The World Is a Rollin…

Last week, we talked about why South America may finally have its bull market, after over a decade of persistent bear markets. This week, we want to break with past traditions and simply give you a bunch of charts—bearish charts. While we are bullish longer-term, we also recognize that timing is everything. Quite honestly, a lot of global equity markets look awful. Now, you can say that this is just a mirror image of the DXY strength, but maybe there’s more than just Dollar strength leaning on these markets. Maybe the global economy just isn’t all that good (oil sure would agree there). Maybe Trump isn’t bullish global equity…

Even if Trump should be good for US equity markets, you have to admit that it’s going to be a chaotic clown-show as well. In 2017, Trump showed up with a slow-moving deflationary economy. He breathed life into it. This time, inflation is high, and things are messier. Most of the changes he has in mind, are actually disruptive to businesses in the short-term. When it comes to pharma, RFK is going to make their long-term prospects dismal as well. In many cases, you could sum up Trump’s plans as stopping the grift. Every semi-monopoly industry that is grifting the US citizen, is going to get worked over. That doesn’t sound like a bull market. That actually sounds chaotic. Look at LLY, an honorary member of the MAG7 boy-band… (fugly!!)

Honestly, a lot of US charts look like this. Partly this could be blamed on the coming changes in DC (PFE is making 11-year lows and will hopefully get zeroed, but it’s still a $140b MC company, and that zeroeing will sting). But at the same time, inflation does seem to be stepping up. Everyone sorta accepts that tariffs are inflationary. Trade wars are inflationary. Changing the rules so that the little guy has a chance, is going to be inflationary. As will closing the border and deporting illegals, so that Americans can get a raise. Look at the chart of the 1970s inflation. We feel pretty confident that a repeat is coming…

While you’ve likely seen some version of just how silly the move in US equities has been, it’s important to remind you again…

…while also reminding you where sentiment is.

Now, let’s go overseas and look at some nasty charts—with a focus on the ones you probably haven’t looked at in ages… We all have an opinions on China and Japan, but Korea just broke down hard and has suffered since peaking in 2021. That one isn’t in the news…

Then there are a bunch of charts like India’s Nifty 50 that seem to have run out of momentum…

Others like Mexico seem like they’re about to fall through the floor… (what near-shoring bull mkt??)

Turning to Europe, let’s look at that nasty H&S in France…

While the FTSE is hanging on for dear life…

Look, we’re not saying that things are about to die, but we’re not not saying that either. There just aren’t many indexes that look good (Australia/Canada/Germany/Singapore are all we can find…). Everything else feels like it’s stalling out. Maybe it’s global interest rates that are about to matter. Maybe it’s inflation. Maybe Trump is about to change how the whole financial system functions. We have been cautious since this spring. We’re still cautious. We try and listen to the market. We especially take note of when the market has trouble absorbing fresh paper…

Remember that BA cap raise that was priced in the hole?? Everyone we knew, said to buy it, b/c you always buy the well-telegraphed cap raise in the hole, on a mega-cap with a new CEO and a great turn-around plan. This was the down-round that was supposed to let BA re-set the deck and go back to kicking ass. It was silly oversubscribed, and the stock closed at $153 after pricing the deal at $143. Now look at it, you can buy all you want, and at a discount to the long-only bros who got cut back on allocations.

We’re not saying that one deal that breaks pricing is the end of the world… However, we are saying that a year ago, that deal would have held, and the stock would probably be grinding higher (instead of lower).

What if global equity markets are simply tired. What if DXY is sucking the liquidity out. What if rates going higher is a much bigger deal than anyone imagines. What if you MAGA by taking DXY to 150 and telling everyone to sell us their stuff on the cheap. We don’t think that’s how it will work, but what if it does??

We’ve taken a tour of global equity markets, a tour of global large cap markets. Not much looks good.

Remember when the D-Bags were in charge?? What if peak douche-baggery was the summer of 23 and we’ve simply been in a failing rally ever since?? That would roughly track our own investing experience… 2024 has been hard unless you owned MAG7. Even worse if you owned MC FP (still an EUR 300b MC)

As we scour the world, we see a lot more charts that look like LVMH, than we see charts that look to be breaking out. In fact, the only sector that really looks good to us, is the dominant and well-run banks/brokers. Look at JPM or GS… (Even DB looks decent, and that one NEVER looks decent)

We remember our good friend PauloMacro telling us that we’re speaking Portuguese and we don’t know it yet. We had him on a KEDM Happy Hour recently to hash out what he meant by that. Taken to an extreme, let’s look at Garanti Bank in Turkey. When rates go up, NIMs go up, but inflation means that there’s fewer defaults, so ROE explodes. Is JPM simply playing it forward a few years?? ‘Cause GARAN TI was what you wanted to own as Turkey’s monetary situation fell off the rails… (for FX purists, it went from 85c on 12/31/21 to $3.28 today in USD)

History repeats (sorta). Maybe there’s a lesson here. Maybe we all should follow what worked in Brazil and Turkey, then play it in size. Cause, that’s the sector that seems to be working. Literally the only one…