A CAPEX Recovery…

“I’ve gotten so old I can’t remember the names of those ladies at the Old Howard, but I can remember that all you got was a flash of this or that, before they waltzed off. Stock market tops are like that. You know it’s there somewhere if you squint hard enough, but you never quite see it, so you keep waiting for more. And then, in the end, as the curtain comes down on the bull market you realize that the one rule about tops is not that they provide this or that signal, but that they come before anyone is ready.” ~ Justin Mamis

Good morning! 

In this week’s Dirty Dozen [CHART PACK]  we cover 2nd half momentum market stats, record aggregate inflows into stocks, yields still working off their overextension, the case for a lower equity vol regime, and finally bitcoin sentiment plus a crypto-miner with a killer chart, plus more…

Let’s dive in. 

***click charts to enlarge*** 

  1. @MacroCharts out with the stats on SPX’s performance historically following a +10% first half.


  1. @NautilusCap provides the counterpoint of what too much of a good thing can sometimes mean, writing“ #SPX H1 year to date momentum ‘IS’ typically a good indication of continuing rest of year momentum (no revelation there as many technicians; including us monitor this closely.) So the study below offers an interesting ‘twist’ on potentially excess momentum…”


  1. BofAML points out that the last six months have seen their largest annualized inflow into equities ever, indicating an increasing willingness by investors to up their risk.


  1. But I’m not much of a fan of annualized numbers. And the smoothed aggregate flows into major equity indices show that yes inflows are picking up but they are still nowhere near the large consecutive inflows that preceded the last two major tops.


  1. Yields have been a bit of a head-scratcher lately and I probably closed out my long bond position too soon. If the past is precedent, then 10-year yields probably keep making their way back towards their 40-week moving average.


  1. Our main yield indicator is so far giving weight to that idea.


  1. This chart is pulled from a report I wrote up a couple of weeks ago for the Collective. It shows how oversold growth is relative to value. It has so far rebounded as expected. And with the breakout in tech and yields staying low, I expect this period of growth outperformance to continue.


  1. BofAML published some great charts on CAPEX (CAPEX is key to the Levy-Kalecki Equation). Apparently, our capital stock is old and aging. CAPEX guidance remains elevated, and the CEO survey bodes well for rising capital expenditures in our future.


  1. Here’s another development that suggests we’re entering a late 2017’esque like market regime. Cue lower equity vol and talk of “Goldilocks”! 

GS writes “the reset lower in equity vol is consistent with the signal from our volatility regime model, which aggregates macro, macro uncertainty and market indicators. The model suggests that a continuation of the high volatility regime that characterized the past year is unlikely from here… Our economists’ expectations for the level of growth to remain at healthy levels in 2H are supportive of lower volatility, and we think markets could consolidate in a ‘goldilocks’ scenario…


  1. And here’s a look at vol across assets (chart via GS). 


  1. 11. Bitcoin has failed to show much oomph off its recent lows, which isn’t a great look. Sentix shows that while “short-term” sentiment has turned sour, providing a contra signal. Bitcoin’s “strategic bias” continues to trend downward which is not a great look for the bulls.


  1. If the crypto complex is able to turn things around here then some of the beaten-down miners may offer a good way to play the upside. The chart below is of the Canadian-based digi miner HUT 8 Mining Corp (HUT). The chart is setting up nicely for a run (h/t Kulok).


If you enjoy reading these Dirty Dozens each week then please feel free to share them on the Twitters, forward them to a friend, or translate them via smoke signal, etc… Every bit helps us get our name out there. 

Thanks for reading.

Stay safe out there and keep your head on a swivel.

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Brandon Beylo

Value Investor

Brandon has been a professional investor focusing on value for over 13 years, spending his time in small to micro-cap companies, spin-offs, SPACs, and deep value liquidation situations. Over time, he’s developed a deeper understanding for what deep-value investing actually means, and refined his philosophy to include any business trading at a wild discount to what he thinks its worth in 3-5 years.

Brandon has a tenacious passion for investing, broad-based learning, and business. He previously worked for several leading investment firms before joining the team at Macro Ops. He lives by the famous Munger mantra of trying to get a little smarter each day.


Investing & Personal Finance

AK is the founder of Macro Ops and the host of Fallible.

He started out in corporate economics for a Fortune 50 company before moving to a long/short equity investment firm.

With Macro Ops focused primarily on institutional clients, AK moved to servicing new investors just starting their journey. He takes the professional research and education produced at Macro Ops and breaks it down for beginners. The goal is to help clients find the best solution for their investing needs through effective education.

Tyler Kling

Volatility & Options Trader

Former trade desk manager at $100+ million family office where he oversaw multiple traders and helped develop cutting edge quantitative strategies in the derivatives market.

He worked as a consultant to the family office’s in-house fund of funds in the areas of portfolio manager evaluation and capital allocation.

Certified in Quantitative Finance from the Fitch Learning Center in London, England where he studied under famous quants such as Paul Wilmott.

Alex Barrow

Macro Trader

Founder and head macro trader at Macro Ops. Alex joined the US Marine Corps on his 18th birthday just one month after the 9/11 terrorist attacks. He subsequently spent a decade in the military. Serving in various capacities from scout sniper to interrogator and counterintelligence specialist. Following his military service, he worked as a contract intelligence professional for a number of US agencies (from the DIA to FBI) with a focus on counterintelligence and terrorist financing. He also spent time consulting for a tech company that specialized in building analytic software for finance and intelligence analysis.

After leaving the field of intelligence he went to work at a global macro hedge fund. He’s been professionally involved in markets since 2005, has consulted with a number of the leading names in the hedge fund space, and now manages his own family office while running Macro Ops. He’s published over 300 white papers on complex financial and macroeconomic topics, writes regularly about investment/market trends, and frequently speaks at conferences on trading and investing.

Macro Ops is a market research firm geared toward professional and experienced retail traders and investors. Macro Ops’ research has been featured in Forbes, Marketwatch, Business Insider, and Real Vision as well as a number of other leading publications.

You can find out more about Alex on his LinkedIn account here and also find him on Twitter where he frequently shares his market research.