“If you want to understand convergence, it helps to start at the beginning.”
- Peter Diamandis & Steven Kotler
That’s how the authors of both Abundance and BOLD (yep, all caps) introduce their definition of convergence in their latest book: The Future Is Faster Than You Think – How Converging Technologies Are Transforming Business, Industries, and Our Lives.
If you think flying cars and tunnel boring are crazy ideas, they really aren’t. I asked my 12 year old son, Jack, about both at dinner last night. He said, “oh yeah, Dad – you didn’t know that? They aren’t quite ready yet though.”
What I love about this book (and any well written book on disruptive growth – remember, we’ve built one of those companies here @Hedgeye!) is that it focuses on The ROC (rate of change) and exponential accelerations.
Back to the Global Macro Grind…
Especially after 7 straight up days for the NASDAQ, reading about stuff like that can make some people “feel” all bulled up. Secular Growers, forever, dudes and dudettes. It’s going to be tremendous!
The problem with most futurist books is that, while they imply the disruption makes things like horse & buggy whips go away, they don’t quite nail the part where their exponential #accelerations perpetuate #decelerations and economic divergences elsewhere.
The unlimited funding of the future is hostage to The Cycle, don’t forget.
Many might quibble with that point, though. On the day that the Fed is going to allegedly start buying super-late-cycle corporate debt and ETFs, the capital market window for Healthcare and Tech innovation IPOs still appears to be wide open.
In the middle of Phase 1 of Deep Depression #Quad4 in March, not so much.
But heh, maybe the aforementioned guys at the X-Prize are going to partner with the guys and gals at both NASA and the SMCCF (Secondary Market Corporate Credit Facility @FederalReserve) and eliminate the Labor Market Cycle?
#Cool. Here were my Top 3 Things to Institutional Subscribers at 6AM today:
- ASIA – back to back down days for the KOSPI (down another -0.7% after failing @Hedgeye TREND resistance), the Hang Seng resumed its stock market crash, down -1.5%, crashing –26.9% from its Cycle Peak, and Australia resumed its new bear market with stocks down another -1.1%, having crashed -24.2% since FEB after entering its 1st #recession in over 30 years
- SECTORS – glaring #divergences continue to mount between my fav US Sector Style (Healthcare, XLV, led gainers yesterday +1.7%) and US Tech (XLK), which continues to signal Bullish @Hedgeye TREND, up another +0.7%... and not only Global Equities (Asia, EM, Europe) but US Financials (XLF) and Industrials (XLI) which were down -1.9% and -1.3%, respectively yesterday
- RUSSELL – I went back to the well again on yesterday’s intraday bear market RUT bounce, re-shorting IWM for the 12th time since FEB – like France’s Stock market (down -26.7% since FEB), Le Russell is still in le #crash mode, eh (down -24.1% from its Cycle Peak, meaning bulls need to be up +32%, from here, to get their Full Cycle Investing return back to breakeven)
Yep, Asia is seemingly still a big place with plenty of technology to be excited about. But their stock markets don’t seem to have the uniquely American FOMO promotion aspect to them, do they?
How about giving some golf claps for being socially distanced out there (from Financials and Industrials) on the Alpha Course yesterday too? Everyone knows their Tech stories, but do they know the Long Healthcare vs. Short Fins one?
A) 55 of the 60 SP500 Healthcare companies have reported aggregate year-over-year earnings growth of +9.3%
B) All 65 of the SP500’s Financial companies have reported an aggregate year-over-year earnings crash of -35.1%
Does that partly explain why Healthcare Stocks (XLV) are only -0.7% YTD vs. Financials (XLF) having #crashed -29.0%? A: Absolutely.
The next question is, always, what’s next? Well, since the ROC of Earnings Growth mattered in Q1 (those are Q1, pre-virus EPS reports), fully loaded with all of its divergences, the macro market is telling you it’s going to matter here, again, in Q2.
Country, Sector, and Factor Exposure divergences always matter. If you want to know if these mounting macro market divergences eventually lead to a broad based (and often abrupt) and singular convergence of market risk… they do.
Don’t ask a Tech futurist for market-timing on those. The future of economic cycle risk often happens faster than they think.
Immediate-term @Hedgeye Risk Range with TREND signal in brackets:
UST 10yr Yield 0.58-0.74% (bearish)
SPX 2 (bearish)
RUT 1 (bearish)
NASDAQ 8 (bullish)
Healthcare (XLV) 96.20-101.66 (bullish)
Tech (XLK) 88.56-96.29 (bullish)
Financials (XLF) 20.27-23.40 (bearish)
VIX 26.23-39.84 (bullish)
USD/YEN 105.75-108.07 (bearish)
Oil (WTI) 14.62-29.13 (bearish)
Gold 1684--1738 (bullish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
