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Shadow Boxing

“I’ve seen George Foreman shadow boxing, and the shadow won.”

-Muhammad Ali

 

Traditionally observed by Commonwealth Nations like my homeland, today is Boxing Day.

 

Much to Muhhamad Ali’s chagrin, today has nothing to do with him beating up on Foreman or Frazier. It used to be the day when British servants received gifts from their overlords in a “Christmas Box.”

 

Now, barring any central plan you might receive from upon high, it’s just another day off for Canadians to drink beers and watch the World Junior Hockey tournament (which is being held in Toronto and Montreal this year).

 

Shadow Boxing - a5

 

Back to the Global Macro Grind…

 

Although its economy is getting speed-bagged, Japan doesn’t do Boxing Day. That said, their bureaucrats love central planning. In a holiday message to the people he is plundering via currency debasement, this is what the Prime Minister, Shinzo Abe, had to say:

 

“I want companies with high profits that are benefiting from the weak yen to raise wages, investment, and on top of that, consider the prices they pay their suppliers…”

 

Isn’t that just great – thanks for the pep talk, Shinzo.

 

In other news, the people of Japan don’t want to do what Abe is telling them to do. Not to be confused with the Policy To Inflate the Weimar Nikkei’s last price, here’s what’s cooking in Japan, economically:

 

1. As the Yen burns, Japanese Consumer Prices (CPI) are +2.7% year-over-year

2. But Japanese Household Spending (in Burning Yen Terms) is down -2.5% year-over-year

3. And the Savings Rate of the Japanese people just went negative alongside real wage growth

 

I know, this is all progressing so very well…

 

But as long as the Nikkei (which, by the way, we’ve been suggesting you be long, while short Yens vs USD) is up, the financial media that panders to central-planning-access is going to tell you that this Abenomics thing could actually work.

 

In other Global Macro news, other than getting to play Denmark in the 1st round of the 2015 IIHF World Junior Hockey Championship today, things for Russia still suck.

 

Despite “bouncing” off its lows, the Russian Trading System Index is:

 

1. Down -38.4% for 2014 YTD

2. And would only have to be +63% (from here) to get whoever “allocated assets” to it a year ago back to breakeven

3. With an immediate-term risk range of 642-875

 

In other words, with the RTSI (Russian Stock Market) currently trading at 847:

 

1. It has immediate-term upside of +3%

2. And immediate-term downside of -24%

 

#sweet

 

And so is worldwide #GrowthSlowing + #deflation risk, right? Maybe if you’re shadow boxing USA style with year-end performance chasing, or something like that. But I wouldn’t confuse that with trending global macroeconomic gravity.

 

Our immediate-term Global Macro Risk Ranges are now (I’ve added the our intermediate-term TREND view in brackets – you can get our Top 12 macro ranges and TREND views in our Daily Trading Range product):

 

UST 10yr 2.03-2.30% (bearish = bullish Long Bond)

SPX 1 (bullish)

RUT 1125-1220 (neutral)

Nikkei 175 (bullish)

VIX 12.95-24.11 (bullish)

USD 89.26-90.89 (bullish)

EUR/USD 1.21-1.23 (bearish)

YEN 118.23-121.11 (bearish)

Oil (WTI) 54.08-57.99 (bearish)

Nat Gas 2.91-3.47 (bearish)

Gold 1161-1197 (bearish)

Copper 2.83-2.93 (bearish)

 

Happy Holidays – best of luck and health to you and your families,

KM

 

Keith R. McCullough

Chief Executive Officer

 

Shadow Boxing - EL 12.26.14


December 26, 2014

December 26, 2014 - HE DTR 12 26 14.001


Cartoon of the Day: Merry Christmas!

Cartoon of the Day: Merry Christmas! - Christmas cartoon 12 25 2014  2

 

From all of us at Hedgeye, we wish you and your families the best this holiday season.


Daily Trading Ranges

20 Proprietary Risk Ranges

Daily Trading Ranges is designed to help you understand where you’re buying and selling within the risk range and help you make better sales at the top end of the range and purchases at the low end.

Tizzle In The System

This note was originally published at 8am on December 11, 2014 for Hedgeye subscribers.

“Each time the system is recalculated, the posterior becomes the prior.”

-Sharon Bertsch McGrayne

 

Simple is as simple does, within a non-linear and dynamic system like the Global Macro market, that is…

 

“Conceptually, Bayes’ system was simple. We modify our opinions with objective information. Initial Beliefs (our guess where the cue ball landed) + Recent Objective Data (most recent ball left or right of the prior) = A New and Improved Belief.”

-The Theory That Would Not Die, pg 8

 

What do you believe? Is what you believed in late September consistent with what you believe after the October and December corrections? How about from January to June (when late-cycle inflation was accelerating) vs. today’s global #deflation? The best way to manage risk is by constantly recalculating your system.

Tizzle In The System - Falling cartoon 12.10.2014

 

Back to the Global Macro Grind

 

What does the system say this morning?

 

With the Russell 2000 down YTD and both inflation expectations and 10yr bond yields #crashing, initial 2014 consensus beliefs of worldwide growth accelerating and rates rising are no longer believed.

 

Since so many Old Wall dudes still use the “Dow” as some sort of proxy for the global economy, here’s what the broader global equity system is saying:

 

1. Weimar Nikkei (Japan) only goes up when the economy is so bad that they need to hit the CTRL+Panic (print) button

2. The liquid side of the “China” trade (Hang Seng) continued to signal bearish TREND @Hedgeye overnight (-0.9%)

3. The former Global Growth “signal” (known as Dr. KOSPI in South Korea) -1.5% overnight to -4.7% YTD #bearish

4. The UK’s FTSE failed @Hedgeye TREND resistance and is back to DOWN for 2014 YTD

5. Germany’s DAX is holding on to TREND support of 9688 at +3.2% YTD

6. Greece, Portugal, and Russia continue to crash (down more than 20% respectively, YTD)

 

Oh, and Argentina dropped -14% in the last 2 trading days… but #NoWorries there – centrally planned currency devaluation has had fantastic economic results for the Argentines! Watch the LEGO movie this weekend with your kids – “everything is awesome.”

 

Yep, everything other than this other Big Macro thing that is correlating with #CommoditiesCrashing called 10yr Bond Yields:

 

1. Japan 10yr = 0.40%

2. Germany = 0.67%

3. France = 0.94%

 

“So” I guess my growth-and-inflation-slowing bull case for the USA Long Bond (TLT) with the US 10yr Treasury Yield crashing (-28% YTD) to 2.16% has plenty of room to run.

 

The only thing that is awesome (i.e. you don’t have to make things up about global growth accelerating and #deflation not being a globally interconnected risk) is actually being long something, in size, with very low-volatility (Long-Term Treasuries).

 

One of our hard core customers called it “TLT tizzling” at our Hedgeye NYC Holiday Party on Tuesday… so I looked that up in the Urban Dictionary: “A fat party. This word is derived from the word partizzle, shortened to tizzle…”

 

LOL

 

Yes, it’s ok to laugh at this game. If you don’t, it might just make you cry. And so will what’s most causal to the pain you are seeing in inflation expectations globally right now – central planners losing Mr. Macro Market’s confidence that they can re-flate asset prices.

 

In case you didn’t know, that’s how this central planning game of expectations ends – in #deflation.

 

It’s one thing to run around telling yourself that the Dow and DAX are up because you just knew that markets can’t go down. It’s entirely another to be doing that over and over again when the global macro system starts to signal that the party’s music is stopping.

 

Our immediate-term Global Macro Risk Ranges (with intermediate-term TREND views in brackets, which you can find in our Daily Trading Range product) are as follows:

 

UST 10yr Yield 2.14-2.24% (bearish)

SPX 2018-2042 (bullish)

RUT 1151-1172 (bearish)

KOSPI 1901-1965 (bearish)

VIX 14.43-19.59 (bullish)

USD 87.67-88.79 (bullish)

EUR/USD 1.22-1.25 (bearish)

Yen 116.79-121.65 (bearish)

Oil (WTI) 60.48-65.38 (bearish)

NatGas 3.49-3.81 (bearish)

Gold 1205-1242 (neutral)

Copper 2.84-2.95 (bearish)

 

Best of luck out there today,

KM

 

Keith R. McCullough

Chief Executive Officer

 

Tizzle In The System - 12.11.14 TLT vs. CRB


Keith's Macro Notebook 12/24: Japan | Oil | Sentiment

 

Hedgeye CEO Keith McCullough shares the top three things in his macro notebook this morning.


Cartoon of the Day: Naughty List

Cartoon of the Day: Naughty List - Lump of coal cartoon 12.25.2014

The only thing worse than getting coal in your stocking this year? Getting oil. It remains the epicenter of the risk of deflation with WTI falling from $101 six months ago to $55.98 today.


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