“I’m just collecting a list of stupid things people do.”
-Richard Thaler
Is Bitcoin a bubble? Is it a mania? Or is it just getting started?
I guess your answers depend on whether or not you own it. Since we just entered the Bitcoin Debate this week (if you’d like a replay of Neil Howe’s call, let us know), I can’t wait to be able to measure and map futures and options data on this thing!
But, seriously, do you own it?
That’s a critical #behavioral econ question that won Richard Thaler a Nobel Prize. He called it The Endowment Effect. “People attached some strange extra value to whatever they happened to own, simply because they owned it.” (The Undoing Project, pg 283)
Back to the Global Macro Grind…
How about are you short it?
With Bitcoin at least, the answer to that question is no one can be short it (yet) in size because A) it’s not a two-way market and B) you can’t get an institutionally sized borrow on the damn thing.
If this isn’t a bubble, the bulls should be encouraging regulators and capital markets to find ways that guys like me can consider shorting it. If this is “just getting started”, there should be nothing to be afraid of on that front.
Having missed the move in Bitcoin (my ancestors totally missed buying Tulips in the 17th century too – boy did they look stupid back then) because I have a day-job of trying to help you risk manage liquid, two-way, global macro markets… I’m not buying up here.
That said, I’m big on buying-the-damn-dips in US Growth stories right now…
So you’re saying there’s a chance? Sure there is. I’ll buy anything if A) I can buy it on sale at the low-end of the @Hedgeye Risk Range and B) it fits both the prevailing economic conditions (growth accelerating) and style factors I want to be long of.
Since I go both ways, and like it… there’s a chance I buy puts on this sucker at the top-end of the @Hedgeye Risk Range too.
That’s why DEC 18th is going to be such an exciting day for people like me who measure and map not only the PRICE of things but their realized and implied VOLATILITIES. That’s when Bitcoin is going to start trading on the CME (maybe on CBOE DEC 10th too).
Back to my day-job (which is not marketing “$100,000 price targets” on Bitcoin)…
While DEC 18 is going to be a riveting day, 2 of the most important pending dates in Global Macro are:
- DEC 8 = US Jobs Report
- DEC 13 = Fed Rate Hike
Some of the research (data and policy) questions I care about most into and out of those dates are:
A) Are we going to see US Wage Inflation #Accelerate?
B) If we do, do we get a rate hike + hawkish Fed commentary/guidance?
C) If we don’t, do we get the hike + dovish commentary/guidance?
Quantitatively, important questions are:
A) Is the UST 2yr Yield going to stop going up at the top of the 1.71-1.83% @Hedgeye Risk Range
B) If it doesn’t, are higher-highs (and higher-lows) in short-term rates going to compress the curve further?
C) If the 2yr Yield stops going up, is the curve going to start steepening again and by how much?
In the short-term, I’m definitely going to be data dependent on the jobs report. In the intermediate-term, I’m probably going to be a seller of the Reflation Trade (which we have been long of since Oil broke out in SEP).
Selling the Reflation Trade is a “selling on the news” strategy (if you missed the +20% ramp in Oil and correlating PMIs, inflation data, etc., you missed capitalizing on the obvious). It’s also one that fits with our call for another Reflation Rollover in Q1 of 2018.
Rather than being distracted from my #process collecting a list of smart and stupid things people say about Bitcoin, I still get paid to make tactical calls on what’s happening in Global Macro markets every day.
Our immediate-term Global Macro Risk Ranges (with intermediate-term TREND views in brackets) are now:
UST 10yr Yield 2.30-2.42% (bullish)
SPX 2 (bullish)
RUT 1 (bullish)
NASDAQ 6 (bullish)
Nikkei 225 (bullish)
DAX 120 (bullish)
VIX 9.26-12.21 (bearish)
USD 92.50-94.20 (neutral)
EUR/USD 1.16-1.19 (neutral)
YEN 110.98-113.21 (neutral)
Oil (WTI) 56.00-59.27 (bullish)
Nat Gas 2.82-3.03 (bearish)
Gold 1 (bearish)
Copper 2.93-3.07 (bearish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
