Teddy Bears

“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%

SPX 1
RUT 1070-1128
EUR/USD 1.10-1.14
Oil (WTI) 43.91-47.11

 

Best of luck out there today,

KM

 

Keith R. McCullough
Chief Executive Officer

 

Teddy Bears - z cod 10.01.15 chart


Cartoon of the Day: 'Biggest Tax Cut Ever'

President Donald Trump's economic team unveiled what he called last week, "the biggest tax cut we’ve ever had.” Before you get too excited about that hang on a sec. "Trump Tax Reform ain’t gettin’ done anytime soon," Hedgeye CEO Keith McCullough wrote in today's Early Look.

read more

Neurofinance: The Psychology Behind When To Sell A Bull Market

"Most momentum investors stay invested too long, under-reacting and holding tight after truly bad news finally arrives to break the trend," writes MarketPsych's Richard Peterson.

read more

Energy Stocks: Time to Buy the Dip? | $XLE

What the heck is happening in the Energy sector (XLE)? Energy stocks have trailed the S&P 500 by a whopping 15% in 2017. Before you buy the dip, here's what you need to know.

read more

Cartoon of the Day: Hard-Headed Bears

How's this for "hard data"? So far, 107 of 497 S&P 500 companies have reported aggregate sales and earnings growth of 4.4% and 13.2% respectively.

read more

Premium insight

McCullough [Uncensored]: When People Say ‘Everyone is Bullish, That’s Bulls@#t’

“You wonder why the performance of the hedge fund indices is so horrendous,” says Hedgeye CEO Keith McCullough, “they’re all doing the same thing, after the market moves. You shouldn’t be paid for that.”

read more

SECTOR SPOTLIGHT Replay | Healthcare Analyst Tom Tobin Today at 2:30PM ET

Tune in to this edition of Sector Spotlight with Healthcare analyst Tom Tobin and Healthcare Policy analyst Emily Evans.

read more

Ouchy!! Wall Street Consensus Hit By Epic Short Squeeze

In the latest example of what not to do with your portfolio, we have Wall Street consensus positioning...

read more

Cartoon of the Day: Bulls Leading the People

Investors rejoiced as centrist Emmanuel Macron edged out far-right Marine Le Pen in France's election day voting. European equities were up as much as 4.7% on the news.

read more

McCullough: ‘This Crazy Stat Drives Stock Market Bears Nuts’

If you’re short the stock market today, and your boss asks why is the Nasdaq at an all-time high, here’s the only honest answer: So far, Nasdaq company earnings are up 46% year-over-year.

read more

Who's Right? The Stock Market or the Bond Market?

"As I see it, bonds look like they have further to fall, while stocks look tenuous at these levels," writes Peter Atwater, founder of Financial Insyghts.

read more

Poll of the Day: If You Could Have Lunch with One Fed Chair...

What do you think? Cast your vote. Let us know.

read more

Are Millennials Actually Lazy, Narcissists? An Interview with Neil Howe (Part 2)

An interview with Neil Howe on why Boomers and Xers get it all wrong.

read more