“The New Era had arrived – a new school of economists argued that when you buy common stocks, you buy the future.”
- Thurman Arnold
No worries, I didn’t grab that quote from the New York Times or Old Wall Journal this morning. It’s from the late 1920’s when “men began to dream of a new world order in which both panics and wars could be eliminated.” -Rainbow’s End, pg 137
Back to the Global Macro Grind…
Is it the beginning or the end of the rainbow? I don’t know. All I know is that it’s Macro Monday @Hedgeye baby! And we’re going to stay with the measuring and mapping process that says last week was #Quad3 USA and #Quad1 in China & Japan.
Let’s start with the Global Currency market moves that continue to have highly (inversely) correlated impact:
- US Dollar Index got smoked towards its AUG 2020 #Quad3 lows, down another -1.9% on the week
- EUR/USD ramped +1.9% in kind, signaling immediate-term TRADE #overbought within its Bullish TREND
- Japanese Yen was up another +1.3% vs. USD and remains Bullish on both our TRADE and TREND durations
- GBP/USD appreciated another +1.6% last week, confirming its recent Bullish TREND breakout
- Argentine Peso was down another -0.8% vs. USD last week and remains Bearish TRADE and TREND
- CAD/USD appreciated another +2.1% last week, confirming its recent Bullish TREND breakout as well
Oh Canada baby! I know my Dad (who gets paid in Canadian Dollars) is pumped about the appreciation of his hard earned currency. If COVID ever slows down, he’ll have more purchasing power when he goes to Florida!
As for the Argentines and Turks (Turkish Lira continued to be devalued, down another -2.1% last week and down -8.5% in the last month), The People in both of those countries are getting plowed with a higher real cost of living.
Should USA do that to her currency? Open question for all of the linear MMT academics (who love the Argentina case study, ha) and Big US Government fans who are feeling fantastic about themselves this morning.
Fully loaded with ramping US Housing/Shelter Inflation, the cost of real American living #accelerated (again) last week:
A) Lumber (you need it to make houses) inflated another +6.4% last week
B) Copper (you need it to make everything green) inflated another +3.5% last week
C) Soybeans (we need them to eat) inflated another +4.3% last week
D) Palladium (can’t eat that or Bitcoin, yet) inflated +12.8% last week (better than stahks!)
Yeah, those of us who are super-duper-elite crushed it with our Short Dollar positioning ahead of the US Election. Long Gold and Silver in Burning Bucks? Awesome. They inflated another +3.9% and +8.5% last week, respectively.
Long Stocks? Oh yeah, that was awesome last week too. Whether you were long #Quad3’s fav Big Cap Tech or Down Dollar’s #Quads 1&2 International Equity exposures, you got richer last week too:
- US Tech (XLK) led US Equity Sector Styles at +9.7% on the week to +5.1% in the last month
- Emerging Markets (MSCI) Equities appreciated +6.6% last week to +6.7% in the last month
- Japanese Stocks (Nikkei 225) were up another +5.9% last week to +3.8% in the last month
Oh yes, Japanese Stocks are at the highest level they’ve been since 1991 this morning. You don’t have friends who missed that move, do you? Imagine they were long German Stocks (down -3.3% in the last month) with that country in #Quad4 instead?
How do we know it wasn’t #Quad2 in the USA last week?
A) Bond Yields were down last week (UST 10yr Yield down -6bps to 0.82%)
B) Gold, Silver, and Utilities were all up, again – they’ll be great shorts with Real Rates rising in #Quad2
Eventually we’ll get to a #Quad2 US economy (our current nowcast is for 1H of 2021 on that). But that’s not happening, economically in November, with 127,399 as the new record daily case count for COVID in America this weekend.
In the words of the greatest tweeter in the history of tweeting, “believe me”, if you have COVID, everything in your life #slows. And you have more time to pray for the no-to-low-income people who are seeing their cost of living #accelerate.
They never had the “new era for stocks.” They don’t have our economic rainbow. Maybe this vaccine will be.
Immediate-term @Hedgeye Risk Range with TREND signal in brackets:
UST 10yr Yield 0.73-0.92% (bearish)
SPX 3 (bullish)
NASDAQ 10,712-12,056 (bullish)
Tech (XLK) 109.31-123.36 (bullish)
Utilities (XLU) 62.10-65.37 (bullish)
Shanghai Comp 3 (bullish)
Nikkei 236 (bullish)
DAX 113 (bearish)
VIX 23.57-43.60 (bullish)
USD 92.01-93.37(bearish)
EUR/USD 1.159-1.189 (bullish)
USD/YEN 103.21-104.80 (bearish)
GBP/USD 1.289-1.319 (bullish)
CAD/USD 0.75-0.77 (bullish)
USD/CHF 0.90-0.92 (bearish)
Gold 1 (bullish)
Silver 23.79-25.98 (bullish)
Copper 3.03-3.17 (bullish)
MSFT 196-228 (bullish)
AAPL 107-122 (bullish)
GOOGL 1 (bullish)
Bitcoin 12,733-15,595 (bullish)
Best of luck out there this week,
KM
Keith R. McCullough
Chief Executive Officer
