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In the Flow – You Are Here (March 2019)

Where are we in March, 2019? We’re seeing a resurgence in the narrative and policies associated with a good old fashioned beggar-thy-neighbor currency competition.

Also, here’s our summary of where we think we are in each of the five evergreen macro issues of markets – inflation, central banks, trade and tariffs, US fiscal policy, and the credit cycle.

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In the Flow – Why Your Long-Vol Allocation Isn’t Working

It’s not impossible for market volatility to spike massively through some deflationary shock to the financial system like a China-driven credit crisis or an Italy-driven euro crisis. What’s impossible is TO GET PAID for taking out an insurance policy against the last war.

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In the Flow – It’s the Multiple, Stupid

Whether it’s ITT and Hal Geneen, or Teledyne and Henry Singleton, or GE and Jeff Immelt, or Berkshire Hathaway and Warren Buffett … at some point these companies get too big to continue growing through acquisition. There’s no more step-function P/E growth to be had on the E side of the equation. So they ALWAYS start focusing on the P side – the multiple – which is entirely a creature of narrative.

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In the Flow – Focus Fields

Two distinct market narratives that came into sharper focus last week – Global Growth Slowdown! and Democratic Socialism!. The first was pushed by the usual market Missionaries – the WSJ and the FT and the talking heads on CNBC – and the latter was pushed by the usual political Missionaries – Trump and AOC and Bernie and the rest of the 2020 presidential crowd.

But only one of these narratives makes a long-term difference for your portfolio.

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In the Flow – Hey, Chester!

For every historical narrative there is a counter-narrative, and every time history repeats itself, the main narrative gets weaker and the counter-narrative gets stronger.

That’s a problem for Jay Powell, as the counter-narrative of Central Banker Lapdog is getting stronger.

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In the Flow – One Narrative to Rule Them All

Last Halloween the hipsters over at Salesforce.com turned their new San Francisco building into a giant Eye of Sauron. I keep waiting for someone to try this with the Federal Reserve’s Eccles Building, but that would be too on-the-nose.

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In the Flow – One Down, Two to Go

More than ever I can hear the approaching hoofbeats of the Fourth Horseman – a regime change in inflation expectations. The hooves are still distant, and you’ll have more bites at the portfolio-preparation apple as global growth concerns in China and Europe persist. But prepare you should.

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In the Flow – Reflexivity

Soros’s Reflexivity is another name for the Common Knowledge Game, just focused on price action narratives. We see the development of just such a price action narrative today in macro world, one that surely makes Trader George’s ears prick up.

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In the Flow – LOL

In the big picture, we’re still in the middle of a technically uncertain game of Chicken between the U.S. and China. But Powell’s VERY public about-face on Friday, coupled with the VERY strong jobs report, creates a VERY different investment backdrop for the US-China trade impasse.

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Narrative Monitors

New ET Pro Monitors

Legacy Monitor Archive (Pre-January 2020)