Things Are Not Looking… Good

“Above all, don’t lie to yourself. The man who lies to himself and listens to his own lie comes to a point that he cannot distinguish the truth within him, or around him, and so loses all respect for himself and for others. And having no respect he ceases to love.” ~ Fyodor Dostoevsky, The Brothers Karamazov

Good morning!  

In this week’s Dirty Dozen [CHART PACK]  we cover Russia’s vulnerability to being cut off from key imports. We then dive into the deteriorating macro data in the US, talk about how investors are still buying the dip, the risk of further downside in risk-assets, some setups in some big names, and some continued opportunities in the commodity space, plus more… 

  1. There’s been a LOT of talk about the West’s dependency on key materials from Russia so here’s a terrific thread outlining Russia’s dependency on critical imports (link here)


  1. The talented Mr.Blonde_Macro published a macro update over the weekend titled “From Bad To Worse”. You can probably guess what it’s about. I largely agree with his sentiment. Here’s the link and a chart from the post. 


  1. While survey data of sentiment shows consensus bearishness (AAII and II etc..). We’re still not at all seeing it show up in the hard data. This chart of aggregate US Equity Index flows shows investors continue to buy the dip in risk-assets. This is not what capitulation or durable bottoms look like. 


  1. We’ve been short small-caps (RTY) since the initial break. And we’re looking to add to this position on a confirmed break below the current bear wedge. 


  1. Taiwan Semiconductor Manufacturing Company (TSM) has put in a major double-top with a confirmed breakdown last week. Semis in general are looking vulnerable. And TSM comes with the added geopol risks (real or perceived) of being an important strategic asset that China would love to control, along with the rest of the country it’s domiciled in. 


  1. We just saw the largest commodity shock in over 60-years last week (chart via BBG). 


  1. A record 21 out of 28 commodities are now in backwardation (chart via BBG). 


  1. The MO portfolio is having a great start to the year, as we’ve been net short equities, holding high amounts of cash, and long just about every commodity that’s currently in an uptrend.

One market we’re not long but are looking to be is sugar. Chart below is a daily. 


  1. Crude has been on an incredible run and it’s now extremely stretched on a short-term technical basis, though for obviously good reasons. But one interesting thing to point out is how low spec positioning remains considering the run and all the attention it’s been getting. 


  1. We are long a basket of energy names as well as futures, but we’re looking to add to our considerable position in energy names by taking tactical swings at opportune setups in the space. Below is Newpark Resources (NR) a smallcap oil and gas services company. 


  1. And then the Tidewater (TDW) chart, which I discussed a few weeks back, continues to develop quite nicely. 


  1. Donate, pray, write/call your political leaders, etc… Make sure to do your part to support the people of Ukraine and their right to exist as a nation and the freedom to choose their own path. 

Thanks for reading.

Stay frosty 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.