“Gimme that beat fool, it’s a full time jack move.”
-Jay-Z
If nothing else, you have to give the man some style points for creativity. I’m not talking about Jay-Z either. You know who I’m talking about. The Tweeter in Chief, bro. The man whose been trumpin’ that stock market up into this Xi meeting!
Back to the Global Macro Grind…
While I’m sure it’s going to be a really super great and wonderful dinner for Trump and Xi in Argentina tomorrow night, I’m not sure the US Growth, Momentum, and Junk Bond Bulls are going to get paid on that.
In fact, they might get dumped on again … and not because of that!
It’s Friday, so please bear with me as I’m running out of things to say about this damn meeting. That’s mainly because there is nothing left to say. The meeting is going to happen … and then, so will The Cycle.
You know, bro. The Global Economic Cycle:
A) The one that started to slow in Europe at this time last year
B) The one that started to slow in China in Q1 of this year
C) The one that started to implode in Argentina in Q1 of this year
Yep, the one that is:
A) Slowing against a 6-year European CYCLICAL expansion (Q417 German GDP = 94th percentile of historical readings)
B) Slowing against the LARGEST monetary stimulus in the HISTORY of China (pre Xi being elected for life)
C) Slowing against an unprecedented 8 quarter streak of Argentina being in Quad 1 or Quad 2
Enough of the base effects and The ROC (rate of change) time series, dude. Gimme a beat to some bullish catalysts!
Imagine I worked for a broker dealer or a bank. Man could I generate some full-time-pre-Mifid-trading-flow for a firm like that, bro. I’d always have some new narrative to pivot bullish towards. #Not
There is no pivoting from touristy headline-to-headline here @Hedgeye. There’s looking back (at the ROC data) and re-calibrating, daily, against those base effects with both incoming data and market signals.
The ROC data part on China, EM, and Europe #slowing is so easy to see at this point of The Cycle that most perma bulls have already turned to begging for the Fed to go dovish.
All that’s done this morning is give birth to the New Momo (1-month price Momentum). Gimme a beat on that, bro. The UST, yeah-you-know-me, 10yr Bond is giving it to Long Bond Bears with its yield being down for the 4th week in a row!
Back to how complacent consensus is on pricing this effervescent Trump/Xi dinner:
- Implied volatility on Chinese Stocks (FXI) has fallen to a -15% DISCOUNT vs. 30-day realized
- Implied volatility on US Tech Stocks (XLK) has been crushed to a -37% DISCOUNT vs. 30-day realized
- Implied volatility on Amazon (AMZN) has been buried to a -44% DISCOUNT vs. 30-day realized
Huh? You messin’ with my FAANG, fool?
Oh, no. I’m looking for some ho-ho-ho, bro. You get out there and buy yourself some FAANG puts for that Santa Claus rally, bro. At these DISCOUNTS, it’s Black Friday all over again! (all FAANG TREND views and risk ranges attached)
That’s record-word-count-exposure given to the bros. So I’ll stop there and simply ask you to consider protecting yourself against a potential Trump and Dump. The Cycle should continue to earn volatility premiums in your portfolio.
Our immediate-term Global Macro Risk Ranges (with intermediate-term TREND views in brackets) are now:
UST 10yr Yield 2.99-3.09% (bearish)
SPX 2 (bearish)
NASDAQ 6 (bearish)
Shanghai Comp 2 (bearish)
VIX 17.00-23.64 (bullish)
USD 96.00-97.54 (bullish)
Oil (WTI) 48.02-56.05 (bearish)
AAPL 165.83-185.11 (bearish)
AMZN 1 (bearish)
FB 128-142 (bearish)
GOOGL 1005-1105 (bearish)
NFLX 248-295 (bearish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
