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“Bears need people. People need bears.”

-Pam Brown

I found that quote this morning on ‘I Love Teddies.Com.’ I think it’s cute. Don’t you like it?

Unlike the dogs that were stocks (ex-Utilities) in Q3, Teddies.Com wasn’t one of the companies (like FogDog.Com) that we brought public when I worked under the Frank Quatrone #Bubble machine at First Boston in the late 1990s.

That’s when I started working on Wall Street. Since, I’ve traversed (and, luckily, shorted) 3 massive US stock market bubbles (2000, 2007, and 2015). It’s a generational thing. Perma bulls need people like me (when I go bearish). People need bears.

Teddy Bears - Bubble bear cartoon 09.26.2014

Back to the Global Macro Grind

“So”, the Old Wall will say. “Worst quarter for stocks in 4 years… and now everyone is bearish, so you need to buy” (provided that the stock market went up in the day prior #MustChaseGreen).

Roger that.

While I can’t, for the life of me, find an epic stock market bubble that peaked (2000 or 2007), then priced it all in within 3 months of the all-time peak, this constant wrangling of my teddy bear ears should be expected.

After all, “it’s different this time.”

Now that we’ve reached three of the most important catalysts of the year (in terms of our bearish case on both Global and US Growth), let’s start Q4 with a reminder of what those are:

  1. Q3 2015 GDP #GrowthSlowing to a range of 0.1-1.5% (reported at the end of OCT)
  2. Q3 Earnings Season (especially for the Financials, which I expect to lead on the downside in Q4)
  3. Q4 is the toughest “comp” (comparative base period for year-over-year growth) of the year

A growth bull who, ostensibly, has been averaging down and taking up his gross exposure to #Bubbles crashing for the last 3 months might say that all of this got “priced in” in 7 Biotech trading days. I disagree.

It might take another week (think OCT 1987) or another year to price in economic reality.

And, unless the data changes vs. the path we’ve laid out, the 10.1% and 15.1% draw-downs from their all-time #bubble peaks (current SPX and Russell draw-downs) is a far cry from pricing in that Consensus Macro is bearish enough.

Sentiment obviously matters. I don’t disagree with that. There is a -226,000 net short position in S&P Index + Emini futures/options contracts right now to support that consensus has shifted from bullish to bearish.

But, again, having not been positioned for #Deflation and #GrowthSlowing to begin with, are they Bearish Enough?

If you have disagreed with me the whole way down. That’s fine. That’s what makes a market. If you disagree with me after a +1.9% SP500 bounce “off the lows”, that’s fine too.

If you want to be bullish (from here), why not get with the program and invest in what’s working?

  1. Long Bond! The 10yr Treasury Yield actually fell on yesterday’s stock market “bounce” = 2.05% last
  2. Utilities (XLU) had a fantastic Q3 on both a relative and absolute basis, and remain under-owned
  3. How about Gold and Oil? Both crushed owning High-Beta, Small Cap US stocks in September

While I can’t get on board with Long Oil (yet), I’m definitely getting there on Gold. Since #GrowthSlowing eventually drives A) Bond Yields Lower and B) Fed Dovishness (Down Dollar), I think Mr. Macro Market smells what I do on that front.

“So” for all your US stock market friends who are sentiment experts (God gave them “gut” feelings) but don’t do macro, ask them if long-term sentiment is more bearish on:

  1. Long-Term Bonds
  2. Gold
  3. Apple

Alex, my Canadian friend, I’ll take “what is the most overowned equity sentiment stock in human history”, for a premium-access seat @Hedgeye’s Macrocosm Conference (invites going out this week to the Top 100 macro minds we can find on the buyside – NOV 18th).

And yes, I signaled “cover” on AAPL yesterday in Real-Time Alerts because it was signaling immediate-term TRADE oversold at $109-110. But don’t confuse that with the next bull market. Intermediate-term TREND resistance remains intact at $119.

“So” (sorry, had to use it again), if neither economic growth nor revenue/earnings growth is your catalyst to “buy stocks” here in Q4 and you’re just buying them on “sentiment”, I wish you nothing but the best of luck.

Remember, I’m just your Teddy Bear now. I’m not going with the position bulls are in. And I’m not going away.

Our immediate-term Global Macro Risk Ranges are now:

UST 10yr Yield 2.02-2.14%

RUT 1070-1128
EUR/USD 1.10-1.14
Oil (WTI) 43.91-47.11

Best of luck out there today,


Keith R. McCullough
Chief Executive Officer

Teddy Bears - z cod 10.01.15 chart