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Christopher Moir
Maker of random charts that seem important 2 years later

ETF Lay of the Land - Wed 28th July 2021

"We don't rise to the level of our goals, we fall to the level of our systems" ~James Clear

I spent 12years in the military on nuclear submarines. Every day was training day. If the game day had ever come you wouldn't have read about it in the newspapers because there might not have been any newspapers left to read. A very solemn start to the morning with this one. The point is that although we had one aim for every patrol, the dangers were everywhere. So we had to train for them. Fires, hydraulic bursts, loss of control, reactor scram, the list goes on and on. Then there is the mundane managing food for an 8-week patrol when you are pushed into week 14. As an engineer, we have no shore support. We have to plan what spares we take with us make sure all our documentation is up to date etc because there is no internet no phones no email. My job is not to provide 100% capability to the Captain if that 100% has an impact on availability. There was always a compromise. If like our bodies a piece of equipment is mission-critical then we normally have two fitted. If we cannot have two then we protect the one we have, or we run it at less than maximum to increase its availability.

What's the point Chris?

Sometimes knowing that your goal is to make x% this year, but today might not be the day you make... (More)

Global Macro + Crypto Technicals 3

Time to dive deep into some of the charts that are in play in the global macro space.

KWEB (China Internet ETF) is down a serious amount over the last few days. We are now threatening to break a trend line that is going back almost 6 years. Today's volume also happened to be the highest in the ETF's history.

Small caps are trading like it is 2003. This was an analog that I discovered a couple of days ago. I think this might be more of interest for @Raoul Pal given how tight the market has been trading with rates.

To follow up with that chart, here is a chart of 10-year yields overlaid with the Russell 2000 Future. It is not a conincidince. Banks and energy are large components of the Russell 2000 and they have been quite sensitive to the volatility of the yield curve over the last month or tow.

But this is no different to the regional bank play. Bullish on growth and yields? Look for upside in the regional bank ETF (KRE)

Keep in mind with KRE that we just hit an important low from a technical perspective.

Longer term, EURUSD looks very good for upside on a risk-reward basis from here.

Closer view of the Euro.

Still looking for 45k on BTCUSD

Tezos holding trend (XTZ)

If real yields start to drift higher, gold is going to go lower. Long Gold and short stocks is not a long term very good trade, but... (More)

Christopher Moir
Maker of random charts that seem important 2 years later

Where's your fed at...?

FOMC tomorrow can we remember the stealth hike last time out? Chairman Powell managed to get the market to price in a hike simply by admitting they might have to think about thinking about interest rate hikes. As a Hedgeye subscriber, I have seen this chart many times.

The "higher than consensus" numbers keep getting higher. Many now use base effects in their vocabulary I have learnt from Keith McCullough and his former Hedgeye partner Darius Dale. This chart shows CPI inflation peaking here in Q2 at 4.85% then slowing (estimate) to 4.70% in Q3. Does this classify as "disinflation"? Of course it does the number is smaller. How is the market going to price it in? Inflation falling from a cycle peak to a number 199bps higher than the highest in the last two years.

Then we have a question from @Ross Moger Bonds are wrong? Which ones are wrong is the important question he asks. From the chart above inflation although peaking doesn't look all that transitory if the model is to be believed. Hedgeye also has rent data that has not been included here which could push the numbers above 5%.

The long end of the curve is pricing in slower growth. Now we have to be careful here it is slower growth globally. UST are the safety trade of the world, not just US citizens/companies/asset allocators. Now, this has born out recently with weakness in China and Hong Kong also Japan is starting to move in... (More)

Bonds are Wrong?

Cathie Wood mentioned that she is currently ignoring the bond market (I think), and this seems to echo  a comment I remember Jared Dillian made on RVDB the other day.

I think he was saying that the bond market was mispriced at the moment (inflationist) and I think he implied that the bond market can be massively mispriced at times and this is one of those times.

I can't recall whether Jared thought it was the shorter or longer duration US Treasury Bonds that he thought were mispriced.

I found this very interesting and flies in the face of some of the other people I love to follow such as Steven "Bond King" Van Metre.  He always reiterates that stocks will follow bond yields, and we are in for a US market correction as yields keep falling.  He seems to imply that bonds are never wrong and always lead.

Perhaps this is just a variant of the inflation vs deflation argument that people could be getting bored of, but I would love to hear peoples incites and whether say the 10Yr US Treasury bond could be massively mispriced or whether it's more likely it's the 2 or 5 year bond that is incorrectly priced.

More importantly if so, what's your personal thoughts on where bonds go and the implications?

I am very much in the learning phase when it comes to bonds so please correct/comment where you see fit, cheers!