“When I started counting my blessings, my whole life turned around.”
- Willie Nelson
If you thought outlaw country star Willie Hugh Nelson was “rich” and famous, you only know the famous part of his story. I was born upon his release of Red Headed Stranger back in 1975. By 1990 Willie was loaded with debt and his assets were seized by the IRS.
I remember riding around with my Dad in his blue pickup truck, listening to Willie’s 8-tracks. Sometimes we were headed to early morning hockey practice. Sometimes we were headed to a construction site or to clean the local GM mechanic shop.
I don’t remember talking about what people were “worth” or what political “class” we were supposed to be in. I don’t remember anything about Willie’s financial problems or the 1991 recession either. All I remember were the good tunes and life lessons that I’m thankful for today.
Back to the Global Macro Grind…
First and foremost this morning, I wanted to take the time to thank all of you.
While I am Canadian, I’ve been blessed with a beautiful and healthy American family. Thanksgiving is a uniquely American experience and I’ll never stop counting my blessings for having an opportunity to build this American company alongside my teammates.
We’re 11 years into this journey and we’ve never had a better quarter or year. That wouldn’t have been possible without the patience and support you’ve all had with our independent research and risk management #process.
Let’s get right back into that.
Here are the Top 3 economic data callouts from a brilliant man that I’m thankful to have on my team. I’ve never worked with a teammate who self-taught himself at the pace that Darius Dale has. Here’s what he’s teaching me this morning:
- USA - the post-Globally Synchronized Recovery (read: “artificial sugar high) inventory destocking cycle we prospectively identified post the surprisingly strong Q1 GDP print continues unabated here in the US, with the growth rate of Wholesale Inventories slowing -65bps to 3.91% YoY in OCT – the slowest RoC since DEC ’17. Recall that Wholesale Inventories are the 24th ranked factor in our nowcast model for US Real GDP growth. The print nudged our Quad 3 nowcast for 4Q19E down to 1.82% YoY/0.26% QoQ SAAR
- CHINA - Chinese Industrial Profits growth slowed -460bps to -9.9% YoY in OCT – the sharpest annual contraction on record. Move along. Nothing to see here, other than a country mired in a cyclical Quad 3 reality and secular slowdown damnation
- REST OF WORLD - French, South African, and South Korean survey data were incrementally confirming of Quad 1/1/2 nowcasts for the respective economies here in 4Q19E. That was more than we could say for Italy, whose slowing Consumer Confidence and Business Confidence data pushed out nowcast into Quad 3. Investors should have, at best, a middling level of confidence in the implied -4bps deceleration in YoY Real GDP growth given that the base rate of 0.35% from 3Q19 is only in the 56th percentile of the 95% confidence interval range surrounding the nowcasted growth rate of 0.31%. That’s a long-winded way of saying the projected Δ is still a toss-up in probability speak (i.e. the 4Q19E dot on the Quad map is close the x-axis) and subsequent data could easily push the Italian economy back into Quad 2
Get all of that? I do. And I’m thankful for that too. I’m a long way from Thunder Bay, Ontario and my initially “un-grade-able” 1st English Lit paper freshman year @Yale. I thank my God every day for being mathematically (and grammatically) Macro Aware!
With headline US GDP nowcasting at 0.26% here in Q4, what could possibly go wrong post these month-end November markups?
Yeah, I know. Our boy Trump says we’re in the “final throes” of what’s been thrown and tweeted at us about “trade progress” for almost a full year now (as both US GDP and Corporate Profit growth has done nothing but slow).
If GDP and Profits didn’t slow, I wouldn’t be able to be thankful for our Full Cycle Investing Returns (from OCT of 2018) in:
- Treasuries, across the curve
- Gold … and
- REITS and Utilities
Oh, and Housing Stocks (ITB). Wow did yesterday’s +32% year-over-year growth in New Home Sales in the USA blow the doors off the people who shorted Housing in OCT of 2018 (with a view that the UST 10yr Yield was going to 4-5%).
As you all know, with US Capex slowing to negative year-over-year growth (alongside SP500 profits slowing to -1.1% year-over-year), we should all be thankful for an epic acceleration across the entire edifice of US Housing data. There’s always an #acceleration somewhere!
When I started counting everything in rate of change terms, my whole professional life turned around. Best of luck and health to you and your loved ones for a Happy Thanksgiving. We have much to be thankful for.
Our immediate-term Global Macro Risk Ranges (with intermediate-term TREND signals in brackets) are now:
UST 10yr Yield 1.70-1.87% (bearish)
SPX 3088-3148 (bullish)
RUT 1 (bearish)
Utilities (XLU) 61.97-63.48 (bullish)
REITS (VNQ) 91.06-93.99 (bullish)
Energy (XLE) 58.48-60.71 (bullish)
Shanghai Comp 2 (bearish)
DAX 13113-13345 (bullish)
VIX 11.31-14.66 (bearish)
USD 97.55-98.44 (bullish)
Oil (WTI) 55.65-59.30 (bullish)
Gold 1 (bullish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
