Macro Dragon WK 2: Reset for the Re-Up... Final Stretch... New Year, New Opportunities, Same Risks..
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.
Macro Dragon WK #2: Reset for the Re-Up... Final Stretch... New Year New Opportunities, Same Risks...
Top of Mind…
- Folks if you are back on deck – theoretically at least – welcome back & Happy 2021!
- May the year ahead, provide you & your loved ones with everything they wish to manifest. With that in mind, don’t forget the key foundational lessons from 2020, gratitude & empathy are part of a sustainable path forward for this planet, not to mention what a life of true wealth is.
- Before KVP get inundated with “what’s your view for the year ahead”, two key caveats:
- One - First of all the Gods of Trading (GoT) & in particular those of Global Macro & Crypto… care not for the human concepts of time & fiscal calendars. The Meta Regime & Meta Trends remain what they are… yes, there can be cyclical resets in near-term sentiment, positioning & micro trends…
Yet, remember the ultimate Macro Sin… is not, taking losses or getting a string of trades or investments wrong… rather its not taking the phenomenal opportunity when it presents itself.
- Two – KVP, being neither too smart, nor too dull… already postulated his closing thoughts in Dec for high conviction skews into 2021… one can check those out here
MD WK 51: 16 CBs, Fed, Year-End to 2021 Trade Views + Thanks for 2020!
- Three – That’s right, needed its own mention… if you missed the… LIFT. OFF. VIP email towards back end of Dec as Bitcoin took out $20K… let KVP reiterate what we covered here:
We ain’t seen nothing yet!
Are there risks of course, when are there no risks?
Catch Peter Garnry & John Hardy highlighting their thoughts on bullish sentiment looking stretched back in mid-Dec.
Are there opportunities? Hell yeah. “Limitless Upside”. Again the Dragon’s view has been, you cannot be serious about long-term wealth generation & asset allocation if you don’t have some % of your capital/net worth in the digital asset space.
We are in the cusp of a new bull market in the space, that is nowhere near as hot as we were in 2017 – only this time its likely to last longer & have a bigger magnitude in regards to ATHs. So far there is very little private/retail participation (compare google search for “Bitcoin” & “Crypto” today vs. 2017, bearing in mind more people & greater digitization as well since then) & to be honest, even the institutional tick-up has miles to go.
At the end of the day, Bitcoin (Gold & number of many assets) are likely not at ATHs if you have to adjust for all the fiscal & monetary stimulus that we have gotten in 2020.
This is what the valuation & fundamental folks are missing, you cannot say something was 20x PE in Jan 2020, so if its 21x PE today “its more expensive”, what about the +70% growth in Fed BS & the +$3trn in US Fiscal spend… & that’s just the US alone? After all don’t we adjust for cash when looking at a company’s stand alone valuation?
Rest of the Week & Other Top of Mind Thoughts
- From KVP’s perspective, waiting for Georgia results to see if we get status quo with the Reps keeping those two senate seats from Georgia. Or if we get one or two flipping to the Dems – where one would be tailwind bullish & two would be big-time mega bullish. Will use that to recalibrate & invert (always invert!) the current overall global macro thesis
- We likely take another 2-3wks before liquidity is fully back on point… & folks get into the mind frame of a new year, despite some parts of the world still very much in hard lockdowns (Segments of the UK, NL, GE, FR, US… etc).
- We got final PMIs across the board, as well ISMs out of the US. FOMC minutes are due Weds US time. And Fri will see NFP, AHE & U/R also out of the US.
- It could be worth noting BoE’s Bailey on Wed who should be giving his first public speech since BoJo & the EU crew got a Brexit deal on Christmas Eve.
- We already mentioned FOMC mins, there are also some Fed speakers including Clarida on Friday who should be touching on the economy & monetary policy. There is going to be big time divergence on the Fed’s pathway this year, with the vast majority likely moving towards normalization, yields significantly higher & the Fed backing out of “we are not even thinking of thinking about raising rates” & their commitment to no hikes until 2023.
- KVP is very much on the other skew of the vast majority. The Meta Regime & Meta Trends is the same… real negative rates are dropping lower & will stay low for years. Yet that doesn’t not mean, that the market does not get ahead of itself with a dead-cat inflation bounce (i.e. 2H21/1H22) given the low bases of 2020.
Some SaxoStrats Specials from KVP’s peers that were likely missed during X-mas Season
- Special Edition Podcast: Equities and interest rate sensitivity
- Special Edition Podcast: Commodity Outlook for 2021
- Podcast: Energy sector ready to rip in 2021? FOMC preview.
- Podcast: Fresh “everything up” (except US treasuries) surge post-FOMC
Dragon’s Heavy Rotation…
More of these on the way – editing ran into year-end, house moves & the like. What can we say, can’t rush greatness. Yet two more Dragon Interview coming up before the month is over.
In case you missed it previously – been super well received, thx for feedback, sharing & support on this project folks - the first in a string of exclusive Dragon Interviews series with exceptional professionals with skin-in-the-game, across different strategies, asset-classes & backgrounds.
We kicked off with Singapore Based, AVM Global Opportunity, run by the talented & always exceptional Ashvin Murthy. Who in KVP’s view is world class in his approach, process & even more importantly trade construction & money management when it comes to consistently compounding wealth in Global Macro. Point being, if the process is pristine & consistent, the returns will take care of themselves overtime.
The timing of the interview is uncanny as it was at the cusp of the last US presidential elections that AVM was launched. It’s worth noting since the interview, the fund has also been nominated for the Singapore’s Best Hedge Fund of 2020, given its consecutive five straight positive months at the start of the volatile 2020 that saw the S&P fall by more than a third over a month.
Start-to-End = Gratitude + Integrity + Vision + Tenacity | Process > Outcome | Sizing > Idea.
This is the wayKVP
Quarterly Outlook Q2 2022
Quarterly Outlook Q2 2022: The End Game has arrived
- Shocks from covid and the war in Ukraine have forced the global financial and political world to change, but what will the end game be?
Energy crisis could turn energy stocks into secular winnerWith long-term expected returns for the global energy sector close to 10%, we look at 40 stocks that could be set to cash in.
The great EUR recovery and the difficulty of trading itIf the terrible fog of war hopefully lifts soon, the conditions are promising for the euro to reprice significantly higher.
Tight commodity markets – turbocharged by war and sanctionsWith supply already tight, commodities keep powering on. But will it last for yet another quarter?
Between a rock and a hard placeGeopolitical concerns will add upward price pressures and fears of slower growth, while volatility will remain elevated.
The Great ErosionInflation is everywhere and central banks try to combat it. But will they get it under control in time?
Australian investing: Six considerations amid triple Rs: rising rates, record inflation and likely recessionWhile global financial markets are struggling in an uncertain world, the commodity-heavy Australian ASX index is poised to keep a positive momentum.
Cybersecurity – the rush to catch up with realityWith the invasion of Ukraine, governments and private companies are rushing to reinforce their cyber defenses.