2020-Feb-06

Macro Dragon: Speechless...

Overnight Risk-On & Thoughts…

• The risk-on party in equities continue & we saw UST yields pop back up over 1.65%. Combination of bullish momentum & euphoria, pretty good prints on service PMIs as well as even news that there could eventually be a cure for the virus (mkt completely ignored/ignores the fact that its not going to happen tmr & its not for people currently with the virus)
• As a macro|cross-asset strategist (among other things) it may strike you as odd that KVP’s default status is no view. This is from the context of waiting for higher probability opportunities to emerge from the tactical/near-term side, whilst having very few strategic views at any one time.
• The price action, is the price action – if you are a bull, not only is momentum playing ball, but so is the economic data,  news headlines & sentiment. If you are a bear – especially if you have been short Tesla up until the day before yest when it fell -17% post 10 straight wks of rising +124% – its time to regroup, sit on the sidelines & wait for higher probability pathways.
• If you are agile enough to play both sides (as you should be), then the bullish side of the portfolio is having a field day. There is now a chance that FOMO will start to play a role… so trailing stops are the name of the game when it’s unclear how much higher we can go & what it’s going to take to turn us around.
• Tactically, for now the Macro Dragon waits…  paying attention to things like why was gold +0.20% yest, when yields & risk assets spike up – that’s odd. USDCNH back at 6.977  potentially confirming what we are seeing on CH equities… hmmm… interesting.  Copper back to that critical 260ish lvls… hmmm…

-

2019-nCoV Update Thu Asia Mrn 6 Feb…

• We’ve expanded our thoughts this wk with a combination of updates, potential scenarios around opportunities & risk surrounding the Novel Coronavirus (a.k.a. 2019-nCoV / Wuhan Coronavirus) on Wed 5 Feb, on Tue 4 Feb, start of WK 6 Mon 3 Feb, here on Fri 31 Jan, here on Thu 30 Jan, here on Wed 29 Jan & here on Tue 28 Jan.

Quick update & thoughts on the Virus since Wed check in:

• As of this Thu Asia morning, the “official figures” are at c. 28,276 (24,553 +15% DoD) confirmed cases, +565 deaths & c. +1,150 recovered. KVP reckons closer conservative number of infected now is likely +50,000 to 100,000 on the mainland… & before it is all over we are likely going to be well in the 6 figures… if we are already there.
• Interestingly enough there was a “leak” from a Tencent site that has been updating on the official numbers, yet somehow for a brief period showed other numbers – usually these things get scrubbed pretty quickly on the mainland. Which leaves one wondering is this planting the seeds of just how bad things potentially are on the ground or just a coding error? Is this just fake news meant to drive panic? Report apparently was in the Caijing (independent magazine) then quickly censored. One thing to note the infected cases & suspected numbers here sound a lot more in line with a virus that was really on formally noticed in early Dec 2019 & given China’s huge population.  So the event was supposed to take place close to midnight 2 Feb, and the “real numbers” flashed as 154,023 confirmed cases then back to the “official numbers” of 14,446 the next day.
• Think the only key takeaway is what we have flagged on Macro Dragon from wk one of following the Virus – the data in China, unfortunately is not likely to matter for markets, especially for the US. It’s really going to be about the data abroad, as that will be construed as cleaner, more reliable & with less vested interests.
• So o/n we got our 2^nd confirmed death outside of China on from the Virus – this was an individual in HK. Meanwhile we have had a massive jump in confirmed cases linked to Japan which now has 45 (+23) clear outlier. +4 in SG to 28. +7 in SK to 23. +4 in HK to 21. +1 in AU to 14, GER still at 12, US at 12, TW still at 11, Macau still at 10 & Vietnam entering our min. 10 threshold.

-

Have a fantastic wk ahead everyone, good luck on the month start, stay healthy as well as keep your mind open to profitable & abundant opportunities. Life happens for us, not to us. 

Namaste,

-KVP

-

Some Anchor Pieces from #SaxoStrats:

• Jakobsen & SaxoStrats team with our 2020: Outrageous Predictions

• Our latest 1Q 2020 Quarterly Outlook: The Great Climate Shift

• Eleanor on a Meta trend: Climate Deeply Embedded in Risk & Opportunity

• Garnry on The Godzilla theme: Green stocks are the next mega trend in equities

• KVP on the Fed: The Half-Life Fed & Min. One Cut By 1H20