“Once a task is finished, we stop thinking about it.”
-Adam Grant
That definitely applies to macro tourism. In psychology they call it the Zeigarnik Effect. “In 1927, Russian psychologist Bluma Zeigarnik demonstrated that people have a better memory for incomplete tasks. Once a task is finished, we stop thinking about it. But when it is interrupted and left undone, it stays active in our minds.” (Originals, pg 99)
Bouncing around like a tourist? Big time. The business of chasing macro headline risks has never been bigger. China? Oil? Banks? Fed? Oh, right. Brexit! Forgot about that one. Then boom! The British Pound gets pounded to a fresh new low.
Pound Down, FTSE Straight Up. The relative “returns” associated with the Bank of England eviscerating the purchasing power of the British People have rarely been better. It’s a good thing the non-fictional link between the real economy and these macro moves is an incomplete one too…
Back to the Global Macro Grind…
It’s also a good thing that, until they lose whatever credibility they have left, central-market-planners are giving me something to write about every morning. They’re giving me plenty of buy/sell opportunities in 2016 too.
By definition, AFTER a macro move like this in GBP, everyone and their brother’s sister in financial media is writing about it like it’s new. The evisceration of the British Pound is far from new. It was simply incomplete. And consensus stopped paying attention to it.
I couldn’t make this up if I tried, but…
A) A -13.2% YTD crash in GBP/USD to $1.27 has driven
B) A +13.3% rip to fresh YTD highs in the FTSE
“So”, you’re saying that, “because stocks are up”, UK economy is ripping, eh? Lol. If you didn’t know how to get your stock market “up” as the economy is traversing its peak cycle compares, now you know. Devalue your currency, relentlessly.
That’s probably why the SP500 is sucking wind relative to the FTSE (+13.3% vs. +5.7% YTD). While the Fed has pivoted from hawkish back to dovish 3x in 2016 (i.e. 6 rhetorical pivots in total), clearly they haven’t completed the task of going from dovish to even more dovish.
If the Yellen’s Fed did that, the US Dollar wouldn’t only be down -2.8% YTD. It would be down -5-10%. Then Oil, “gas prices”, and the beloved ISM could really rip – and the “economy” would be doing fantastic, right?
Is the “bottom” in global demand and the “recovery” in the ISM fictional narrative complete?
- One economist called the ISM’s move to 51.5 in SEP a “surge” yesterday (lol x2)
- In reality, the 2016 high water-mark for the ISM narrative was a whopping 53.2 reading in JUN
- The last 3 readings have been 52.6, 49.4, and 51.5
That got Bond Bears a whopping +3 basis point move in the US 10yr Yield yesterday. It finally got me the buying opportunity I’ve been waiting for in REITS (VNQ) yesterday too (Real-Time Alert signal to BUY VNQ into the bell).
Heck, if both the ISM Services report (much larger part of the economy than the known industrial/cyclical #recession) tomorrow and the US jobs report on Friday continue to register as TRENDING rate of change slow-downs, I’ll call those “fantastic buying opportunities.”
Fair e nuff. I realize I am considered “too bearish”, by many. But I think that a devaluation of my conviction in #GrowthSlowing is going to be incomplete until #TheCycle stops slowing. So upward and downward (in rate of change data terms) it is for me from here.
In other central planning news this morning…
- India cut rates
- Italy to issue 50 year bonds
- With Ford (F) sales -7.7% in SEP, they’re going to work with government on a free-credit workout/bailout
That last one is obviously part truth (horrible Auto Sales are ringing the register on the Hedgeye #ConsumerCredit slow-down call – see Q3 Macro Themes deck for details) and part fictional satire. But all 3 points contain the same truthful story about US and Global growth.
After all of these central planning experiments… after all of the negative yielding bonds (“free money”)… and all of the currency devaluations… we’re still left with US and Global Growth slowing to its slowest year-over-year rate of change of #TheCycle.
And while the story of establishment economists figuring out (on delay) what happens when a cyclical slow-down hits a secular (demographic) slow-down that only manifests faster with time is still incomplete, it still matters. And they’ll be thinking about it.
Our immediate-term Global Macro Risk Ranges are now:
UST 10yr Yield 1.52-1.65%
SPX 2142-2180
RMZ 1169-1210
VIX 12.01-16.71
USD 94.99-96.25
Oil (WTI) 43.67-49.07
Gold 1
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
