Friday, July 10, 2020

Macro Update

Our proprietary macro index improved by 5.77 points this week to -38.46. While a long way from positive, and still screaming deep recession, that's a far cry from the -82.69 it scored back on June 1st. 

Morning Note: Knee-jerk reactions, economic cycles, and crony capitalism at its worst...

The Dow future contract went from down ~200 points a little while ago to slightly positive just after news hit that the U.S. producer price index actually declined last month versus expectations of a slight increase. The other major averages went from notably red to green as well.

Thursday, July 9, 2020

Morning Note: "The Day's Still Young"

Asian stocks closed mostly in the green overnight, with the Chinese state continuing to succeed mightily in their quest to mask reality by pumping China and Hong Kong equity markets.

Wednesday, July 8, 2020

This Week's Message: Never Share Your "Secrets", and Thoughts on Systems (economics and markets specifically) and on Galileo

Every Wednesday I, in "This Week's Message", attempt to offer up content that's a bit more pithy on present happenings than perhaps you'll find in our daily messaging. 

Sitting here this afternoon I'm honestly feeling a bit numb after spending much of the morning working on a study I've assigned to myself on the rate-of-change dynamics in the price of a certain asset class and what they possibly say about future price movements in the stock market. I actually have about a century's worth of data to score, so it's a bit monotonous, and time consuming, but so far intriguing. Upon conclusion I'll likely highlight my findings herein. If they're indeed telling, well, then I won't be telling much about the study itself. For, if, say, you happen to discover a legitimate market signal beneath all of the noise, you never ever share it, as it'll only "work" as long as the crowd isn't using it.

Morning Note: Concentrate (well, please don't!)

Asian stocks traded mixed last night, with 7 of the 16 markets we track closing in the red. China saw another strong rally on blatant and, for now, unrelenting state intervention. I illustrated yesterday how ugly such shenanigans tend to play out before all's said and done.

Tuesday, July 7, 2020

Evening Note: What the Bulls are Missing...

Today's selloff came late for the S&P and the Nasdaq, and didn't capture the level of volume most of the recent down days have exhibited. I.e., while volume indeed increased as stocks sold off, taking the entire trading session into account, the 27% below the 20-day average volume figure says today was more about stubborn buyers than it was passionate sellers.

Morning Note: Back In The Twilight Zone

Asian equities traded mixed overnight, with 10 of the 16 markets we track closing in the red. Chinese stocks -- aided by the state -- continue to rally. The last time we saw such blatant state-influenced pricing of China's markets ended very badly.

Monday, July 6, 2020

Evening Note: The Most Bullish Chart for Stocks Right Now

Believe it or not I won't be raining all over the stock market's parade today, at least not when it comes to today's S&P 500 breadth.

Chart of the Day: Things That Happen When You're In A Bubble

Hedgeye's Keith McCullough, who, like us, has intimate experience with modern history's greatest bubble/bear markets, is singing our tune this morning:

Quote of the Day: We're Not Alone

As we continue to mine the data for evidence that the latest in stock market action owes to some fundamental basis, we continue to come up with little more than fool's gold.

Alas, we're not alone:

Morning Note: Beware, Reattachment Can Be Painful

Last night saw a huge rally in Asian equities -- China and Hong Kong in particular (up nearly 6% and 4% respectively) -- on, well, you guessed it, political and policymaker pumping. 

Friday, July 3, 2020

Macro Update: A Better Look, Commodities, and A Monster Mountain Left to Climb

This week saw a notable improvement in our macro index, with a net gain of 7.69 points taking it to -44.23. Still scary-low, but a far cry from its all time low -82.69 on 6/1.

Wednesday, July 1, 2020

Quote of the Day: Gravity Doesn't Care About Narratives

In his morning commentary Hedgeye's Keith McCullough spoke to our earlier post with regard to commodities ("flation"), as well as to our latest reporting on the bearish action in corporate credit:

This Week's Message: Flation is a virtual certainty...

The Dow future contract went from trading ~200 points lower to a hundred points higher by the open on news from ADP that private sector payrolls grew by north of 5 million (2 mill+ in June and a revised 3 mill+ in May) over the past two months, plus other headlines suggesting that two potential COVID vaccines are looking good in early-stage trials. 

Tuesday, June 30, 2020

Evening Note: Conviction This Time?

Another big rally in the major equity averages today! The Dow closed up 217 points, but the big moves were in the Nasdaq, +1.87%, and the S&P 500, +1.54%. Which means tech (dominates both indexes) had a great day.

Morning Note: The Bull, The Bear, And The Simply Objective Participant

FYI I'm on the road all week so I'll be light in terms of frequency and content herein for the next few days.

U.S. equities are all over the place this morning. Over the past couple of minutes the Dow has gone from nearly positive to down triple digits, to down 70 as I type. The S&P has been green to red and back to green presently, the Nasdaq has stayed green by roughly a half-percent. 

Monday, June 29, 2020

Evening Note: Shorts Getting Tired of Getting Killed

U.S. equities staged an impressive rebound off of Friday's deep selloff. The Dow gained 580 points, the S&P jumped nearly 1.5%, the Nasdaq Comp up 1.2% and The Russell 2000 spiked a whopping 3.1% in today's session.

Morning Note: Setups Not Supportive

Last week's (for most of Asia) downward momentum in equities carried through to last night's session, with all but 2 of the 16 markets we track trading notably lower. Not so much for Europe, as 10 or the 19 bourses we follow are trading higher so far this morning. The U.S. is looking to rebound a bit off of Friday's drubbing with the Dow threatening a 170-pt open, the S&P set to start the day roughly .5% up, the Nasdaq just barely in the green and the Russell 2000 in rally mode with its future contract pointing to a 1.4% open.

Friday, June 26, 2020

Macro Update: You Heard Correctly, But No!

This week's macro update is going to be short and sweet. The Mrs. and I are heading out early afternoon to meet up with a 3-yr old who's ready for some serious Meemaw and Peepaw action this weekend.

Morning Note: Huge Risk When These Two Converge

Asian equities followed the U.S.'s lead from yesterday, with all but 3 of the 16 markets we track closing higher. Europe's trading mostly in the green this morning (15 of 19 markets up), while U.S. equity futures are pointing a 200-pt decline in the Dow, and .4%, .15% and .26% dips for the S&P, the Nasdaq Comp and the Russell 2000 respectively.

Thursday, June 25, 2020

Evening Note: One past, many possible futures...

Super quick evening note. It's the Mrs.' birthday and, well, you know...

Stocks staged a big turnaround today sparked by news that the central bank is inviting commercial banks to their we're-bailing-out-the-riskiest-risk-takers party.

Wow! Moral Hazard (and Cronyism) To the Extreme!

Well, folks, suffice to say that the powers-that-be are not only committed to preserving the bubble, but to inflating it even further in the process.

Quote of the Week

As you know, we do our own work; as we absolutely have to if we are to have confidence/conviction in how we manage portfolios.

Morning Note: The Only Certainty

Yesterday marked the third day in a row with a triple-digit move in the Dow. Of course the key distinction being that yesterday's move was down, while Monday's and Tuesday's were up.

Wednesday, June 24, 2020

This Week's Message: Same concerns, only...

I'm typing this week's message on a day when, at least at the moment, the Dow is down some 750 points. Multiple headlines say a surge in COVID cases would be the culprit.

Morning Note

The headline this morning reads:
"Dow futures slump 240 points on COVID surge and trade tensions"

Tuesday, June 23, 2020

Evening Note: Market Misreading -- And -- Have Folks Already Scratched That Itch?

In this morning's message I noted that the trading session had begun with a markedly better look than yesterday's. Well, by the end of the day, other than a few more sectors finding their way into the green, the internals -- just like yesterday -- were nothing befitting a healthy bull market. 

Morning Note: Move along folks, nothing to see here...

So there I was last night, minding my own business (pondering how certain laws of physics make good metaphor for markets, literally), when my peripheral vision catches this on the screen to my left:

Monday, June 22, 2020

Evening Note

This morning I offered up a quick commentary on what I was seeing in today's trading action. That distortion between headline index numbers and the underlying action, while a little less skewed to the bearish case, pretty much lasted till the close.

Chat and Chart of the Day

Here's an excerpt from our inter-office data/research discussion log, and the accompanying chart:

Quick note on this morning's action...

In my morning note I implied that one day's action should never be construed as the stuff of trends. 

Morning Note

Asian equities were mixed overnight, with 9 of the 17 markets we track closing in the red. Europe's mostly red this morning; 13 of the 19 markets we track there are trading lower. U.S. equities are bouncing around a bit with the Dow down .28%, the S&P 500 about the same and the Nasdaq flat as I type.

Saturday, June 20, 2020

Macro Update

Well, the bad news is our macro index just posted its 35th consecutive week below zero. Plus, its net score remains lower than any logged during the past two recessions (back-tested). The good news is this week's score marks the third consecutive weekly improvement.

Friday, June 19, 2020

Chart of the Day (maybe the year)

Of all the charts that would trouble the thoughtful investor, this one might take the cake:

What Might "Crack the Ice"

As I stated in his introduction letter, and, per the below, our new operations manager (Dan Lillibridge) has a thing for markets.

As you might imagine (particularly if you know Nick, Jeannette, and yours truly [not to mention Ryan, who's presently finding currencies fascinating], and now Dan) we often have quite the inner-office dialogue going on around markets and the economy. We have a group chat feed where any of us can log in, comment, ask questions, etc.. 

At times, I find it can be instructive enough to share a bit herein.


Morning Note: Not Why We've Been Adding Commodities

Hard to believe, although it shouldn't be, that we're back to pumping the China trade narrative -- although more subtly at the moment than a year ago -- to pump equity markets. Oh and it's not only us, by the way, China's happy to play the pumper every bit as much themselves.

Thursday, June 18, 2020

Evening Note: In the End, Macro Always Matters -- Plus Our Foreign Macro Update

Analyst Julien Bittel points out essentially the case we started making late last summer when our proprietary macro index rolled into the red (as it did [on a back-tested basis] prior to the previous two recessions as well) and we began hedging portfolios.

Morning Note: Not for the Faint of Heart

Asian equities, save for China and India, closed in the red overnight, Europe's selling off across the board and U.S. equity futures are pointing to a down open this morning.

Wednesday, June 17, 2020

Evening Note and Quotes of the Day

Quick one this evening. If you haven't yet, be sure to take in today's video commentary.

As for today's market, in a nutshell, the Dow and the S&P 500 took a bit of a hit, the Nasdaq was just a tad to the green, while the Russell 2000 got slammed -1.8%. Our core portfolio mix closed flat on the session.

This Week's Message: Volatility and the Current Setup (video)

Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust:

Yep, FOMO!!

78% of mutual fund managers say stocks are overvalued:

But, per yesterday's morning note (featured quote below) -- and Stage 6 of the Boom/Bust Cycle -- they're playing the game anyway:

From Bloomberg's Lisa Abramowicz this morning:
"It's not just Davey Day Trader buying the recent rally. Fund managers' June cash levels dropped from 5.7% to 4.7%, the biggest decline since Aug'09, while hedge fund net equity exposure soared to 52% from 34%, the highest since Sept'18: BofA Global June Fund Manager Survey."

Yep, FOMO (Fear Of Missing Out)! 

Morning Note: Patience and Caution are Key Right Here...

Quick one this morning...

Asian equities were slightly green in the aggregate overnight. Europe's up a bit this morning while in U.S. equities, the Dow and the S&P are flat, Nasdaq's up .4% and the Russell 2000's down a hair.

Tuesday, June 16, 2020

Evening Note

As I express/explain our relatively bearish thesis during client review meetings I've been making reference to the coming wave of bankruptcies and the simple, apparently unbeknownst to many market participants, fact that the Fed cannot print sustainable corporate cash flow -- nor jobs for that matter.

Charts of the Day

Well, if the stock market (based solely on price action), and much of the media were our guides we'd say we're presently leaving the runway toward a brand new, sustainable, economic expansion.

Pre-market Note to Self: Back to Stage 6

Feeling like sharing from my personal log is apropos this morning. FYI, I tend to be a bit more blunt in my notes to self...

6/16/2020 Tuesday

Trump’s promising a trillion dollars in infrastructure, Fed’s buying corporate bonds, retail sales and industrial production will be bouncing off the bottom this morning, Asia screamed higher overnight, Europe’s rallying hard and U.S. equity futures look to open 3% higher…

Morning Note

Fed corporate bond buying, well, the Fed funding a taxpayer-backed special purpose vehicle to buy corporate bonds (same thing, but ostensibly makes the illegal legal), a pending trillion-dollar stimulus proposal (yes, we're -- at the margin mind you -- adding a bit of materials exposure this morning to our core portfolio) and a revived thrust in FOMO (fear of missing out) has the market in abrupt turnaround mode after last Thursday's (Dow down nearly 1,900 points) epoch drubbing.

Monday, June 15, 2020

Evening Note: Could It Truly Be About Rookie Day Traders and Sports Bettors?

Yet another, let's call it, amazing day in the equity markets. Late last evening the Dow future contract was pointing to a 1,000 drop at this morning's open. By the time the bell rang things had improved, albeit slightly, to where the index began the day somewhere north of 600 points in the red. Then, by a stroke of Fed genius (well, Fed intervention), late morning pdt, stocks reversed course and stayed that way to the tune of +157 Dow points come closing time. As I type, futures are pointing the index to another 450 points higher from there.

Quotes of the Day: On Moral Hazard

Stocks staged an impressive turnaround this morning on this news:

Quote of the Day

More Mandelbrot wisdom:

Morning Note

A sea of red washed over Asian equities last night. Same for Europe so far this morning, although not as deep, while U.S. equity futures are definitely feeling some pain: Dow’s set to open down over 600 points, the S&P 500 future contract is off 2%, Nasdaq’s is down 1.4% and the Russell 2000 contract is trading 2.5% lower as I type.

Sunday, June 14, 2020

Quote of the Day

Just finished reading Benoit Mandelbrot's utterly essential The Misbehavior of Markets again (i.e., this, like Reminiscences, has become a perpetual read for me), therefore, a flurry of quotes are likely to come your way over the next few days.

Saturday, June 13, 2020

Macro Update: Is, per the stock market, the coast clear?

Just completed my weekly macro exercise: Our PWA Index improved for the second consecutive week, going from -61.54 to -57.69. 

Friday, June 12, 2020

Trading Setups

A good friend of mine asked for my thoughts the other day on telemedicine as an investment. He also recently inquired about Disney. I thought my reply may be instructive in terms of trading setups right here as well; in case you're thinking about it:

Quote of the Day: Captures the Essence of How We Approach Portfolio Management

If you're at all watching the latest intraday price moves of the equity markets -- not to mention the day-to-day, week-to-week and month-to-month price moves -- I imagine you're getting a feel for the futility of short-term predictions. While technical analyses do play a role in our process, we view the price fluctuations as essentially the wind, while general macro conditions constitute the all-important tide; the latter being what ultimately determines the prevailing risk/reward setup.

Morning Note

Asian markets showed some calm last night after yesterday's global equity drubbing. Most markets closed in the red, but with the worst being a -2.23% (small only in comparison to yesterday) hit for New Zealand. India, Indonesia and China's Shenzhen Index actually closed up. European equities are rising a bit this morning and U.S. equity futures are pointing to a bounce that would recapture roughly a third of yesterday's decline.

Thursday, June 11, 2020

Evening Note

No doubt you're expecting me to comment on today's big selloff in global equities. So, not to disappoint, allow me to say that today saw a big selloff in global equities. Now, hold that thought.

Morning Note: Much Left to Play Out

Asian equities (save for China, down moderately) got crushed overnight. Europe this morning is deeply in the red across the board. U.S. equity futures are pointing to a bloody session (at least at the open) as well. 

Wednesday, June 10, 2020

Evening Note: The Thing About the Bull Case

After bouncing all around during today's session, U.S. equities, save for technology, finished in the red. 

Quick Note On Today's Fed Announcement and the Stock Market

Fed funds rate remains at "near" zero, and the committee says they'll not raise rates through the end of 2022.

Quotes of the Day: It's 1999!

Tweet this morning by economist John Hussman:

This Week's Message: A Really Tough Spot

I wrote the following in a post I titled "Wait for It" back on March 23rd. Coincidentally, that was the day the market bottomed:

Tuesday, June 9, 2020

Evening Note

The Dow, the S&P and the Russell 2000 all took pretty good hits during the cash session today. The Nasdaq Comp, however, closed up 0.29%; the usual suspects -- Apple, Facebook, Amazon, Microsoft and Google -- doing their share of the heavy lifting.

Chart of the Day

The graph below illustrates how dramatically stock prices have strayed from fundamentals the past few years, but also take note of the prior two recessions (in red) and how corporate profits bottomed ahead of the bottom in stock prices, dramatically during the '01 recession:

Morning Note: Reminiscent of the Dotcom Bubble

Asian equities were mixed overnight with Australia up 2.4%, Thailand down 2.1%; all other markets landing somewhere in between. Europe's getting hammered across the board and U.S. futures are pointing to a notably lower open with the Dow contract looking at a 346-point drop; the S&P 500, the Nasdaq and the Russell 2000 are set to start the day with declines of 1.1%, 0.4% and 1.6% respectively.

Monday, June 8, 2020

Evening Note

As clients and regular readers are fully aware, our present macro thesis dictates that, while we indeed have exposures in a number of areas that are currently "working" in markets, we remain biased toward mitigating the risk of a potentially substantial downside move in equities.

Morning Note: Us Being Stubborn, and a 32-Year Old Warren Buffett on the Stock Market (2-minute must-watch video)

Asian markets (save for Japan +1.37%) traded slightly higher overnight virtually across the board. European equities are mixed this morning, while in the U.S. the Dow is up 250 points, the S&P is up .38% and the Russell 2000 is surging 1.7%. The Nasdaq, however, is slightly in the red.

Friday, June 5, 2020

Macro Update

We just scored our macro index for the week, and while the improvement in no way compares to what we witnessed with this morning's jobs number, it was notable nonetheless: Improving 21.15 points to an overall score of -61.54, from last week's all-time low of -82.69.

Bonus Must Read Quote of the Day

Definitely not complaining, but still trying to get my head around today's jobs report.

Quote of the Day

Former Goldman Sachs portfolio manager and hedge fund founder Will Meade recalls the year 2000:

Morning Note: Must Read!

The highly-anticipated May employment report was just released, and it has to be the biggest miss vs economists' expectations on record. 

The consensus estimate, which jibed with weekly and continuing jobless claims reported throughout the month, was a loss of 7.7 million jobs. What we got was a gain of 2.5 million. That's awesome! But, per below, it's a total head-scratcher. 

Thursday, June 4, 2020

Quote of the Day: Must Read!

RealVision's Roger Hirst echoes our message herein regarding the economic outcome should the powers-that-be succeed in keeping asset prices buoyed during what is the worst recession since the Great Depression:

Evening Note: Knee-jerk Nature

For this evening's note I'm going to simply cut and paste from a Bloomberg article to point out:

Morning Note: A Study In Behavioral Economics

While the major averages have retraced more than I expected during what I believe to be a bear market rally, the state of global macro affairs and their go-forward setup offers virtually zero odds of companies in the aggregate returning a level of profitability that comes close to justifying present equity market valuations.

Wednesday, June 3, 2020

Evening Note

Have to share this quote from an interview I'm listening to with Stephen Clapham, founder of investment research firm Behind the Balance Sheet:

Quote of the Day: Reckoning

RealVision's always thoughtful Ed Harrison made sense on his blog yesterday. Here's a snippet:

This Week's Message: Not So "Classic" After All

While market history and a veritable plethora of data allow me to continue my this-is-a-classic-bear-market-rally (BMR) narrative, the fact of the matter is that we're at the point where I need to dispense with the word "classic".

Tuesday, June 2, 2020

Evening Note

Wow! At 12:48pm pt this afternoon U.S. stocks literally rocketed higher. I'm looking for a headline, or a tweet, but -- other than the conspiratorial tweets suggesting that the PPT ("Plunge Protection Team" [alleged government operatives]) are at it again via their supposed proxies -- I don't see any.

New Bull Market??

Like I said in the intro to this morning's quote of the day, the market internals (as well as the macro data) we track do not remotely signal that the bear market is anywhere near over (although, of course anything's possible).

Quote of the Day

I've noticed a few headlines and tweets lately implying that the recent "rotation" -- from the up-till-now winning sectors to the up-till-now losing sectors -- is a bullish sign for equity markets. Given macro conditions, and the market internals I've referenced herein of late, that's definitely not my take.

Morning Note

Roughly a half-hour before the open the Dow future contract is trading about a half-percent higher, S&P 500's contract is up .35% and the Nasdaq future is up 0.13%. Oil and copper are up nicely, silver's down and gold's catching a tiny bid (up .08%). Ag commodities (our newest core position) are mixed. The 10-yr treasury is trading lower (yield higher), European sovereigns are up (yields lower) across the board.

Monday, June 1, 2020

Evening Note

Among the many indicators we monitor outside of the components of our own macro index are Markit's individual country purchasing managers indices.

Morning Note

Rioting in the U.S., demonstrations in Hong Kong as Beijing tightens its grip, pandemic still in play, Chinese state-run ag companies halting imports of U.S. products, and, as I type, the Dow's up 45 points, treasuries are taking a hit and European equities are extending their strong rally. Asian equities were strong across the board overnight.

Sunday, May 31, 2020

Quotes of the Day

Jim Kwik, in Limitless, his thought-provoking book on thinking, points out what I'll call the habitual shortcutting that stands in the way of successful investing: 

Saturday, May 30, 2020

Quote of the Day

As you've noticed, I've been calling your attention to presently high levels of short-interest and the short-covering phenomenon throughout the course of what has been a most impressive rally off of the March lows.

Macro Update

Here's the up-to-date graph of our proprietary macro index (you're sitting down?):

Friday, May 29, 2020

Quote of the Day

Keith McCullough is, once again, making sense this morning:

Quick market update

In this morning's note I wrote:

Morning Note: The Greenhouse Effect

Listening to a couple of expert interviews yesterday evening I found myself pondering the punditry's forever need to identify the ultimate catalyst that'll instigate the next great change in stock market trend. 

Thursday, May 28, 2020

Morning Note: The Proverbial "What If" Question

European equities are enjoying a strong rally this morning on the prospects for a stimulus package that of course involves some serious lending, but also some serious granting (of some $500 billion) to member countries. Thing is, The Netherlands, Denmark, Austria and Sweden aren't that enthused about backstopping weaker states. Interesting that Germany, the usual hardliner, doesn't make the list of dissenters.

Wednesday, May 27, 2020

Quote of the Day: Bubbles...

Without question Guggenheim's Scott Minerd is a pundit worth listening to. He and I aren't always on the same page, but he is smart, experienced, thoughtful and, above all, objective.

This Week's Message: A Macro and Market Update (video)

Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust:

Tuesday, May 26, 2020

Evening Note

You'll recall that a major headwind for equity markets over the past couple years has been the US/China trade dispute(s).

Morning Note

"This market makes no sense" is the present mantra among many macro analysts/investors/traders, and even among individual investors who've been around the block a time or two.

Sunday, May 24, 2020

Quotes of the Day

We've acknowledged herein of late the millennial-trader phenomenon that some believe helps explain the latest somewhat counter-intuitive rally in stocks off of the March lows. I've noted that it reminds me a bit of the dotcom craze of the late-'90s.

Saturday, May 23, 2020

Quotes of the Day

I sympathize with RealVision CEO/Macro Strategist Raoul Pal's comments yesterday:

Macro Update

Once again I can keep the macro update relatively light on narrative and heavy on charts.

Friday, May 22, 2020

Morning Note

The world of asset prices is mostly making sense this morning.

Asian equities, Hong Kong big time, got hammered overnight. Re: Hong Kong; China is abandoning all pretense by introducing legislation that would do a real number on HK's autonomy -- right, frankly, in the US's face.

Thursday, May 21, 2020

Quote of the Day!!!

Man! Hedgeye's Keith McCullough and I are on the same page these days!
"Super short-term performance anxiety. That's what a lot of people have right now, super short-term, that's a problem. It's embedded in all of our behavioral and biological issues. But these problems, if you go back and study this point in time; the spring of 2008, the spring of 2000, people* that had those and acted on those lost their fund, lost their job. You know, this is a big time, a big time for us, and if it wasn't a big problem for some, if you didn't have this almost existential FOMO**, then it wouldn't be happening. Something to think about at VIX*** 30." 
*Portfolio managers.
**Fear Of Missing Out
***S&P 500 Volatility Index

Morning Note

Another 2+ million folks filed for unemployment last week, bringing the total to 38+ million, and, as I type, the Dow’s up 60 points, gold’s down $14/ounce, silver’s off 1%, copper’s flat, oil’s up 3%, ag commodities are mixed (introduced to portfolios yesterday) and the 10-year treasury note is up a smidge (yield down a smidge).

Wednesday, May 20, 2020

This Week's Message: Half-Court Shots

I could honestly just limit this week's message to the last paragraph of last evening's note (but I won't):
"...while, per the above, it's not just us, our experience with past bear markets, our deep study of conditions and our understanding of the signaling within market internals in no way guarantees -- as our messaging of late may imply -- that the bear market's next leg lower will be soon upon us; it simply says that the risk/reward setup right here demands that we hedge our bets."

Tuesday, May 19, 2020

Evening Note

As I've noted herein multiple times of late, the market "internals" have been messy throughout much of what appears on the surface as a strong rally off of the March lows. I've referenced dynamics around leadership, volume, breadth, short interest, sentiment and so on. 

Quotes of the Day: Curiouser and Curiouser

As you've noticed, I'm fond of quotes. In fact, featured prominently in the document where I record the data I collect during my daily macro grind are no fewer than 30 that I like to peruse before digging in. 

Morning Note: Historic

US equities opened a bit lower but turned green within 30 minutes I suspect on the prospects of positive commentary coming out of Mnuchin’s and Powell’s testimony this morning on the CARES Act. The market’s ultimate reaction today will be influenced by how Mnuchin, in particular, fields what’ll be pointed questions, and to the extent both gentlemen further the we’ll-do-whatever-it-takes narrative.

Monday, May 18, 2020

Evening Note

Jerome Powell suggested -- in a 60-minute interview last evening -- that unemployment could hit 30% and that the economy may not see full recovery until the end of 2021, and, lo and behold, stocks staged an epoch across-the-board rally today.

No 'Big' Surprise

Per last Thursday's note, while this morning's rally feels big, there's nothing really shocking going on today:

Morning Note

US equity futures began their strong rally last evening when traders bought Fed Chair Powell's (60-minute interview) statement that they have plenty of tools left in the box, and dismissed his warning that the economy may not fully recover until the end of 2021.

Sunday, May 17, 2020

Quote of the Day

While perusing one of history's best reads on human nature this evening I came across the following which had me thinking about tonight's 60-minute interview with Fed Chair J. Powell, and the futures market's reaction:

A Bit Less 'Positioning' Advantage for the Bulls

I've stressed aplenty the past few weeks how high short interest in the market can essentially serve to support stock prices. I.e., when traders are concentrated on the bear side of the boat, particularly while wearing no life jackets (shorting is risky business), the slightest tilting toward the water on the bear side -- i.e., a rally lifting the bull's side -- will have the bears scampering toward at least the center of the boat for safety (ie., buying to cover their short positions).

Friday, May 15, 2020

Macro Update

I'm offering very little narrative in this week's macro update, as none's really needed; the featured charts speak for themselves.

Morning Note: Focus On The Right "Why"

The S&P opened lower this morning on what you’d expect from retail sales and industrial production data. Although, as I type it’s staging an impressive rebound; essentially flat at the moment. Futures were off over 1% pre-open on the data and on news that the US plans to ban Huawei from the American chip market and China’s threat to retaliate by way of iconic US brands such as Boeing and Apple.

Thursday, May 14, 2020

Evening Note

US stocks staged an impressive rally today off of what was a notably lower start. From what I gathered from the internals and the leadership, short-covering legitimately deserves the credit. But what inspired the initial pop that had the shorts rushing for cover? Looks entirely technical.

The S&P 500 failed once again -- last Friday and again this Monday -- to pierce the all-important 61.8% retracement level, then in just two days it pounded its way back down to the 50% line; which was an area that was virtually bound to offer some relief. The bounce clearly spooked the shorts into action:

Click to enlarge...

Coincidentally, I touched on this likelihood this morning while stocks were still in the red:

“Stocks are attempting a threepeat daily selloff, although they're coming off the lows a bit as I type. Make no mistake, even if we are now embarking on the next leg lower, along the way the market will be met with some aggressive buying, and, therefore, impressive intraday (and all-day/week/month/months) rallies as (along with occasional spike on the market-pumping headline) technically-inclined bullish traders rush in to battle the bears at previously-established support/resistance lines. Those market "internal" statistics I often reference give us a sense as to which side has the most conviction.”
Speaking of those “internal statistics”, today’s were sloppy. Although, at first blush you’d think, at least in terms of volume, that the day’s action was bullish; with total S&P 500 volume 11% above the 20-day average on a nice 1.15% up day. Problem is, the volume peaked at 8:30am pt when the index was significantly in the red. From there the market staged a rally that -- save for one brief dip -- carried through to the end of the session, but on volume that trended lower throughout. Moreover, while the NYSE up/down volume (3805/1866) was decent, as was the S&P 500 advance/decline line (386/117), the Nasdaq actually saw fewer advancers than decliners on an up day (1260/1360) and the number of stocks hitting 52-week highs vs 52-week lows was the opposite of bullish: Within the S&P 500 4 hit new one-year highs while 16 hit new lows; for the Nasdaq the new highs totaled 20, while new lows totaled 108.

As for economic data, all you need to know is that 2.9 million Americans filed new unemployment claims last week. Added up we’re now looking at roughly 25% of the American workforce being currently unemployed. The notion that stocks at present levels accurately reflect such a statistic is -- to put it mildly -- at odds with market history and fundamental commonsense.

Thanks for reading,

Quote of the Day

I've probably hit on short positioning the past few weeks more so than any present market trading dynamic. I've been saying that, given the significant net short interest in S&P 500 futures contracts, anything that might have the market rallying a bit is virtually certain to be exacerbated to the upside by short-covering.

Morning Note: What It's Not Okay Not Knowing

While Tuesday checked every bear market session box save for volume, yesterday was a clean sweep: The major averages sold off notably, with S&P 500 total volume 17% above the 20-day average and NYSE up/down volume finishing the day at 728/6477. The S&P 500 saw 52 of its members rise in price, while 451 declined. The Nasdaq’s advance/decline mix was 479/2164. The rest of the internals we track told the same story.

Wednesday, May 13, 2020

The Week's Message: A Week's Worth of Messages

There's a lot on our research plate this week, so, in an effort to buy myself some extra time -- while keeping the weekly message pertinent, and, ideally, useful to subscribers -- I'm going to highlight what I believe to be the highlights from the blog since last week's weekly message:

Morning Note: The Lure Of Easy Money

US equity futures look to be giving up overnight gains as Fed Chair Powell tells the Peterson Institute that essentially times are tough; really tough.

Tuesday, May 12, 2020

Evening Note

Just a quick rundown of the day's action, then a couple of quotes. One from a Wall Street legend whose story is on my shortlist of recommended bios to study anytime a newbie trader asks my advice. The other's from an article published this afternoon on the latest actions of today's newbie traders.

Quote of the Day

Keith McCullough points to where, even in this US equity market that seems so detached from economic reality, fundamentals are making sense -- and will likely continue to going forward:

Morning Note: This Is, Alas, A Historic Day

An old (in terms of how long we've known each other 😎) friend and client said to me yesterday, “this is like nothing we’ve ever seen.”

Monday, May 11, 2020

Evening Note

Quick note tonight... just a little thinking out loud...

Pre-market headline this morning read that the Saudi's will cut oil production by another 1 million barrels/day after a call from President Trump.

Quote of the Day

Hedgeye's Managing Director and macro strategist Darius Dale is making perfect sense to us this morning:

Morning Note

Per this weekend’s video commentary, individual investors (save for the Robin Hoodies) remain scared, investment advisors are feeling braver, and futures traders believe it's just a matter of time before the bottom falls out. I’ll add this morning that the latest trend in the VIX and the equity put/call ratio says options traders are feeling, let’s say, less-scared of late.

Sunday, May 10, 2020

Chart of the Day

The on the surface indicators that give us a feel for short-term equity market prospects are on balance supportive. I.e., while there are a few signs here and there that short-term bears may be defecting to the bull camp, there remains sufficient fear to keep the market afloat at current levels, or higher (i.e., in the short-run you're smart to be a contrarian).

Saturday, May 9, 2020

Macro and Market Update (video)

Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust:

Friday, May 8, 2020

Quote of the Day

Larry from Texas emailed a comment into Hedgeye's morning macro conversation:
"I own three restaurants in Texas, cannot get staff to come to work because they make more money collecting unemployment, we'll continue losing money with only 25% allowed seating capacity."

Morning Note

Judging by the pop in U.S. equity futures on this morning's jobs report you'd think we actually experienced a nice bout of job creation. Instead, and incredibly sadly, an estimated 20.5 million Americans found themselves newly out of work last month; based on data compiled during the reference week that included April 12th.

Thursday, May 7, 2020

Quote of the Months to Come...

Macro analyst Roger Hirst in a RealVision conversation this evening speaks smartly about the risks the economy and markets face in the months to come:

Evening Note

The narrative around today’s rally was fascinating (in that it presumably sparked the rally), and familiar. Against yet another literally economy-shattering jobless claims number came news that U.S. and China trade negotiators are up for a chat next week.

Morning Note

Analyst Jim Bianco tweeted a link to an article this morning on the rush among pharma to produce a COVID vaccine. He suggested that hope for a vaccine is what’s driving this morning’s rally, then concluded with “I guess hope’s a strategy”.

Wednesday, May 6, 2020

Evening Note

Having blogged at you plenty already today, I'll keep this evening's note brief and to the point.

Chanos On Reality

Investor Jim Chanos, in a Bloomberg interview this morning with Barry Ritholtz pretty much echoed my earlier note featuring BlackRock's CEO, as well as -- per a reply to that earlier note ("sounds like yesterday's discussion!") -- (while I have my own nuance) my own conversations with clients:

Larry Fink On Reality...

The following, from an advisor to the President, and the CEO of the Wall Street Firm presently doing the Fed's bidding in asset markets, while spot on, is interesting, considering the source.

This Week's Message: Price or Conditions? -- Or -- Taking Only "Good" Shots

In this week's message I'm dispensing with all charts and data (save for 1 point), you get plenty of that from me everyday. 

Recently I've found myself thinking more than usual about the price of stocks, or, I should say, about the price movement of stocks... well... actually, about the fact that the recent price movement of stocks -- all bear market history lessons aside -- in no way jibes with present general conditions.

Tuesday, May 5, 2020

Evening Note

In this morning's note I suggested that the momentum from yesterday’s late-day rally was looking to push into today’s session, and that today’s session would likely see better breadth -- vs yesterday’s rally that turned out to be quite narrow/uninspiring.

Question of the Day

Question of the day: Can you solve a debt crisis by piling on more debt?

Morning Note

Yesterday’s late rally, as narrow as it was, is gaining steam, and, I suspect, some breadth heading into this morning’s open.

Monday, May 4, 2020

Quote of the Day

Macro strategist Cameron Crise, in today's "Macro Man" column touched on liquidity vs solvency:

Evening Note

J.Crew and Golds Gym filed for bankruptcy protection today. The likes of Sears, Neiman Marcus and JC Penney are likely next on the retail chopping block. These, as you might imagine, would be on virtually any analyst’s list of obvious recession casualties, regardless of the cause. But of course COVID-19 is anything but your run-of-the-mill “cause”.

Morning Note

Warren Buffett’s out of airline stocks, sits on a mound of cash, and the take away from his annual shareholders' meeting over the weekend is, well, the famous value investor has dumped an industry that’s off 50% from its peak, and he sits on a mound of cash. 

Saturday, May 2, 2020

Quotes of the Day: The Stories Central Bankers Tell

In Princes of the Yen, Japan's Central Bankers and the Transformation of the Economy, a documentary film based on Richard Werner's book of the same name, the author himself concludes with:

Friday, May 1, 2020

Macro Update

Just finished the weekly scoring of our macro index. This from The Economist this morning essentially sums up the present state of general conditions:

Morning Note

“US Futures Lower amid Trade War Fears”
Seeing several similar headlines this morning. Apparently the President mouthed a sentence yesterday that featured the words China and tariffs.

Of course stocks selling off couldn’t have anything to do with 30 million American’s having filed for unemployment amid the start of the worst recession since the Great Depression, could it?

Thursday, April 30, 2020

Evening Note

Just a brief note this evening…

Huge global data dump today, and, without giving you the details, as you no doubt suspect I’m seeing some of the worst economic data of my nearly 36-year career. More on that in our macro update in the next day or two…

Quotes of the Day

Quoting myself from last November:
"The fact that CLOs didn't implode like CMOs did in 2008 is "a key driver of their recent popularity" offers me zero solace! Frankly, that's the sort of magical thinking ('home prices won't go down') that led to the 2008 disaster."

This Week's Message: What Others Think Others Are Going To Do...

Keynes suggested circa a century ago that trading (as opposed toI'll say, investing in) markets is not about assessing fundamentals, it's about what traders think other traders are going to do. And for the more savvy traders, it's about what they think other traders think other traders are going to do. 

Wednesday, April 29, 2020

Evening Note

Q1 data released today came in much worse than expectations. Even though the real COVID hit didn’t materialize until March, today’s releases confirm what of course we already knew about how tough this recession is going to be.

Morning Note

For a third day in a row U.S. equity futures are rallying hard in the pre-market, in the face of some dire headlines:

Tuesday, April 28, 2020

Evening Note

Just a quick note this evening:

A 400-pt open for the Dow this morning turned into a 33-pt decline at the close. The Nasdaq rolled over bigger and closed down 1.4%. That’d be -336 points if the Dow had matched it.

Morning Note

Could almost cut and paste yesterday's morning note: Although this morning it's not GM and Tyson, it's:

Monday, April 27, 2020

Evening Note

The prospects for unrelenting stimulus, the willingness to “believe”, per the quote below, and no doubt some substantial short-covering, per my morning note, continue to keep the S&P 500 hovering at levels that many thoughtful/experienced analysts (yours truly included) see as dangerous, given real general conditions. As you'll see in the chart below, the results for the S&P 500 don’t necessarily tell the broader market story.

Question of the Day: "Why Is Tech So Strong?"

In his morning macro presentation Hedgeye's Keith McCullough was singing our tune as he fielded the following question:
"If we are in deep Quad 4 why is tech so strong?"

Morning Note

GM announced this morning that it’s suspending its dividend as well as its share buyback plan, Tyson foods says “the food supply chain is broken”, oil tumbled to below $13, Deutsche Bank “warns of loan defaults”, Apple delays production of 2020 iPhones on “supply woes” and economists Tom Orlik and Jamie Rush say that “a $6 trillion global recession is the optimistic scenario”. But wait, last night the Bank of Japan announced “more stimulus steps”.

Sunday, April 26, 2020

The Responsible Investor's Narrative

So we get the bull's narrative; STIMULUS! 

Okay, but, ultimately, or I should say, responsibly, we really need to see more by way of developments -- other than how the Dow's doing -- to justify flipping to a bullish posture, don't you think?

Saturday, April 25, 2020

Quote of the Day

Daniel Coyle, in his insightful and, frankly, delightful book The Talent Code points to how the world's most talented individuals approach their specialties.

Macro Update (video)

Bringing you our macro update once again via video this week. 

While editing, it occurred to me toward the end that I was at that point just rambling on about the stuff I've been rambling on a lot about lately. So if it seems a bit choppy it's because I cut out a bunch of what felt even more redundant than the content I left in 😎.

Hope you enjoy.

Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust:

Friday, April 24, 2020

Evening Note

Wow, what a week! Ironically, there's so much going on out there, while there's not much going on out there (if you know what I mean), that I find myself late on a Friday afternoon ill-prepared to give you the kind of pithy, eye-opening data and context that would do justice to the financial market/economic circumstances we presently find ourselves in.

I.e., I'm going to give you the "good stuff" -- my macro view of the world (literally) -- over the weekend, after I organize and prioritize the data for your consumption. 

In the meantime, for this evening's note -- which I'm compelled to bring you, now that I've formed this habit, and because it gets a good number of hits -- I'll just think on paper for a few minutes and leave this one at that...

Morning Note

In yesterday’s cash session stocks surrendered a 2% rally on news that Gilead’s drug disappointed in human trials.

US equity futures are rallying in the pre-market this morning against a sea of red across Asia and Europe, against yesterday’s PMI releases showing some of the worst prints on record, and against news this morning that US durable goods orders plunged 14% in March, vs -11% expected. Not to mention against abysmal outlooks emerging from Q1 earnings reports.

Thursday, April 23, 2020

This Week's Message: Our Moves So Far This Year (video)

We're devoting this week's message to a complete rundown of all of the adjustments we've made thus far this year to our core portfolio allocation.

Morning Note

Weekly jobless claims came in at 4.4 million this morning and of course equity futures are trading higher in the pre-market session.

Ironically, a headline that crossed my screen just a few minutes before the jobless number was released pretty much explains how stocks continue to reflect a rate of earnings that is unfathomably detached from reality:

Wednesday, April 22, 2020

Evening Note

A notification just crossed my phone from Bloomberg advertising a podcast titled “How the Crisis Pushed the Fed Into New Territory”

Well, my immediate thought was uhh…. no, let’s do one titled “How the Fed Fostered Yet Another Credit Bubble That, Like the Last Two, Has Them Charting New Territory To Try and Circumvent the Consequences of Their Own Doing.” 

Yeah, I know, that title is too big to fit anywhere. But I digress....

Quote of the Day

While much of Wall Street focuses on the prospects for stimulus ultimately saving the day -- could happen, although ultimately saving our portfolios from the saving will be a whole other something to manage -- we're (along with stimulus prospects) focusing on stuff a bit deeper below the surface.

Morning Note

US equities are trading nicely in green this morning, boosted in the pre-market by a surprise pop in oil prices (and, per the below, by some serious short covering). Asian equities, save for Japan, rose across the board last night. Europe’s trading solidly in the green. Bonds are selling off (yields higher) a bit (2-yr+ maturities). The dollar’s down in Asia, but mostly up in Europe. Commodities (ex-ag), save for palladium, are trading higher.

The pre-market jump in oil corresponded precisely with this tweet:

This tweet yesterday morning, however, didn’t provoke the hoped-for market response (at least not yesterday). Although, combined with the pop in oil, I suspect it isn’t hurting at all this morning.

In terms of the fundamentals, nothing’s changed. I.e.,  conditions remain ugly with no letup in trend at this point.

The above comments no doubt largely explain this morning’s move in equities, exacerbated markedly I strongly suspect by some serious short-covering: Futures traders came into this week with the highest net short exposure on SPX in years, while SPY short interest was hugely elevated as well.

SHORT-COVERING = buying borrowed shares
SPX = S&P 500 Index
SPY = ETF that tracks the S&P 500 Index

Tuesday, April 21, 2020

Evening Note

US equities closed lower again today: SPX -3.1%, Dow -2.7%, Nasdaq -3.48%, Russell 2000 -2.33%. Europe sold off across the board to a similar extent as well.

Quote of the Day

Hedgeye's Keith McCullough hints at what has some folks -- like some of the ones you see on financial networks -- totally missing the mark(et) in terms of the present state of general conditions:

Morning Note

Asian equities tanked last night, across the board. The rest of the world’s equity markets are notably in the red this morning as well. Oil continues to get trounced (June WTI contract down 27%), taking pretty much the entire commodity complex with it. Our two positions, gold (unintuitively) and silver* are seeing 0.80% and 3.52% declines respectively.

Monday, April 20, 2020

Evening Note

Oil got absolutely hammered today; the contract expiring tomorrow closed at -$37/barrel (yes that’s a minus sign, and, yes, they’ll pay you to come pick some up) -- a phenomenon that has never occurred. 

I.e., while stocks (SPX -1.76% today) remain disconnected from economic reality, oil -- while there are technical aspects to today’s historic move* -- is accurately reflecting it.

Morning Note: Oil, Stocks, and what they're reflecting...

US equities opened lower this morning and have been volatile (VIX back above 40) within a -1.5% to -.5% range for SPX. Bonds are up (yields down), gold’s up, silver’s up, the dollar’s up and oil is getting utterly hammered. Europe opened lower but most countries have now moved into positive territory. China traded higher overnight, while Japan traded off 1% and Australia tanked 2.5%.

Sunday, April 19, 2020


As part of our weekly scoring of general conditions we record the 1-week, 1-month and year-to-date performance of major U.S. sectors, as well as regions, long-term treasury bonds, gold, silver and copper.

This Morning's Log Entry: We Can Only Imagine!

Note: To the extent that I express my short-term outlook on markets, a sector or a commodity in my log entries, these are not to be the least bit construed as trade recommendations for the reader. They are, under present conditions in particular, subject to change without notice. What might appear to the reader as a viable trade idea today, could be something I'll do an about face on -- as new information presents itself -- tomorrow, with no prior warning. I share excerpts from my notes only when I deem them useful in terms of helping our clients maintain proper perspective.

Betting markets have the Dow going from high double-digit red to slightly green on news this morning that Mnuchin and Pelosi are close to a deal to add cash to the small business loan program.

Saturday, April 18, 2020

Macro and Market Update (video)

Here's history's greatest trader on bear market retracements. His "paper profits" refer to what he had made on his short position at that point during the bear market he was trading. He held his ground because he was certain that what he was about to experience was simply a bear market rally/retracement. He turned out to be correct. It was all about his study of "general conditions":

Quote of the Day

I've learned, at times the hard way, over the past 35 years that there's so much more to assessing probabilities for financial markets than securities' price movements themselves. I'd argue, despite the fact that we do our share of technical analysis, that, of the things we analyze in our daily course of business, securities' price movements are the least telling.

Friday, April 17, 2020

Chart of the Day

More evidence of the ill-health of today's equity market.

Bonus Quote of the Day

Hedgeye's Keith McCullough, like yours truly, intimately experienced the past two historic bear markets (he's younger, and smarter btw, so I go back a ways further).

In his morning note he confessed that he needed to rewind to the tech bubble to confirm what he already knew about early bear market action:

Pre-market note

US Equity futures trading are rallying hard this morning (+2.2%), although off of their overnight highs.

Quote of the Day

The following by macro analyst Cameron Crise should sound very familiar to those of you who've reached out to me in recent days soliciting my view on wading (unhedged) into this market:

Wary of the Rally

In last evening's note I pointed out the suspiciously weak volume experienced during the impressive (price-wise) rally in stocks we're currently experiencing. Suggesting that we should be, well, suspicious about its sustainability.

Thursday, April 16, 2020

Facts and Opinions

Can't resist sharing the following quote from an interview I'm listening to this evening with Grant Williams, the author of the widely read Things That Make You Go Hmmm, and relating it to our messaging herein, as well as to the work we do for clients:

This Evening's Notes

News after the close is that Gilead’s COVID treatment is showing very encouraging early results. Equity futures are screaming higher (3+% as I type). That’s hugely encouraging news that is absolutely worth celebrating!!

Quotes of the Day

Bloomberg's James Crombie is making perfect sense this morning:

Pre-market note

US Equity futures trading moderately higher pre-market, going from red to green on the 5.5 million jobless claims number. Remarkable! Both the number and the fact that the market traded higher on the news. Clearly, this remains a market mesmerized by the belief in stimulus and lulled by 11 years of buy-the-dip success.

Wednesday, April 15, 2020

Quote of the Day

FX Weekly in their article The Flipside of Oprahnomics echoed the concerns I laid out in this morning's Weekly Message:

The Week's Message: Will The Fed's Actions "Work"? And What Would "Work" Look Like?

In a RealVision interview aired Monday former Kansas City Fed chief Thomas Hoenig expressed his support for the methods his former employer is resorting to in the midst of what will be the greatest recession since the Great Depression. While at the same time he voiced his concerns about the ultimate exit strategy, and the unfortunate precedent it all sets. I share his concerns!

Quote of the Month

In his morning macro presentation Keith McCullough plain and simply nails the Pavlovian (after a long bull market) buy-the-dip instinct that can be (is) a killer during true, and inevitable, bear markets: 

Pre-market note

U.S. equity futures are tanking this morning on poor earnings and economic data. Europe is getting hammered while Asia was mixed overnight, although China was off across the board. Dollar rallying, bonds rallying, commodities selling off.

Tuesday, April 14, 2020

Digging for Clues

Beyond the traditional bear market technical profile -- that would see the first selloff retraced by at least 50% (like now) -- for the current rally in stocks to make fundamental sense the macro setup has to have either stopped deteriorating, or is deteriorating at a measurably slower pace. And of course an economic rebound would have to be in the not-too-distant offing.

The Great "Shadow-Banking" Crisis

Massive loan loss provisions -- JPMorgan today -- notwithstanding, the current crisis is not likely to be in retrospect deemed a banking crisis. However "shadow-banking crisis" may ultimately fit the bill...

Quote of the Day: Keeping Sight of the Diamond

Skimming through some of my highlights in past readings last night I stumbled across this from Vizi Andrei's Economy of Truth.

Pre-Market Note, And The Headline of the Day (maybe of the year)

Equity futures are rallying hard this morning. Headlines say on better COVID news. JPM reported a big miss on earnings, and announced it's set aside $8.29 billion for bad loans (twice expectations), but booked better than expected trading revenue (no surprise given market volume/volatility in Q1).

Monday, April 13, 2020

Quote of the Day (maybe of the crisis)

Pardon the cut and paste and sloppy highlighting, but you gotta read this. It'll sound familiar to regular readers.

This is from a 2015 speech by one of history's great (I'd say he's in the top 3-4 of all-time) investors, Stan Druckenmiller

Anything I might add would simply be repeating the same mantra we've been chanting herein from before the day we began hedging portfolios late last summer.

Yes, the speech was given 5 years ago, but we did see back-to-back double-digit stock market corrections in 2015/16. They didn't morph into something worse because we were able to skirt recession in both instances, not the case this time. 

Where he asks the question regarding the state of the economy ("worst in last 102 years?"), he was being entirely facetious; as the Fed was conducting monetary policy in 2015 as if the economy were still in recession:

Sour Grapes Only For The Taxpayer

Sure, I'm tempted to complain about the Fed chasing us out of our best position of the year (the ETF that shorts junk bonds) last week (although they made its replacements "gold and, yes, cash" look more attractive) but it is what it is. Better to just manage the risk within whatever cards we're dealt.

Futures Traders Ain't Buying It

Last week I featured the now net short interest among futures traders who speculate on the S&P 500 Index, along with short interest on SPY and in the NYSE.

Pre-Market Note

US equity futures have erased most of their steep overnight losses. Asia had a rough night.

Saturday, April 11, 2020

Quotes of the Day

Foreign exchange macro strategist James Aitken, in an excellent RealVision interview published yesterday, speaks to much of what we've been speaking to herein of late. Which is the reality that the system was essentially strained to the hilt prior to the arrival of this "exogenous shock" to markets:

Things Just Got Messier!

You clients who are new to our process should know that the number of adjustments we've made during the past 3 months equal what, during bull market conditions, normally occurs over the course of years.

Thursday, April 9, 2020

Macro Update, And More On Bear Market History

Just completed the weekly scoring of our proprietary macro index. As you'd expect, it's not pretty.

All The Fed Can 'Safely' Chew, And Our Short Junk Bond Position

The notion that the US Federal Reserve would actually buy any corporate debt whatsoever would've been virtually unheard of (well, maybe) just a few months ago. 

The Multi-Trillion Dollar Question

In my pre-market note this morning I stated what I view as the "multi-trillion dollar question":

Pre-Market Note

Equity futures saw violent swings between green and red on the 6.6 million jobless claims number released this morning. 

Wednesday, April 8, 2020

This Week's Message: Some History, And a Test of the Most Basic Investing Concept

While the stock market bounce off the lows to this point seems big on a percentage basis, considering the depth of the original selloff and the level of retracement thus far, it’s, at best, run of the mill compared to other such bounces historically.

Below the Surface: Hope Springs Eternal

Monday saw stocks up a whopping 7%! Yesterday was huge as well, until it all fell apart late in the day. Today's looking good (it's 11:04am) with the S&P up 2.23%.

Well, dang!, if it were only about the price action...

Pre-Market Note: Present States of Mind

Equity futures are up 1.2% as I type; they traded nearly that much lower at times during the overnight session. Yesterday’s session saw the kind of action that, once again, isn’t seen outside of bear markets.

Tuesday, April 7, 2020

Bonus Quote of the Day

I'll finish today's onslaught on your email inbox with something short and, well, not so sweet.

Headline of the Day

I'm fascinated by the following:

Reasons to be sanguine, and reasons not to be...

Bloomberg's Ye Xie points out in the first paragraph below what no doubt has recent stock buyers feeling sanguine. In the rest he points out why they may need to check those feelings. 

Quotes of the Day

Hedgeye's Keith McCullough in his morning macro update echoed our recent messaging herein:

Pre-market notes: Stocks are extremely dangerous right here...

Note: To the extent that I express my short-term outlook on markets, a sector or a commodity in my log entries, these are not to be the least bit construed as trade recommendations for the reader. They are, under present conditions in particular, subject to change without notice. What might appear to the reader as a viable trade idea today, could be something I'll do an about face on -- as new information presents itself -- tomorrow, with no prior warning. I share excerpts from my notes only when I deem them useful in terms of helping our clients maintain proper perspective.

Equity futures are once again in serious rally mode this morning. The stated catalysts being an improving covid-curve, prospects for additional government stimulus and the perceived certainty of an OPEC/Russia oil deal this Thursday.

Monday, April 6, 2020

This Evening's Log Entry

Note: To the extent that I express my short-term outlook on markets, a sector or a commodity in my log entries, these are not to be the least bit construed as trade recommendations for the reader. They are, under present conditions in particular, subject to change without notice. What might appear to the reader as a viable trade idea today, could be something I'll do an about face on -- as new information presents itself -- tomorrow, with no prior warning. I share excerpts from my notes only when I deem them useful in terms of helping our clients maintain proper perspective.

Another classic bear market rally today:

Watching some of the headlines as they pass by, it's easy to tell who was caught levered-long, or just long, at the top -- the hedge fund gurus and the Wall Street firms who are right now advising folks to back up their trucks and load em up with stocks.

Charts of the Day

I completely understand if you're wondering how I can come across so confident with my labeling recent spikes in stock prices, today's included, "bear market rallies". Suggesting that the worst is yet to come.

Well, of course I've been pounding you with the macro, which -- despite what you're hearing from many on Wall Street -- screams tough times ahead, record stimulus notwithstanding. But then there's human nature, with all its fears, hopes and biases, and the way it tends to push markets around under various circumstances.

For example, here's a graph of the VIX Index (white), nicknamed the "Fear Index", which tracks implied volatility in S&P 500 options contracts, along with the S&P 500 itself (yellow); capturing the first big spike in the VIX of the 2008 bear market:

And here's the same for the current bear market:

Yeah, WOW! 

Even more wow is the fact that stocks were down ~25% at precisely this (vix/s&p) point in '08, just like today...

So, bear-market human nature: 

Humans panic on the realization that recession looms, the VIX spikes and stocks fall. Then, shortly thereafter, the Pavlovian buy-the-dip response of the previous bull market takes over on any shred of good news, the VIX falls and stocks rise. 

Thing is, recessions simply don't work themselves out that quickly...

Here's the rest of the 2008 experience:

Yep, the vix calmed down, but settled within a 40 to 60 range (that's high), while the S&P 500 fell another 32% (-57% peak to trough).

Now, the above stated, make no mistake, while the history is compelling, it doesn't have to repeat. Thus, we continue to crunch the data and measure the trends, day in and day out, and remain open to all possibilities.

Pre-Market Note

Here's from my pre-market log entry this morning (recall from our videos that being "short" means selling borrowed shares on a bet that the market's going to drop. If you're wrong you can lose a ton. Closing a short position means buying back the shorted stock, which -- when short interest is high -- will add substantial oomph to a rally):

Sunday, April 5, 2020

Quote of the Day

Ironically (per the quote below), just after posting an excerpt from my weekend notes (where I questioned the prospects for a V-shaped recovery) I read a recent study titled "Longer-Run Economic Consequences of Pandemics" by economists Oscar Jorda, Sanjay Singh and Alan Taylor.