“True intellect should not appear to be intellectual.”
-Nassim Taleb
I don’t agree with Taleb on that because I personally do not care what people look like. I don’t care about style. I care about substance. I also care about people who are transparent, accountable, and trustworthy.
In a chapter he named after everyone’s favorite President, “The Facts Are True, The News Is Fake”, Taleb makes a more important point about the intellectual dishonesty of today’s conflicted and compromised media:
“The divergence is evident in that journos worry considerably more about the opinion of other journalists than the judgment of their readers. Compare this to a healthy system, say that of restaurants. Restaurant owners worry about the opinion of their customers, not those of other restaurant owners.” -Skin In The Game, pg 181
Back to the Global Macro Grind…
I personally don’t care about the opinions of Old Wall macro strategists either. I care about the opinions of analysts, strategists, PMs, CIOs, etc. who are our customers. We collaborate with many of them within the framework of our rate of change #process.
Process, process, process..
Yep, you self-righteous Mucker you… I get it. My competition doesn’t like me. If they did, Hedgeye wouldn’t be successful. Winning the backslapping contest is for people who don’t have a process as their backbone. I love competing with them.
After 2 full days of meetings in New York City, one thing is crystal clear – Wall Street is reluctantly long all sorts of international equity, credit, and currency exposure and looking for reasons why it’s not all acting like alpha should.
A surprisingly large consensus was not setup for this sustained breakout in the US Dollar. This FX and EM move in particular is currently causing some major problems in parts of the hedge fund community.
So let’s start with a real-time rate of change update on that front:
- US Dollar Index is testing fresh YTD highs this morning up +0.3% at 93.86
- EUR/USD is breaking down to fresh YTD lows of $1.17
- Turkish Lira continues to crash and is now down over -20% YTD
- EM currencies like the Argentine Peso and Brazilian Real continue to signal Bearish TREND @Hedgeye
- EM inflation will continue to rise off its cycle lows as it is reported in local FX
- Real EM GDP Growth will continue to slow from its epic 2017 cycle highs
- EM Asia Equity markets like Malaysia were down another -2.2% overnight
- EM Europe Equity markets like Poland are down another -1.5% this morning and continue to signal Bearish TREND
Some of this stuff is too micro for the Macro Tourist journos out there. They like the big stuff – you know, like really big and huge stuff – like Trump, China, and Europe. Some of them really like the #Bitcoin too.
Here’s the update on 3 of those things:
- Chinese stocks dropped another -1.4% overnight after failing @Hedgeye TREND resistance (again)
- European PMIs for the month of May continued to slow to new YTD lows
- Bitcoin failed @Hedgeye TREND resistance (again) in May and has immediate-term downside to $7803
As opposed to being long the world’s reserve currency (US Dollar) and/or liquid US domestic equity and commodity exposures that are linked to US #InflationAccelerating (Oil, Natural Gas, Energy Stocks, etc.), Wall Street is long a lot of other stuff…
And not all that stuff is what THEIR customers really understand!
But no worries. There’s only about $3.5 TRILLION out there in US Dollar denominated Emerging Market Debt… and I’m sure there are plenty of intellectual arguments for why that credit exposure is “safe” and/or some central banker will try to insure as much.
I realize a trillion dollars isn’t all that it used to be. Then again, neither are some of the Old Wall hedge fund “macro” guys that don’t want to be my customers because we’re on the other side of the stories they tell my competitors! I do love this game.
Our immediate-term Global Macro Risk Ranges (with intermediate-term TREND views in brackets) are now:
UST 10yr Yield 2.95-3.14% (bullish)
SPX 2 (neutral)
RUT 1 (bullish)
NASDAQ 7 (bullish)
Energy (XLE) 76.06-79.21 (bullish)
Industrials (XLI) 73.50-76.37 (bearish)
VIX 12.29-16.26 (bullish)
USD 92.15-94.16 (bullish)
EUR/USD 1.16-1.19 (bearish)
YEN 109.10-111.49 (bearish)
GBP/USD 1.33-1.36 (bearish)
Oil (WTI) 70.08-72.66 (bullish)
Nat Gas 2.75--2.93 (bullish)
Copper 3.02-3.11 (bearish)
Bitcoin 7 (bearish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
