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: Sentiment = Still Bullish?
Top of Mind…
- From a US Equities perspective, the sentiment continues to be nothing but bullish – this virus could mutate, overwhelm entire cities overnight & we’d still probably rally
- Partly joking, yet the key thing to remember here is… at least up until now, the sentiment has been very bullish & the overall price action higher has been strong.
- Looking beneath the wave – the mean ≠ variance – we continue to see that financials continue to underperform (had to cut divs, buybacks & preserve capital as the balance sheet of main street sits on those big financial banks, JPM, BOA, WF, Citi, MS, GS) as well as some of the discretionary names, as well as companies with softer balance sheets.
- Tech – as always it seems – continues to set the bell-curve… with Amazon exploding to all time highs… They are monopolies, they have little to no debt, they have way more Net Cash than the US government & they are thriving in a remote-only world
- The NDQ is c. +175 in 2 wks… Amazon? +25% in 2wks… that just mind boggling when you think of its mkt size… this is not a stock going from $10m to $12.5m… this is stock that’s basically gone from c. +$950bn to $1.2 trillion… leaving Bezos net worth at c. $145bn.
- Another odd $50bn & Bezos will be worth more than the entire economy of New Zealand. And KVP thinks there is a message there somewhere… in many ways corporations have fully evolved to be a new species sovereign entities… like governments except with solely the pros & none of the cons.
- Would KVP short tech? Not in a trillion years… KVP does not walk up steep hills… that’s not Macro… he walks downhill… being long Amazon to the hilt is floating downhill on petals & butterflies. Being short Amazon is blowing you out of the game. For one to win in the game, one must stay in the game
- Meanwhile oil continues to collapse as the back end of the curve is starting to slowly calibrate than Jan 2020 (global oil demand & global growth) is not just a thing of the past, yet is likely not to come back in the future for 2-3yrs. Again sensational call by Ole on this from a number of a wks back… we’ve been singing the anthem hoarse here on the Dragon & kudos to the folks it resonated with. Yes, there may be tactical hocus-pucus Trump type tweets... yet again, until the global economy halts its free fall - any production cuts are completely meaningless
- Still a part of the curve is fast asleep on the car wheel that is parked in the home driveway, Dec WTI is actually ticking up this Asia Mon Morning at 33.82. You know those domino videos they show on line? That’s still what we have to see in the oil futures contracts… there is not going to be a V-Shaped recovery people & things will not even be back to close to normal over the US summer (peak demand for oil).
- We currently have over 21m people unemployed – thats c. 12% of the 165m labor market... that’s more job losses, than jobs created since the 2008-2009 financial crisis … we are likely to get at least up to 25-30m before all this is over… & it will take a while for those jobs to come back. No jobs, no driving, no discretionary spending, etc… all are not conducive to a floor for oil demand. From May, continuing claims & JOLTS will become the new jobless claims…
- One thing is for sure - if you forcibly shut down the economy & people have/will have to crystallize personal & business losses... as the government you have to make them whole. Its no fault of theirs... but it will sure be the fault of the US government, if they don't put forward a lot more Fiscal relief-stability packages... another $500bn is a joke... we need Ts instead of Bs... Plus the individual states will also need a bailout... always paradoxical how Wasll Street always gets taken care of first & lip service is given to Main Street...
- Net-net... expect a lot more printing & debt... that is one of the few things you can say with almost pure certainty in these uncertain times...
On The Radar Today…
Flash PMIs (Thu), when + how do we reopen (May-Aug) themed week 17
- NZ: +0.8%a 0.4%e 0.5%p QoQ, 2.5%a 2.1%e 1.9%p YoY
- EZ: GER PPI, Current Account, Trade Balance, Monthly Buba Report
- Good luck to everyone out there, be nimble & position accordingly.