Summary – A top-down review of interesting calls and comments made last week in Treasuries, monetary policy, economics, stocks, bonds & commodities. TAC is our acronym for Tweets, Articles, & Clips – our basic inputs for this article.
Editor’s Note: In this series of articles, we include important or interesting Tweets, Articles, Video Clips with our comments. This is an article that expresses our personal opinions about comments made on Television, Tweeter, and in Print. It is NOT intended to provide any investment advice of any type whatsoever. No one should base any investing decisions or conclusions based on anything written in or inferred from this article. Macro Viewpoints & its affiliates expressly disclaim all liability in respect to actions taken based on any or all of the information in this article. Investing is a serious matter and all investment decisions should only be taken after a detailed discussion with your investment advisor and should be subject to your objectives, suitability requirements and risk tolerance.
1. Markets Last Week
US Indices:
- Dow up 1.7%; SPX up 95 bps; RSP up 1.5%; NDX up 43bps; SMH up 72 bps; RUT up 3.1%; MDY up 1.6%; XLU down 65 bps; VIX flat
In particular,
- J.C. Parets@JC_ParetsX – 8-16 – That’s a new 52-week high for the Dow Jones Industrial Average, the first one we’ve seen all year. Yesterday was also was the highest weekly close ever for the world’s most important stock market index.
And,
- Scott Brown, CMT@scottcharts – 8-16 – Small caps never broke their April lows vs. the S&P 500 and are knocking on the door of a major breakout in absolute terms
Craig Johnson of Piper-Sandler had made a call on CNBC on July 23 that the Russell will make a new high by Aug 15. That hasn’t been realized despite a big week for the Russell. To his credit, he returned on CNBC on Friday Aug 15 to reiterate his bullishness.
Speaking of VIX,
- Charlie Bilello@charliebilello – 8-13– On the morning of April 7, the $VIX crossed above 60. It ended today at 14.49, down over 75% from the April peak. That’s the lowest close of the year. Video: https://youtube.com/watch?v=y-XQbmda9oo&t=54s
Mega Caps:
- AAPL up 98 bps; AMZN up 3.8%; GOOGL up 1.2%; META up 2.1%; MSFT down 36 bps; NFLX up 2.3%; NVDA down 1.2%; MU up 1.7%;
Financials:
- BAC up 2%; C up 1%; GS up 1.3%; JPM up 60 bps; KRE up 3.4%; EUFN up 2.1%; SCHW down 1%; APO down 1.8%; BX up 1.6%; KKR down 27 bps;
Dollar was down 33 bps on UUP & down 46 bps on DXY:
- Gold down 2.2%; GDX up 38 bps; Silver down 1.4%; Copper up 42 bps; CLF up 8.9%; FCX up 1.2%; MOS up 1.5%; Oil down 83 bps; Brent down 39 bps; OIH down 36 bps;
Speaking of crude & natural gas:
- RenMac – Natural gas remains the largest single fuel for US power generation and it was nice to see household energy services decline 0.3% in July CPI. The energy sector continues to look vulnerable with crude rolling over in a weak trend and natural gas breaking down to new YTD lows.
International Stocks:
- EEM up 1%; FXI up 1.8%; KWEB up 3.7%; EWZ up 4.4%; EWY up 1.4%; EWG up 57 bps; INDA up 1.1%; INDY up 1.2%; EPI up 84 bps; SMIN up 1.3%;
Fixed Income:
- 30-year Treasury yield up 6.6 bps on the week; 20-yr yield up 6.5 bps; 10-yr up 3.5 bps; 7-yr up 2.3 bps; 5-yr up 0.7 bps; 3-yr down 1.4 bps; 2-yr down 1.1 bps; 1-yr down 0.7 bps;
- TLT down 96 bps; EDV down 1.8%; ZROZ down 2%; HYG up 30 bps; JNK up 21 bps; EMB up 50 bps; leveraged DPG down 47 bps; leveraged UTG up 57 bps;
Is coiling a synonym for getting excited?
- Mike Zaccardi, CFA, CMT 🍖@MikeZaccardi – 8-16 – 10yr yield coiling. Macro-technical traders are getting excited.
2. Positioning et al …
Beginning with “consolidated” positioning,
- The Market Ear @themarketear – Higher …. but still not at extreme levels when it comes to consolidated equity positioning.
Now a contrast between two disciplines:
- The Market Ear @themarketear – Systematics – from undershooting to overshooting discretionary investors.
Finally volatility based:
- The Market Ear @themarketear – Volatility control funds running big longs… again.
Moving to a higher bearishness plateau,
- Seth Golden@SethCL – Aug 15 – Goldman Sachs warns⚠️ investors to be prepared – S&P 500 $SPX Drawdown Probability Index has risen to highest level since April, at greater than 25%. While that may seem like a low probability, crossing this threshold has resulted in 3-5% pullback 85% of all occurrences. $SPY $QQQ $IWM $NYA $ES_F $VIX $VVIX $SOXX
Even Mr. Bullishness himself pointed out the below:
- Ryan Detrick, CMT@RyanDetrick – Aug 15 – S&P 500 making new highs, but potential negative divergences under the surface. Good one from @FrankCappelleri this morning.
A pullback in short order?
- Seth Golden@SethCL – 8-13 – In spite of record ATHs for major indices yesterday, very, very few OVERHEATED conditions exist. No RSIs register 70+, no BPIs register 70+, no A/D Line ATHs either. But... every time Upper Bollinger Band has been breached, minor pullbacks have occurred in short order. $SPX $NDX $SPY $COMPQ $QQQ $NYA $DIA $VIX
That brings us to Rick Rieder with Scott Wapner of CNBC (clip says on Aug 12, 25) with the title “Best Investment Environment Ever … “. He explained it per CNBC & our notes:
- “I think that, I do; … by the way that doesn’t mean necessarily everything is going up …. there are a couple of things at play that are extraordinary … first equity side; technicals in equities are crazy; … cash on the sidelines; buybacks related to IPO calendar, i.e., demand vs. supply pretty extraordinary … these company multiples are not that attractive; earnings growth; MAG 7 yr/yr growth 54%; …. “
Then after a bit on fixed income, Rieder added (see clip above from minute 1:12),
- (minute 1:12) “one last thing; today volatility you don’t have to necessarily … one of the things I was saying … what’s you exit strategy, what’s your escape hatch if you get something surprising volatility in the equity market we did a trade today equity vol … it was 10 … vol 9.5-10 vol to own crazy low volatility to own equities ; so you don’t actually have to take the downside risk; that’s a pretty good environment “(minute 1:37)
Seriously, folks! Listen to the above clip in that interval; you might notice as we do, unlike the rest of the clip, Rieder’s words in the segment above seem jumbled as if some words have been dropped from the clip. Rieder said “we did a trade today” & then jumbled words without adding anything on what that trade was except “it was 9.5-10 vol to own equities. Weird, isn’t it?
Even more weird when our own scribbled notes have Rieder saying “today; converted stock holdings to options“. That would make his statements crystal clear, right? Rieder converted stock holdings to options & that too at 9.5-10 vol to buy these options. So, as Rieder is quoted in the above clip, “so you don’t actually have to take the downside risk“.
This raises questions, at least to us. If Rieder’s trade did actually “converted stock holdings to options“, then why was this brilliantly sensible trade at 9.5-10 vol hidden from CNBC’s viewers? And as Rieder himself said, is this ability of Rieder to replace stock holdings by 9.5-10 vol options is why Rieder says” that’s a pretty good environment“? Meaning those readers who didn’t convert or did not know to convert their stock positions to options before a potential or actual selloff don’t have such a “pretty good environment”?
Regardless of what makes today “such a pretty good environment“, is it proper for CNBC to NOT DISCLOSE Mr. Rieder’s trade that makes today “such a pretty good environment“?
This is a valid ethical question, we believe. But then we are simple folks & we don’t understand the complicated decisions of CNBC & CNBC Closing Bell governing “adequate disclosure” issues. Allow us to repeat again our view of how CNBC Closing Bell has dropped in standards & ethics since Maria Bartiromo used to host it.
We must add that the above does NOT apply to Mr. Rick Rieder. We recall hearing Mr. Rieder describe his trade as “converted stock holdings to options” and our scribbled notes support our memory. So any lack of disclosure is in the lap of CNBC & CNBC Closing Bell, in our judgement.
3. Interest Rates, US Economy & the Fed
Why don’t we begin where we left off in Section 2 about Mr. Rieder’s views in the clip above? When asked by Scott Wapner of CNBC, “the Fed’s going to cut? In September?“, Mr. Rieder said at minute 1:39:
- “I think , its almost a given that they cut, particularly if you get a payroll report that shows what has heretofore happened … you are seeing some sogginess around job hires, job openings, … you have got more slack coming in to labor markets – I still think the funds rate can get to the labor markets – I still think the funds rate can get it down faster more aggressively than where they are today … inflation reports today; … there is a little bit of elevation from tariffs …. but you are still running under 3% core CPI & things like shelter, you are beginning to see some improvement ; I think they have got room ; 5-yr inflation is at 2.5%; you have room to get that funds rate down by 100 bps”
Unlike CNBC, Bloomberg TV tends to cover major issues in more depth like asking Mr. Rieder about the US debt load. Mr. Rieder’s answer below is one reason he has been our No. 1 nominee for the Fed for almost a month:
- (minute 3;16) ““there is only one way to de-lever the economy; you have got to out-run the debt; you have to outgrow it; so there is a plausible outcome where you get nominal GDP running at 4.5%-5%; if you get the interest rate down to 3%, then you can start to de-lever but it takes a really long period of time… The one engine today is higher growth; as long as we can grow, then you can work thru it“
That brings us to David Zervos, another named strategist in the panel of candidates. Below is what we heard from Mr. Zervos on January 10, 2025 on CNBC:
- “that’s not a sign there is inflation expectations; that’s not a sign about Fed credibility; that’s a sign that they are kinda going to stick around high rates for a little too long & make something a little negative for the economy to happen;”
Before we get to an opinion what that negative might be, let us hear Mr. Zervos describe the current Fed obsessed about fighting the “last little battle of inflation” on August 15, 25 on CNBC:
Remember what made the Fed panic recently about their dogged adherence to the strong economy with high inflation concern? It was the stunning revisions to the jobs numbers from the BLS. Has the BLS changed radically after the firing of last chief & have they had the time to change their modus operandi?
Listen to Barry Knapp of Ironsides Macroeconomics on August 12, 25 on CNBC:
- “there is a good chance they (Fed) start with 50 (bps); the way I get there is on September 9th when we get the first estimate of the annual benchmark revision; its gonna look like last year, -800,000 or so; the Fed is going to realize that not only were the revisions really ugly for the last month but we are actually looking at a much slower job creation rate ;… our supply of labor is coming down but demand has weakened a lot more & they really aught to be loosening policy… ”
Who is likely to have a better handle – BLS or St. Louis & Cleveland Fed?
- David Rosenberg@EconguyRosie – Either something is really going wrong with another BLS database in the form of CPI rental rates which are running at nearly a +4% YoY pace, or there is something wonky with the St. Louis FRB and Cleveland FRB because their new tenant rent index just collapsed in epic form in Q2. It swung massively to a deflationary -8.9% YoY trend from +1% in the first quarter and +2.3% a year ago. I’ll tell you how strange this is … if the St. Louis Fed and the Cleveland Fed were to input their data into the CPI, the headline and the core index would be deflating outright (and by -2.3% for the core!). Never mind 50 basis points on September 17th – maybe Powell should go 150!
Now something we never thought we might say or write! Bloomberg’s Tom Keene is someone we perceive as a “superior-to-the-Fed” elite who would never think of ordinary Americans from the slightest sympathetic angle. He first surprised us in the pre-FOMC show last time when he contrasted the economic conditions in Kansas vs. rich New Jersey. And this week, Signor Keene stunned us by his quoting of Torsten Slok saying:
- “container departures from China to the US are collapsing; when consumers cannot get the products they want from abroad & the products that are imported are more expensive – the outcome is a slow-down in U.S. consumer spending“
Does this have any serious linkage to employment? That question drove us to Dr. Lacy Hunt of Hoisington Management. He points out that,
- “in terms of a whole host of economic measures, the economy primarily keys off the monthly employment report- payroll jobs; the payrolls jobs report is a very limited survey; just 360,000 firms, admittedly large firms; but we have 12 million firms in total; So the BLS has to go from this small to the big sample; moreover the BLS has no current information on what is happening at smaller firms;”
So what is the best poll of them all? Dr. Hunt said:
- ” the exit poll taken on election day in which people coming out of the poll were given 5 choices for the economy – from very bad to very good. … 70% said conditions were bad or very bad; in other words, people were very concerned about the economic circumstances “
And that was just after the November election. So we were struggling even before this year started, Dr. Hunt said. He added that the labor market report has its tentacles in all kinds of economic indicators. Dr. Hunt pointed out that BLS had misses in the past. They had a similar miss in 2007-2008. The BLS reworked their formulation & said they had fixed the problem, Dr. Hunt said.
So where are we today? Dr. Hunt explains:
- “What we know about the US economy is that the Service Sector is steady as she goes. One of the tell-tale signs is that we are on the precipice of something more serious is that the Service Sector has flatlined in the last 3 months. That just doesn’t happen by accident & the July numbers are confirming that. The other problem is that the economy was portrayed by …. the 2024 statistics that were over-stated; … payroll jobs have overshot the broader full labor market they call Quarterly Consensus & its companion Employment Dynamics for 5 out of last 6 quarters and every single quarter of 2024“
So?
- “it looks like the overcount in private sector alone was just under a million; a huge miss; …. as the data is now coming in, it appears that we have had a 5-7 sigma error, very similar to what occurred during the great financial crisis; …it is possible that in 2 of the quarters last year, we actually had sequential declines in employment, a totally different picture “
Watch & listen to Dr. Hunt explain the above in the clip below:
Now ask yourselves how have we as a society allowed a 4.25%-4.5% Federal Funds rate for so long in 2025?
4. Macro Viewpoints lowers it’s ONR by 50 bps to 3.25%
We have suggested in the last few articles that we were thinking of lowering our ONR (Over-Night Rate) from 3.75% where it has been since its inception in April 2025.
After everything we read & observed this week, Macro Viewpoints has decided to reduce the Macro Viewpoints Over-Night Rate by 50 bps to 3.25%.
5. On A light note
Somehow Tom Keene’s words & especially his tone made us wonder whether he is joining the ranks of us plebians who want the Fed to cut rates, fast & deep. If so, Mr. Keene would likely miss the opportunity to be named Sir or Lord by his beloved Britain or welcomed by the current FOMC. So in a very light vein we point out that Mr. Keene might one day be felicitated as another American citizen was below, one named Alfred Hitchcock. But who might have the right British accent to do so as John Houseman did? Jonathan Ferro, perhaps!
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