“Imagine yourself in your counterpart’s situation.”
- Chris Voss
Imagine you were long Long-term Treasuries (TLT) and Low-Beta Consumer Staples (XLP) stocks yesterday and short (or underweight) Energy Stocks (XLE) which were up another +3.3% on the day…
As Voss goes on to coach in Never Split The Difference in a chapter he titles “Don’t Feel Their Pain, Label It”, we’ll just label that #Quad2 and remind ourselves that “the beauty of empathy is that it doesn’t demand that you agree with the other side’s ideas.”
“You can label your counterparts fears to diffuse their power… the faster you interrupt action in your counterpart’s amygdala, the part of the brain that generates fear, the faster you can generate feelings of safety, well-being, and trust.” (pg 73)
Back to the Global Macro Grind…
We can empathize with latent Full Cycle positioning that is long of a Deflation/Duration portfolio (Treasuries, Gold, Utes, Staples, Housing Stocks, etc.)… because up until the end of #Quad3 and #Quad4, we were long of it!
The aforementioned #behavioral negotiation strategy by Chris Voss and the FBI is for dealing with a hostage crisis. You do not want to be the hostage. Being hostage to any Asset Class, Sector Style, or Factor Exposure in perpetuity is called jail.
Instead, we want you to be as free as a baby Kangaroo, bouncing around bullishly in the Australian sun!
Or maybe running around the yard like a puppy on Rainbow Lake… we want you to “feel” the liberty of being able to Go Anywhere with your hard earned capital and compound Full Investing Cycle returns!
Lol. Yeah, maybe I can start a Perma Bull marketing firm too.
In all seriousness, the US Dollar entering crash-mode (down -10% since June) is going to manifest into a more serious problem for low-to-no-income people whose Cost of Living is priced in whatever Dollars they have left.
Whereas it’s epically bullish for we, the Macro Aware people, who can capitalize on not only #InflationAccelerating (in Devalued Dollars) locally, but Real Growth Accelerating Globally in #Quad2.
Who gets it? The Global Macro market does:
A) Dr. KOSPI was ramping another +0.8% to new all-time and #Quad2 Cycle Highs overnight
B) And the beloved SPY, which has a -0.8 30-day inverse-correlation to Burning Bucks hit another all-time high too
No, not everyone is going to get paid. If you’re just looking at US Equities:
A) Energy Stocks (XLE) inflated +3.3% yesterday vs.
B) Consumer Staples Stocks (XLPE) falling -0.8%
And if you’re looking at Global Equities:
A) Thailand (THD) and Philippines (EPHE) saw their stock markets inflate another +1.5-1.6% overnight, whereas
B) Spain (EWP) and Germany (EWG) are seeing their stock markets down -0.6-0.7% this morning
Why? Emerging Market Stocks like a crashing US Dollar more than the demographically challenged European exporters love a Euro ramping to $1.22 and beyond!
That’s not to say I won’t be buying the damn dips in European Equity markets this morning too. Why not? Some European countries (Netherlands, Norway, Finland, etc.) are already in #Quad2.
What’s most exciting about the American #Quad2 data isn’t where it is today (our US GDP Nowcast ticked higher, again, post yesterday’s ADP jobs report and the MBA Purchase Applications ramp to -1.71% y/y)…
It’s where it’s going in the next 3-6 months. While our headline “inflation” nowcast ticked higher to 1.23% y/y for Q4, that rainbow and puppy dog could easily DOUBLE towards +2.4% by Q2 of 2021.
What do you think bond yields are going to do if we’re right on that? You know where we could be wrong? A: to the upside! Yes. With Janet and Cece hitting the CTRL+Print JOBS buttons in t-minus 3 months, bond yields could rip higher.
If they rip higher from here, Real Rates will ramp (off their Deflation Cycle lows) too. The US Dollar Crashing into an epic US GDP Ramp from -1.7% (today) to +10.9% y/y growth rate in Q2 of 2021 will make you feel like that baby kangaroo!
Immediate-term @Hedgeye Risk Range with TREND signal in brackets:
UST 10yr Yield 0.81-0.97% (neutral)
SPX 3 (bullish)
RUT 1 (bullish)
NASDAQ 11,840-12,472 (bullish)
Tech (XLK) 120.32-125.92 (bullish)
Energy (XLE) 34.89-40.86 (bullish)
Utilities (XLU) 62.10-64.73 (bearish)
Gold Miners (GDX) 33.03-36.79 (bearish)
Shanghai Comp 3 (bullish)
Nikkei 250 (bullish)
VIX 19.51-23.98 (bearish)
USD 90.93-92.46 (bearish)
EUR/USD 1.188-1.212 (bullish)
Oil (WTI) 42.07-47.13 (bullish)
Gold 1 (bearish)
Copper 3.25-3.53 (bullish)
Bitcoin 16,925-20,502 (bullish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
