“The single biggest existential threat out there is cyber.”
-Michael Mullen
Apologies in advance for this morning’s Early Look being late. While I haven’t gone there on publishing the Dark, Late Look yet, I have started to compile the completely biased macro and geopolitical tourism sites that could perpetuate my views. All click-bait, all-the-time.
In all seriousness, I’m on the train headed to Baltimore to meet with Institutional Investors… and I just looked up “cyber quotes.” Wow. But, instead of scaring the hell out of you like they do, I’m going to extend Cyber Monday’s all-time highs into Tuesday!
Whether we close at fresh all-time highs or not really doesn’t matter to me. What I want to know is whether or not consensus bought or sold the damn dip from Cyber Monday? The best bull market days happen when bears are forced to capitulate and cover.
Back to the Global Macro Grind…
Why is it that so many people love buying things on sale other than stocks? Why do they prefer buying on up vs. down days? Do they need new data to support their views? Do they have a #process to contextualize that data and/or Mr. Market’s signals?
Too many questions and too little time on this train! In terms of contextualizing the most recent US economic data, I can do that both accurately and quickly:
- Last week’s US Durable Goods report (ex-aircraft & defense) was up +6.5% year-over-year in OCT = 37 month high
- Last week’s US Capex report was up an impressive +8.1% year-over-year in OCT = just off 65 month highs
- Yesterday’s US New Home Sales report was +18.7% year-over-year = 10 year highs
New Homes, Capital Expenditures, and Durable Goods demand #accelerating (great proxy for household spending on big ticket items) are hardly the “soft data” points that US growth bears spent most of JAN-JUL of 2017 whining about.
These are the yougely hard economic data points (born out of the soft ones like consumer and business confidence #accelerating) that have also become very hard to accept.
In fact, combined with Oil’s recent recovery (+19% in the last 3 months), the latest narrative-drift-and-shift for macro tourists (moaning about the “yield curve”) is, ironically, explained by a glaringly obvious #acceleration in hard data.
That’s what drove the Fed to go hawkish on a DEC rate hike. That, in turn, drove the US 2yr Treasury Yield, +50 basis points in the last 3 months to fresh multi-year highs (like the economic data is seeing).
And voila! The latest cyber-attack (the click bait kind) by the bears is born out of them having all the causal growth and inflation factors driving shorter-term rates higher completely wrong for the last 12 (but especially the last 3) months.
Forget the last 3 (or 12) months though…
What if a 2017 US Growth Bear had the objectivity and process to go bullish on US growth in the last month?
A) In the last month alone, the Nasdaq 100 (NDX) is up +6.1% to +31.7% YTD
B) In the last month alone, Google (GOOG) is up +8.4% to +36.6% YTD
C) In the last month alone, Amazon (AMZN) is up +23.0% to +59.5% YTD
Just to recognize why your portfolio wasn’t attacked in November 2017 (like it was when the US economy was obviously slowing in NOV of 2007), read the market’s scoreboard one more time. It doesn’t lie; political people do.
One of the most “expensive” mega cap stocks in US history got +23% more expensive in the last month alone. If you got both the economy and Amazon’s Q3 right, you really got OCT-NOV right.
G-r-r-reat! Now what?
Well, first things first. You don’t chase this market and its FAANG components after the latest move. The whole point about buying these damn dips is that you get to hedge your gains by selling the rips.
Again, selling high (after buying more lower) is a matter of @Hedgeye #process:
A) When a stock, ETF, etc. is at the top-end of the @Hedgeye Risk Range … and
B) When you see massive implied volatility PREMIUMS collapse into DISCOUNTS… and
C) The market (Nasdaq for example) has done the same as A & B
You’ll have some of those #overbought signals in futures & options markets this morning:
- Nasdaq 100 (NDX) has seen its implied volatility PREMIUM crash into a -4% DISCOUNT vs. 30-day realized
- Google (GOOG) has seen its implied volatility PREMIUM crash into a -18% DISCOUNT vs. 30-day realized
- Amazon (AMZN) has seen its implied volatility PREMIUM crash into a -50% DISCOUNT vs. 30-day realized!
Unlike cyber-threat-mongering, the real threat to the 2017 Growth Bears was their complete capitulation to the point that they won’t buy the former protection they paid big premiums to promote as existential threats to your portfolio.
Our immediate-term Global Macro Risk Ranges (with intermediate-term TREND views in brackets) are now:
UST 10yr Yield 2.30-2.40% (bullish)
SPX 2 (bullish)
NASDAQ 6 (bullish)
VIX 8.69-10.95 (bearish)
EUR/USD 1.16-1.19 (neutral)
Oil (WTI) 55.49-59.37 (bullish)
Gold 1 (bearish)
AMZN 1145-1201 (bullish)
FB 178-185 (bullish)
GOOGL 1040-1079 (bullish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
