about 1 year ago

    #Economics
    Macro Report: Short Squeeze continues cover image

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    Macro Report: Short Squeeze continues

    JF

    Jeremy Fielder

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    Mega Caps don't rally to All-time highs in a Bear Market. 😄

    The Short Squeeze continues...

    Inflation is Done...Here's why!

    • The Majority of Inflation pressures (in blue) are coming from services, ex-food & energy; everything else has collapsed.


    Core CPI is another way of saying "services inflation."

    • The Majority of Core CPI (in green) is coming from Shelter.

    • Shelter is sticky, which is another word for "lagging."
    • Real-time Shelter via Redfin, Zillow Data & Case-Shiller prices are collapsing, which means Core CPI will collapse in time.

    Zillow rent prices (YoY) lead Shelter CPI by 6-12 months. Since Shelter is the largest portion of CPI, Zillow rents tell us Shelter will come down fast. Thus CPI collapses.

    ​The Federal Reserve regards services excluding housing as a critical indicator of future inflation trends. It's also collapsing.

    • Import & Export Prices are negative.



    • Producer Prices are headed lower.
    JobsJobless claims continue to move higher, pressuring the Fed to hold rates, maybe even cut sooner than later.
    • Keep in mind the unemployment rate also rose to 3.7% last week, and the Fed sees it at 4.1% 
    PolicyAs inflation risks fall apart and Jobless claims rise, the Fed has decided to stop hiking. 

    China cutting rates - easing policy

    Japan Increasing Lending - easing policy

    Macro ForcesAs inflation collapses, so will bond yields, further fueling risk assets.
    Yields = Cost of Capital 

    • Yields are strong because the Economy is more robust than expected, and recession odds are falling.

    Dollar = Cost of Trade

    • The Dollar is weak because investors are turning "risk on" in anticipation of lower inflation and the Fed pause.

    Oil = Cost of Energy

    • Oil is weak because global demand is weaker than anticipated, while Russia and Iran sell cheap oil to China and India. (as low as $37 per barrel vs the spot price of $70.)

    VIX = Cost of Insurance
    • Volatility is cheap because investors see market risks evaporating.

    Technicals

    From a technical perspective, the S&P is over-extended, maybe it has a little more juice, but I'm expecting a pullback into July.

    The same goes for Nasdaq.


    However, Small Caps have room to Catchup, and investors who missed the Big Tech Mega Cap rally will likely look for More Beta.

    Bitcoin should rally soon; all the bad news couldn't knock it below 25k

    Economic Activity 

    The Economy continues to slow on a rate-of-change basis but remains steady, meaning it's still expanding.Business ActivityGrowth continues to slow but remains in positive territory. This support the pause

    Sales have increased the most for new vehicles and decreased the most at the gas station.


    Easiest Macro TradeIn The Long run, Global Central banks & Global Governments will need to "PUMP" liquidity to RESET - economic growth. I believe Crypto is the fastest horse.
    • M2 - Money Growth is rising between the 4 Major Central Banks.
    • The Dollar should fall as it is debased
    • Bitcoin rises

    Fed Net Liquidity or Fiscal Liquidity? Take your pick



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