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“I’ve developed a karaoke habit. I’ve become a crooner.”

-Serena Williams

If this imploding Global Equity market has got some of your friends down, maybe you should take them out for a night of karaoke. You don’t want to scare them – and you definitely don’t want to talk up your Long Bond position – so ease into it with some crooning.

To croon, or not to croon – that remains the risk management question. By Webster’s definition, a crooner is a karaoke singer who “sings slow, romantic songs in a soft, smooth voice.” That’s how I’m thinking the bearishness of it all can be empathetically framed.

After trying his best to belt out his rendition of Draghi’s “Whatever It Takes” in the last few weeks, the Governor of the Bank Of Japan (Kuroda) pivoted into a deep, slow version of Master P’s “No Limit Soldiers” last night… it was scary.

Stock Market Crooners - central banker cartoon 02.02.2016

Back to the Global Macro Grind

As my brother from West Seattle, Darius Dale, reminded me – that Kuroda crap ain’t dope; it’s downright terrifying. He changed the ole school central planning lyrics to “there is no limit to measures for monetary easing.”

That’s right, after 90-100 TRILLION (per year) in Japanese monetary policy easing, writing 30,000 Yen checks to “poor folks” for Christmas (that’s $265), and opting for “Negative Yields” on long-term Japanese Government Bonds on Friday, Kuroda has no limits!

Since the BOJ’s Governor is simply a poor man’s version of a decent Draghi Crooner when it comes to moving markets, this is what the response was in Asia overnight:

  1. Japan’s stock market (Nikkei 225) hammered for a -3.2% down day (down -17.5% from its 2015 peak)
  2. Japanese Yen went UP on that, +0.4% versus the US Dollar
  3. CNBC celebrated the move, as they do most things central-market-planning

“So”, someone on Wall St. might ask, how does this all end?

A: Strong Dollar #Deflation

If you’re the poor wretched “investor” who has been long something big that settles in Dollars (like Commodities and their related countries, stocks, and bonds) since 2013, you should probably take up crooning and drinking (late night) at NYC karaoke bars.

There are, of course, multiple macro factors at work here that are being compounded by PBOC, ECB, and BOJ panic. But the most important of them all is that the US Federal Reserve is TIGHTENING into a slow-down.

All the while…

  1. China is lying about their need to devalue its currency by 10-15%
  2. Europe is trying to keep pace with Draghi Euro-Devaluation rhetoric
  3. Japan is dying

Keynes had a lot of things wrong, but he did nail this: “In the long-run, we’re all dead.” Japan’s grand monetary policy experiment started way back in the 1980s when a huge American central-market-planning rockstar, Paul Krugman, told them to “Print Lots of Money.”

And they did.

And it didn’t work. So, when they really started dying (population growth went negative and their core demographic spending cohort from the 1980s started falling off a cliff), they introduced “Abenomics” in 2012-2013.

As you can see in today’s Chart of The Day, when it comes to unconventional monetary policy, the key divergence to focus on is the delta between the Fed’s Balance Sheet (which is contracting) and the balance sheets of the ECB and BOJ (expanding rapidly).

Again, there are many factors across many durations to consider here, but if I could only pick 3 charts that explain why stock market perma-bulls (who are now begging, again, for US Dollar Devaluation) are wrong being long “reflation”, this would be one of them.

Leaders: Should we beg for an easy money Fed (again) and US Dollar Devaluation?

Isn’t that the definition of insanity (doing the same thing over and over and over and over and over again, and expecting different results?) Or is the fact that this is a very relevant option just the saddest part of our profession as it stands today?

At this stage of the #CurrencyWar (one of our Top 3 Macro Themes right now), all I know is that I hear a lot of bad versions of the same old song. Maybe that’s why crooning is dope, bros. Have yourselves another “relaxed drink.” This is going to be a long drinking session.

Our immediate-term Global Macro Risk Ranges are now:

UST 10yr Yield 1.85-2.00%


Nikkei 16006-18146

VIX 20.04-28.40
EUR/USD 1.07-1.09
YEN 119.01-121.54

Best of luck out there today,


Keith R. McCullough
Chief Executive Officer

Stock Market Crooners - 02.03.16 Chart