“It’s like Highlander. There can only be one.”
-Bobby Axelrod
I’ve heard from sources familiar with YTD returns that Axe Capital is Long Growth, Short Value, and absolutely killing it. Bobby has always wanted top spot on Wall Street. There can only be one.
If there is a strategist who has been more bullish on being long US Growth vs. Value ideas like “reflation” than we’ve been, it would have to be Mr. Market himself. That guy is crushing it.
Crush or be crushed. For many of us, that is the game. Why else would we get up at this god forsaken hour of the morning? With the Nasdaq closing at an all-time high of 6344 yesterday, that puts it up +17.8% YTD vs. the Russell Value (IWN) at -0.1% YTD.
Back to the Global Macro Grind…
I know. I know. It’s “not right, KM”… “this is crazy”… “nothing fundamental matters anymore”… “it’s all about the machines”…
Roger that.
In other hard-to-accept-data news, 46 of the SP500’s companies have kicked off Q2 Earnings Season:
- Aggregate SALES and EARNINGS growth is currently +5.1% and +13.4%, respectively, on a year-over-year basis
- Tech SALES and EARNINGS growth is leading the early surge at +6.7% and +33.0%, respectively
- Energy SALES and EARNINGS growth haven’t contributed to the aggregate yet (0 of 34 companies have reported)
So, when Energy reports, you definitely want to “back that out” of accelerating US profit growth (after not backing it out during the Energy bubble years) as you “back out the Tech names” that are driving a YTD return for the Nasdaq 100 of +20.9%.
We don’t do FAANG. We’re too cool for that. We do FANDANGO – here’s the raging bull update there:
- Facebook (FB) up another +2% yesterday = +41.6% YTD
- Amazon (AMZN) up another +1.4% yesterday = +36.6% YTD
- Netflix (NFLX) zoomed +13.5% yesterday = +48.3% YTD
Yep, that’s the FAN in FANDANGO. Are you a fan? Don’t you love buying the most “expensive” components of the FAANG on dips before they get more expensive? Let’s do the DANGO:
- Dow Bro (DJIND) was down -0.25% from his all-time high yesterday = +9.2% YTD
- Apple (AAPL) was up small +0.35% yesterday = +29.6% YTD
- Nvidia (NVDA) made another new high yesterday = +55.5% YTD
- Google (GOOGL) was up another +1.1% yesterday = +24.5% YTD
- Oracle (ORCL) was just off its YTD highs yesterday = +31.1% YTD
That’s right Bobby Axe, “whenever you can, put an (expensive) company in your mouth”… and if you’re looking to make short sales, “a good matador doesn’t try to kill a fresh bull. You wait until he’s been stuck a few times.”
To be sure, there have been higher profile hedge fund PMs than Axe out there this year who were a lot louder (at lower prices) about how this market was going to implode. It hasn’t, yet.
But in the spirit of being “The Man” at said Connecticut-based hedge fund or elsewhere, I can’t for the life of me understand why someone isn’t simply Long Growth and Short Reflation, in size, and loud about it this year?
You like making money on the short side? Reflation’s Rollover has been stuck more than a few times:
- Russell Value (IWN) was down another -0.4% yesterday = down -0.1% YTD
- Commodities (CRB Index) bounce +0.57% yesterday but = down -8.12% YTD
- Oil and Gas Stocks (XOP) were down another -1.2% yesterday = down -23.9% YTD
Down, down, and down YTD. That’s what you want in short ideas, absolute negative YTD return. This year is really a crusher of a year though because the relative returns associated with being long growth vs. value (via reflation) are so eye-poppingly-wide.
Even if you’re big on shorting “overvalued” companies, you could slap an Ackman-type-one-idea fund on this year and be long Facebook (FB) vs. short Snapchat (SNAP), which is down -45% from its momentum chasing high post its IPO.
But that’s just being silly now, isn’t it?
What hasn’t been silly is being long US growth vs. “Long Europe because it’s cheaper.” Especially if you consider the returns in European Equities since Barron’s printed (in block letters on its cover) “BUY EUROPE” in the last 2-3 months, that’s been ugly.
Spanish stocks (IBEX Index) are leading losers in European trading this morning and are down -3.3% in the last month vs. the Nasdaq 100 at +3.5%. There’s always a bear market developing somewhere. I’ll give Bobby a buzz on that idea today.
Our immediate-term Global Macro Risk Ranges (with intermediate-term TREND views in brackets) are now:
UST 10yr Yield 2.26-2.38% (neutral)
SPX 2 (bullish)
RUT 1 (bullish)
NASDAQ 6 (bullish)
XOP 30.44-32.27 (bearish)
VIX 8.87-11.13 (bearish)
EUR/USD 1.13-1.15 (bearish)
Oil (WTI) 43.83-47.38 (bearish)
AAPL 144.74-151.60 (bullish)
AMZN (bullish)
FB 157-166 (bullish)
GOOGL 951-999 (bullish)
NFLX 160-186 (bullish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
