Macro Dragon: Tactical Risk-Off Paths & Bitcoin +13% with a solid close above $10,000
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: Tactical Risk-Off Paths & Bitcoin +13% with a solid close above $10,000
Top of Mind…
- Regime: First things first, KVP will re-flag the regime piece he has been talking about for a while – this is key for understanding the big picture, meta trends, asset allocation & strategic moves that we are likely to be in for a long-time, potentially years.
- Bottom line, the probability of pathways leads to a continued risk-on bias in almost all assets classes (EQ, Bonds, RE, CMDs + precious metals in particular) with a structural multi-year bearish skew on the USD & volatility in general
- So if you have not made time for these two pieces, please do:
Macro Dragon: Re-Up Part IV-A... Higher Probability Pathways... Monetary Policy, Scenario Planning, Liquidity & Regime
Macro Dragon: Re-Up Part IV-B... Higher Probability Pathways... Fiscal Policy, Infrastructure & Asset Allocation
- Potential Tactical Risk-off, Scenario One: A key potential near-term risk off over the next two months – if its playing out, should play out by E-Sep – is one where the probability has been rising every day. Yes, KVP thinks that the chance of a phase one deal break is much great than 50%, with a layer cake of tailwinds to Trump, as a re-election strategy
- See again…
- Phase One Deal Break Coming? One thing that continues to stand out is the daily rising probability of the Phase One Deal break scenario, that KVP covered with Peter Garnry on the Saxo Market Call last wk – it just makes so much sense for trump to pull that plug as an election strategy…
Playbook here would be massive opportunity for heavy tactical risk-off (which is likely to be short in time, so be that tactical shorts or lightening ), coupled with a strategic opportunity to buy the dip (cover the shorts &/or get longer & stronger). Obviously the near-term skew is likely to be US assets of CH/Asia Assets – i.e. the liquidity flows in the US on both the monetary & fiscal side will be dwarfing anything we are likely to see out of China.
Yet again, remember the strategic long-term skew given the regime we are in, KVP firmly believes anytime you are playing risk-off without an event, you are in essence standing against a tsunami of liquidity that has never been seen before & that is not going to let up anytime soon.
- Potential Tactical Risk-off, Scenario Two: This is something else, who’s probability is increasing everyday that we originally flagged the risks of social instability in the US way back in Apr… 23 Apr 2020 Macro Dragon: Social Instability...
- What is interesting now is the protests, both peaceful & with clashes are increasing across more cities in the US. Its next to impossible to get a really good gauge of the signal from the noise, given media incentivization for click bait & sensationalization. What is clear to KVP though are at least two things currently:
One: If one takes a step back & thinks about all the guns in the US of A, these protests, even those with clashes, have been remarkably peaceful. Both from a protest perspective & from an authorities perspective. There is however a serious pathway, that is greater than 50%, that we get to a tipping point whereby ballistics start to be used by both sides. Can you imagine the fall out if we have say 10 protestors get shot & killed, as well as 10 members of the different federal agencies…
Two: This could be a scenario that Trump is gunning for. He has sent in federal employees irrespective of the local authorities requesting additional help, or even being aware or forewarned of additional resources in their cities. Trump’s angle here is playing on people’s fear & need for stability – the bigger the potential fall-out from future clashes on non-peaceful demonstrations, the potentially better light some segments of voters will see Trump. Remember, this is the age of spin, it is about perception - & social media warps & +10x the perception on anything extreme. Making the outliers look a lot more plentiful & higher probability than they are.
- Potential Tactical Risk-off, Scenario Three: Lastly, the longer Congress (Reps) holds further fiscal response of the US hostage – the likely bigger probability of a bigger & more emotional turn-out at protests across the country. Worth noting that it does also raise pressure on Powell & Mnuchin to do more.
- From KVP’s standpoint, republicans are potentially cutting their own throats – i.e. we know that either presidency will be spending over the next 4yrs – or at the very least Trump’s throat.
They are though – tacitly or knowingly – going to be stoking the social instability fires. If they are doing this knowingly as an election strategy built on fear vs. law & order – it is the paragon of high stakes, with the livelihood of millions of Americans at stake. Note the last cheque of $600 in benefits has been paid out in the US.
- Any delays or perceived delays in continued liquidity support form the fiscal or/& monetary side, could give a near-term pause on risk-on asset, to risk-off price action.
- Bitcoin: We’ve been talking about the precious metals complex, gold, silver, miners, etfs, credit spreads, etc for months now. We also mentioned Bitcoin & crypto a few wks back, well last night was big for Bitcoin. We got a +13% pop that took us over the critical $10,000 resistance level to a close of 11, 043 – this technically is a very big thing deal in the Dragon Chartbook. This $10K was like golds $1750/60… its really all about $15K & more importantly the $18-20K lvl being the next key resistance….
This ship is about to leave the harbor & if you think the precious metals price action has been blazing, you better strap in your seatbelt… because when crypto gets going… its going to be Dyno-mite! And again, remember that we got the trackers – just ask your friendly Saxo RM or GST. Here was the Dragon last check in on Bitcoin.
14 May 2020: Macro Dragon: Checking-in on Bitcoin... Legendary Trader Paul Tudor Jones, is in Love, with Bitcoin & Gold...
- Market Call: Appreciate quite a few of you, were missing this. With the Saxo Market Call tip of the Spear John Hardy back on deck, the market call is back up & running. Catch the latest one from o/n where Hardy & our CIO & Chief Strategist Jakobsen talk summer jitters, violent riots in Seattle, precious metals, US politics among other things that are top of mind. Gold hits all time high with heady cocktail of risks in the week ahead
To Keep In Mind Today
(again light wk, all about 2Q US GDP, Aussie 2Q CPI, Fed & CH PMIs)
- EZ: Spanish Unemployment Rate
- US: CB Consumer Confidence, Richmond Mfg. Index
Start-End = Gratitude + Integrity + Vision + Tenacity. Process > Outcome. Sizing > Idea.
This is the wayKVP
Latest Market Insights
Outrageous Predictions 2023: The War Economy
- 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.
French President Macron resignsThe 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.
Gold rockets to USD 3,000 as central banks fail on inflation mandateAs 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
EU Army forces EU down path to full unionWith 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.
A country agrees to ban all meat production by 2030In 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.
UK holds UnBrexit referendumFollowing a recession and domestic pressure, the United Kingdom is thrown into political turmoil that will end with a vote to wind back Brexit.
Widespread price controls are introduced to cap official inflationHistory 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.
OPEC+ & Chindia walk out of the IMF, agree to trade with new reserve assetSanctions 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.
USDJPY fixed to the USD at 200 as Japan overhauls financial systemFollowing 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.
Tax haven ban kills private equityWith 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.