Macro Dragon: Welcome to WK # 22...

Macro 4 minutes to read

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: Welcome to WK # 22...

Top of Mind…

So remember, US out today on Memorial day – it is the final wk for the month of May, one more month & that’s 2Q/1H under wraps!

Would expect similar themes of May to carry onto Jun, especially in regards to how much of the world’s economies are coming back on line (not just “opening up”) & in the US, new focus will not be continuing claims & JOLTS, as it will be all about how many folks are getting their jobs back. Again, seems like too high a number (over 2/3) expect to get their jobs back… KVP would be impressed with 50% of those jobs returning by year end. 25%? Sure… 50% by close of 2020? Not so sure…

Still as we talked about in the monthly Macro Dragon exercise… on potential higher probability pathways... expect more fiscal expansion as it becomes beyond clear that this is not a V-shaped bounce for the underlying economies of the world. Another “fiscal stability plug” (it is not stimulus) to workers would be more of the same, yet upside risk would be a game changing infrastructure fund – as this could create actual real underlying economic demand for years – with downside risk being no further fiscal policy spend of any significance. To put it, in another way – have to keep serving the alcohol if you don’t want people to come of the high of the party to face the consequences.

Could we have a better than expected economic bounce out of all this? Sure… again, so far dislocation between the underlying economy & listed asset classes continues to diverge… so May, could see some of the same. Remember the paths of least resistance, global tech higher, global banks lower (i.e. latter cannot hide).

Part of the themes this week is likely to continue on the geopolitical front - Keep watching US / CH, as well as AU / CH on further fall-out key risk… keep USDCNH on your dashboards, KVP would not be short this cross until its very clear that all we are going to get is bark & no bite from the US / trump.

Of course keep monitoring Covid-19… especially in parts of Asia where it seems to be pulling a 2^nd wave. Have to admit, KVP is of the view that even if places around the world get a 2^nd wave – i.e. assuming they have fully reopened – the bar to shut down again is going to be that much higher & not as convinced markets will react negatively on a sustainable basis.

In fact, it could be deemed great news for listed assets such as equities… as it could mean that the likes of Papa-Fed (& other central banks) are going to be back pushing on the liquidity button, like a monkey in the cage that gets rewarded (So far at least) for every push of the button. So again nothing is off the table, as we are all literally all on the table in this new financial repression & MMT world.

Economic data wise: Standouts are likely to be 2^nd reading on US GDP, as well as PCE & personal spending & Personal income data. There is a tentative date for the treasury currency report, could they perhaps mention the SNB & have an impact on CHF crosses? Not sure… We do have inflation figures out of the EZ & JP, GDP out of CA & capex out of AU.

Central Banks: Rate decision wise we will hear from BoK where ar e25bp cut is expected to +0.50% - yep, yep… they are currently still +0.75% is a 0% to negative yielding bank world. BoC’s Poloz will be talking, as will a few Fed members including Williams, Kashkari & Bullard. KVP would also put Norges Bank deputy Bache on the radar.

US: House Prices & new Homes sales, PMIs from Richmond & Chicago, 2^nd GDP reading on 1QGDP -4.8%e/p, Durable Goods, Core PCE, Personal Spending + Personal Income, UoM, tentative on Treasury currency Report

CH: Data light wk

EZ: GER final GDP -2.2%p, ECB financial stability review, M3 Money Supply, Private Loans, CPI Flash

JP: All industries activity, BoJ + Tokyo Core CPI, Unemployment Rate, Retail Sales

UK: House Prices, CBI realized sales, consumer Confidence

AU: Construction Work, Private Capital Expenditure, Private Sector credit

NZ: Trade Balance, RBNZ Financial Stability Report, ANZ Business Confidence

CA: Current Account, GDP m/m, Corporate Profits

Please Make The Bandwidth For The Following…

Latest Macro Digest from our CIO & Head of Research-Strategy, Jakobsen. Macro Digest: Strategy Change - Neutral Risk to Negative Risk - The real "virus" is insolvency and unemployment

May 14 Thu – Saxo Market Call, where we touched on bitcoin, gold, negative rates & banks – again keep reflagging this one, as there is a lot of shelf life in the themes discussed here

Macro Dragon: Checking-in on Bitcoin... Legendary Trader Paul Tudor Jones, is in Love, with Bitcoin & Gold...

Banging the drums & blowing the trumpets on this again… this will be max one of the special eight from KVP this year

Make time for NOK & Norway folks, JJH touches on part of the implication on the fiscal measures announced last wk FX Update: NOK to break higher on massive stimulus?

Dragon’s bull case for gold… Dissecting Gold part II of III... The Bull & of course a framework for the other side Dissecting Gold part I of III... The Bear

Dembik on the German/French initiatives last wk: The Franco-German initiative: A promising start

Garnry on equities covering energy names & ‘bubble stocks’ + crowing out of the banks

Lastly on shelf life ideas & think pieces, our latest monthly exercise: Re-Up pt III... High Probability Pathways & Scenarios?

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

Namaste,

KVP

Outrageous Predictions 2023: The War Economy

Billionaire coalition creates trillion-dollar Manhattan Project for energy
The constantly growing global need for energy drives the world's richest to huddle up and launch a R&D project in a size the world hasn't seen since the Manhattan Project gave the US the first atomic bomb.
Read article
French President Macron resigns
The political stalemate in France and the rise of Marie Le Pen following the 2022 elections corners President Macron, forcing him to give up on politics and resign from his position. At least for now.
Read article
Gold rockets to USD 3,000 as central banks fail on inflation mandate
As markets and central banks realise that the idea that inflation is transitory is wrong, and that prices will remain higher for longer, gold is sent through the roof, hitting a price tag of USD 3,000
Read article
EU Army forces EU down path to full union
With continued challenges in the region and a US military that isn't aggressively enacting its former role as global policeman, the European Union agrees to create its own armed forces, bringing the whole region closer.
Read article
A country agrees to ban all meat production by 2030
In an effort to become one of the global leaders on the path to net-zero emissions, one country decides to not only put a heavy tax on meat, but to ban domestic production entirely.
Read article
UK holds UnBrexit referendum
Following a recession and domestic pressure, the United Kingdom is thrown into political turmoil that will end with a vote to wind back Brexit.
Read article
Widespread price controls are introduced to cap official inflation
History tells us that with the war economy comes rationing and price controls. And this time is no different, as policymakers introduce strict price controls that lead to a range of unintended consequences.
Read article
OPEC+ & Chindia walk out of the IMF, agree to trade with new reserve asset
Sanctions against Russia have caused widespread turmoil due to US Dollar moves in countries across the globe that don't consider the US an ally. To relieve themselves from this, they leave the IMF and create a new reserve asset.
Read article
USDJPY fixed to the USD at 200 as Japan overhauls financial system
Following the challenges that faced the Japanese Yen in 2022, the Bank of Japan attempts to keep the currency from sliding. Unsuccessful on the long-term, Japan will launch a reset of its entire financial system.
Read article
Tax haven ban kills private equity
With the war economy comes an increased focus on national interests and sovereign nations' ability to assert themselves. In that regard, the OECD countries turn their attention on tax havens and pull the big guns out, banning them altogether.
Read article