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Macroeconomics

The Credit Cycle - Free Wealth is Over?Idea for Macro: - Financial sector selling off heavily. - While it's early to call a bear market, the exhaustion gap at an all time high is a reasonable signal for market reversal. - XLF, XLE and FAAMG have been holding up the broader markets at this high... Cracks appearing? Underlying conditions: - Institutions will invest based on 18 months into the future (Druckenmiller). - There are 3 relevant possibilities for the banks: (1) Inflation is sticky, interest rates will be raised in the future, within 18 months. This actually increases the banking sector's profitability, but the price is declining because they have been speculated above valuations. (2) Inflation is transitory, interest rates will not be raised, and we will have negative real rates. This will hurt the banks' profit margins. This is a possibility due to the 40 year demand-push deflation the US has been in (see Oil/CPI). (3) More importantly, the economy will decelerate (deflationary). Liquidity components of the Fed B/S have been decelerating and global credit impulse (lending) has gone negative. No more easy lending, less loans, meaning less earnings for the banks. Investors know this and are exiting the overheated trade. Either way for inflation, global liquidity and global credit impulse are turning down, so the Long Volatility trade seems to be ideal. Why did global risk assets rise to such insane levels? Credit impulse - easy lending. Now that supply of sugar is gone. Only one thing left that can happen. GLHF - DPT
AMEX:XLFShort
by UnknownUnicorn1043646
Look at all these sector rotations! Welcome to the new regimeRecently we've seen a significant "rotation" in markets toward large cap tech and defensives, and away from small caps, financials, and transportation. In this post, I will describe the rotation through a series of charts, and I will also suggest some explanations for what's going on. The long and short of it is that I think we've just witnessed a regime change, and markets are going to look very different for the rest of the year. What's up: ecommerce, software, automation After a long period of underperformance early this year, the software sector made a bullish trendline break vs. the S&P 500 at the end of May, and has been outperforming ever since: Likewise the Global X Robotics & Artificial Intelligence ETF: And the Amplify Online Retail ETF: Note that the online retail ETF is outperforming despite recent weak retail sales numbers. What's down: airlines, retail, materials While tech names have been breaking out upwards, we've seen downward breakouts in several other sectors that outperformed early this year. This includes most of the winners of the "reopening" trade, including airlines: The "consumer discretionary" or retail sector has also rolled over, obviously with the exception of ecommerce: As retail rolls over, we're also seeing some very bearish action in the materials sector. In addition to a sharp selloff in lumber, we also saw iron ore and gold take big dumps in the last few days. The materials sector has broken its uptrend relative to the S&P: What's going on: weak demand and the Delta variant Partly tech may be outperforming because of falling bond yields. Tech has been inversely correlated with interest rates since early this year. But I think a couple other factors are also in play. The economic data lately have been very disappointing, with weak retail sales, weak durable goods orders, and weak housing starts. A lot of consumers now say they are hesitant to buy a house, and initial unemployment claims ticked up significantly this week. The ECRI leading weekly index has been in a downward slide since mid-March. All of this points to weakening consumer demand, which I think is why you see the retail and materials sectors falling so hard. The drop-off in demand is partly due to inflated prices, and partly due to the elimination of expanded unemployment benefits. Having already spent their stimulus checks, consumers now simply have less money to spend. There's another factor, too, which is Covid-19 variants. The variant known as "Delta" has been ravaging India and spreading fast in the rest of the world. This variant is highly contagious and has been described as "Covid-19 on steroids." Meanwhile, the vaccine-resistant variants known as "Alpha" and "Beta" have been spreading in Europe and the United States. Alpha is now the predominant strain in the US, having increased from 12% of cases to 37% of cases in the last 4 weeks. With variants a growing threat, it's possible that some traders are hedging against a "reclosing" economy, or at least the possibility that consumers might travel less. Another noteworthy shift: bonds over financials Also note that financials have broken their relative uptrend, with a big drop today: The selloff in financials was a reaction to the upward breakout in bonds: It appears that we're headed into a new cycle of monetary stimulus and low interest rates, which means lower yields for banks. Oddly, the US dollar also broke out upward today. I'm unsure what that's about, or how it fits in with the price action in bonds. Normally higher bonds and higher inflation would be bearish for the dollar. What's threatened: aerospace, energy, and transportation The aerospace, energy, and transportation sectors are so far still in an uptrend, although all three exhibited some weakness today. You'd think that aerospace would fall along with airlines, but remember that the aerospace sector also includes defense, and we are increasingly under threat from China. The transportation sector includes passenger travel like airlines, but it also includes shipping companies like UPS and FedEx. So ecommerce strength may offer some support, but this could still fall out of its uptrend soon. The energy sector trades somewhat in sympathy with transportation, so transportation weakness could bode ill for energy. Energy is also inversely correlated with the US dollar, so today's upward dollar breakout could cause pain for energy. However, this sector is currently being supported by oil shortages and hype around the possibility that oil will reach $100/barrel. Keep an eye on defensives, real estate, and biotech Investors seem to be getting more and more defensive. That includes taking refuge in large, high-quality names. Large caps underperformed early this year, but that has changed in June, with the cap-weighted S&P 500 having broken its downtrend relative to the equal-weighted index: It also looks like several defensive sectors are basing relative to the index. The relatively undervalued communications sector may benefit from the bipartisan infrastructure bill that's now near to passing in the Senate: We're also seeing consumer staples, utilities, and healthcare find some support, though no big upward breakouts yet: Surprisingly, real estate and biotech are also both seeing bullish movement relative to the S&P 500, so these are sectors to watch. Both are relatively undervalued due to having underperformed for a long time:
AMEX:JETSShort
by ChristopherCarrollSmith
8
Macro - Risk is Very HighIdea for Macro: - Credit Cycle turned down from top of Risk Range. - Global Credit Impulse negative, US Systemic Liquidity Flows turning down, Fed Balance Sheet 5yr avg. at top of risk range. - Demand-push Inflation at top of risk range, in 40 year downtrend. - Implied Volatility vs. Realized Volatility reaching a critical level. - PC ratio reaching low levels (signals investor complacency). - SKEW at an ATH. Perceived Tail Risk is at an ATH. Speculate a correction in equities this Summer, then a large correction EOY-Q1 2022. GLHF - DPT
TVC:US30YShort
by UnknownUnicorn1043646
5
China Credit Cycle & US MarketsIdea on Macro: - China's Credit Impulse has turned negative. - Credit impulse is the change in new credit issued as a % of GDP. - China's Government Bonds 10 YR Yield are correlated with China's Credit Cycle. - The Credit Cycle taking a downturn signals deflation. Bond prices will rise as borrowers (issuers) will expect to pay back the principal at a loss, and interest rates will fall to incentivize borrowing. During deflation, default risk increases. - There is news of China "cracking down" on the market... Warning signs: www.bloomberg.com Commodities: www.reuters.com Cryptocurrencies: www.reuters.com - However, these are simply headlines. What is occurring is a downturn in the China Credit Cycle, and deflation in their economy. - The US markets too follow the China Credit Cycle. After the 2008 bailouts, the US markets followed the credit impulse back to recovery. - Now China's Credit Cycle has begun a downturn. US markets have deviated so far from this traditional relationship - creating a global asset inflationary bubble, that there is only one thing left it can do, according to reflexivity... return to the mean. - Once the deflationary shock takes place, there are several ways out. WWII followed the Great Depression, with defense spending and inflation. - A wild thought, but perhaps with the UAP disclosures, the US is toying with an idea for future defense spending... www.cnn.com GLHF - DPT
TVC:CN10YShort
by UnknownUnicorn1043646
DXY - USD BounceIdea for USD (DXY): - DXY has been on a decline. - However, Trade Weighted DXY has yet to decline, such that it is difficult to tell what exactly it will do next. - This means that the dollar has been losing strength mostly against the Eurozone. - It is possible that the dollar will continue its decline: - However, in a shorter time frame, it is looking likely for a small bounce. - Looking at the EURUSD chart, a likely trade setup is forming: Key EURUSD resistance: Speculation for the long term: GLHF - DPT
TVC:DXYLong
by UnknownUnicorn1043646
Black Swan - The End of a Force-Fed Credit CycleIdea for US10Y, Credit Cycle, and Equities: The Bottom Line: - There is no monetary inflation, because the money created does not enter the economy... however there is credit inflation because credit is created with that money as collateral. - There is PRICE inflation, ASSET inflation, CREDIT inflation, NO monetary inflation, oil deflation. - When credit can no longer inflate, credit inflators will begin to sell assets so that they can redeem their asset appreciation for money to redeem for the debt they have lent or borrowed. Where is the money that was injected into the economy? Where did it come from? Who loses here? YOU! The money created from high salaries caused by the speculative asset bubble, and the middle class who invest their hard-earned dollars into the asset bubble, creating more jobs and easy money, which is in turn invested back into the bubble for effortless paper wealth... The inflated prices you pay for food, education, housing, health care... When credit inflators decide to redeem their asset appreciation. It all returns to ashes. - During the collapse of a credit bubble, governments will sell off bonds in a frenzy, because there is too much supply. GLHF - DPT Allies — the strongest and truest in the world: underlying conditions - Jesse Livermore
TVC:US10YLong
by UnknownUnicorn1043646
9
Black Swan - Stagflation and Deflationary ShockIdea for Macro: - Oil is in a downtrend, at the resistance. - Current price inflation and USD devaluation is an attempt to inflate it over the resistance. It will fail. - When Oil reverses, USD will reverse. - Talking heads talking about beginning tapering talks, talking about inflation, talking about deflationary shocks EOY or next year... No, it is already here. Deflationary shock comes first. Taking the contrarian position: - Short Credit - Short Equities - Short Gold - Short Oil - Short Housing - Short Crypto - Long Volatility GLHF - DPT
NYMEX:CL1!
by UnknownUnicorn1043646
3
Towers Reaching For The HeavensIdea for Macro: - Inflation? Deflation? Both exist. - The bottom line is that there is deflation in demand. The price of Oil/CPI is on a clear decline. - The Fed and Central Banks do not control economic inflation and deflation, only asset inflation. - Inflation exists in assets, as made clear by the parabolic prices of nearly every asset class. - The USA is the world's largest debtor nation, and their debt is increasing at a parabolic rate. - The US cannot endure deflation. This is why the Fed and Biden administration goes to such extreme measures to engineer asset inflation, in hopes of negating economic deflation. - Reflexivity states that when prices deviate too far from objective, underlying fundamentals, prices will reverse to converge back toward equilibrium. - The breaking point is likely not to be either inflation nor deflation. The Black Swan is most likely to be in the implicit short volatility bubble. The world is short volatility in explicit and implicit positions. At any point, reflexivity can crash this bubble in an onslaught of volatility, leading to the unravelling of the monstrous $2.4 quadrillion derivatives bubble. - We have seen the 'Six Sigma event' in the GME short squeeze.... If you see a 'Six Sigma event' in the market, it's not a 'Six Sigma event'. - Hedge fund liquidations and near crises are appearing from the smallest events of volatility. The short volatility trade has been normalized, and institutional investors are incredibly leveraged. - Now the whole world has one language and a common speech: "Buy the Dip". - Tesla and Bitcoin's previous high marked peak euphoria, and the point of maximum financial risk. The current bounce is simply complacency. When the market is in complacency, anxiety will come next. - QE Tapering has already begun. - The tidal wave of volatility to come will be mythical. - The time has come. GLHF - DPT When He broke the third seal, I heard the third living creature saying, "Come." I looked, and behold, a black horse; and he who sat on it had a pair of scales in his hand. And I heard something like a voice in the center of the four living creatures saying, "A quart of wheat for a denarius, and three quarts of barley for a denarius; but do not damage the oil and the wine." - Revelation 6:5-6 And on every lofty mountain and every high hill there will be brooks running with water, in the day of the great slaughter, when the towers fall. - Isaiah 30:25
TVC:USOIL
by UnknownUnicorn1043646
SP500 - Can The Bull Market Really Continue?Idea for SPX: - Stock market is at a 100 year old resistance. - Can it really continue its parabolic bull run? - Here is an interesting fractal of the 20s to 50s, which closely matches with the current market conditions from the late 90s. - Right as the market hit the resistance, it did see a minor pullback and slowed for a year, but then continued its way up glued to the trendline for 10 years afterwards. Past performance does not guarantee future success, but based on this fractal, it is definitely not out of the question. Pullbacks are normal, so it is inevitable that we will have one, but this time, will it turn into more than just a minor pullback? That's a good question. GLHF - DPT
TVC:SPX
by UnknownUnicorn1043646
Oil - Possible Wyckoff AccumulationIdea for Oil: - Oil seems to be setting up for an inflationary shock event in the longer timeframes. - Understanding the trend of oil prices can help in market selection and portfolio construction. - Oil has broken out of a falling wedge. - There was a Wyckoff Spring from Hades as price went negative! - However, lower highs, lower lows, and volatile sell-offs are still a sign of weakness. - Oil has shown that its price can go negative, so a relatively low price should not be mistaken as a bottom. - Something to mention is that Biden has shown his international non-interventionist stance with the Israel-Palestine event, and I speculate that he is turning his attention toward domestic population control, from the UFO disclosures. This is a signal for volatility in oil during his term. GLHF - DPT
NYMEX:CL1!
by UnknownUnicorn1043646
Black Swan - The Housing BubbleSpeculative Idea for MBB (Mortgage-Backed Securities ETF): - Why is there a speculative housing bubble in the middle of a crisis? - "A major catalyst of the general financial crisis of 2008 was the subprime mortgage crisis of 2007, when a rising wave of defaults on home mortgages sent the value of mortgage backed securities plunging." - "They're in trouble right now," as Colleen Denzler, an investment manager at Smith Capital Investors, which has about $350 billion in assets under management (AUM), and who previously was the global head of fixed income at Janus Henderson, told BI. She is now underweight MBS. "Bubbles get popped when things turn around either through some sort of crisis or through a change in what caused them," she said. "This could be a while, and that's how we're positioned," she added. - "Other complex debt securities whose plunging values were a catalyst for the 2008 financial crisis are rising in popularity today. The synthetic CDO, a pool of derivatives linked to various categories of debt, is among them. Pessimists fear that history may be set to repeat itself, and that cautious investors should take cover." - NY Fed Report: Total household debt rose by $85 billion to $14.64 trillion. GLHF - DPT
NASDAQ:MBBShort
by UnknownUnicorn1043646
1
Sentiment Sunday - GoldSentiment Sunday: - Eyes are on gold this week, gold bugs are buzzing about a possible explosive breakout. - Rising material costs signaling consumer inflation, yet Fed's monetary inflation model has not indicated inflation yet. - Mixed sentiment, as Fed is likely to maintain dovish monetary policies. - Energy, Industrials, and Industrial/Capital Goods-related materials showing strength, supporting a 'Reflation' macro quadrant situation. - Poor employment data signaling a possible move toward stagflation. I speculate that the economic data from now will begin to reflect the effects of the pandemic. - Lumber, copper, cryptocurrencies seeing massive gains, speculators expecting the precious metals to finally trail. - Elon Musk stated that DOGE was a 'hustle' in his anticipated Saturday Night Live hosting, causing a correction in the cryptocurrency market. Investors are likely exiting and preparing to move into lagging inflationary assets. - Trend is still not defined, but the bullish case for gold is rather strong. GLHF, DPT Disclaimer: We absolutely do not provide financial advice in any shape or form. We do not recommend investing based on our opinions and strongly cautions that securities trading and investment involves high risk and that you can lose a lot of money. Loss of principal is possible. We do not recommend risking money you cannot afford to lose. We do not guarantee future performance nor accuracy in historical analyses. We are not registered investment advisors. Our ideas, opinions and statements are not a substitute for professional investment advice. We provide ideas containing impersonal market observations and our opinions. Our speculations may be used in preparation to form your own ideas.
TVC:GOLDLong
by UnknownUnicorn1043646
1
"What If?" Wednesday - CPI and War"What If?" Wednesday: - It's still Tuesday, but I wanted to post this early. CPI: - Speculated CPI to beat expectations. - Bullish breakout of resistance, 2X ATR volatility. Yom Kippur War II: - "The Yom Kippur War, Ramadan War, or October War also known as the 1973 Arab–Israeli War, was fought from October 6 to 25, 1973, by a coalition of Arab states led by Egypt and Syria against Israel. The war took place mostly in Sinai and the Golan—occupied by Israel during the 1967 Six-Day War—with some fighting in African Egypt and northern Israel. Egypt's initial war objective was to use its military to seize a foothold on the east bank of the Suez Canal and use this to negotiate the return of the rest of Sinai." - According to Chernyaev, on November 4, 1973, Soviet leader Leonid Brezhnev said: We have offered them (the Arabs) a sensible way for so many years. But no, they wanted to fight. Fine! We gave them technology, the latest, the kind even Vietnam didn't have. They had double superiority in tanks and aircraft, triple in artillery, and in air defense and anti-tank weapons they had absolute supremacy. And what? Once again they were beaten. Once again they scrammed. Once again they screamed for us to come save them. Sadat woke me up in the middle of the night twice over the phone, "Save me!" He demanded to send Soviet troops, and immediately! No! We are not going to fight for them. - Iraq raises oil export prices to US and lowers them for Asia. - In response to U.S. support of Israel, the Arab members of OPEC, led by Saudi Arabia, decided to reduce oil production by 5% per month on October 17. On October 19, President Nixon authorized a major allocation of arms supplies and $2.2 billion in appropriations for Israel. In response, Saudi Arabia declared an embargo against the United States, later joined by other oil exporters and extended against the Netherlands and other states, causing the 1973 energy crisis . - Ship gets stuck in Suez Canal. - Colonial pipeline cyberattack. - US missile submarine in Strait of Hormuz, intercepts weapon shipment. - Israel-Palestine conflicts escalates, with Hamas firing over a hundred rockets into Tel Aviv (a tech hub)'s residential area. - Trans-Israel pipeline in Ashkelon burned. - US citizens lining up for oil, and hoarding oil in expectations of shortages. - “We’re going to make it clear to anyone collecting unemployment who is offered a suitable job they must take the job or lose their unemployment benefits.” - Joe Biden - 'But Joe, how can I get to work with no gas?' #DealWithIt I heard the military is always hiring! COVID: - Meanwhile COVID mutation rampages in India, where a large share of IT services in the US are outsourced to! This includes cybersecurity related positions. Speculation: - Energy crisis will be the first domino piece to fall. Inflationary Shock forecast: GLHF - DPT
FRED:CPIAUCSLLong
by UnknownUnicorn1043646
Black Swan - US Government Bonds 10 YRSpeculation for US Government Bonds: "If you want to learn how to trade, go down to the beach and watch the waves." - Ed Seykota After reading this, I went down to the river and watched the waves for a bit, and came up with this model. If you think of a river, the riverbanks are made of sand and pebbles... Each pebble and grain of sand are underlying conditions. Together, they create a hard boundary, that the waves cannot traverse and bounce off of. There are unknowns beneath the surface, which can only be detected with signals and indicators, from the behavior of the waves. The waves bounce off each other to create ripples, and sub-waves in the opposing direction, at the middle, they form a stalemate, this is the Line of Least Resistance (LLR). There is a current, coming from upstream, and all the way down to the sea, which ultimately cannot be resisted. However, there are large objects - stones usually, that break out of the surface and create ripples of their own as the current bounces off of them. These are typically large events. It is interesting to watch little whirlpools of volatility form as energy is trapped in between such ripples! The trader is the bird, who lands in the river and gets swept to another location. It is up to the bird's judgement to predict where it will take them. Perhaps they will be swept to danger, or a prize beneath the surface. Housing: - Commodities and building materials are being speculated to unprecedented rates. Lumber almost $1700 for the forward contract. - Fed maintain that inflationary effects are “transitory” and remain dovish on monetary policies. It can be speculated that such the inflationary effects will continue in commodities if such dovish monetary policies are maintained. - Commodities being speculated to such prices affects house prices due to the scarcity of resources. It also erodes price margins of house-builders. Cryptocurrency: - Cryptocurrencies have served as a faithful indicator for real inflation perceived by investors. Semiconductors: - There is a global semiconductor shortage. - China is the greatest importer of semiconductors. - US trade sanctions have cut their supply of this most vital component. - However, US's largest imports are capital goods, followed by consumer goods and industrial supplies and materials. - China was the largest provider of foreign goods to the US supplying 18.6% of all US imports in 2020. - "Europeans found the Chinese amusing for their rejection of paper money... People presumed that the Chinese were five generations behind us - In reality they were a generation ahead of Europe. Under the Mongol emperors they had experienced a boom in which paper billions were issued to finance military conquests and vast public works, only to go through the bitter deflationary consequences - and the impression of all this had lasted through many subsequent centuries." - Jim Rickards Bonds and Interest Rates: - Investors are euphoric, reciting the mantra of "don't fight the Fed," however, when Janet Yellen cracked and let a neutral comment slip, the markets tumbled. Institutional investors are wary, and prepared to exit at the first sign of trouble. Risk is great in a vertical market, especially in a speculative bubble. - It is believed that bears are praying for a black swan event to crash the market... I beg to differ. To me, it seems like the bulls are praying for a black swan... The possibility of QE being extended forever. "There is no inflation. Interest rates won't be raised. QE tapering won't happen. It will be different this time!" - Inflation must be maintained at all costs in the Fed's mind. Inflation erodes debt. - The US is the largest debtor nation in the world... It cannot endure deflation. Deflation raises the real value of debt. - However, when inflation rises, bond holders will sell their long-term bonds, as inflation corrodes their value, so interest rates must be raised. Typically, higher inflation leads to higher yields, which translates to higher interest rates. - Now, the Fed simply buys their own bonds. They buy their own debt with fabricated money to create artificially higher bond prices, keeping yields controlled, therefore signaling that inflation is not rising, so they do not have to raise interest rates. - This is a false impression of demand, and it debases the currency against real commodities and assets. It inflates the everything bubble with cheap money. Everything is to manipulate interest rates, which is the signal for economic health. - Low interest rates stimulate economic growth due to easy lending, and inflation does indeed translate to higher levels of spending. Speculation: - In retaliation to the semiconductor shortage, China is squeezing the global commodities market. - COVID-19 is squeezing global production. - House builders will be priced out and abandon projects, and eventually home-buyers too will be priced out of the market. Then - when there are no more buyers, real estate investors will flood the market with their assets which are no longer appreciating in value, having obtained a cool 70% profit in a year (XLRE). Tangible real estate likely yielded much more. - Cryptocurrencies' speculative bubble will pop, as blockchain technology has fully been harvested. It's speculative prices are not needed for it to function. - There are 2 paths that I see for the Federal Reserve: (A) QE Infinity, YCC, etc. Printing more and keep the game going until it cannot. (B) Naturally allow bonds to return to true price, completely destroying the everything bubble. - There exists a $1.5 quadrillion USD derivatives overhang, in addition to the "everything bubble". It is possible that the Fed can no longer opt for option B. As we saw with Archegos/Credit Suisse and Robinhood/Citadel, there are massively overleveraged funds that are pricing in a QE hard floor, with liquidations just beneath the surface. - If you think that these hedge funds learned their lesson from Archegos, you are wrong. Institutional trend traders - how do they make money? They buy the dip until it doesn't work. Market maker quant firms like Citadel - how do they make money? They use monstrously leveraged positions to capitalize on miniscule bid-ask spreads. They will easily be swept by an unexpected and volatile move. It is the private investor only that dares to go against the trend. There are business fundamentals trading funds. They too will capitulate when nothing is going their way. How telling it was when every major broker locked down to prevent a mere $80~ billion liquidation during Gamestop's first rise! - It is likely that eventually, the Fed will lose control, and there will be an inflationary shock. How the Game Ends: - What is truly fascinating is that if you think about it... the Fed can indeed "print money" forever. They are the world reserve currency. - There is but one way the game ends... China will release their blockchain backed digital currency (DCEP/CBDC), while accumulating real commodities and capital goods. - CBDC's are favored by the G20, IMF, BIS et al. (financial elite), as they address tax evasion. There is an estimated $36 trillion in corporate tax havens (as of 2016). A global sanction of China is unlikely. - China and the eastern bloc will simply exit the western Federal Reserve System, they will capitulate on the US Dollar, and demand commodities and real assets. When the Bretton Woods Agreement was abandoned, a potential crisis caused by a run on gold was averted, but this time, there is no escape. - Soon, the world will have to choose between money backed by military power and money backed by tangible goods. My friends, it is possible that the river has at last found its way to the wide ocean... The possibilities are infinite. "Allies — the strongest and truest in the world: underlying conditions" - Jesse Livermore GLHF, DPT Disclaimer: We absolutely do not provide financial advice in any shape or form. We do not recommend investing based on our opinions and strongly cautions that securities trading and investment involves high risk and that you can lose a lot of money. Loss of principal is possible. We do not recommend risking money you cannot afford to lose. We do not guarantee future performance nor accuracy in historical analyses. We are not registered investment advisors. Our ideas, opinions and statements are not a substitute for professional investment advice. We provide ideas containing impersonal market observations and our opinions. Our speculations may be used in preparation to form your own ideas.
TVC:US10Short
by UnknownUnicorn1043646
6
Black Swan - The Strait of HormuzSpeculative Idea for USOIL/Macro: - Tensions in the Middle East gaining momentum, as Isareli security forces clash with Palestinian protestors on the Temple Mount holy land. Al-Aqsa Mosque, built upon the remnants of the Temple of Solomon. - Iran progressing their space program, allowing ICBM technology. - Israel blamed for cyberattacks that sabotaged Iran's nuclear facility, causing a 'possible minor explosion'. - US fires warning shot at Iranian boats in the Strait of Hormuz. - "A US Coast Guard ship fired warning shots at Iranian boats that came close to American naval vessels in the Strait of Hormuz, the Pentagon says". - "The US Navy vessels were escorting USS Georgia, a guided-missile submarine, as it transited the Strait of Hormuz". - "A third of the world's liquefied natural gas and almost 25% of total global oil consumption passes through the strait, making it a highly important strategic location for international trade". 2 Thoughts: (A) Cyberattacks on nuclear facilities a threat. (B) Why is the US missile submarine there? Geopolitical operators diligently working to squeeze the oil supply chain. Could this be a Suez Canal v2, following the Colonial pipeline cyberattack, or the beginning of something more? GLHF - DPT
TVC:USOILLong
by UnknownUnicorn1043646
1
Black Swan - A Gale of Creative DestructionIdea for Macro/Tesla: - We speculate a coming crisis, similar to the energy crisis of the 1970s-1980s, not with oil, but machinery, minerals, semiconductor chips and semiconductors/electronics materials. - We expect the tech bubble to crash in the nearest future. - This crisis will only be the first domino piece to fall in the Imperial Circle of the US financial system. It is the first moat of the financial elite. 1970s: - "Growing computer power and engineering sophistication enabled the development of a host of new complex applications designed to improve accuracy and save the customer time and energy. The advantage provided by its unparalleled range of tools reinforced Schlumberger as the market leader, and that meant the company was in prime position to benefit from the upsurge in worldwide oil exploration triggered by the OPEC oil embargo of 1973." - Schlumberger - Innovation and disruptive tech drove investors to speculate its valuation to monstrous levels during the exploration boom of the 1970s. - From its initial public offering on the NYSE in 1962 to its peak in 1980, Schlumberger appreciated 50-fold. Its cult status among investors was rivaled only by Radio Corporation of America during the 1920s. - "Jean Riboud is credited with building the world’s leading oilfield testing company. During his tenure, he produced a 19-fold increase in revenue (to $6.4 billion) and a 44-fold increase in earnings (to $1.2 billion), often producing results that were the best in the world. His success was generated through a commitment to long term planning, a dedication to research, and a strong decentralized management structure." - Harvard - "Under his leadership, Schlumberger grew to become the largest oilfield services company in the world with interests in other sectors such as semiconductors. He expanded the company business by acquisitions, too; the taking over of Fairchild Camera and Instrument was one such acquisition. By the time he relinquished his position to his successor, Michel Vaillaud, in 1985, the company had a net profit of US$I.2 billion on a revenue of US$6.4 billion and had presence in over 100 countries, controlling the operations of 70 percent of the world's oil wells. At that time, the company employed 80,000 people, held US$10.9 billion in assets and was considered by many as the best managed company in the world." - Wikipedia - The real price of petroleum was stable in the 1970 timeframe, but there had been a sharp increase in American imports, putting a strain on American balance of trade, alongside other developed nations. During the 1960s, petroleum production in some of the world's top producers began to peak. Germany reached its production peak in 1966, Venezuela and the United States in 1970, and Iran in 1974. - Although production in other parts of the world was increasing, the peaks in these regions began to put substantial upward pressure on world oil prices. Equally as important, control of the oil supply became an increasingly important problem as countries like West Germany and the U.S. became increasingly dependent on foreign suppliers for this key resource. - In October 1973, the members of Organization of Arab Petroleum Exporting Countries or the OAPEC (consisting of the Arab members of OPEC) proclaimed an oil embargo "in response to the U.S. decision to re-supply the Israeli military" during the Yom Kippur war; it lasted until March 1974. - By January 18, 1974, Secretary of State Henry Kissinger had negotiated an Israeli troop withdrawal from parts of the Sinai. The promise of a negotiated settlement between Israel and Syria was sufficient to convince Arab oil producers to lift the embargo in March 1974. - Independently, the OPEC members agreed to use their leverage over the world price-setting mechanism for oil to stabilize their real incomes by raising world oil prices. This action followed several years of steep income declines after the recent failure of negotiations with the major Western oil companies earlier in the month. - For the most part, industrialized economies relied on crude oil, and OPEC was their major supplier. Because of the dramatic inflation experienced during this period, a popular economic theory has been that these price increases were to blame, as being suppressive of economic activity. However, the causality stated by this theory is often questioned. The targeted countries responded with a wide variety of new, and mostly permanent, initiatives to contain their further dependency. The 1973 "oil price shock", along with the 1973–1974 stock market crash, have been regarded as the first event since the Great Depression to have a persistent economic effect. - The decade of the 1970s was a period of limited economic growth due in part to the energy crises of that decade. Although the mid decade was the worst period for the United States the economy was generally weak until the 1980s. The period marked the end of the general post-World War II economic boom. It differed from many previous recessions as being a stagflation, where high unemployment coincided with high inflation. - Other causes that contributed to the recession included the Vietnam War, which turned out costly for the United States of America and the fall of the Bretton Woods system. The emergence of newly industrialized countries rose competition in the metal industry, triggering a steel crisis, where industrial core areas in North America and Europe were forced to re-structure. The 1973–1974 stock market crash made the recession evident. 2004: - Although Musk has long been the face of Tesla, he did not join the company until 2004. He invested $30 million into the company and became the chairman of its Board of Directors. - Opening on the NASDAQ at $17 a share, Tesla raised $226 million in its IPO. - Musk, in several public writings and statements, has said that he would like the company to eventually become an energy solution across many sectors. - Tesla, lead by Musk has revolutionized the auto industry with disruptive tech innovations, leading investors to speculate its stock price to a monstrous valuation. 2018: - The volume of trade in goods between the US and China has grown rapidly since the beginning of China's economic reforms in the late 1970s. The growth of trade accelerated after China's entry into the World Trade Organization (WTO) in 2001, with the US and China becoming one another's most important trading partners. The US has consistently imported more from China than it has exported to China, with the bilateral US trade deficit in goods with China rising to $375.6 billion in 2017. - Initiating steel and aluminum tariff actions in March 2018, Trump said "trade wars are good, and easy to win." U.S. President Donald Trump in January 2018 began setting tariffs and other trade barriers on China with the goal of forcing it to make changes to what the U.S. says are "unfair trade practices" and intellectual property theft. 2019: - January 14: An article in The Wall Street Journal reports that in China's 2018 trade surplus with the United States was a record $323.32 billion despite Trump's tariffs. - March 6: The U.S. Department of Commerce stated that in 2018 the U.S. trade deficit with China reached $621 billion, the highest it had been since 2008. - July 17: China announced an accelerated decrease in holdings of US treasury holdings, targeting 25% of its current holdings of $1.1 trillion. - January 3: Reuters reported that in December 2019 the American manufacturing sector fell into its deepest slump in over a decade, attributing the decline to the U.S.-China trade war - Analysis by Goldman Sachs in May 2019 found that the consumer price index for nine categories of tariffed goods had increased dramatically, compared to a declining CPI for all other core goods. - Analysis conducted by Moody's Analytics estimated that through August 2019 300,000 American jobs had either been lost or not created due to the trade war, especially affecting manufacturing, warehousing, distribution and retail. 2020: - China will spend over $300 billion on importing semiconductors this year, an industry expert told the World Semiconductor Conference in Nanjing on Wednesday, as the U.S. continues to put pressure on the country’s access to the most advanced chips. - “China is the world’s largest importer of chips,” Wei Shaojun, vice chairman of the China Semiconductor Industry Association, said on Wednesday. China imported $301 billion worth of semiconductors last year—more than the $238 billion it spent on crude oil. Wei said that China will still spend $300 billion or more on semiconductors this year so long as “nothing out of the norm happens.” - The “norm” is fast changing as U.S.-China relations deteriorate. The Trump administration has increasingly used its dominance in the semiconductor industry to cut off Chinese companies—particularly Huawei Technologies—from international supplies. - COVID-19: "Some major industrial companies have closed facilities and are mulling the extent of layoffs to help curb the spread of the virus, as well as for economic reasons. Clearly, the manufacturing sector, which employs some 13 million workers in the US, is poised to be hit hard during this outbreak, primarily for two reasons: First, many manufacturing jobs are on-site and cannot be carried out remotely. Second, slowed economic activity has reduced demand for industrial products in the US and globally." - PwC 2021: - By Feb. 4, Tesla had surpassed a stock price of $900. - Mineral exploration boom under way. - January 20: Trump left office and Joe Biden was inaugurated as president of the United States. Biden said that he did not have immediate plans to remove the tariffs and planned to review the phase one trade deal and discuss the matter with allies first. - COVID: Currently, there are certain mutations and variants that are being followed closely by investigators across the world. For example, the mutation E484K present in the South African variant B.1.351 seems to create a greater risk for reinfection and decrease some of the efficacy of COVID-19 vaccines. This same E484K mutation has also been found to be present in the Brazilian variant P.1 and the New York variant B.1.526. - We speculate that there is risk of further lockdowns due to COVID-19 mutations leading to further decline of manufacturing. - During the 70s, the hungry oil and gas industry demanded energy, yet today, it is tech and the EV industry. They demand metals, semiconductor chips, and related electronic materials. Today, emerging nations like China and India have appetites like the US during the 1900s. - Previously, the Bretton Woods agreement was abandoned because other countries had accumulated 3x the amount of USD than the amount of gold the US had, threatening a run on US gold! - The current situation also shares similarities with the 1920s. There exists a threat of a liquidity crisis. There is a 1.5 quadrillion dollar derivatives overhang, and an "everything" bubble. - Today, US dollars are not backed by anything. The reserve status is based largely on the size and strength of the U.S. economy and the dominance of the U.S. financial markets. - We speculate that there is a cascade of liquidations of overleveraged hedge funds like Archego beneath the QE floor. The question is, can the US "print" money forever? Can they purchase bonds forever? This is a topic for another post, but: “Large government deficits exist and will almost certainly increase substantially, which will require huge amounts of more debt to be sold by governments — amounts that cannot naturally be absorbed without driving up interest rates at a time when an interest rate rise would be devastating for markets and economies because the world is so leveraged long." - Ray Dalio “It is a sobering fact that the prominence of central banks in this century has coincided with a general tendency towards more inflation, not less. If the overriding objective is price stability, we did better with the nineteenth-century gold standard and passive central banks, with currency boards, or even with 'free banking.' The truly unique power of a central bank, after all, is the power to create money, and ultimately the power to create is the power to destroy.” - Paul Volcker The financial system of the US will be tested, and possibly changed forever. The very concept of what money is may be re-evaluated. GLHF, DPT Disclaimer: We absolutely do not provide financial advice in any shape or form. We do not recommend investing based on our opinions and strongly cautions that securities trading and investment involves high risk and that you can lose a lot of money. Loss of principal is possible. We do not recommend risking money you cannot afford to lose. We do not guarantee future performance nor accuracy in historical analyses. We are not registered investment advisors. Our ideas, opinions and statements are not a substitute for professional investment advice. We provide ideas containing impersonal market observations and our opinions. Our speculations may be used in preparation to form your own ideas.
NASDAQ:TSLAShort
by UnknownUnicorn1043646
4
Macro MondayMacro Monday: DXY failed to reverse and continues its decline: Oil has yet to fill the gap: Oil speculators should take caution if they bought due to the cyberattack, as oil does not equal gas. Refineries use oil to make gas. Gas prices rise because a huge refinery is off-line, so a huge oil buyer is out of the market, causing demand for oil to decrease. So in a refinery attack, oil prices go down, but gas prices go up! Yes, oil buyers are locked into contracts, they are obligated to buy, but buyers can sell futures to hedge. Gold finally showing its desire to track inflation: VIX bouncing off a low: Yields once again being stifled: Nasdaq possible continuation in the correction: We saw a wonderful segment on Hedgeye on the weekend, where they had Chris Whalen to talk primarily on inflation. Here are some insightful points that stood out for us: Whalen: contractors in NY are moving away from fixed pricing to time + materials, because they can't control material prices, and this means the material prices will go straight to the consumer. This is non-monetary inflation, so this is something the Fed can't control. are flying blind, they have no idea what's going on... The monetarist inflation definition is what we use. The bottom line is that the Fed is a backward looking agent. McCullough: Linear econ it's all these nice linear charts... moves in bond yields are always non-linear! W: They're not going to let go of a lifetime of work. If you tell them things have changed... there's a problem, because they're no longer relevant. Putting economists on the board to actually make policy is a terrible mistake. McCullough outlined a nice leading indicator: Underlying Price CPI (which defines inflation) will converge with Inflation Spread: Prices Paid - Prices Received (Fed Regional Survey Composite). This is a leading indicator for linear economist's inflation definition. W: Janet Yellen is a labor economist and employment, doesn’t care about monetary inflation. She will let inflation run longer than we may think. What is the Fed’s priority, Is it employment? Is it price stability? No, it’s keeping the Treasury bond market open. While they pay lip service to keep inflation low, what they’re really concerned about is can the Treasury issue more debt? Yellen’s tendency will go further and try to buy long-dated bonds and go to YCC. M: How do you get back to deflation? Recovery in some areas, some areas under terrible deflationary pressure. Commercial real estate sector is under pressure. Utilization of assets back to where they need to be, so that the valuation of building makes sense. These assets will be marked down. Small businesses are destroyed and are not coming back, you are going to need to either lower taxes or costs to attract new businesses, or find something new to do with the land. M: If you get commodities right, you’re gonna get inflation right, you’re gonna get the rate of change right, you’re gonna get the long end of the curve right. W: Once this behavioral change you’re seeing in price changes get out of control, will have to really slam on the brakes, like Volcker did in the in late 70s. There’s really no political appetite for that, so you’re gonna have inflation. That’s it. At the last press conference, “Chairman Powell said that it’s not his job to talk to Congress about fiscal policy… “ I’m sorry, you’re wrong, because you can’t fulfill your mandate if Congress is out of control! That’s the bottom line. Fed Chairmen need to have the courage to go up to the Hill and tell them the truth, and you know what, if they lose their job? Bravo. That’s what we need. We need more courage in this country. The Fed is the most cowardly, despicable institution I’ve ever worked for. M: How does this dance end? W: It just keeps going. Your purchasing power just keeps going down every day. Your only shelter is in stocks and real estate, everything else is a fraud, and I include ‘most’ coins. I’m sorry, beanies babies, or tokens, I’ve been a member of FINRA for 30+ years. As long as you know that it’s speculation, it’s okay. I bought Square when it was in single digits, because it was ‘Fintech’ and I knew equity managers would find it. It had nothing to do with business valuations, it had everything to do with equity managers, right? So they took it up to $180. ‘Chuckles heartily.’ All of these things are driven by scarcity and demand of managers. M: A lot of people don’t understand that the prices of these assets are going down as the dollar goes down, the correlation of the CRB commodities index and Bitcoin with the dollar are identical. W: The reason the Fed can get away with all the stupidity they put in play is because of the offshore demand, yet you never hear them talk about it. Do you ever hear them talk about the offshore demand for US currency? No. The thing that saves the dollar is the use as a means of exchange. It’s not as a store of value. If you constantly take away purchasing power from Americans regardless of wealth, we all become wards of the State, that’s how it ends. The reality is that you can’t have a free lunch. Lunch does cost something, it means that the piece of paper in your pocket next year will buy less. That’s it. Yardeni says that: “The Great Inflation” of the 1970s was driven by supply shocks, especially in food and energy commodities and was worsened by a wage-price spiral. There was much talk about “stagflation.” Now, the economy is suffering from “stimulus shock.” Insanely stimulative fiscal and monetary policies have caused demand to boom, overwhelming both production and inventories. Shortages could weigh on economic growth while fueling inflation. A wage-price spiral isn’t likely, in our opinion; but we have to acknowledge that it is more likely than it has been during any time since the 1970s. Commodity prices going vertical. Since they bottomed last spring, the CRB all commodities price index and the CRB raw industrials spot price index have soared 56% and 45%, respectively, through Friday’s close. Leading the way have been lumber 4 (549%), steel (240, through Thursday’s close), and copper (125). While the aforementioned CRB indexes are still slightly below their 2011 record highs, the metals component of the CRB raw industrials spot price index just rose to a record high last week. The price of a barrel of Brent crude oil is up 131% y/y. Even grain prices have gone vertical, with the S&P GSCI Grain Index up 88% y/y through Friday’s close. “I don’t think there’s going to be an inflationary problem, but if there is the Fed can be counted on to address it.” – Janet Yellen Insights: There’s an insight to be made to play the stock picking game. Recall Gallacher’s fundamentals. William Gallacher's Fundamentals: 1. Select historically "Cheap" or "expensive" markets. 2. Develop a critical eye for what is "important" fundamental information to a particular market. Get (1) neutral, (2) bullish, or (3) bearish. According to Whalen, it would appear that what is “important” fundamental information is the equity managers’ demand in this market! It does look as if inflation will continue to soar in commodities, for the time being, and the stock picking game will have to continue, as select appropriate market sectors. The uranium sector is of great interest to us and showing strength, if you missed lumber’s DOGE-like run: Of course, the Fed is walking a tightrope in our opinion, and the risk continues to pile on. We will be watching for the monster move in volatility! GLHF, DPT Disclaimer: We absolutely do not provide financial advice in any shape or form. We do not recommend investing based on our opinions and strongly cautions that securities trading and investment involves high risk and that you can lose a lot of money. Loss of principal is possible. We do not recommend risking money you cannot afford to lose. We do not guarantee future performance nor accuracy in historical analyses. We are not registered investment advisors. Our ideas, opinions and statements are not a substitute for professional investment advice. We provide ideas containing impersonal market observations and our opinions. Our speculations may be used in preparation to form your own ideas.
CME_MINI:ES1!
by UnknownUnicorn1043646