Friday, April 3, 2020

Macro Update: Historic

Note: Once again, I'm tempted to skip this week's macro update altogether. You and I know it's going to be ugly, and it's only going to get worse before it gets better. That said, these updates rival our weekly message as our most-hit blog posts, so I'm compelled to keep featuring our findings herein, even though they'll simply reflect what we already know...

Well, even though still much of the data are dated -- i.e., pre-U.S. shutdown -- enough of what we track is sufficiently current to deliver the lowest score (-50) for our proprietary macro index since the heart of the Great Financial Crisis of 2008 (back-tested). Our lowest-ever (back-tested) score came during the Tech Bubble Recession of 2001.

Headline of the Year!

Clients and regular readers know that our view had been that the next recession and bear market was likely to rival 2008, largely due to the underlying corporate credit bubble. That was before we ever dreamed of COVID-19.

Quote of the Year!

Speaking to the gyrations the market's experiencing presently on promises of oil production cuts and, as I touched on earlier, the prospects for small business stimulus running smoothly, or ultimately -- along with everything else being thrown at markets -- defying economic gravity, here's Hedgeye Risk Management's Keith McCullough singing our tune:

Morning Note


Equity futures have literally been all over the place this morning. Going from notably red to slightly green on news that Russia agrees to cut oil production, then back and forth on the -701,000 jobs print. The remarkable thing about the hugely negative jobs number is that it covered the early part of March, before the government-mandated shutdown. Expectations were for -100,000.

Thursday, April 2, 2020

This Evening's Notes

The 6.6 million weekly jobless claims number reported this morning was 10 times the number during the worst week of the 2008 recession. And, lo and behold, stocks finished the day on a high note.

Charts of the Day: Credit Risk Says Be Careful

While folks focus on the incredible gyrations in stocks, the kind of which are absolutely the norm -- for bear markets -- it's really the under the surface stuff that we need to keep watch over. If, that is, we're to assess more than simply whatever headline of the day happens to be pushing the market one way or the other.

Quick Note on This Morning's Action

Stocks are bolting higher this morning on the following:

  • President Trump says opec could cut 10 million barrels a day...
  • OPEC calls for emergency meeting...
  • China plans to increase oil reserves...

Energy stocks up 14%, oil itself up 21% as I type...

Wednesday, April 1, 2020

This Week's Message: We've A Long Ways To Go

Considering even the best case GDP projections going forward, the notion that stocks have already priced in the economic reality to come is, in my opinion, the definition of faulty. If the market doesn’t leg down to, at a minimum, the recent lows over the next few days/weeks, I suspect we’ll see it when the data that will truly reflect current conditions begin to hit late-April, early-May.

Quote of the Day: Beware the conflicts of interest...

If while watching, say, CNBC, or any other financial network/news of your choice, some Wall Street bigwig says the bottom's in and it's time to start grabbing those big-name stocks you always wanted to own -- while you look outside and see empty streets and shops, and, well, you get the picture -- causing you to say "huh?" out loud to yourself, you'd be wise to wonder if Bigwig's firm maybe already holds a few shares of those big-name stocks itself.

Tuesday, March 31, 2020

Volatility Measures Calming Down, But Still Denote A High Level of Risk

The bulk of this evening's market notes are essentially more of the same, so I'll spare you all but the following on volatility. This is for those of you who like getting a bit deeper into the weeds:

Quote of the Day

Chatting with a client yesterday, he kicked off the conversation by mentioning that his colleagues have been talking about what a great time it is to buy stocks. He asked my opinion...

On Corporate Credit I Remain Concerned

As regular readers and clients know, I've been resoundingly bearish on corporate credit (junk in particular) for months. As I've stated ad nauseam from the beginning, a comeuppance in all things high yield during the next downturn (which is now) is what'll likely make the next recession/bear market (now) a rival to 2008's.

This Morning's Log Entries


SPX, at the moment, has moved into the green after trading 1%+ lower early on. Per the pre-market note, traders are no doubt struggling with gaming what will be some of the worst data on record vs the largest stimulus efforts on record.

Monday, March 30, 2020

The Loss of a Tailwind

On multiple occasions herein since late last summer, when we became cautious on stocks, I've featured the data around the fuel share buybacks had supplied for the market, at, in too many instances, the expense of once-healthy balance sheets.

This Evening's Log Entry

Equities rallied 3.5% against not so rosy internals (ex: spx volume 22% below average, NYSE Up volume only 52% of total). I.e., while, based on price action alone, there remains an appetite for stocks, the internals today suggested that traders weren’t as hungry for them as they were last week.

Chart of the Day

Along with our own macro update from last Friday, this morning's release of the latest Dallas Fed Manufacturing Survey should give you a feel for why we can't get the least bit complacent here:

Quick Note on This Morning's Action

Equities rallying this morning, SPX +2%... Today ended a 3-Monday streak of limit-down futures. That, in and of itself, might encourage a few buyers. Could be that sellers are waiting to be sure qtr-end rebalancing’s through. 

Sunday, March 29, 2020

How Wars Are Won

For the purposes of this morning's message let's think of bear markets as times of war (i.e., of potentially devastating risk) for investors.

Friday, March 27, 2020

Macro Update

I was tempted to skip this week's macro update, given how rapidly the data will deteriorate from here. So I'll just keep this one brief and to the point.

Today's Notes

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.

After hours:

This week’s major rally was classic bear market action, in my view. Panicky deleveraging selloff, followed by the arrival of monetary and fiscal stimulus sparking a sharp rally -- aided by shorts getting caught offside -- that likely fails as the market begins to ponder what’s next. 

Ice Too Thin (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: Reimagining Current Conditions

Going through our weekly macro exercise (dissecting every separate data point) this morning I was reminded of a quote I highlighted in Steven Strogatz captivating (well, so far, just started reading it) Infinite Powers: How Calculus Reveals the Secrets of the Universe.

Thursday, March 26, 2020

This Evening's Log Entry

Here are my notes to self, and to you, this evening:

Headline of the Day: The Best 3-Day Surge Since.......

Forgive me for playing the party-pooper this week -- I mean, I honestly do welcome the rally. Thing is, per my recent messaging, it was absolutely to be expected. And, by the way, if history runs remotely true to form there'll be a bunch more before this particular bear market runs its course.

Quotes of the Day: The Fundamentals (lack thereof) Underlying the Market, And What This Week's Rally Tells You

Bloomberg's Heather Burke captures the fundamental issues underneath the current impressive rally:

Quick Note On This Morning's Action

Stocks are rallying hard this morning, against 3+ million in weekly jobless claims and what will likely turn out to be an underwhelming stimulus package.

Tuesday, March 24, 2020

This Evening's Log Entry

Here are the highlights from my notes to self this evening:

Corrected Headline of the Day

The few minutes between my posting our headline of the day and the close of trading had it literally missing the mark by 75 years.

Headline of the Day

If you at all struggle with our warnings herein about bear market rallies; on days like today, going forward (there'll be more), simply make note of the headline references to the last time the market saw a rally like that.

Quote of the Day: Public Service Announcement!

Bloomberg Asia analyst Garfield Reynolds echoes our messaging (on bear market rallies) herein:   emphasis mine...

From Last Night's Log Entry

My notes to self often get so technical and so into the minutia, and long (surprise surprise), that they're of little use, in their entirety, herein.

So I'm sharing two snippets from last night's log entry below just to give you the flavor of what I'm seeing and thinking about conditions in the very short-term (the last sentence being the most important):

Monday, March 23, 2020

Wait For It...

So this morning we woke to an announcement that the Fed will essentially print enough money to rescue virtually every institution, save for -- at this point anyway -- junk-rated corporations. S&P futures went from way down to way up instantly on that news. Only to see them careen back into the red just as the cash session was about to open.

Quote of the Day: Gravity

While discussing the Fed's huge move this morning, Hedgeye's Keith McCullough echoed our messaging herein; which is, we expect rallies, but -- for the time being -- of the ultimately (they might last awhile) unsustainable bear market variety:

Sunday, March 22, 2020

This Evening's Log Entry: Reminiscent of TARP

The Senate couldn’t come to terms on $2 trillion in fiscal stimulus this afternoon, and while that’ll be the media’s narrative for why futures opened limit down, they -- via the “betting markets” -- had been nearly there all weekend.

Human Nature Always Rhymes

"Watching the world’s central bankers and finance officials grappling with the current situation—trying one thing after another to restore confidence, throwing everything they can at the problem, coping daily with unexpected and startling shifts in market sentiment—reinforces the lesson that there is no magic bullet or simple formula for dealing with financial panics. In trying to calm anxious investors and soothe skittish markets, central bankers are called upon to wrestle with some of the most elemental and unpredictable forces of mass psychology."

Saturday, March 21, 2020

A Premature Notion

While as I continue to profess, I remain open to all possibilities, the popular (in some circles) notion that once we get more money flowing into the hands of market participants, amid what is an historic halting of economic activity, the equity market will miraculously rise and begin discounting a return to robust economic growth is, in my humble opinion, a most premature notion.

Friday, March 20, 2020

Macro Update

As you might suspect, our analysis continues to exhibit macro deterioration. And, as I know you suspect, the worst, alas, is yet to come...

Just the First Phase

Excerpt from my last evening log entry:

Thursday, March 19, 2020

Quote of the Day

Bond strategist -- and respected analyst of all things Fed and credit markets -- George Goncalves echoes what you've been reading herein of late, regarding the "buy the dip?" question:

What's Behind The Whipsaws?

If the intraday ups and downs are making you dizzy (the Dow was up 200 points just minutes ago, down 230 as I type), know that the market these days is -- to no small degree -- being pushed around by, let's say, non-traditional, or mechanical (although humans do program the machines), forces.

Wednesday, March 18, 2020

Today's Log Entry

3/18/2020 Wednesday

All currencies fell against the dollar during the session today, and continue to as I type this evening: While the Fed is madly printing, other countries are aggressively printing their own currencies as well. And, clearly, the global demand for dollars is dwarfing the Fed’s attempts to suppress its rise. Thus, even the safe-haven short USD/JPY play, that has worked so well of late, has stopped working. This evening, for example, while U.S. equity futures are selling off by nearly 5%, the dollar is up 1% vs the yen. That is the complete opposite of what markets have grown accustomed to, until literally the past few days.

Bonus Quote of the Day

The following will be the essential narrative among the world's central banks for some time to come:

Quote of the Day, And a Short Video Commentary

Amid all of the present, and growing, chaos, Apple reminds us that there is indeed light at the end of the tunnel.
"Apple announces new iPad Pro with camera that can scan 3-D objects"
 Here's me sharing my thoughts on the latest:

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, March 17, 2020

This Week's Message: This Time Is Different

"This time is different" -- market sages like to say that, when it comes to investing, those are THE four most dangerous words in the English language.

Was Today Worth Writing Home About?

Today saw a strong snap-back rally after yesterday's beating. So -- apart from the whopping 6% move -- while I'll certainly take it, was today worth writing home about?

Where Are We In The Bear Market Cycle?

Here's Bloomberg macro analyst Cameron Crise's thoughtful take on where he believes we sit in what he views as the bear market cycle:

Quote of the Day

Hedgeye's Keith McCullough makes sense in his morning note (should sound familiar):

Monday, March 16, 2020


Doing a little charting of past bear markets this evening -- history sometimes rhymes -- and thought I'd illustrate for you the fractal nature of markets. 

In Case You're Wondering

No doubt there'll be lots coming your way herein, as I absorb the latest macro news/data. 

In the meantime, I want to touch again on the "time to buy?" question.

Thoughts On What Happens Next (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: 

Sunday, March 15, 2020

Headline of the Day

Betting markets (we'll call them) -- a pre-pre-market, in a sense -- just a few minutes ago had the Dow opening down roughly 1,000 points come tomorrow morning.

Saturday, March 14, 2020

Should We Buy the Dip? (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 Happened to Safe Havens Last Week?

The following from Bloomberg highlights the dynamic (forced liquidation) that we discussed herein that had, among other things, gold selling off last week -- counterintuitively:

Friday, March 13, 2020

Asset Allocation Update, And How To View Put Protection (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: This Part of the Movie

This from Hedgeye Risk Management CEO Keith McCullough this morning speaks precisely to my comments on gold yesterday:

All Too Familiar -- And -- In The Words Of History's Greatest Trader

Today's, as I type, 3.4% rally in stocks is precisely what I virtually promised would occur (not the timing of course) in yesterday's video commentary. Having lived through several bear markets during my career I'm all too familiar with what are termed "bear market rallies."

Thursday, March 12, 2020

Market Commentary (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: 

Quick Commentary On This Morning's Action

As I type the major averages are trading down roughly 7% across the board.

While like many days of late this is no doubt unnerving, just know that this is what markets do when the realization that recession is near, or here, hits.

Wednesday, March 11, 2020

This Week's Message: Core Allocation Update

I was initially planning on making this week's message all about credit markets, but find myself in need of some extra time to sit with our current core mix of assets and determine to what extent, if any, rapidly evolving conditions warrant a bit of tweaking. 

Quick Note On The Latest

As I type the Dow's down ~1,000 points, S&P 500 is off  3.7% and the Nasdaq's down 3.3%. This comes after a huge promise-of-stimulus-induced rally yesterday.

Tuesday, March 10, 2020

Macro Update: Really Not Good!

This macro update is coming to you a bit late; catching up from a few days away from the office:

While -- for the past 20 weeks straight -- I've been able to for the most part characterize our weekly macro analysis as marginally negative, well, alas, that's no longer the case.

This Thing Called "Moral Hazard"

While, by definition, we're not at this point in recession, could it actually be that we're already looking at the taxpayer bailing out heavily-leveraged businesses?

THE Question!

Question from a blog subscriber (this, by the way, is THE question):

Hold Your Horses

As I type, just over an hour into today's session, the S&P 500 is up 2.27%, coming off of an initial 4%+ rally.

Monday, March 9, 2020

The Prevailing Bias

Today saw yet another of those recent "not-since-2008" trading sessions; this one being the worst of the current string.

Sunday, March 8, 2020

Main Street Sentiment -- And -- This Evening's Rout In Futures Markets

Sunday 3/8/2020

Keeping you up to date as events unfold, and offering perspective where I can, as Nick and I are presently away from the office.

Here are essentially three brief blog posts in one.

5pm MST

A young man on the ski lift yesterday heard Nick and I talking about -- what else -- and chimed in and gave us a stock tip; "buy Tesla".

Wall Street's Surprising Confidence Explained

As I type this note, 9pm-ish on Saturday 3/7/2020, the news surrounding COVID-19 points to yet more pain for the stock market come Monday morning.

Saturday, March 7, 2020

Quote of the Day: Be Aware

The following by Howard Marx speaks to why we began hedging portfolios during the 2nd half of last year, and why our asset mix is markedly different today than it had been throughout this entire bull market. 

Wednesday, March 4, 2020

This Week's Message: Highlights From The Week Thus Far

This is likely to be the last you'll hear from me till early next week: Heading out with the family to slide around on some snow for a few days. 

Monday, March 2, 2020

Quote of the Day: Inherent Dangers In The Current Setup

The following, by Howard Marx, speaks resoundingly to our assessment of -- and the dangers inherent in -- the present market environment:

This Morning's Log Entry

Readers keep in mind that the most important statement I make below is: 
"there are always multiple potential outcomes to any economic/market scenario -- and I'll absolutely keep an open mind"

While I present a sequence of events that may indeed unfold, I am in no way committed to the thesis. The economy and the markets are dynamic and so is our analysis. Conditions change, developments unfold and we adjust accordingly.

Sunday, March 1, 2020

Can Central Banks Rescue the Economy From Coronavirus COVID-19? Or From Anything Else?

What will more central bank stimulus do for the economy?

Smart time to buy??

As some -- not me, mind you -- are suggesting, this may absolutely the best time to back up the truck and load up on growth stocks.

And let's say you do, and let's say you make a ton of money over the next few weeks.

Did you make a good investment?

Think of it in the context of this from my blog post earlier today:
"It's not at all wacky that amid what was arguably a slowly deteriorating global macro backdrop to begin with the COVID-19 threat would send stocks reeling. I.e., given the lock down in China, huge supply-chain issues, spread to other countries, travel restrictions, companies stepping up and lowering earnings guidance, and so on -- regardless of whether this morphs into the next bear market -- a strong selloff was/is the appropriate response."
Well, rest assured that "slowly" no longer characterizes the pace of present global macro deterioration.

Okay -- so what? Regardless of the state of general conditions, and of other things, if an investment made money it was a good investment, right??

Well, think of it in the context of my basketball analogy from 2018:
I play a lot of basketball, and, as my son and the dudes I play with will attest, I like to attempt three-pointers. In that success enhances the enjoyment of virtually any endeavor, I knew from the start (my late start [not surpassing the 5'5" mark till after highschool and, thus, being a wrestler during my formative years]) that if I was to score enough to justify my itchy trigger finger, I had to learn good shooting fundamentals. While I'm fully aware that 100% from the field is infinitely beyond my reach, I know that if I can stay in rhythm, if my form is sound and if I practice good shot selection, my odds of maintaining a respectable enough percentage to keep me from being the lowly last pick come time to select the teams increase dramatically.
Different players bring different talents to the game. There's a young man we play with, we'll call him Bartholomew (just in case he happens to stumble upon this blog post) who possesses exceptional ball handling ability and plays the point beautifully. Surprisingly, however, his outside shooting leaves much to be desired. So much so that when he launches a three his teammates cringe; hoping the ball finds nothing but air. Now why would his own teammates want Bart to miss his shot, in embarrassing fashion no less? Because they know that if he drains it, their odds of winning will decrease exponentially.
You see Bart believes that a shot that goes in has to be a good shot. Therefore, when he makes one he believes that he possesses the fundamental makings of a good shooter -- and good shooters shoot. So he shoots and he shoots and he shoots and, in reality not having mastered good shooting fundamentals, he misses and he misses and he misses and, alas, his team loses.
We can sum up basketball shooting as follows. There are:
1. Good shots that go in.
2. Good shots that miss.
3. Bad shots that miss.
4. Bad shots that go in.
#1's are great. #2's are fine, unavoidable, and possess a livable probability rate. #3's, while costly, are the most predictable and, therefore -- being costly -- should be readily avoided. #4's -- as explained above -- are an utter curse!
Here's my point:
We can sum up investing as follows. There are:
1. Good investments that make money.
2. Good investments that lose money.
3. Bad investments that lose money.
4. Bad investments that make money.
#1's are great. #2's are fine, unavoidable, and possess a livable probability rate. #3's, while costly, are the most predictable and, therefore -- being costly -- should be readily avoided. #4's: I can't think of a worst case scenario than a new investor hitting a #4 right out of the gate. The perverse feedback from that experience could absolutely send him or her to the poorhouse -- as he or she might think that he or she's discovered a high probability investing method and chalk up the subsequent string of losses to rotten luck. I.e., believing what are in reality #3's to be #2's. The emotional imprint from that early "success" may indeed last longer than his or her capital.
Unfortunately -- as I've observed over the years -- it's not just "new" investors who are capable of falling prey to #4s...

What's Wacky About This Market

It's not at all wacky that amid what was arguably a slowly deteriorating global macro backdrop to begin with the COVID-19 threat would send stocks reeling. I.e., given the lock down in China, huge supply-chain issues, spread to other countries, travel restrictions, companies stepping up and lowering earnings guidance, and so on -- regardless of whether this morphs into the next bear market -- a strong selloff was/is the appropriate response.

Saturday, February 29, 2020

Friday, February 28, 2020

Morning Notes

Sharing some morning notes:

Future Fed Chair hopeful Kevin Warsh said before the market opened to expect globally-coordinated central bank action if this keeps up. Equity futures quickly retraced half of their pre-market losses.

Thursday, February 27, 2020

Now vs The Previous Double-Digit Drawdown - And - Brief note on today's action and on our core mix...

Here's from my commentary herein last Sunday evening:
"...Dow futures are presently trading 340 points lower; which should come as no surprise to anyone.
Frankly, given the fragilities showing up in much of the global macro data that we've been pointing to for months, and, not to mention, the underlying leverage in the corporate space, when we factor in the economic realities of the coronavirus we really should be looking at much worse in terms of stock price action."

Quote of the Day: "Boggles The Mind"

If the present selloff in stocks continues, I strongly suspect we'll see the Fed step in with a rate cut -- possibly even before their next meeting.

Tuesday, February 25, 2020

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

While stocks do believe it or not fall on occasion, it seems so odd these days that I find myself compelled to comment. Keeping in mind that day-to-day fluctuations are never, ever, ever, a factor in what makes for good, smart, investment management -- it's all about underlying general conditions!

Consumer Continues to Feel Good: But a little less so on the jobs market...

The Conference Board's Consumer Confidence Survey (one of three consumer sentiment surveys we track) for February was released this morning, and while the overall score missed expectations it was slightly higher than January's.

Monday, February 24, 2020

This Week's Message: The Weber-Fechner Law In Action

If it seems like I've been picking on policymakers and their penchant for printing, borrowing and, thus, punting economic excesses, stresses and strains into the future, well, I indeed have. For, in their attempts to allay the necessary pain/purging that is part and parcel to virtually all cyclical phenomena, they in effect camouflage (and exacerbate) the inflation of real-world issues until they grow too heavy to punt any further down the road. At which point market forces, having been held too long at bay, must resort to the most extreme and painful measures if they're to effectively clear a path for healthy, sustainable growth going forward.

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

Not much to add here to recent messaging; so I'll just reiterate that a day like today (still very early) should come as zero surprise to anyone. And I don't say that because of the coronavirus necessarily, but because days like today are natural, necessary occurrences, particularly if/when we're in the latter stages of a long bull market.

Sunday, February 23, 2020

This Is A Test Of The Emergency Broadcast System

While there's a lot of time left between now (Sunday afternoon) and tomorrow's open, Dow futures are presently trading 340 points lower; which should come as no surprise to anyone.

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.