“Only humility will lead us to unity, and unity will lead to peace.”
–Mother Teresa
How peaceful is the world right now? Many people would say it’s the worst it's ever been.
I was on The Macro Show yesterday talking about how I can look at Israel Sovereign CDS and see where current geopolitical risk is. It is accelerating, meaning I don’t know what the next headline will be. But I do know a negative headline is likely to happen. Then I can go on to say, with increased political risk, shipping rates will accelerate and you should look at ETFs like BDRY.
Isn’t that a little wild?
As you might know by now, I love reality checks based on numbers. There is something called the Global Peace Index, which ranks how peaceful 163 countries are on an annual basis. In 13 of the the past 15 years (including 2023), global peace deteriorated.
The most peaceful places to live: Iceland, Denmark, Ireland, New Zealand and Austria. The least peaceful: Afghanistan, Yemen, Syria, South Sudan and Democratic Republic of the Congo.
Where does the U.S. rank on this list of 163 countries? 131. That is three spots above Palestine and 12 spots above Israel (before the war). Our peace ranking is closer to North Korea than it is to France. Oh, and the country we love to compare ourselves to – China – is ranked 80.
As soon as I mention China, a majority of readers might assume the index is biased or lacks credibility. But that’s the thing: the numbers are the numbers. Unless we drastically change ourselves, things will stay where they are.
Here are some more stats:
- The United States recorded the fourth-largest overall increase in its homicide rate, which is now above six per 100,000 people and more than six times higher than most Western European countries.
- The U.S. is ranked 161 of 163 for militarization.
- U.S. peace has been on the decline since 2015.
- The U.S. has the largest economic impact of violence, $4.2 trillion. That is double the next largest, China, at $2.1 trillion. Economic impact of violence is defined as: the expenditure and economic effect related to “containing, preventing and dealing with the consequences of violence.”
Based on those figures, it looks to me like the U.S. economy runs on violence, and continued violence is what will grow our economy. That's a pretty sad fact: For the U.S., violence is good for business. But when you are looking at any geopolitical headline in 2024, remember, $4.2 trillion has a lot of reach, and just based on the numbers, the U.S. is probably involved in some way.
My question to you: What are you doing in your daily life that creates peace? Now, it’s time to re-read the quote of the day.
Back to the Global Macro Grind ...
What does the above have to do with today’s macro picture? Well, I hate being long Shipping BDRY when rising global tension is the main catalyst. But what we can do is talk about the things no one wants to talk about and hopefully create a better place for our children to live.
In the pre-market, you are waking up to META +17%, AMZN +6.4% and AAPL -2.6%. Then we have Nonfarm payrolls at 8:30am ET.
From Andrew Freedman on META: “We knew there was a large surprise gap going into 2024 relative to sell-side estimates ... buy-side was pretty much there on 2024, but range of probable outcomes now skewed higher for 2024/2025 post the guide.”
From Jeremy Mclean on AMZN: “As we expected, AMZN print looks solid. Revenue and EBIT beat. Guide for inline on rev, ahead on EBIT. Best Idea Long.”
From Felix Wang on AAPL: “I just laid out all the misses from AAPL to my clients. It's NOT just China. Many of the points were addressed in my Short Apple call/presentation 2 weeks ago.”
I’ll continue to listen to The Call and our analysts' sector research for continued thoughts on these names post print.
Did you know Russell earnings are down -25% this quarter with revenues down -3.8%? Are you confused why the market’s net long positioning of the Russell is in the 94th percentile? Did you know if you are invested in a 2030 target date retirement ETF, 33% of your holdings are in the Russell? Did you know the Russell becomes more than 50% of your portfolio once you reach a target date fund of 2045? It is crazy how you can guess the next day's headline by simply following the money.
The best ETFs to be long this week: Carbon Offset KSET, Alternative Harvest (cannabis) MJUS, Uranium Miners URNM, 25+yr Zero Coupon ZROZ, Poland EPOL, Decarbonization DKRB, UST +20yr TLT, Nickel Miners NIKL
The best ETFs to be short this week: Nigeria NGE, Interest Rate Hedge PFIX, Star Market KSTR, Regional Bank KRE, China Technology CQQQ, Korean Entertainment KPOP, Nat Gas UNG, Lithium Miners ILIT, Gasoline UGA
From our partners over at Tier 1 Alpha: Short-dated implied vol for today went to 18.9, then goes to 16.45 on 2/5. The gamma flip line is 4885.
Shanghai is opening down -1.5%, India +0.6%, and Australia up +1.4%.
In HedgAI Signals (subscribe for free here to receive these short-term signals daily): Netflix NFLX has remained long since January 8 (a 17% gain). Added a long of Nvidia NVDA. There are sell signals within commodities Lithium LIT and Wheat WEAT.
I’ll be honest, it is an extremely light day in terms of global economic data. The big event is at 8:30am (US Non-Farm Payrolls). I’ll finish this Early Look by giving you the global Manufacturing PMI data I presented yesterday on The Macro Show.
Taiwan EWT
- 20th month sub-50, highest in 11 months
- Increased staff, output, and new orders
Philippines EPHE
- Small acceleration in new orders, employment unchanged, buying activity increased
Thailand THD
- Deceleration in employment. Incomplete business depleted most in a year
Germany EWG
- 6th sequential acceleration, highest since Feb
- New Orders lowest since April 23, Purchasing Activity lowest since March, Employment unchanged at low
Greece GREK
- Highest since April 2022
- Highest new orders in 2 years, domestic and external acceleration. Efforts to enhance capacity
Norway NORW
- New orders (43.8 vs 49.3 in December 2023), both domestic and export orders decreased
- Production (49.3 vs 50), employment (51.7 vs 53.5), suppliers’ delivery time (56 vs 48.8), inventories (35 vs 37.4), input prices continued to rise (58.6 vs 57.9)
Eurozone EZU
- 3rd sequential acceleration
- New orders and out accelerated, external new orders declined to lowest since April. Sharp drop in backlog work
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets
UST 10yr Yield 3.85-4.18% (bearish)
UST 2yr Yield 4.19-4.43% (bearish)
High Yield (HYG) 76.70-77.81 (bearish)
SPX 4 (bullish)
NASDAQ 15,101-15,775 (bullish)
RUT 1 (bearish)
Tech (XLK) 195-206 (bullish)
Insurance (IAK) 103.68-108.28 (bullish)
S&P Momentum (SPMO) 67.74-70.98 (bullish)
Shanghai Comp 2 (bearish)
BSE Sensex (India) 70,299-73,001 (bullish)
VIX 12.56-14.97 (bullish)
USD 102.61-103.65 (bullish)
Oil (WTI) 72.83-78.11 (bearish)
Gold 2013-2086 (bullish)
Uranium (URA) 29.42-32.81 (bullish)
MSFT 393-412 (bullish)
TSLA 171-210 (bearish)
NVDA 590-649 (bullish)
Bitcoin 40,258-44,317 (neutral)
Good luck out there today,
Ryan Ricci
