COACHING THREAD: In response to the @NickTimiraos article I tweeted, I've had no less than two dozen retail investors tweet at me some version of the following:
"High credit card debt = the household sector balance sheet is not healthy nor is consumer spending resilient".
Ignoring the very obvious fact that anchoring on a NON-STATIONARY TIME SERIES like nominal credit card debt should not ever ever ever be used to form the basis of CYCLICAL (read: stationary) determinations, the reason high credit card debt it misses the mark is threefold... 2/
1. The US household sector is FLUSH with checkable Cash on both an absolute ($7.6tn), share-of-total-assets (5%), and share-of-disposable-personal-income (41%) basis. 2. Household debt is low, at only 88% of nominal disposable personal income (vs. 115% pre-GFC)... 3/
3. At +2.0% on a 3-month annualized basis, consumer spending is still growing decently on a REAL basis -- i.e., AFTER subtracting a ~40yr high in inflation. +2.0% compares to a pre-COVID trend of +2.5%... 4/
All told, be careful not to succumb to the bad "analysis" of🐻 porn peddlers that NEED the US economy to fall off a cliff in short order to justify their reckless "wen Lambo?" #BTFD behavior. This segment of uninformed volume NEEDS the economy to suck so the Fed pivots soon... 5/
"What happens if the US economy does NOT fall off a cliff soon?" is the #1 question you should be asking yourself as an investor today.
I am grateful @NickTimiraos shined a light on this critical aspect of the Macro debate in his excellent article. 6/6
PROCESS THREAD: One of the things that sets the @42macro research process apart is I update our 125 to 150-slide monthly Macro Scouting Reports daily to prepare for client meetings. That is to ensure I don't miss any critical Macro updates like today's September JOLTS release. 1/
Obviously not every slide in the deck needs to be updated every day, as some only feature monthly or quarterly data. But I do go through every economic release, from every major economy, every single day, to ensure that I do not miss updating any slide that requires an update. 2/
While that sounds psychotic, you'll quickly learn from top buysiders like my mentor @Mike_Taylor1972 that this is the level of daily discipline that separates stud investors from those that fail on the buyside. That discipline is the difference in being UP YTD vs. DOWN 20-70%. 3/
The stock market is making me nervous about a deeper pullback. It is trading over a percent below the Lower Boundary of its Probable Range, indicating it wants to at least break down to neutral from the perspective of our Volatility-Adjusted Momentum Signal (VAMS).
THREAD 1/
That said, the last time we saw such a deep downside deviation w/r/t the S&P 500’s Probable Range was on 5/12/21. At the risk of anchoring on an n-size of 1, investors can breathe a sigh of relief b/c that was not a sell signal on either a one-week or one-month forward basis.
2/
I watch Micro Caps $IWC and Frontier Markets $FM as ancillary signals of broader "risk off" conditions -- which our primary risk tools are disconfirming. Both are bearish VAMS, but neither has broken to new lows. That is a good thing for broader risk appetite until it isn’t.