“It was a magnitude, not a number.”
-Steven Strogatz
Long “solutions” to “trade” and potentially real “wars”? Well done. Short-term, you don’t always have to get numbers in The Cycle right to get some big-time behavioral trades right. Fading at both the top and bottom end of @Hedgeye Risk Ranges will help you do that.
On numbers vs. magnitude, “it may seem strange to modern minds that pi doesn’t appear in Archimedes formula for the area of a circle, A = rC/2… he avoided that because pi was not a number to him… it was simply a ratio between 2 lengths.” -Infinite Powers, pg 33
I’m not Archimedes and neither Dr. Drake nor Quadzilla (Darius Dale) are ancient Greek mathematicians. Modern machines, predictive tracking algos, etc. help us nowcast the numbers so that we can get the magnitude of the turns in The Cycle right.
Back to the Global Macro Grind…
So did Trump’s latest tweet on no WWIII get you paid if you bought “stocks” (and covered shorts) near the low-end of @Hedgeye Risk Ranges last week? Absolutely, bros and bro-ettes. This guy is good!
How about Oil (USO) and Gold (GLD)? Did the bigliest market moving man in the history of earth help you sell some of those core #Quad3 asset allocations at the top-end of their Risk Ranges 48 hours ago? Did he get you to buy more on sale again yesterday?
In his own massive mind, this guy does a lot of things, but he wasn’t quite able to change what’s happening in either the Credit or Earnings Cycle yesterday. Unless he has his boys change it, he won’t be able to change Q4’s GDP #Slowing report either.
Credit and ROC (rate of change) in Earnings vs. “Stocks”? Imbalances? Ever hear of WeWork or a CLO?
|
“In the CLO space, we are seeing the rating agencies begin to downgrade companies that aren’t meeting their proforma leverage metrics after including wild adjustments to their EBITDA estimates to sell the deal and understate true leverage. So slowing actual growth will exacerbate that. Add some of the technical issues with CLOs with lower rated buckets (small amount of CCCs allowed to own) and they start to not be able to finance single-B deals.” |
Nope. That wasn’t written by Morgan Stanley’s Investment Banking team. I’ll keep the voice-of-reality anonymous. If you have friends who’d rather focus on Mike Wilson going bullish because the Fed is printing an annualized $1.2 TRILLION of funny money, let them eat tweets.
Oh, and btw, we still think the Fed isn’t Dovish Enough … and will have to move to Phase 4 of money printing in 2020!
Why else would I be:
A) Shorting more US Dollars on the bounce this morning … and
B) Buying more Commodity Exposure in terms of both Commodities and their respective “Stocks!”
As you can see in today’s Chart of The Day, this is precisely what you should be doing when the Fed goes for cuts #4 and beyond! That’s when even the Fed economists realize that the “bottom” isn’t yet in.
Now some people think that any and every cyclical slow-down (trade or real wars, for example) and/or #InflationAccelerating spike means that the US economy has bottomed and is b-lining straight into #Quad2.
*Reminder: #Quad2 = both inflation and REAL growth, #Accelerating, at the same time
In fact, its not just some people. It’s how consensus is currently positioned from a macro perspective (see non-commercial CFTC net positioning data for details):
A) Short Dollars
B) Short Treasuries
C) Long Small Cap Stocks
I get the positioning. That was my p.a. (personal account) positioning for all of 2017 (and pre The #Quad2 Cycle Peak in Q3 of 2018)! I think you need your head read to carry that position into a 0.35% headline GDP report at the end of the month, but that’s just me.
At this point it’s not about the precision of our number and/or nowcasting process. It’s about the magnitude relative to both Old Wall forecasts and the buy-side’s positioning.
Our immediate-term Global Macro Risk Ranges (with intermediate-term TREND signals in brackets) are now:
UST 10yr Yield 1.78-1.95% (bearish)
SPX 3 (bullish)
RUT 1 (neutral)
NASDAQ 8 (bullish)
Utilities (XLU) 63.49-64.75 (bullish)
REITS (VNQ) 90.86-92.87 (bullish)
Energy (XLE) 59.11-61.14 (bullish)
Tech (XLK) 90.88-93.94 (bullish)
VIX 12.15-14.99 (bearish)
USD 95.87-97.40 (bearish)
USD/YEN 107.80-109.75 (neutral)
GBP/USD 1.29-1.32 (bullish)
Oil (WTI) 59.43-63.93 (bullish)
Gold 1 (bullish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
