Macro Dragon: VIX Crumbles, as Equities Fly & Oil Soars...

Macro 2 minutes to read

Kay Van-Petersen

Global Macro Strategist

Summary:  Macro Dragon = Cross-Asset Daily Views that could cover anything from tactical positioning, to long-term thematic investments, key events & inflection points in the markets, all with the objective of consistent wealth creation overtime.

(These are solely the views & opinions of KVP, & do not constitute any trade or investment recommendations. By the time you synthesize this, things may have changed.)

Macro Dragon: VIX Crumbles, as Equites Fly & Oil Soars... 


Top of Mind…

  • VIX -7% 31.23, seems like another lifetime when we were at 85… clearly everything is so much better now (heavy sarcasm) – despite the every increasing gap between the fall-out economically & the pricing on wall street. Basically US Equity prices are saying that we are going to bounce back from all this - & have been bouncing back – this is just a short term blip… remains to be seen whether this will hold. Either way, options are much cheaper to express upside or downside views
  • SPX +2.7% 2939, NDQ +3.5% 8,983, RTY +4.8% 1361
  • This is not sustainable folks… not whilst the structural underlying economy continues to fall apart in a vicious loop of negative reflexivity. Overtime the market is weighing machine, in the near-term it’s a random machine. Put it another way, at some point fundamentals will come home to roost… & likely with a vengeance…
  • WTI Oil +22.0% 15.90, Brent Crude +10.2% 23.30, Copper +1.2% 238.65 USTs -0.03% 138.98
  • DXY -0.30% 99.72, Gold +0.33% 1711, JPY -0.18% 106.86, AUD +1.0% 0.653, NZD +1.35 0.61
  • For what its worth KVP, does not think this will be a shallow recession… not in a million years… the best we can hope for now is a shallow depression – whatever that even means. The world is not going back to Jan 2020 for a long time (Some parts global tourism will take years)… just because the economy is “open” does not mean the economy goes back to 70-90% of capacity in a few quarters, let alone weeks. We are likely at -30m jobs by CoB today & that will be in just 6 wks (GFC 2yrs to lose -10m jobs)
  • There will be pockets of the listed universe that will not be able to escape the synthetic demand created by the Fed backstopping parts of the financial listed universe – banks! Banks. Banks. Banks… the assets & liabilities of Main Street sit on Wall Street banks & European banks… if KVP was the CEO of a bank (leans back in the home office chair, puts feet up on desk, arms behind back of the head & lets out a big sigh)… he would be doing capital raise after capital raise… now when the market is luco en la cabeza
  • KVP will also share that a lot of analysts, strategists, traders, investors, portfolio managers, CIOs, etc… are really frustrated & upset… yet its not the upset around FOMO or having underperformed etc… (some of these people have outstanding out of this world returns YTD… we are talking multiples within the last few months)… it’s the upset / frustration that is screaming in every one of their cells at the disconnect between the underlying economy & the price action we are seeing…
  • Obviously there is often a big difference between wanting to be right & wanting to make money, yet time tends to merge the two… i.e. most people actually end up being right, yet where they have the mismatch is their trade horizon is much shorter than their idea horizon
  • Let KVP emphasize this again, also for his own sake…
  • …There is the commitment to compounding money & there is the commitment to being right.
  • They are not necessarily the same thing. Make sure you know what game you are playing. The game we choose to play, is much more important than how we play the game we are in.
  • What game/s are you in? Did you consciously choose them, or did you just one day wake up in the matrix? 
  • It’s like +200% probability that the economy will need a lot more support from both the fiscal side & the monetary side.
  • In fact – it is going to be IMPOSSIBLE for the economy to NOT need more help…
  • C’mon people… you asked everybody to switch off their engines, at no fault of their own & at epic cost to themselves with most having little to no savings (let alone stocks, i.e. 50% of US citizens don’t even own stocks – in fact KVP would love to know how much of Trumps base own any equities… despite his obsession with the stock market)… the whole purpose of being a government is to be their for your taxpayers when they need you. Its insane… its like your paying (taxes over your years of working) for the privilege of politicians (whose salary, healthcare & benefits are paid by you) to not help you after you have lost your job or your business, don’t have healthcare, etc. And the paradox here in the US at least is... the virus was likely brought over by white collared works travelling abroad on business  - who have equities, savings, healthcare, more flexible jobs, better education, more options, etc - & its going to devastate blue collared workers - who tend to have the inverse of all the things that white collared workers have. 
  • If you think class warfare & dislocation is bad now... the 2022 election candidates & voting bases will make Bernie look like a capitalist 
  • Perhaps lets change the current relief package (its not a stimulus when the body is in shock & a coma) skew of…
  • Wallstreet > Mainstreet… to Mainstreet > Wallstreet….
  • Yes yes… I know isn’t that a crazy idea… anyhow… the saddest part about all this… Powell (for all the balls the Fed / Treasury has dropped/missed) is still miles ahead of everything else that is being done globally & especially on the US’s fiscal side of things… its akin to an obese runner winning the 100m dash… makes you think who the hell are the other runners & what are they doing…


Start-End with Gratitude+Integrity+Vision. Create Luck. Process > Outcome. Sizing > Idea. Repeat 




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