“It isn’t easy to prove direction of causality between a narrative and the economy.”
- Robert Shiller
No, Bob, it is not. But it’s easy to prove that, if you proactively predict the TRENDING rates of change of the economy, those numbers will eventually provide for the historical narrative.
Back to the Global Macro Grind…
But, but, Roubini just called Bitcoin’s “bubble worse than the tulip mania”… and a bunch of blokes who still read the FT for their Global Macro view are besides themselves, worrying, and wondering when the world will end…
After an epic -0.03% correction in SPY yesterday, taking its 2-day correction to a whopping -0.14%, I for one feel blessed that the bubbly earth I live on didn’t evaporate below my bed overnight.
It’s good to be here with you this morning, long of the bubbles we can enjoy blowing in Global #Quad2.
You don’t like bubbles? Oh, c’mon now. Lighten up. Stop wasting your time reading zero edge and spend some quality life-time with your kids blowing some really big ones using hula-hoops and stuff!
If you knew what causes bubbles (this particular multi-factor cocktail of #Quad2), why wouldn’t you be long them?
It’s a serious question that serious #FullCycle Investors should have been asking themselves since Global #Quad2 started signaling it was here back in November of 2020.
Would you prefer to be intellectually “right” and voluntarily lose money being short them?
Don’t forget that the all-time closing SPY highs we recently registered weren’t entirely born out of Bitcoin bubbliness – they were, in many cases, born out of bearishness. Crowded hedgie HIGH SHORT INTEREST stocks, shorted at 3-6x earnings, eh…
You know that the SP500 still has a consensus net SHORT position of -24,440 futures & options contracts, right?
You also know that in the last 3 years (i.e. when The Cycle’s ROC was #accelerating to a new Cycle High in Q3 of 2018) that there was a bubbly net LONG position in SPY of +247,179 contracts, right?
Maybe you did, maybe you didn’t. But I’ll wall street bet you $1M of my own Burning Bucks that 90% of people don’t.
Forget about what makes you “feel” all intellectual and “smart” about calling market moves certain bubbly names… and start with contextualizing this moment in Cycle Time with:
A) Where the ROCs (rates of change) of The Cycle came from (i.e. base effects) and …
B) Where it’s likely going to #accelerate to next
And voila, you’ll get to the Mother of All Bubbles that you A) have been and B) should continue to remain long of.
What will those rates of change look like at the peak of #Quad2?
- GDP GROWTH #accelarating towards +10% year-over-year (highest ROC since coming out of WWII)
- INFLATION #accelerating to more than a 2-bagger vs. yesterday’s CPI print, i.e. > +3.0%
- PROFITS #accelerating from +7.3% year-over-year to double-bubble profit rates and beyond
If you want to short a stock like Spirit Airlines (SAVE) into that because its “down this morning after reporting not having people on planes this quarter”, have fun with that at 3x Van Sciver’s recovery EPS number with 14% SHORT INTEREST.
If I’m right and Oil (WTI) is going to inflate towards the $72-74 range and the UST 10yr Yield can easily bust a move towards 1.8-1.9% as headline US Inflation (CPI) accelerates towards +3%, and beyond…
Then… there’s a bubble in Deflation/Duration holdings (Long-term Treasuries, TLT, and Gold) that I’ll keep making money in on the short side. Why not wait to short bubbles when they are actually popping? My kids love that game too.
Immediate-term @Hedgeye Risk Range with TREND signal in brackets:
UST 10yr Yield 1.09-1.22% (bullish)
SPX 3 (bullish)
RUT 2 (bullish)
NASDAQ 13,406-14,299 (bullish)
Tech (XLK) 132.17-139.28 (bullish)
Energy (XLE) 39.55-45.98 (bullish)
Gold Miners (GDX) 33.60-35.90 (bearish)
VIX 16.09-24.85 (bearish)
USD 89.89-91.38 (bearish)
Oil (WTI) 53.65-60.32 (bullish)
Nat Gas 2.67-3.08 (bullish)
Gold 1 (bearish)
Copper 3.59-3.79 (bullish)
Silver 25.44-29.07 (bullish)
Bitcoin 38,089-48,956 (bullish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
