (XLF) 34.06-35.99 (bearish)
Defense (ITA) 114-118 (bullish)
Healthcare (PINK) 26.20-27.48 (bullish)
Shanghai Comp 3145-3241 (bearish)
Nikkei 32,116-32,998 (bullish)
BSE Sensex (India) 65,801-67,828 (bullish)
DAX 16,002-16,301 (neutral)
VIX 13.01-16.17 (neutral)
USD 99.41-101.64 (neutral)
EUR/USD 1.102-1.125 (neutral)
USD/YEN 138.02-142.23 (bullish)
GBP/USD 1.276-1.312 (bullish)
CAD/USD 0.754-0.763 (bullish)
Oil (WTI) 74.46-80.45 (bullish)
Oil (Brent) 78.86-84.01 (bullish)
Nat Gas 2.46-2.84 (neutral)
Gold 1 (bullish)
Copper 3.77-3.96 (bearish)
Silver 24.15-25.96 (bullish)
MSFT 333-350 (bullish)
AAPL 190-197 (bullish)
AMZN 125-133 (bearish)
META 292-325 (bullish)
GOOGL 121-131 (bullish)
NFLX 396-445 (neutral)
TSLA 245-290 (neutral)
NVDA 432-479 (bullish)
Bitcoin 28,788-30,340 (bearish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
