“In 2021, twelve thousand lobbyists spent $3.7 billion influencing policy at the Federal level.”
-OpenSecrets
If you didn’t know that, now you know. Those numbers are from an excellent chapter in End Times called “The Ruling Class” where Peter Turchin defines “American Plutocracy Today.”
“I use this term in its neutral meaning, simply as shorthand for a state dominated by economic elites. Simply put, at the top of the power pyramid in America is the corporate community.” (pg 123)
In other “breaking” news, “Dimon Warns World Not Ready For 7%.”
Back to the Global Macro Grind…
What Jamie Dimon really meant was the Levered Long world, his Commercial Real Estate clients, etc. aren’t ready for 5%, never mind 6% or 7%. And that he doesn’t want any more rate hikes.
Too bad. The Bond Market has gone with gravity instead of what certain people want/need. Despite Powell’s lies about Inflation Expectations “not having an impact” on Bond Yields, they continued higher yesterday.
UST Yields continue to signal a series of #BHLs (big-higher-lows) and #HHs (higher-highs) for The Cycle too:
A. UST 2yr Yield’s Risk Range™ Signal = 4.99-5.19%
B. UST 10yr Yield’s Risk Range™ Signal = 4.28-4.57%
C. UST 30yr Yield’s Risk Range™ Signal = 4.37-4.69%
Not surprisingly, both the price of Oil and the US Dollar Index continues to signal #BHLs and #HHs as well:
A. US Dollar Index Risk Range™ Signal = $104.49-106.11
B. WTI Oil’s Risk Range™ Signal = $88.41-91.21/barrel
C. Brent Oil’s Risk Range™ Signal = $91.05-94.32/barrel
In sharp contrast to what those in the US Real Estate plutocracy want/need, The People of the Unites States of America want lower gas prices, lower rents, etc.
What would “no more rate hikes” and/or what the plutocrats really want (rate cuts) do for:
A. Gas Prices?
B. Home Prices?
C. Etc.?
Yep, if you haven’t already, you’re starting to see what my #VASP (Volatility Adjusted Signaling Process) is seeing, eh?
You’re seeing that since Oil inflated +34% (from $67 WTI in June to $90) the UST 10yr Yield went from 3.7% to 4.5% WITHOUT Powell going forward with a rate hike.
You’re also seeing that any whisper of “no more hikes” is THE catalyst for the reflation of prices.
So what are they going to do with these market dynamics?
A: I don’t know, but they will try something!
Consider the alternative: what if they just let prices clear? I know, you’re laughing out loud about that… but most of you don’t live in China or Russia right now… and the whole free market capitalism thing is still a thing in America, no?
Regardless, there’s still an epic amount of LEVERAGE in the US System, so we’ll see how it develops.
Let’s look at the most LEVERED of SHORT-TERM bets there’s EVER been in US Markets (US Options Market):
A. Over 50% of expiring US Equity Options are Zero Days to Expiration Options
B. Front-month US Equity Volatility has been suppressed by epic #MOAB Call Buying (July was peak)
C. Now front-month VIX is signaling an immediate-term TRADE breakout that could easily TREND higher
By my math, here are the levels of US Equity Volatility to watch:
- Front-month VIX immediate-term TRADE breakout line = 14.31
- Front-month VIX closing high of 17.89 in AUG
- Front-month VXN (NASDAQ Volatility) closing high of 22.71 in AUG
I’m old enough to remember the VIX ramping to 27 in March (#NazVol went to 30!) when we had Phase I of the Credit Event (that we were calling for back in 2022). Does anyone remember what the catalyst was for US Regional Bank blowups?
Oh right, that happened. Well what do you think is going to keep happening as we enter a recession in 1H 2024? If/when that happens, will the Fed finally “cut rates” and give us $147 Oil like they did in 1H of 2008?
I can’t wait to hear what Powell says about “inflation expectations coming down” in that scenario.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets
UST 30yr Yield 4.37-4.69% (bullish)
UST 10yr Yield 4.28-4.57% (bullish)
UST 2yr Yield 4.99-5.19% (bullish)
High Yield (HYG) 73.45-74.51 (bearish)
SPX 4 (bearish)
NASDAQ 13,028-13,671 (bearish)
RUT 1 (bearish)
Tech (XLK) 161-169 (bearish)
Energy (XLE) 88.61-93.21 (bullish)
Utilities (XLU) 62.20-64.91 (bearish)
DAX 15,293-15,747 (bearish)
VIX 14.81-18.55 (bullish)
USD 104.49-106.11 (bullish)
Oil (WTI) 88.41-91.21 (bullish)
Oil (Brent) 91.05-94.32 (bullish)
Nat Gas 2.56-2.99 (bullish)
Gold 1 (bullish)
Copper 3.61-3.81 (bearish)
MSFT 310-329 (bearish)
AAPL 170-179 (bearish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
