“You’re part of it whether you want to be or not.”
-Tom Wolfe
That was an important quote from Wolfe in You Can’t Go Home Again. Especially if you’re part of the easy money Fed Cowbell generation of investors (i.e., most of us), the past 6 weeks has really had you question what the other side of our market lives might look like.
What if Inflation Re-Accelerating tells the Bond Market’s yields, You Can’t Go Down Again?
And I don’t mean forever. I mean for enough time that an entire generation of investors can’t deal with it? Generations matter. I took the Tom Wolfe quote from an excerpt in my Partner’s book (Neil Howe) about “Identifying Generations”:
“To Wolfe as to F. Scott Fitzgerald, Ernest Hemingway, Malcolm Cowley, and other writers of the 1920s, membership in that generation reflected a variety of mannerisms: weary cynicism at an early age, risk taking, binge-like behavior, disdain for pompous older generation.”
Sound familiar to you GenX peers of mine?
“To belong to it you had to come of age. No one formally defined it that way: people just knew.” -The Fourth Turning is Here, pg 79
Back to the Global Macro Grind…
I’m 48 years old and in GenX. Powell is 70 and is a Boomer. Am I weary of that generation’s pompous central bankers? A: yes. Markets have only completely collapsed 3x in my almost quarter century of investing, so I know … I’m probably just overthinking it!
So what do I do with the “Powell Is Lying” headline that grabbed plenty of attention? A: I keep fading what both he and Consensus Positioning were saying … and I stay Long of Inflation Re-Accelerating in all of the Long & Short manifestations of that macro view.
Let’s start with where I’m at on my Top 10 Longs this morning (re-ranked by position SIZE in The MFO Long Only Account):
- FDRXX (Fidelity Gov Cash Yield)
- TBIL (UST Treasury 3-Month Bills)
- TFLO (Treasury Floating Rate Bond ETF)
- US Dollar (UUP)
- Large Cap Energy (XLE)
- E&P Oil & Gas (XOP)
- India’s Top 50 (INDY)
- Japanese Stocks (EWJ)
- Small Cap Japan (SCJ)
- Energy & Remediation ETF (NVIR)
Let’s color that up a bit with some explanations relative to my criticism of Powell A) not raising rates like he said he would if the data #accelerated (which it did) and B) Powell saying that the Bond Market wasn’t trading on inflation expectations:
- My Top 4 Asset Allocations are all expressions that I think both the FX and Bond Markets have it right and I’ll have a nice pay day (again) at the end of the month with the Short-End of The Curve pricing in higher-for-longer on both INFLATION and RATES
- Is there a more obvious expression of a Long Inflation view than Long Oil, Gasoline, and Energy Stocks?
- Long Japan and India are not signaling #Quad3 Stagflation like US Small Caps (IWM), Real Estate (XLRE), or Utes (XLU) are
Those last 3 are in my Top 10 Shorts in my MFO Long/Short Book:
- Euro (FXE)
- SPY
- Utes (XLU)
- OXLC (US fund manager who is long CLO exposure)
- HYG (High Yield)
- JNK (Junk)
- Yen (FXY)
- AAPL
- PSCU (Small Cap Utes)
- XLRE (Real Estate)
Pretty straightforward (I’m Short Rate Sensitivity). And, to be clear, prior to the Fed Meeting, my Credit Shorts (HYG, JNK) were in my Top 3 alongside my Euro Short, but they moved down my position SIZE rank yesterday as I was covering-SOME on bright red.
Is the most widely held #MOAB (Mother of All Bubbles) Stock in human history (AAPL) Rate Sensitive? A: evidently yes.
While I’ve been short the Russell 2000 (IWM) since JAN of 2022 (it’s crashed -27% from Cycle Peak) and only added SPY back to the short side on AUG 1, 2023, AAPL wasn’t added until it broke my #VASP @Hedgeye TREND support level of $184 this month.
On Yesterday’s Macro Show I reviewed the 1st TRADE and TREND #VASP Breakdowns of NVDA. While MSFT and AAPL have broken TRADE and TREND multiple times, this is a 1st for NVDA since I’ve been modeling its risk in my Risk Range™ Signal product.
TREND Signal levels for NVDA and AMZN are $423 and $131, respectively, so I’d be watching those closely. There’s a GenX guy I know who says that risk happens slowly, then all at once. He’s had a weary cynicism of Wall Street since 1999 and got that from Hemingway.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets
UST 30yr Yield 4.35-4.58% (bullish)
UST 10yr Yield 4.25-4.51% (bullish)
UST 2yr Yield 4.97-5.20% (bullish)
High Yield (HYG) 73.69-74.68 (bearish)
SPX 4 (bearish)
NASDAQ 13,081-13,727 (bearish)
RUT 1 (bearish)
Tech (XLK) 162-170 (bearish)
Energy (XLE) 89.01-93.20 (bullish)
Utilities (XLU) 62.07-65.02 (bearish)
Shanghai Comp 3065-3151 (bearish)
Nikkei 32,221-33,602 (bullish)
BSE Sensex (India) 66,108-68,151 (bullish)
DAX 15,399-15,832 (bearish)
VIX 13.72-18.49 (bullish)
USD 104.52-105.95 (bullish)
EUR/USD 1.060-1.077 (bearish)
USD/YEN 146.99-148.76 (bullish)
Oil (WTI) 87.05-91.68 (bullish)
Oil (Brent) 90.17-94.63 (bullish)
Nat Gas 2.53-2.95 (bullish)
Gold 1911-1967 (bullish)
MSFT 315-330 (bearish)
AAPL 170-179 (bearish)
AMZN 127-139 (neutral)
META 292-311 (bullish)
GOOGL 128-138 (bullish)
NVDA 406-449 (bearish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
