This note was originally published at 8am on September 14, 2011. INVESTOR and RISK MANAGER SUBSCRIBERS have access to the EARLY LOOK (published by 8am every trading day) and PORTFOLIO IDEAS in real-time.
“Gravity is only the bark of wisdom’s tree, but it preserves it.”
I am definitely not as long as I was 24 hours ago. This morning’s Global Macro Grind is just not good.
So before I get into Geithner, Lagarde (IMF), and Barroso (EU) policies to suspend gravity, let’s go through that grind and take a walk down the world’s fundamental path of a continued Growth Slowdown:
- JAPAN – Japanese stocks fell another -1.1% overnight to a fresh 18 month low. It’s not “headline” news, but that doesn’t mean that one of the world’s Top 3 economies ceases to exist. This remains the land of Keynesian nod.
- KOREA – as in the South side, saw its main stock index (and really one of the biggest leading indicators for industrial and tech demand, globally), the KOSPI, collapse for another -3.5% move overnight. Since May, the KOSPI has crashed (down -21.5%).
- CHINA – Chinese stocks bounced “off the lows” to close up +0.55% overnight. While we highly doubt that the best “idea” the Chinese have is investing in Berlusconi Bonds, they are captive to a Global Growth Slowdown, even if they don’t perpetuate it.
- GERMANY – the train wreck that has become the German stock market crashing continues. When I write the word crash, I mean it, literally. If the SP500 was down as much as the German DAX since May (down -33%), the SP500 would be testing the 900 level and Geithner would be promoting a $3 TRILLION TARP at today’s Delivering Alpha Conference.
- ITALY/SPAIN/GREECE – dead cats bounce all of the time in a global economic system where the suspension of gravity remains the primary policy – but they bounce to lower-highs. And unless Lagarde (IMF) and Barroso (EU) start TARPing these pig banks in the coming days, both the Euro and these European crash markets will come under further selling pressure.
- RUSSIA – yep, they’re still around but what was The Inflation Trade bid (USD Down, Oil Up) of Q1 2011 (QE2) in the Russian stock market is now gone. The RTSI index is down again this morning and testing fresh YTD lows.
- BRAZIL – like many of the countries in Asia, the Brazilians appropriately raised interest rates when the US should have and can now start cutting them. This has Brazil looking a lot better than most European and US stock market indices all of a sudden but, again, cutting interest rates requires fear mongering (ie Growth Is Slowing people), so plenty to ponder there.
- CANADA – if all Keynesian Policy finger pointing fails, Geithner can still blame Canada.
Sorry. Did I say I was going to wait until I addressed the Fiat Foolery of Geithner, Lagarde, and Barroso? I couldn’t help myself.
Sadly, Gravity’s Bark will have to deal with these people intervening in what were our “free” market lives until they sufficiently blow this entire thing up.
Obviously Greek bonds, Italian stocks, and US Financials have been blowing up since February. This is not new. What is new is that consensus has been forced to realize that policy perpetuates the growth slowdown problem as opposed to rescuing it.
Geithner loves this stuff. He’s a big Anti-Gravity guy. Spending 47% of his born life at the US Treasury and Federal Reserve (New York Banker kind) and not accepting any responsibility in his policy recommendations across 23 years of his being on the Big Government Intervention team is impressive. That’s what gets you the nod as a keynote to generate some alpha!
As for what France’s lovely Christine Madeleine Odette Lagarde (new head of the IMF post the other French guy having some transparency problems) and Jose Manuel Durao Barroso (President of the European Commission) can do to drive some volatility in these very price stable and socialized markets … let’s consider their options:
- TARP the Europig Banks with some Geithner/Paulson policy (that’s what the EFSF is – a hybrid TARP)
- Start issuing some Eurobonds so that the Europig Bonds get a little lift from the German Bund mix
- Fire Greece out of the EU
Fire, as in the “rapid oxidation of a material in the chemical process of combustion” (Wikipedia). Or, as in firing the Greeks (after the Troika meetings) for lying about their numbers. There may not be gravity in the Fiat world – but there will be fire!
This is obviously a gong show at this point and, as a result, I see no reason not to trade this Global Macro market risk aggressively.
Rick Perry went with the “treason” thing. And Jamie Dimon opted for the “blatantly anti-American” thing.
I am going to go with fading the anti-gravity thing.
My immediate-term support and resistance ranges for Gold, Oil, Copper, Germany’s DAX, and the SP500 are now $86.18-90.11, $1808-1846, $3.93-4.04, 4889-5314, and 1141-1181, respectively. Don’t be ideological about all of this – just trade the ranges.
Best of luck out there today,
Keith R. McCullough
Chief Executive Officer