“Negotiation is not an act of battle; it’s a process of discovery.”
- Chris Voss
Oh you know I love #process. If you didn’t, thanks for joining us as a subscriber this morning! The process of macro market and economic discovery isn’t about certainty. It’s about how incoming market signals and economic data change probabilities.
As Voss goes onto explain in a great #behavioral book, Never Split The Difference, “Don’t commit to assumptions; instead, view them as hypotheses and use negotiation to test them rigorously.” (pg 47)
That’s right. I don’t wake up every market morning committed to a position or needing to have conversations with Old Wall talking points. I need to write down the next batch of data and negotiate my next incremental market move from there.
Back to the Global Macro Grind…
“Slow it down. Put a smile on your face” -Voss. It’s another Macro Monday @Hedgeye! For those of you who are new to our apolitical and data-driven measuring and mapping process, today is the day we review what happened last week.
As always, let’s start with the Global Currency market:
- US Dollar Index was devalued another -0.4% last week and continues to signal we’re heading for #Quad2
- EUR/USD was +0.2% last week and remains Bullish on both @Hedgeye TRADE and TREND durations
- Yen appreciated another +0.7% last week vs. USD and also remains Bullish TRADE and TREND
- GBP/USD was +0.7% last week and is in the midst of a big Bullish @Hedgeye TREND breakout
- Argentine Pesos were down another -0.8% last week vs. USD and are down -3.9% in the last month
- Mexican Pesos were up another +1.5% vs. USD last week and are +5.1% in the last month
Yes, that’s right. If you’re going to be long a peso and short a peso, stay with Long Mexico vs. Short MMT Argentina. You know the US Dollar Devaluation story of a pending Biden COVID stimulus plan is big when Mexico’s currency is this bullish!
Down Dollar = a higher cost of living for The People who are paid in Burning Bucks. On that score, here’s how Commodity Inflation did last week:
- CRB Commodities Index hit a new Cycle High, +2.8% on the week = Bullish TRADE and TREND @Hedgeye
- Oil (WTI) inflated another +5.0% last week and was the last major holdout to breakout on my TREND signal
- Copper inflated another +3.9% last week and has inflated +5.2% in the last month = Bullish TREND
- Corn inflated another +2.1% last week and has inflated +3.6% in the last month to new Cycle Highs too
- Soybeans inflated another +2.9% last week and have inflated +11.0% in the last month = Bullish TREND (SOYB)
- Cocoa inflated +14.7% last week and is the latest commodity tamping to a new 3-month high this morning
- Lumber inflated +9.0% last week and has inflated +33.4% in the last month alone!
No, no, no. “There’s no inflation in breakevens” or in the Fed’s models, yet… Hahaha
That’s true. But there’s epic inflation gains in our Full Cycle Investing (Long Commodities) accounts. Nice job not getting sucked into those TINA talking points. TAAS (there are alternatives to US stocks) is crushing it.
And, sadly, The People who have no-to-low-income are getting crushed too. Please, if you’ve been making money in markets this year, Pay It Forward this Thanksgiving. The People need you.
During a Down Dollar, China #Accelerating Phase Transition, being Long Emerging Market Equities crushes it too:
- Emerging Market Stocks (MSCI) were up another +1.8% last week to +6.6% in the last month
- Russian Stocks (RTSI) were up another +2.8% last week alongside Oil and are +10.7% in the last month
- Taiwanese Stocks (EWT) were up another +3.3% last week and are +6.6% in the last month
If you have friends over for Thanksgiving who still only do the Dow-in-points or stahks! Tell them these Sector and Country Stock Styles aren’t +6.6-33.4% in the last month for the right reasons:
- German Stocks were only +0.5% last week and are +3.1% in the last month because Germany is in #Quad4
- Utility Stocks (XLU) were down -3.9% last week and are -0.5% in the last month because they don’t like #Quad2
- Consumer Staples Stocks (XLP) were down -1.5% last week to only +1.9% in the last month (not good #Quad2)
If the only thing those people you know do is US stocks, Long Inflating Energy Stocks (XLE) is where it’s at, baby! Give your friends some Hedgeye Small Cap de-SPAC “picks” (MP and EOSE) with that turkey too!
Being long Energy (XLE) wasn’t like being long Lumber (+33.4%) last week, but it certainly paid the bills at +5.9% on the week and +19.8% in the last month.
Consider the alternative to being Macro Unaware that Real Rates Rise alongside #InflationAccelerating during #Quad2. Those are the people who stayed long Gold which was down -1.0% last week and is down -1.9% in the last month.
For everyone, re-learning what goes up/down in each Quad is a process of discovery.
Immediate-term @Hedgeye Risk Range with TREND signal in brackets:
UST 10yr Yield 0.81-0.98% (neutral)
SPX 3511-3632 (bullish)
RUT 1 (bullish)
NASDAQ 11,577-12,029 (bullish)
Tech (XLK) 118.22-123.13 (bullish)
Utilities (XLU) 62.33-67.54 (neutral)
Energy (XLE) 32.58-38.04 (bullish)
Gold Miners (GDX) 34.97-38.09 (bearish)
DAX 128 (bearish)
VIX 21.72-27.76 (bearish)
USD 92.01-93.12 (bearish)
EUR/USD 1.176-1.191 (bullish)
USD/YEN 103.23-105.37 (bearish)
GBP/USD 1.312-1.338 (bullish)
Oil (WTI) 39.80-43.48 (bullish)
Gold 1 (bearish)
Copper 3.14-3.31 (bullish)
Best of luck out there this week,
KM
Keith R. McCullough
Chief Executive Officer
