“When it’s two-thirty in the morning, I always have a brain tumor.”
-Robert Sapolsky
“Feeling” like you gotta buy some puts ahead of the CPI? Get in line. While we’re not seeing the Panic Put Buying we saw ahead of NVDA’s last Earnings Report and/or the last CPI, there are plenty of “feelings” reflected in positioning.
The aforementioned quote comes from a classic #behavorial book that was first penned in the 1990s. It’s titled Why Zebras Don’t Get Ulcers. Especially if you’re like me (not a scientist or doctor), this book was highly educational.
“It’s two-o’clock in the morning and you’re lying in bed. You have something immensely important and challenging to do that next day…” I’m sure many of you get that drill. I do. And I can’t imagine laying there as a Macro Tourist!
Back to the Global Macro Grind…
A certain type of Old Wall Guy gets really offended when I call him a Tourist. Yes, it’s always a guy and he’s typically in his 60s or 70s. He gets really mad. I would too if I was a Tourist on Macro matters, reading the Old Wall Journal.
The good news is that most of you reading this don’t get mad about that. You’re glad. How on earth would you generate the alpha that you have in the last 3 months being Long Of Inflation if the establishment wasn’t missing it?
BREAKING: (former Fed Head) “Bullard Says 3 Cuts Is His Base Case”
Yep, right on time. Right after the lion (inflation) encircled the wildebeest (Powell), they trot out an even more unimpressive and domesticated gnu to tell you not to keep selling Treasury Bonds (we remain Short of TLT)…
Bullard fits my profile to a tee. He’s a 63-year-old career Linear Econ from academia who’s never nowcasted breakouts in Fed induced inflation accurately. I feel bad for him and Purdue this morning.
Congrats to UConn from Hedgeye HQ in Stamford, CT!
Other than being a mouthpiece for the Fed, why are we (tax payers) paying for 785 “economists” like this? We all love “AI”, right? But we want the least objective “sources” we can find to set the cost of capital, Money Supply, etc.?
What got Bullard to talk up Rate Cuts?
A) These clowns got the market to believe they were going to cut at least 6x by December of 2023
B) Now, post Oil’s 27% inflation (since December of 2023), the market is only pricing in 2 cuts…
C) So, it’s time for Bullard to just say something that CNBC will run with all day long
Isn’t monetary “policy making” fun?
What’s more fun is A) not being a Macro Tourist (jumping from CNBC headline to headline) and, instead B) measuring and mapping both the US and Global Economic Cycles at the same time.
How on God’s good earth of wildebeests and lions would one even attempt to have conviction on either INFLATION or Rate Cuts, if you have no edge on where the Global Industrial, Manufacturing, & Commodity Cycle is headed next?
As a reminder on those big cyclical things:
A) The Global Industrial & Manufacturing Cycle bottomed in Q4 of 2023
B) The Global Commodity Cycle (prior peak Q1 of 2022) bottomed in Q4 of 2023
C) The Chinese and European Recessions bottomed by Q1 of 2024
Right, these Linear Econs who are apologists for the Fed (because that’s how they get paid), never acknowledged these recessions never mind explained their impact on what Goolsbee calls a “hall of fame year for inflation.”
In other measuring and mapping news:
A) The UST 2yr Yield bottomed in early January of 2024 as the Chinese and European Recession data did
B) The UST 10yr Yield bottomed in Q4 of 2023 when the Global Industrial, Manufacturing & Commodity Cycle did
C) UST 2yr yield has ramped from 4.14% to 4.76% and the UST 10yr Yield has ramped from 3.79% to 4.38%
And you wonder why some of these unelected and unaccountable Econs at the Fed get mad at me? Seriously, if you’re not going to talk about what’s happened to Commodities and Bond Yields for the last 3 months, you’re a joke.
What isn’t a joke is how concerned Wall Street’s real-time positioning gets every time they “feel” they’re about to get another empirical data point that the Fed’s expectation for inflation in 2024 is dead wrong.
Heading into tomorrow’s CPI, we’ve seen implied volatility on SPX get bid up to a +58% PREMIUM vs. 30-day Realized Volatility. Something big like AMZN, which had an implied volatility DISCOUNT of -8% 1-month ago, has a +73% PREMIUM now. Protect the house against the lions of real-world inflation is the consensus bet!
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets
UST 10yr Yield 4.20-4.48% (bullish)
UST 2yr Yield 4.54-4.83% (bullish)
SPX 5150-5284 (bullish)
NASDAQ 16,051-16,493 (bullish)
RUT 2043-2113 (bullish)
Tech (XLK) 204-210 (bullish)
Insurance (IAK) 114.95-117.77 (bullish)
S&P Momentum (SPMO) 78.92-80.99 (bullish)
Shanghai Comp 2 (bullish)
BSE Sensex (India) 72,993-74,992 (bullish)
DAX 18,105-18,561 (bullish)
VIX 11.99-16.71 (neutral)
USD 103.69-104.84 (bullish)
Oil (WTI) 82.01-88.57 (bullish)
Oil (Brent) 86.31-92.67 (bullish)
Gold 2 (bullish)
Copper 4.04-4.36 (bullish)
Silver (SLV) 25.39-28.66 (bullish)
AAPL 165-173 (bearish)
AMZN 179-187 (bullish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
