Friday, February 21, 2020

Brief note on today's action, and on our core mix...

As I type the Dow's down 186 points (0.64%), the S&P 500 is down 0.78% and the Nasdaq Comp is down 1.19%. 

Thursday, February 20, 2020

Macro Update

All of this week's data reports that flow to our proprietary macro index have been released, allowing me to score our index a day early. Just finished, here's a recap:

Wednesday, February 19, 2020

Quote of the Day: Amazing!!

Last Sunday afternoon I said to Nick; "let's see what happens when Apple cuts its outlook because its prize [growth] market is for all intents and purposes on lock down." 

Ironically, the announcement came Monday (Presidents' day) afternoon, and, lo and behold (tongue in cheek), the stock gaped down roughly 4% (that's nothin based on the news) at the open on Tuesday. However, by today's (Wednesday's) close it was back to within a buck of its pre-warning price. Amazing!!

Chart of the Day: Retail Mortality

So I totally get what Amazon does to the brick-and-mortar retail space, but still, given the presumed strength of the consumer, there has to be more (perhaps the corporate debt reality I keep pounding on herein) to what you see below than simply online shopping.

This Week's Message: The Secret Sauce

No kidding, it absolutely makes some sense to us that amid what you already know about the coronavirus and its impact on the global economy, as well as the frightening data points charted for you below, that global stocks are holding near their all-time highs and may (as in maybe) very well continue right on through them in the weeks to come. 

Tuesday, February 18, 2020

Bonus Quote of the Day: When Most People Are Wrong...

The key Marks refers to below requires a constant deep dive into the state of general conditions, an understanding of crowd behavior, and patience:

Quote of the Day: "Every Decade or So"

Market extremes seem to occur "every decade or so". Hmm....
 “Buy low; sell high” is the time-honored dictum, but investors who are swept up in market cycles too often do just the opposite. The proper response lies in contrarian behavior: buy when they hate ’em, and sell when they love ’em. “Once-in-a-lifetime” market extremes seem to occur once every decade or so...
--Howard Marks 

Monday, February 17, 2020

Threatening Japanification!

As I type the news out of China remains concerning. While there will be the resumption of some production over the next few days, more than enough of the country remains on lock-down to hit its economy in a big way. Which (the economic hit) explains the willingness to take the huge risk of resuming some production in the face of still no vaccine.

Sunday, February 16, 2020

Consumer Debt Picture

While I am hugely concerned over the state and complexion of present debt in the system, the issues are not concentrated in residential real estate this go round:

Saturday, February 15, 2020

Quote of the Day: Prospects Were Already Tentative

Per yesterday's note, quote-worthy pundits are hard to come by -- above all they have to exhibit objectivity: I.e., goes without saying that their perspectives had to have been compelling enough to keep me engaged for a few years, supported by data, and, importantly, they (perspectives) would've had to have evolved as conditions change. In other words the bearish "experts" who perennially warn of doom, and the bulls who do the opposite aren't worth a minute of your time.

Something To Think About -- And -- Acting Accordingly

Ponder the following:
"Where do we stand today? In my opinion, there’s little mystery. I see low levels of skepticism, fear and risk aversion. Most people are willing to undertake risky investments, often because the promised returns from traditional, safe investments seem so meager."

Thursday, February 13, 2020

"Round One To Liquidity": "Liquidity" Being The Punch Bowl

Regular readers will note that I tend to quote the same people over and over, and over, again. Well, as clients will attest, we do our own work, but that doesn't mean we don't respect the work of others; of a shortlist of others, that is.

Quote of the Day: Where's Wall Street Coming From?

Hedgeye CEO Keith McCullough understands how it works:

Wednesday, February 12, 2020

Quote of the Day: "Too Much Wretched Excess!" -- And -- It Ain't Easy Playing the Curmudgeon

Well, I'm not as old as Charlie Munger, Warren Buffett's revered business partner, but my take on present conditions kinda has me feeling like an old curmudgeon these days.

Today's Data Dump -- And -- Your Q4 Earnings Update

Unlike last Wednesday -- where I green and red-dotted the day's releases -- this morning's data dump was less than inspiring.

Chart of the Day: The Only One You Need!

If it's any mystery to you how the market can continue to assail new heights amid all of the world's uncertainty and all of the data we've presented herein, I believe I can sum it up with one chart.

Tuesday, February 11, 2020

Chart of the Day: Job Openings Closing

Thought about holding this for the weekend macro update, but this morning's release of the BLS's Job Openings and Labor Turnover (JOLTS) report deserves its own blog post.

Really Bad Breadth

Came across a statistic this morning that caught my attention. While our own breadth measures have been signaling potential trouble ahead, or, at a minimum, anything but a healthy market environment, the following punctuates just how bad current market breadth actually is.

This Week's Message: Classic Bubble Blowing and Buying

While the weight of the evidence says that the equity market has formed your textbook, classic bubble, the Fed still has room to move interest rates notably lower to catch down to the rest of the world, and seems more than willing to increase the size of its massive balance sheet ever-further, despite the risk, and despite the history of bubbles and of its propensity for expanding them at their later stages.

Friday, February 7, 2020

Macro Update

Just completed our weekly macro analysis. Here's a recap:

On Today's Jobs Number

Really good headline jobs number, but, as always (and as evidenced by the rally in gold and bonds, and the drop in stocks* on the news) the devil is in the details.

Thursday, February 6, 2020

Quote of the Day: Pendulum's Swing

Another potentially timely Howard Marks quote:

Charts of the Day: Peak Optimism?

According to Gallup, Americans feel better today about their finances than they have in over 40 years! Well, ironically, per the history of that survey (see below), and what we've been preaching herein, that's troubling.

Quote of the Day: Speaks Volumes About Present General Conditions

I've been slowly taking in Howard Marks's insightful (to put it mildly) book The Most Important Thing Illuminated. His perspectives on cycles and risk match my own to a virtual tee, and -- not that we needed it -- they validate our present balanced  (less correlated to a raging bull market than we've been the past 10 years) approach to the market.

Wednesday, February 5, 2020

Lots of Green In Today's Data Releases , An Earnings Update, And Priced For Perfection

There's lots to parse in today's data dump, and while one can point to mild winter weather, base effects and less-rosy internal breadth to poke holes in some of today's headline readings, bottom line is that global sentiment (much of today's releases are survey/opinion data) has clearly improved over the past month.

Quote of the Day: We Fundamentally Differ From The Pack

Hedgeye Risk Management's CEO Keith McCullough's comment in his morning macro presentation speaks to some our latest messaging:

This Week's Message: The Boom/Bust Cycle, And Thoughts On The Coronavirus

Yesterday, I penned a blog post where I referenced a conversation I had with Nick about the seeming nonsense that the market at these levels, at these valuations, with these sketchy fundamentals, with all of today’s geopolitical uncertainty and so on could attract such bullish sentiment.

Tuesday, February 4, 2020

The Madness of Crowds! Or is it?

Chatting with Nick after the market close today: Both of us marveling at the willingness of investors to buy into a market that trades at its all time high and that, by some metrics, sports record valuations; amid the highest ratio of corporate debt to GDP in history, amid half of all investment-grade corporate debt garnering the lowest-tranche credit rating (and other hugely problematic developments in that space), amid a virus outbreak that has hobbled the second-largest economy in the world, amid the imminent failure of what's been dubbed by some as the greatest trade deal in history (China making good was a stretch even before coronavirus), amid a mixed, at best, global macro setup, amid...well... there's more but I'll stop there.

Troubling Trends Amid The Market Meltup

While today's data releases continue to point to a mixed macro picture -- factory orders up, durable goods orders down -- the following denote troubling trends.

Quick Video Look At The Market

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:

Quote of the Day: Sentiment and Emotion Dominate

As you may have noticed, I've been making it a point to acknowledge the fact that while my macro assessment is the least optimistic it's been since the last recession, the stock market may absolutely continue its march higher into the foreseeable future -- despite the fundamentals.

Monday, February 3, 2020

Some Uncertainty In The January ISM

I closed an earlier post with:
"I have to say that the US ISM data (albeit barely back in expansion mode) is an unambiguous positive!"

Today's Log Entry


China’s overwhelming stimulus last evening clearly did the trick, for the moment, despite the big selloff in its own market last night. If today’s global rally holds, Chinese stocks will likely stage a relief rally of their own this evening.

The Latest Data: The Good And The Bad Thus Far

This is a really big week for data, below is what we're looking at so far. Let's eat our vegetables first.

Sunday, February 2, 2020

Brief Note On This Morning's Action: Staying In The Shallow End

Last update, yesterday afternoon, Dow futures were pointing to a minus 80-point open; as I type the Dow's trading up 300 (retracing half of Friday's selloff) in today's regular session. Those key currency pairs I featured have flipped back to rally mode as well.

Quick Followup Note To This Morning's Quick Note

That sanguineness I referred to among currency traders this morning has dissipated; still not panicky, but the pairs I referenced earlier have rolled over a bit -- which, in my view, makes more sense given the news.

Quick Note On This Morning's Action

Interesting action in currency markets this morning: Following Friday's rout, generally worse news out of China, and elsewhere, and general (and logical) expectations for the global equity selloff continuing into the start of this week, the most telling currency pairs are signaling relative calm as U.S. equity futures markets open a little later today. 

Saturday, February 1, 2020

January Results

Before wrapping up and going silent for a few days I thought I'd share with you the first calendar month results for our new core allocation.

Friday, January 31, 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:

Quote of the Day: What Makes Balloons Pop?

While today's selloff may indeed turn out to be yet another buying opportunity during what is, in my view, likely the latter stage of the longest bull market ever, consider the following from James Wetherall's excellent book The Physics of Wall Street:  

Thursday, January 30, 2020

Brief Note On Today's Action

To quote from our Monday blog post (when the Dow was trading lower by 400+ points):

Quick Note On This Morning's GDP Report

While I honestly expected this morning's Q4 GDP number (the first of three estimates; so revisions may follow) to come in below the consensus estimate of 2.1% (it came in at 2.1%), the internals resoundingly confirm our present assessment of general conditions (consumers stable, businesses not).

Wednesday, January 29, 2020

This Week's Message: Deer In The Headlights

I listened intently to Fed Chair Jerome Powell's post-policy meeting press conference this morning, and, after, say, a half-dozen questions, and after parsing the good chairman's answers, I found myself imagining being there and posing a question of my own.

NYC's 'Economic' Blunder

Looking at a little demography this morning, with regard to New York, I couldn't help but recall what I, frankly, viewed as a major economic (politically-motivated) blunder on the part of certain politicians who railroaded Amazon's plans to place an HQ in NYC right out of town. 

Q4 Results Making Sense So Far

With roughly 13% of U.S. companies having reported Q4 numbers, the results (so far) jibe with our present macro analysis.

Chart of the Day: Dr. Copper Looks Worried

Copper -- the ubiquitous industrial metal -- is often referred to as “Dr. Copper” for what its price movements suggest about the state of the global economy.

Quote of the Day: An Expensive Error

Emphasis mine...
"...the loss was not bad luck; it was bad analysis.

Tuesday, January 28, 2020

Let's Forget About The Market On This One!!

So check out S&P 500 futures' action after hours this evening. The red arrows point to the reaction to news that the U.S. government was about to ask airlines to suspend flights between China and the U.S.. The green point to a followup comment from Washington that no such request would be made:

Unappetizing Risk/Reward Setup

A common theme coming from yours truly in client review meetings (and herein, as you've noticed) is that while I can't tell when the next meaningful downturn will hit, in my humble view it'll be another doozy (that's a technical term for really bad one) when it does.

Quote of the Day: Fed Facilitation

We've been expressing a lot herein lately our concerns over conditions across the corporate debt space. Below is from macro strategist Julien Brigden's latest note:

This Morning's Brief Log Entry


While I’ve noted one credible strategist who attributes the past two-day selloff to deteriorating economic forces and threatening technicals, while I sympathize, I completely disagree. I’m with the overwhelming consensus that says the catalyst was the coronavirus, with the technicals playing a role in terms of the speed of yesterday’s decline in particular.

Monday, January 27, 2020

Bonus Quote of the Day: The Human Side of Investing

Another I think timely quote from Howard Marks's The Most Important Thing Illuminated:

Emphasis mine...

"“The human side of investing” is the critical side. It’s certainly an area in which superior investors must excel, since financial analysis won’t guarantee superior performance if your reactions to developments are skewed by psychology just like those of others. Thus my third key theme relates to control over emotion and ego. Accomplishing this is quite difficult, since everything in the investing environment conspires to make investors do the wrong thing at the wrong time."

Quote of the Day: The Risk Disciplined Investors Willingly Accept

Was reading Howard Marks's excellent, and accessible (I recommend it) book The Most Important Thing Illuminated over the weekend, and I'm thinking the quote below is timely:

Brief Note On This Morning's Action

Of course much remains to be discovered with regard to the coronavirus itself, and, thus, its impact on the global economy.

Friday, January 24, 2020

The Fed-Put Narrative, And My Problem With It

The overwhelming thesis among credible market actors is that the rally in stocks from September of last year to now is entirely about Fed liquidity and global central banks’ risk-aversion. And that there remains a very solid central bank put (with a strike price just a hair below current levels) that essentially pushes the next bear market past the foreseeable future, and that every dip remains a buying opportunity.

Macro Update

Just finished our weekly macro scoring session. Here's a recap:

Thursday, January 23, 2020

More On The Corporate Debt Mess

Here are some snips from a Bloomberg article this morning titled CLOs Are Packed With Loopholes that screams the risk we've been identifying herein for months in the corporate debt space.

Hard to fathom that a mere 12 years after the bursting of the greatest credit bubble in modern history we're seeing similar shenanigans playing out once again:

Wednesday, January 22, 2020

Risky Private Equity/Lending Setup (1-minute video clip)

We've been illustrating herein ad nauseam the risks we're seeing throughout the corporate debt space. 

A dive into the private equity universe is telling!

Here are the highlights from a January 16 interview with Dan Rasmussen, hedge fund manager specializing in levered small companies and high yield bonds.

This Week's Message: Simply Not Willing!

Getting a lot of feedback lately from clients who have taken note of what they view as a decidedly bearish shift on my part over the past several months.

Well, I definitely get that, however, when we look at our target core mix of assets, while indeed it has a more defensive tilt than we've maintained over the past 10 years, it's clearly not outright bearish.

Tuesday, January 21, 2020

Quote of the Day -- Possibly Of The Year!

If Guggenheim's Scott Minerd is anything, he's objective. He's never one to sensationalize or to wed his ego to his thesis. While he and I haven't always been on the same page over the years, I've always viewed him as being thorough and thoughtful in his approach to markets, and, therefore, credible.

Eerie Calm Currency Markets

During Doubleline Capital's recent "Round Table Prime" session -- which brings together a tight group of credible market actors to discuss the state of the global economy and markets -- the firm's founder, and largest bond manager in the world, Jeffrey Gundlach made a point that jibes with my Sunday morning commentary:

This Morning's Log Entry: No Skinny-Dipping!


UK employment data surprised bigtime to the upside this morning, boosting the pound, while emerging markets are tanking on a Hong Kong downgrade by Moody’s and, more so, on fear over the possibility of a virus epidemic breaking out in Asia. The German Zew Economic confidence index blew away expectations to the upside (supports our Eurozone thesis, and our EWG position). U.S. equities traded lower early on, but have bounced back to even as I type (9am).

Monday, January 20, 2020

What Causes Inflation?

So, this morning's blog post sparked the curiosity of yet another dear friend, who also reached out to me via email with an excellent question that I believe will also be instructive to the rest of our readers. 

Here you go:

What Is Repo?

This evening, a friend, via email, asked me to clarify a few points/terms made in my "Bonus Quote of the Day" post from this morning. I'm thinking many of our readers would appreciate some clarity as well.

The question was, what is "repo liquidity play" and what does "facilities" refer to?

Here was my response:

Bonus Quote of the Day: Has The Fed Put The Cherry On The Bubble?

Julian Brigden is in my view one of the few macro strategists worth listening to. 

Quotes of the Day: Corporate Debt Is A Problem!

Grant Thornton's chief economist and I are on exactly the same page on this one:

Sunday, January 19, 2020

The Mastery Of Investing -- And -- Is This The Last Leg Of The Bull Market?

Is mastery possible when it comes to investing?

Well, I suppose it depends on whom you ask, and on their definition of mastery.

Saturday, January 18, 2020

Macro Highlights

Just finished the weekly scoring of our macro data, no video this week, just the highlights.

Friday, January 17, 2020

This Morning's Log Entry: FOMO Alive And Well


Clearly, the bull market stays alive largely, if not entirely, on central bank stimulus. Should the Fed get repo under control and curtail the nightly purchases, the market will likely be tested.

Data of the Day: The Good, The Bad, And The Ugly

The morning's releases picked up where yesterday's sunnier than expected data left off. In a big way in terms of housing starts:

Thursday, January 16, 2020

This Week's Message: Positives In Context

We're finally seeing some of the good data that were widely expected for the December releases. I was beginning to wonder; given the worse than expected ISM print last week and a few other not so rosy data points.

Wednesday, January 15, 2020

Problem? What problem?

All the fanfare and market-pumping aside, to the extent that tariffs are the problem, phase one barely scratches the surface.

Tuesday, January 14, 2020

Precarious Risk/Reward Setup In Debt Markets -- Not To Mention In Stocks As Well

Stocks (large cap) continue their ascent into all time high territory, smack in the face of somewhat sketchy fundamentals and what I fear is becoming a corporate debt bubble for the ages.

Bubbles Can Be Great, and a quick Q and A

Here's Hedgeye Risk Management's tech analyst Ami Joseph on the present setup:

Monday, January 13, 2020

Bonus Quote of the Day: Speaking of dotcom-esque

Speaking of dotcom-esque:

Quote of the Day: Dotcom-esque Losses Can't Break This Bullish Fever

As I suggested last week, it makes obvious sense to expect the market to continue to trade higher in the near-term (except for the fact that such sentiment leads to lopsided setups, which, in and of themselves are cause for concern). 

Saturday, January 11, 2020

Macro 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, January 10, 2020

This Week's Message: Spot-On Macro Assessment, Fundamentals vs Trade Talk, And Sorry Sentiment Among Execs

December jobs numbers missed expectations, which to us comes as no surprise given our overall macro assessment. What was particularly unsurprising was the 12k decline in manufacturing jobs. 

Thursday, January 9, 2020

This Morning's Log Entry

1/9/2020 7:45am

SPX continues to march higher, up 61bps today; the headline excuse this morning (at least pre-market) was that China confirmed that negotiators are coming 1/15 to sign phase-one. Of course we knew that, but in a classic FOMO (fear of missing out) setup, any reason’s a good reason to buy.

Wednesday, January 8, 2020

Charts of the Day: A Look At Delinquency Rates

Thought I'd share some of the data I'm gathering for an upcoming presentation.

You've heard herein that the consumer remains in pretty good shape; virtually everywhere else you're hearing that he/she's in great shape.

Quote of the Year: The Secret To "Beating The Market"

So, Ray Dalio, who is arguably one of the very best investors of all time, manages a hedge fund that up until last year had enjoyed an 18-year run without a single negative calendar-year return print. Remarkable!!

This Morning's Log Entries

1/8/2020 7am

Overnight S&P futures plunged 1.7ish% on the Iranian missile attacks of US bases in Iraq. After the dust settled it was clear that Iran strategically struck in a way that would yield no US casualties and that they felt they could herald at home as a strong response to the killing of their military leader. Consequently the S&P has rebounded back into the green to the tune of 31bps this morning.

Quick Technical Chart Check (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, January 7, 2020

Bonus Quote of the Day: "Mind boggling spectrum of scenarios"

Economist Diane Swonk speaks to her profession's challenges in "modeling" the escalation with Iran: 

Quotes of the Day: "Not A Steady-State Market" -- And -- Whom To Listen To

Here's Hedgeye Risk Management's blunt CEO Keith McCullough (tops my very short list of analysts worth listening to) responding to a viewer on his morning macro show.

Some Decent Economic News

We actually have some positive, well, decent economic news to report this morning. The Institute For Supply Management Non-Manufacturing (services) Survey came out this morning with a score of 55 (above 50 denotes expansion).

Monday, January 6, 2020

It's Risk-On For Risky Deals -- Again :(

Perhaps we're overdoing the quotes from Mastering Market Cycles (almost done), but, my!, the book absolutely speaks to what we're seeing in current general conditions, in investor psychology and, most concerning, in the debt markets.

Quote of the Day: Remarkable, and, alas, typical...

If you've been with me the past few months you've been introduced to the current state of the corporate debt market, and the kind of unbridled risk-taking that characterizes bubbly credit markets in general.

The following from Bloomberg today is remarkable, and, alas, typical:

"The Most Important Thing To Note"

This market is the definition of resilient! Under normal conditions -- when stocks are reasonably valued, when general conditions are good, when company balance sheets are healthy, when credit spreads make sense, when corporate bond issuance is measured and covenants and rates make sense, when the Fed isn’t aggressively adding liquidity ($70 billion in repo last night!), when investors are acting rationally, etc. -- you’d expect events such as those occurring today to bring the market notably and sustainably (for a bit) lower, while it consolidates gains, while investors reassess risk, and so on.

Sunday, January 5, 2020

Quote of the Day: Overlooking Cyclical History

Here's Howard Marks quoting John Kenneth Galbraith.

This I suspect is timely!

Way Too Soon To Tell

As you've noticed, and I suspect expected, weekend events (Iraq voting to expel all foreign troops, Iran's abandoning what was left of the nuclear accord, numerous back and forth threats, and more) have piled more uncertainty onto the state of markets and the global economy. I'm seeing it in currency futures this afternoon -- stronger yen, for example -- although not yet to the degree I was expecting.

Saturday, January 4, 2020

Quote of the Day: Excessive debt issuance is ultimately ruinous...

For an understanding of how a 2008-style mess comes to pass, and of some of the reasons why we're shifting to an asset mix less correlated to a roaring bull market, I highly recommend Howard Marks's book Mastering the Market Cycle.

Here's a snippet:

Friday, January 3, 2020

Some Comforting And Some Not-So-Comforting Data

Schwab's Jeffrey Kleintop shared some stats this morning on past market reactions to U.S. airstrikes. He prefaced them with:

Thursday, January 2, 2020

This Week's Message: What Interest Rates Say -- And -- Why I Sleep Well At Night

Just listened to an interview with Jim Grant, editor of Grant's Interest Rate Observer, I've been a fan of Jim's my entire career. He's quite the historian, and an utterly brilliant thinker.

Risk On For Sure, Right?

Only because it's the first day of the new year am I pointing herein to the oddness of a particular single-day's trading action.

What a way to start the new year! With the Dow (30 stocks) up 330 points (1.1%), the S&P 500 up 0.8% and the Nasdaq Composite ahead by 1.3%!

Quote of the Day: The Investor's Greatest Enemy

Currently reading Howard Marks's insightful book, Mastering the Market Cycle. While I could literally pull dozens of quotes that jibe with yesterday's post on market sentiment, I'll share just this one for now:

Repo Crisis Averted, Maybe...

We've scratched the surface a bit herein the past few weeks on what can only be termed as a serious liquidity issue in the overnight funding (repo) market. While some suggest that it's not serious, that it's purely technical, and so on, well, when a technical glitch requires half a trillion in fresh bucks to simply keep liquidity flowing (as opposed to actually fixing the problem) I think we can get away with calling it serious.

Wednesday, January 1, 2020

Quote of the Day: China's Wasting No Time!

As I suggested in a recent (client-only) post, stimulus from China in 2020 could bode well for a couple of our core positions.

Well, they're wasting no time:

Investors Expecting A Most Happy New Year!

We recently developed our own sentiment indicator -- we call it the PWA Fear And Greed Barometer -- as a way to keep constant track of how the passengers are distributed among the investment cruise ship, so to speak.