“An investment in knowledge pays the best interest.”

-Benjamin Franklin

Are you invested with pundits who are hyper-ventilating about how many US Senators don’t like the Healthcare bill this morning? Or are you corroborating with apolitical and data driven analysts and portfolio managers who have a repeatable process?

Data driven doesn’t mean cherry picking something with zero edge that is designed to generate clicks and ad revs. When we measure and map rates of change in both macro markets and economic data, we try to consider everything at the same time.

Consider, as a glaring example, Old Wall Media’s willful neglect of highlighting yesterday’s massively huge ramp in US Capital Goods Orders. Otherwise known as Capex – it accelerated to a 33-month high growth rate of +5.04% year-over-year!

Capex #Accelerating - ben franklin 5 25

Back to the Global Macro Grind…

I’m in New York City for Day 2 of a jam packed Institutional Investor tour where I’m going building to building presenting my Long Real Growth #Accelerating vs. Short Reflation view. Some people love it. Some people cringe.

If you don’t want to believe in the cycle and/or the actual data, whatever you do… do not look at yesterday’s US Durable Goods report for the month of May 2017 (within that report was Capex #Accelerating):

  1. Headline Durable Goods #accelerated from +0.7% year-over-year in APR to +2.7% in MAY
  2. Durable Goods Ex-Defense & Aircraft #accelerated from +3.7% year-over-year in APR to +5.3% in MAY
  3. Capital Goods (Capex) #accelerated from +3.1% year-over-year growth in APR to +5.0% in MAY

The reason why we look at Durable Goods “Ex-Defense & Aircraft” is because it’s an indicator for US Household Spending (i.e. the heavyweight Consumption component of US GDP). That and US Capex just hit a 33 month high!

If those two very “hard” data points don’t surprise your “surprise index”, I don’t know what will…

Once you see a super important set of TRENDING (3 months or more) data points like this you really have to ask yourself why? How on God’s good earth is this possible? Un-reported 33 month highs?

The answer is quite simple, really. It’s the cycle, stupid.

While the US Capex Cycle coming out of a prolonged RECESSION in 2016 may be an inconvenient truth for partisans who believed that Obama walked on economic water, as you can see in the Chart of The Day, Capex in this country was nasty negative:

  1. In rate of change terms, the US Capex recession bottomed as the US stock market did in JAN-FEB 2016 at -6.2% y/y
  2. But the recession in Capex continued through NOV 2016 when it was -2.7% year-over-year
  3. Then zoom (rate of change rip!) year-over-year Capex popped to +1.5% in DEC 2016

So, the answer on how we can be at a 33 month high of +5.0% year-over-year capex growth is that we’re comparing against a recession. As I remind our subscribers all of the time, that’s the catalyst for growth – comparing against recessions!

Do you think that Corporate Profits #Accelerating from 6 consecutive quarters of negative year-over-year growth (SP500 companies) to +15% year-over-year growth in Q117 might:

A) Increase a CEO’s plans to hire and
B) Increase a CEO’s capital expenditure plans?

Oh, right. The partisan media forgot to call out that the US was in an Industrial, Cyclical, and Profit Recession as we hit those all-time lows for US Bond Yields at this time last year too.

In our mathematical vernacular, Q1, Q2 and Q3 of 2016 are all very easy economic “compares.”

While profits and capex accelerating are hard data points for 2017 US Growth Bears to acknowledge, they can take a gander at another “soft” (survey) ramp for Capital Expenditure Plans from the Regional Fed Surveys that we compile into a composite index.

That’s at the highest level CEO’s have seen since 2007. Is that bad? Or isn’t an investment in rate-of-change knowledge cool?

Our immediate-term Global Macro Risk Ranges (and intermediate-term TREND views in brackets) are now:

UST 10yr Yield 2.12-2.21% (bearish)
SPX 2 (bullish)
RUT 1 (bullish)
NASDAQ 6195-6290 (bullish)
VIX 9.77-11.15 (bearish)
USD 96.50-98.11 (neutral)
Oil (WTI) 41.99-45.46 (bearish)
Nat Gas 2.81-3.11 (bearish)
Gold 1 (bullish)
Copper 2.54-2.65 (neutral)
AAPL 142.69-148.24 (bullish)
AMZN (bullish)

Best of luck out there today,
KM

Keith R. McCullough
Chief Executive Officer

Capex #Accelerating - 06.27.17 EL Chart