“Instead of about bombs and bullets, it’s about ones and zeroes and dollars and cents.”
-Robert Spalding, Brigadier General
While I am sure we’re on the cusp of the greatest “trade deal” in the history of humanity (at least that’s what US Equity FOMO Futures have been hoping for, for the past 72 hours), the real deal with China is that the Americans are figuring China out.
I’ll have General Spalding for a Q&A session at our online Investing Summit next week (here's the access link if you’d like to join us). Here’s how he frames where we’re at in his new book Stealth War – How China Took Over While America’s Elite Slept:
“Having served as Chief China Strategist for the Chairman of the Joint Chiefs of Staff and as a Senior US Defense official, I left my position at the White House deeply concerned about a different stealth weapon being turned against my country.”
Back to the Global Macro Grind…
Oh, you want to hear more about that? Or do you just want a “deal” to tone down some “tariffs”, fluff up some “year-to-date” SPYs, and have some lying Chinese guys who are cool with demonic human rights violations buy moarrr soybeans?
“For the past 40 years, the Chinese Communist Party (CCP) has been playing a beautiful game. It is sophisticated yet simple. It is a competition to gain control and influence across the planet – and to achieve that outcome without resorting to military engagement.”
“Perhaps nothing threatens the CCP more than the Constitution of the United States.” -General Spalding
I know. I know. Why should we really care about what a 26 year veteran of reality thinks this morning when we can just buy “stocks” on any semblance of something better than The Cycle? We all want to be “long-term” investors in America, right?
Moving along…
Here’s what Global Equity + @CNBC Dow Bro FOMO Futures are thinking “because you’re saying there’s a chance” this AM:
A) Hang Seng with a big bear market bounce of +2.3% (still -21% from where China’s cycle started #slowing in 2018)
B) Germany’s DAX with a big +1.7% Counter @Hedgeye TREND bounce
C) SPY up 22 then 30 handles, bro!
As on EVERY one of these bounces in “stocks” to lower-highs, there’s no FOMO in the rest of Global Macro this AM:
A) Copper is up a whopping +0.28% on potentially the greatest deal ever
B) Gold is +0.4% as real yields, globally, reflect The Cycle #slowing reality
C) US Dollar is up small (as it should be in Global #Quad4) and UST 10yr Yield has moved 0 basis points
Why the divergence between the big stuff like The Cycle, Global FX, Rates, etc. and “stahks?” Simple answer: career risk management.
Obviously returns for active managers (particularly “Macro” Hedge Fund managers) have been a major problem at every cycle turn for more than a decade now. So you really should empathize with why people are constantly forced to chase.
That said, the rest of us who have been making a lot of money during both Global #GrowthAccelerating (2016-2017) + the US Growth Acceleration to The Cycle peak of Q3 of 2018… then making the US #FullInvestingCycle turn in Q418 should keep capitalizing on their FOMO.
I do not know what this “deal” is going to be this afternoon, but what I do know is that:
A) I’d love another shot at short selling everything I covered on red during the last 3 weeks of HIGH BETA being for sale
B) I’m loving the contrarian Quad pivot into Global #InflationAccelerating (Commodities + Energy Stocks), regardless
While the HIGH BETA + SECULAR GROWER FOMO is in massive yuge oversupply, there aren’t many Oil & Energy Bulls out there. Having been a bear on both for the last year, I can empathize with their overstaying their bearish positioning.
Not to actually make someone trading on emotion actually think about what happens AFTER the greatest deal ever is announced this aft, but what if The Fed sees this deal as a reason to fade Fed Fund Futures and NOT cut rates again at the end of October?
Oh boy, that would not be good for FOMO.
It wouldn’t be good for my patient rotation into #InflationAccelerating Asset Allocations, Sector Styles, and Factor Exposures… inasmuch as any “deal” that doesn’t deal with Chinese guys stealing American Technology wouldn’t be either.
Our immediate-term Global Macro Risk Ranges (with intermediate-term TREND signals in brackets) are now:
UST 10yr Yield 1.47-1.71% (bearish)
SPX 2 (bearish)
RUT 1 (bearish)
NASDAQ 7 (bearish)
Energy (XLE) 55.11-58.99 (neutral)
DAX 110 (bearish)
VIX 15.64-22.22 (bullish)
USD 98.03-99.15 (bullish)
GBP/USD 1.21-1.25 (bearish)
Oil (WTI) 51.72-56.06 (neutral)
Gold 1 (bullish)
Copper 2.52-2.64 (bearish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
