“Do this, look out for that.”
- Team Six Commander
“One of the traits that sets Navy SEAL teams apart is their combination of stealth and adaptability. They can reliably navigate complex and dangerous landscapes in complete silence.” -Culture Code, pg 115
When it comes to navigating the complexity and volatility of non-linear macro markets, can you?
Some people just read the Old Wall’s perma bull “macro” talking points and “buy stocks” at any time and price under any developing economic and/or volatility condition. It’s fascinating to watch. Drawdowns are frequent. Compounding is rare.
Back to the Global Macro Grind…
Darius and I had a client call with one of the Buy Side’s long-term compounders yesterday. Unlike plenty of PMs who have either become some leveraged version of beta or replaced by cheaper passive index returns, this guy is a long-term alpha generator.
Unlike many who are just ranting garrulously about how great “the market” (all they do is stocks) has been since April (and are quite literally still trying to get their accounts back to FEB’s breakeven), this guy is up double-digits YTD.
His Top 3 Asset Allocations: Growth, Gold, and Cash.
With the Cash component literally burning at The Mnuchin Deficit stake, he was very concerned about the short-term emergence of a Down Dollar and Accelerating Inflation.
“My Tech and Biotech names have gone to the bloody moon, Keith. Gold is up a ton. And I don’t know where to go from here while most Americans are getting crushed.”
Ultimately, he ended the conversation by going to grab a gin and tonic. That’s one place to go. #Drink
It’s infrequent that you hear a leader in this profession (who is making money) speak with such disdain for the state of the US economy, debt, and deficits. He’s beating 95% of fund managers, seeing inflows, and more bearish than me!
“Keith, just stop and think about all of this for a second. From here, how does it end? It’s going to end in riots.” #Drink, again. I agree. As you can see in today’s Chart of The Day, 51.3 MILLION jobless claims have been filed in the last 17 weeks.
Anyway, I just thought it was one of the more interesting discussions I’ve had with a guy 30 years older than me.
In other non-Old Wall talking-point news this morning:
- USD (short) – after a fleeting 1-day bounce off the low-end of the @Hedgeye Risk Range, the US Dollar resumes its Bearish TREND this morning with EUR/USD +0.3% to $1.14 – on super short-term inverse correlations macro markets (SPY, GLD, and Commodities) like that more than they liked yesterday! The People who are paid in Dollars (if they have a job) will have to eat it
- INFLATION (long) – “Keith, show me the inflation” – ok. The Protein Complex ripped higher on a down day for US Equities yesterday with Cattle +2% and Hogs +5%. Lumber remains on an epic ramp, inflating another +3.8% yesterday… and this morning Corn is popping another +1.3% with Food and Medical Costs moving up into the right on The People too
- VOLATILITY – continues to break-down in the most bullish Full Investing Cycle markets (Treasury Bond Vol collapsing with the MOVE down to 46 and Gold Vol collapsing to 15 on front-month GVZ) as a fresh breakout in The Volatility of the most crowded part of the US Equity market (NASDAQ Vol = 35 on the NFLX news) remains an open question
How can inflation be accelerating as Treasury Bond Yields are falling? That’s easy. A: Recessionary Economic Stagflation.
While it may not be clear to some people on Wall Street that the rest of America remains in a recession, that’s what the rate of change economic data for July, Gold, and the Bond Market are saying, in silence.
Immediate-term @Hedgeye Risk Range with TREND signal in brackets:
UST 10yr Yield 0.59-0.67% (bearish)
UST 2yr Yield 0.13-0.17% (bearish)
SPX 3124-3235 (bearish)
RUT 1 (bearish)
NASDAQ 10,312-10,645 (bullish)
Tech (XLK) 103.94-108.95 (bullish)
Financials (XLF) 22.23-24.42 (bearish)
Shanghai Comp 3167-3510 (bullish)
VIX 26.11-33.11 (bullish)
USD 95.90-97.01 (bearish)
Oil (WTI) 38.83-41.54 (bullish)
Gold 1 (bullish)
Copper 2.75-2.99 (bullish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
