There’s no asset class too much money won’t spoil. ~Barton Biggs via A Hedge Fund Tale of Reach and Grasp

Good morning!

In this week’s Dirty Dozen [CHART PACK] we look at the latest Global Fund Manager Survey, talk some more about ALL the cash that large funds are sitting on and why that’s bullish for stocks, and then make the case for why rising free-cash flows will drive a reacceleration of stock buybacks in the coming quarters. Plus, we discuss some really interesting charts showing demographic splits and what they could mean for the equity risk premia, plus a whole lot more…

Let’s dive in.

***click charts to enlarge***

1. The September BofA Global Fund Manager Survey came out last week. Below is the summary with key takeaways highlighted by me.

2. The UK, energy, banks, staples, and Japan are the contrarian longs.

3. Markets are a pendulum swinging from one extreme to another…

4. The last few weeks I’ve been noting the wide dispersion in extreme positioning amongst players in this market. Retail and small funds are extremely long while large institutions/hedge funds have missed out on the incredible rally off the March lows and are subsequently sitting on significant piles of cash (as noted in the most recent BofA FMS).

Well, here’s another chart confirming the large piles of cash. UBS writes “US active fund positioning is 1.8stdev below average… Cash levels are still elevated. Institutional money market flows tend to follow the Fed rate with a 1yr lag, and the cut to zero earlier this year should mean more cash flows to equities over coming months. Cash levels are supportive at levels as a % of equity plus bond market cap not seen since 2012.”

This is one of many reasons why the downside in equity markets is likely limited over the short-term and the longer-term path of least resistance remains up.

5. Buybacks are a key part of our macro equity framework. Buybacks are supported by free cash flows and cheap debt. This is why the below chart is so important. Buybacks have been anemic year-to-date, but with aggregate SPX FCF up 20% YoY we should see that trend start to reverse over the next two quarters (chart from UBS).

6. These are very interesting charts from UBS. The chart on the left shows the population growth by cohort (35-55 and 65+) on a YoY basis. As you can see, the 35-55 age group is inflecting higher while retiree growth has peaked and is set to rapidly slow. This is important because the younger cohort tends to own more equities as a % of investment versus the 65+ group which is more heavily weighted towards less risky assets.

The chart on the right shows the correlation between the growth difference of the two cohorts (gold line) and the equity risk premium (blue). If this correlation continues to hold then we should see the equity risk premium — which is currently well above its long-term average — narrow significantly. And since the Fed is unlikely to let yields rise, that means higher equity valuations are in order.

7. The last two months I’ve been making the bull case for small-cap outperformance. Here’s a chart from UBS showing the connection between relative small-cap/SPX dividend yields and performance… If history is any guide, we should see small-caps step on the gas soon.

8. Small-cap value is my favorite place to look for names right now as both factors should continue to materially outperform over the coming quarters.

9. I’m not convinced that we’re going to see a secular turning point in relative performance though. That would require a sustainable jump in inflation and a steepening of the curve. But we should at the least see a tradeable multi-month reversion play.

10. A lot of value plays are dependent on rising commodity prices. And commodity prices are dependent on the US dollar, which I expect to trade lower over the coming year(s) — although, I’m still looking for that tradeable bounce!

A big part of my dollar bear thesis is the end of Core Domination and a reversion in capital flows from the highly crowded US equity market, back out to the periphery. The chart below shows that US stocks are near an all-time record high as a share of the MSCI global index.

11. The USD bear thesis is broadly supported by the relative growth outlook as well. (chart via Nomura).

12. But I wonder if relative COVID trends begin to affect the FX majors at all. If you watch the mainstream media, you wouldn’t know it but the relative trends in daily cases are much worse in Europe than they are in the US as of late.

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

Alex Barrow

Co-Founder of Macro Ops. Alex is a former US Government Counterintelligence Professional, U.S. Army  Interrogator, and USMC Scout Sniper.  He’s an independent trader with over 10-years in markets. 

***The following is an excerpt from a weekly note sent out to members of our Collective on 9/3***

Let’s start this note off with a story and a lesson from one of my all-time favorite trading related books, John Percival’s The Way of the Dollar. John writes (emphasis by me):

“There is another description of the consensus-that’s-not-confirmed-by-price. It consists of two images that have become part of the ancient lore of Wall Street, the Wall of Worry, and the River of Hope. A bull market we recall, “climbs a wall of worry” ; and “a bear market flows down a river of hope”. In point of fact, the description normally only applies to the early and middle stages in bull and bear markets. So we can be very comfortable when we diagnose a wall or a river — assuming we’re climbing and flowing respectively.

“In the later stages of the trend, things change. The worriers capitulate to the up-trend; and the hopers throw in the towel and give up the fight against the bear. At this stage, in a bull market, we find die-hard bears saying that, well, we are heading for a collapse, but prices are going to go up further before they head down. And in a bear market, die-hard bulls assert that prices are far too low — but they can go lower still. The conversion process is nearing its end.

“Now we have to get a little wary, for obviously we are in the region of consensus. And this is a very dangerous region because nobody on earth can tell how far things can go. Currencies, stocks, commodities — it makes no difference. In this respect, they’re all the same.

“It is said of Joseph Kennedy, father of President John Kennedy, that when he was having his shoes shined one day in autumn 1929, he was astonished to hear the shoeshine boy tip him a hot stock that was sure to go from 160 to 2000 or whatever. That was all Joe K needed. If shoeshine boys (or elevator attendants, or hairdressers, the cover of Newsweek or whatever) were tipping stocks, it was time to get out. So Joe K started selling short and thus laid the foundation of the family fortune — so the story goes.

“But if it’s true that Joe K went short at that moment then he was lucky. The sucker buys at the top of the market; geniuses and liars sell at the top of the market; but the super-sucker sells short at what he thinks is the top of the market.

“In 1979, the then financial editor of Britain’s Daily Mail newspaper, Patrick Sargent (later to be a founder of Euromoney), called the top of the gold market at around $450. It was a perfectly sound call, in the light of the speculative heat in gold at the time especially from one who had been bullish of gold for a good time. Yet gold was to climb a further $400 by early 1980, when speculation turned from red-hot to white-hot. Imagine being short at $450! As I say, no-one on earth knows where a speculative trend will end — except with hindsight…

“This brings us to the question of how you can distinguish a minor multi-week extreme from a major multi-month or multi-year extreme. The late stages in that great dollar bull market of 1980-5 provide a clue: you watch the way the conversion process trickles down through the different categories of currency observers. In mid-1984, the world was still full of die-hard dollar bears who had considered the currency overvalued ever since 1981. Who were they? It wasn’t the dealers, who are not and do not need to be overly concerned with underlying value; nor was it the trend-followers. It was the value-oriented analysts — researchers and economists by profession — with a long-term orientation.

“What happened was that sometime during the autumn of 1984, the bearish consensus among this category turned round; and it happened relatively suddenly. You will see it quite clearly if you go back over the research material turned out by major banks at the time. “The dollar is grossly overvalued at DM 3.00, but we think it will head further up before it collapses”, that kind of thing.

“In other words, it’s just as you would expect. When the long-termers who were formerly skeptical at last capitulate to the trend, then you have a total consensus and the end is nigh for the major multi-month / multi-year move. Nigh, but not necessarily over. At this point, one of our sentiment gauges comes into its own. We have to watch market action: the way the markets react in relation to the background and to news events.”

Consensus conversion… no-one on earth knows where a speculative trend will end… and total consensus...

Some valuable lessons from John… These are things we should keep front of mind as we navigate a bull volatile market through the worst period of seasonality (September) for markets.

The Nasdaq sold off as much as 6% at one point today. Giving it its largest single-day decline since March. This action shouldn’t surprise any of us since it’s typical volatility following a major buy climax, along with the increased trend fragility and sentiment/positioning headwinds we’ve been noting these last two weeks.

The Nasdaq SQN closed last month over 3std in a Bull Volatile regime]. My bud Chris D lays out in this tweet what has happened historically following similar readings.

The outcomes are a little better when looking at just the Nasdaq during the following 30-days after an SQN reading above 3.

Here we get 7 instances over the last 25-years with 5 gains and 2 losers. The average gain is 3.69% and the average loss was 0.94%. But the peak-to-troughs moves show a much wider dispersion of outcomes.

Our Trifecta Lens gives the market a current score of -2, which is the worst reading since before the March low. It’s still far from the -6 readings that have marked past major tops, such as the one we saw in February. But it could quickly get there if we see the market move down to its lower Bollinger Band. On the other hand, it could flip back to positive.

Buy climaxes such as these are notoriously difficult to play. Speculative momentum could easily reverse this market back up tomorrow. Bears want a negative weekly close, giving them a weekly sell signal. And bulls want a reversal. This 3,510 level on the SPX  will be acting as a magnet tomorrow. Seeing as how this is a 3-day weekend, I have a feeling we might see further selling tomorrow as people look to lighten up their books.

Normally we wouldn’t even consider cutting/hedging risk at this point since the indices are still well above their lower Bollinger Band Setups. But the overextension of the tape from their 20-day averages means the market could fall a good deal before hitting its lower bands. And considering the extreme sentiment/positioning, I’m more willing to proactively hedge out some of our risk.

If today was the start of a broader 10-15% pullback, then that would put the 3,200 and 3,000 levels into play on the SPX.

So this is what we’re doing for now. We flattened out our Core 25% SPX position and put on a 25% of NAV equivalent short in the Nasdaq (NQZ2020). We also have our bond position which is acting as a counter-balance. But if this ends up being more of a reflation rotation type move, then bonds may not give us as much negative downside capture as we’d like.

We’re keeping the remainder of our positions on for now and will honor existing stops, of course. We’re going to be nimble and adjust fire as this move progresses. We don’t want to overreact and get treed nor do we want to under prepare and get caught flatfooted. We’ll send out updates as we make moves.

My base case is that this ultimately ends lower, in the 10-15% range. And I suspect we’ll start to hear the narrative of “failing CARES 2 stimulus talks” come to the fore. Congress is back in session soon and talks have reportedly hit a wall. I ultimately believe we get a bill passed, likely closer to the Dem’s target range of $2trn — nothing like a market selloff to instill some fear, do a little arm twisting, and get our valiant leaders to act!

Plus, there’s still a large amount of big hedge fund money that has sat this entire rally out (as I pointed out in this week’s Monday Dozen). I assumed they’ll use any 10-15% dip to come in and buy hard, especially if it looks like a solid CARES 2 will get passed.

Basically, my current base case is what I tweeted yesterday (below). This is just speculation of course and there are a lot of moving parts, so opinions weakly held and all that.

~~~~~~~

This note was sent out to Collective members on the 3rd. Our TL Score is now -5 for the market. That’s the most bearish reading since the start of the late February selloff, where we saw a consecutive string of -6s (which is about as bearish as our scoring gets).

This means that trend fragility is high and we should expect continued vol and further downside in the near-term until some of the negative marks in the TL score can be corrected.

If you’ve enjoyed reading this report then you should think about joining our Collective. The Collective is the anti-newsletter trading and investing service. Unlike others in this space, we at MO don’t peddle constant doom narratives or seek to confirm biases.

Our aim is simple… make high risk-adjusted returns consistently. Continuously learn while doing so, and have a lot of fun along the way. And in this regard, our record speaks for itself. This is partly why we have BY FAR the highest retention rates of any investing service in the industry. Collective members tend to stay members for a long time because there really is nothing else like us.

Our doors are open until the end of day Sunday. At which point we’ll be closing the enrollment period and won’t be opening back up for some time.

We offer differentiated research, theory and education resources, plus a killer community (Slack) filled with some of the smartest Operators from around the world. Our members are predominantly professionals but we also have a number of highly motivated retail players. The one thing we all share is a deep love for the game and an unquenchable thirst to get better.

If this sounds like you then consider signing up and checking us out. I look forward to seeing you in the group! And as always, don’t hesitate to shoot me any questions.

Click here to sign up for the Collective

Alex Barrow

Co-Founder of Macro Ops. Alex is a former US Government Counterintelligence Professional, U.S. Army  Interrogator, and USMC Scout Sniper.  He’s an independent trader with over 10-years in markets. 

At any moment of time there are myriads of feedback loops at work, some of which are positive, others negative. They interact with each other, producing the irregular price patterns that prevail most of the time; but on the rare occasions that bubbles develop to their full potential, they tend to overshadow all other influences. ~ Soros

Markets, like much of nature, are composed of infinite feedback loops.

Understanding these feedback loops was one of Soros’ big analytical edges back in his prime. They’re a critical component of his theory on Reflexivity and also formed the foundation of his framework for analyzing currencies.

In this note, we’re going to explore the primary feedback loops at work in the US dollar. We’ll do this using Soros’ “currency equation”. And in doing so, we’ll see how the long-term USD bull trend is near the end of an unsustainable Core Domination paradigm. One that is ripe for reversion to the mean…

Let’s start with a review of the basics.

Like all markets, exchange rates are driven by supply and demand. Currency supply and demand can be separated into two broad categories: fundamental and speculative.

Fundamentals are things like the trade and balance sheet of the currency issuer and its fiscal and monetary policies, such as its budget deficits and its control of the money supply.

Speculative demand is centered around expectations of the relative and future value of the currency. Think exchange rate trends, interest rate differentials, and relative market opportunities.

To simplify even further. Currency supply and demand is comprised of three things:

1. 1. Trade
   2. Non-speculative capital transactions
   3. Speculative capital flows

Trade affects exchange rates through the balance of trade. Countries sell goods in their home currency. For other countries to buy those goods, they have to exchange their currency for the seller’s (exporter’s) currency. And vice-versa for when the country wants to import goods. This differential is referred to as the balance of trade. A trade surplus is an appreciating force on a currency and a deficit is a depreciating one.

Speculative capital flows are the buying and selling of currencies with no attached underlying asset.

Speculative capital moves in search of the highest total return. The total return is made up of:

1. 1. Exchange rate differentials
   2. Interest rate differentials,
   3. Local currency capital appreciation.

Of the three, exchange rates are the most important because they tend to fluctuate more than interest rates or relative market returns. It doesn’t take much of an exchange rate decline/increase to completely overshadow the return on interest rates or capital appreciation.

In the short-term (months to a few years) exchange rates are driven by speculative flows. In the long-term, economic fundamentals (trade + non-speculative capital transactions) dominate exchange rate movements. It’s the dynamic tension between these two that comprise the trends and fluctuations of currency markets.

Soros broke these factors down so he could turn them into simple logic statements (the below example is taken from his book The Alchemy of Finance). He did this in an effort to gain a better understanding of the drivers of a trend and the sustainability of that trend.

The importance of these drivers shifts over time, from regime to regime. This is one of the reasons why the FX markets are notably hard to forecast. Players are often keying off the thing that worked during the last cycle while unaware of what’s driving the current one.

The most recent USD bull market that kicked off in 11’ was driven by an equation that looked something like this.

DXY = US V > RoW V (rest-of-world) = ↑(i+e+m) → s↓ → e↑

Where US growth was stronger on a relative basis (accounting for the US safety premium) than growth in the RoW (US V > RoW V). This led to positive interest rate differentials for the dollar which drove exchange rate appreciation and brought in speculative flows (s) into US assets (stocks + bonds). This drove relative US market outperformance (m).

As a result, the dollar benefited from numerous positive feedback loops that boosted its Total Return Equation, which again, is the most important factor in driving speculative flows.

But here’s the thing… A number of these factors are no longer supportive of the positive USD feedback loop; such as relative growth, yield spreads, and recently, the trend in the exchange rate itself.

In addition, there are a number of longer-term fundamental factors, such as a deteriorating trade balance (T↓) and widening budget deficit (B↓) that are actively working against it.

So now the DXY equation looks something a little more like this:

DXY = ↕(i+e)+↑(m)→ s↕ → e↕

Where the now dollar only has relative market performance (m) working in its favor.

Reflexive processes tend to follow a certain pattern. In the early stages, the trend has to be self-reinforcing, otherwise the process aborts. As the trend extends, it becomes increasingly vulnerable because the fundamentals such as trade and interest payments move against the trend, in accordance with the precepts of classical analysis, and the trend becomes increasingly dependent on the prevailing bias. Eventually, a turning point is reached and, in a full-fledged sequence, a self-reinforcing process starts operating in the opposite direction. ~ Soros

And as we can see in the chart below, this sole-remaining USD bull pillar of relative market performance is historically stretched.

(Note: Benign Circles in the US are characterized by low inflation, an easy Fed, a strong dollar, and US outperformance. While US Vicious Circles are marked by above-trend inflation, a weak dollar, and US underperformance.)

This is one of those things that means little in the short-term but a lot in the long-term.

The fact is that capital concentration is likely near its zenith here in the US. The valuation premium placed on US financial assets is over 1.5std above its long-term average. And it now no longer has the supportive tailwinds of positive growth, yield, or exchange rate differentials.

So at this point, the primary thing preventing the dollar from completely tipping over is relative US asset outperformance, or rather the bullish trend in tech. And this speculative trend that has driven Domination by the Core is itself being driven by stimulus-funded trend followers.

Understanding this, we’ll know the time is ripe for the real start of the USD bear market when the trend in US tech begins to bend — which I suspect will come sooner rather than later. That will mark the extinguishment of the final bullish USD supportive leg and the start of a new regime. One balanced by capital flows back to the periphery (RoW) and a Vicious Circle for the US.

This new regime will be led by commodities, emerging markets, cyclicals, value, etc… And it will kickstart a number of monster cyclical trends.

Finally, I should note that this will just be a standard cyclical turn in the dollar. And in no way does it reflect the greenback’s status as the world’s reserve currency. I’ll write in a follow-up note about why that’s not a serious risk.

In the meantime, DXY is nearing significant support. We should see a bounce soon — failure to do so would be an important signal. Newton’s 1st Law reigns though and a chart in consolidation tends to stay in consolidation. So we need to wait for a range breakout to confirm that a new regime has arrived.

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

Alex Barrow

Co-Founder of Macro Ops. Alex is a former US Government Counterintelligence Professional, U.S. Army  Interrogator, and USMC Scout Sniper.  He’s an independent trader with over 10-years in markets. 

I hate to start this note off with some bad news but… there’s just no way we can ignore the elephant in the room any longer. So here goes…

After doing *extensive* research over the last 37-minutes… and when I say extensive, I mean I went DEEP… I probably watched the first 1/13ths of maybe five different 7ish minute-long YouTube videos, clicked on the top four suggested results from a single google search, and finally scrolled through twitter for the remaining half hour.

My findings… well, they are, shall we say… disturbing.  And I hate to be the bearer of grave tidings but I call ‘em how I see ‘em and apparently guys and gals,  we’re witnessing the complete and total collapse of the fiat US dollar system… a massive debasement of titanic proportions, ensuring the quick end to the US’s exorbitant privilege as the world’s reserve currency…

Shocking, I know… But my sources are credible. This is coming from a wide-range of YouTube influencers with zero background in markets, economics, or finance (so they’re not tainted by bias). I also read some real damning articles on the dollar’s demise from this totally above-the-board website www.dollarcollapse.com.

Oh… and yeah, some bank called Goldman’s Sach is pretty fired up about the USD’s end too.

I submit the following as evidence to you the jury.

On a somewhat unrelated note, I also learned that Bill Gates is trying to depopulate the world through tainted vaccines (a typical Billy G move). And, as if that wasn’t enough. Apparently… there’s a powerful shadowy satanic worshipping cabal of Democratic pedophiles trying to take down the honorable patriot, Donald Trump.

What a blessing the internet is… To think I was soooooo ignorant before I started this knowledge quest and journeyed into the digital Library of Alexandria that is the interwebs.

What a blessing. And I must say… parents have to be super excited about the prospects of their kids doing at-home online schooling for well into the foreseeable future. Let’s plug our little ones in and get all great this knowledge into their tiny impressionable brains right away, I say!

Alright, sarcasm quota has been hit for the day.

Now I’m going to tell you why the internet is wrong, again.

This is part of my ongoing series titled “The Internet Is Wrong, Again”. You can find my first in the series titled “Yield Curve Inversion: Why This Time is Different” from way back in early 2019 when the consensus thinking was that a recession and bear market was nigh. And then there’s my popular follow-up in the series titled “Much Ado About Nothing: Repo Rates and Doom Narratives” where I talk about, well I’m sure you can guess.

Anywho… this is the start of a short series of posts I’ll be doing on the dollar. In today’s note, we’re going to take a quick look at where we are.

In the follow-up pieces, I’m going to share with you my framework for analyzing hard currencies and we’ll talk about a thematic that I call “Core Domination”. It’s going to be the major driver of macro trends over the next 5+years so make sure to catch that one. And in the finale of the series, I’ll end by answering the question “is the US dollar at risk of losing its status as the world’s reserve currency” — to give you a hint, the answer is: NO.

Okay, so let’s begin by putting this “dollar crash” into perspective. It’s experienced a “devastating” “violent” “plunge” of *checks notes* … 10% from its cycle highs.

Looked at on a monthly basis it’s bouncing off the lower end of its 5-year long trading range. So from a technical standpoint, the Dollar Doom crowd might be getting a bit ahead of themselves.

In fact, I’d rather be a buyer here than a seller since I know Newton’s First Law of Markets reigns supreme and a dollar in consolidation tends to stay in consolidation. Until, obviously, it doesn’t. This trading range has held for 5-years (minus the brief 18’ undershoot) and we should expect that to continue until the tape says otherwise.

If looked at in a Marcus Trifecta Lens, which is how we analyze everything here at MO. The technicals favor a reversion to the mean over the short-term.

Next, we have sentiment and positioning.

We already have a good sense of where sentiment is since I don’t think anything screams consensus more than a throng of popular teenage Youtubers streaming advice on how to protect your 401k from the coming dollar crash.

So I think we’re safe in skipping that one and going straight to positioning. And here the hard data confirms the soft.

Take Citi’s Pain Index for example. This index tracks positioning by looking at FX fund performance relative to currency moves. It recently dipped below -40, indicating that Funds are very short some USD.

Similar crowded positioning is reflected in the CoT data. Here’s Commercial net data showing a rare dollar long position — implying specs are very short.

And here’s the positioning breakdown by pair. The euro’s long positioning is in the 100th percentile for the last decade (the euro comprises more than half of the trade-weighted USD basket).

So long-term the dollar is at lower support in a 5-year sideways range. Sentiment and positioning are ringing alarm bells. Now, all we need is an actual setup.

Let’s have a look at the daily timeframe.

Here we have a chart showing a clear 3-push sell climax.

This pattern typically shows up as the result of a buy or sell climax and often takes the shape of a wedge. In essence, it shows waning momentum and an inability of buyers/sellers to make headway after three attempts — a sign of trend exhaustion. This typically sets the stage for a 2-leg (minimum) reversal. That’s what I’m looking for in the dollar right now.

I’ll be sending out an alert to fellow Collective members if and when this trade triggers. Look out for the follow-up piece later this week where I’ll dive into my FX framework and one of my favorite macro thematics at the moment;  my “Core Domination” theory.

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

Alex Barrow

Co-Founder of Macro Ops. Alex is a former US Government Counterintelligence Professional, U.S. Army  Interrogator, and USMC Scout Sniper.  He’s an independent trader with over 10-years in markets. 

It will generally be found that men who are constantly lamenting their ill luck are only reaping the consequences of their own neglect, mismanagement and improvidence, or want of application.
~ Samuel Smiles

Good morning!

In this week’s Dirty Dozen [CHART PACK] we talk about sentiment, the path of relative factor performance following a large spike in bearish sentiment, and then we dive into weak seasonality in the SPX, discuss the bearish divergence in credit, and end with a look at the euro and natural gas, plus more…

Let’s dive in.

***click charts to enlarge***

1. Two key pillars of this rally off the March 23 lows has been the incredibly bearish sentiment and extreme under positioning in risk assets. Both of these bullish legs have been chipped away as sentiment and positioning have chased prices higher. They are now no longer tailwinds to risk assets (chart via Nomura).

2. Over the last few weeks we’ve seen some rotation into small-cap/value versus growth and momentum. This graph from Nomura shows the average small-cap vs large-cap pattern following similar extremes in sentiment regimes. If there’s continued follow-through then small-caps should soon start to materially outperform.

3. But there’s a good chance that outperformance will come from falling less versus rising more…

4. The SPX has had a strong few months but is now in its weakest 2-month seasonal period of the year.

5. In the Hierarchy of Markets, credit traders sit near the top, right below metal traders. This is why credit leads equities and as a result we should be concerned about widening credit spreads. I’m not calling a top here — my indicators still say its odds on we see the market run a bit higher — but if this divergence doesn’t soon reverse, it’ll be time to button up the hatches.

6. Meanwhile, the median P/E has doubled since the March low and is now at a record high (chart via @MacroCharts).

7. And positioning in the Nasdaq (blue line) is extremely elevated according to UBS.

8. The macro backdrop to all this is a White House and Congress in recess till early September after failing to make any progress on fiscal talks. This is bad news, especially considering the fact that banks have essentially stopped lending.

Here’s Morgan Stanley discussing the latest Fed SLO survey “The Fed’s July Senior Loan Office survey indicates that banks reported much tighter lending standards across all loan categories, with the acceleration in tightening faster than anything seen during the Global Financial Crisis. Demand was also weaker in all categories except the residential mortgage, with Commercial & Industrial (C&I) loan demand falling sharply as companies pay down credit lines. Banks tightened standards across all loan categories at an accelerating pace.”

9. If the US dollar bull market is indeed over, it would be the shortest one on record as measured from trough-to-peak, via CS.

10. One of the most bullish developments for the euro (and thus bearish USD) is the recent creation of a European supranational fiscal program. Credit Suisse points out that there’s plenty of room for the euro to increase its role as a reserve currency.

11. This is a great chart from Morgan Stanley showing the monetization levels (ARPU) of the big tech platforms. YouTube seems to me to be by far the most under-monetized digital asset out there.

12. There’s a LOT to like about natural gas and natural gas stocks right now. The Capital Cycle is supportive of a cyclical bottom, sentiment is about as dour it can get, and the curve is at levels that tend to coincide with cyclical bottoms.

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

Alex Barrow

Co-Founder of Macro Ops. Alex is a former US Government Counterintelligence Professional, U.S. Army  Interrogator, and USMC Scout Sniper.  He’s an independent trader with over 10-years in markets.