Alpha Trader

This week’s Alpha Trader podcast features hosts Aaron Task and Stephen Alpher talking with Brendan Ahern, chief investment officer at KraneShares, whose flagship fund is the $5B AUM KraneShares CSI China Internet ETF (KWEB).

Among the topics covered:

Why the fall of Afghanistan - no doubt a serious issue for the Middle East - doesn’t necessarily translate into China getting more aggressive with Taiwan

There’s plenty being lost in translation with respect to the regulatory news coming out of China, says Ahern. Much of what we’re seeing - while clunkily handled by Beijing - is no different than much of the regulatory issues faced by the likes of Facebook and Amazon on a regular basis in the U.S. or EU.

The result has been a large disconnect between fundamentals (still great) in Chinese Internet players like Alibaba (BABA), Tencent (TCEHY), JD.Com (JD), Meituan (MPNGF), and Pinduoduo (PDD), and the price action (not so great).


Links of interest:
Why Ray Dalio thinks worries about the China regulatory crackdown are overblown

Why George Soros is highly worried about China

KWEB’s top holdings

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This week’s Alpha Trader podcast features hosts Aaron Task and Stephen Alpher chatting with Scott Bauer, CEO of Prosper Trading Academy.
Among the topics covered:
Barring worsening news on the Delta variant or some other unfortunate event, there’s little standing in the way of the market continuing to move higher, says Bauer. That doesn’t mean investors shouldn’t be buying protection, and - thanks to recent low volatility - that protection is relatively cheap at the moment.

Recent strong economic growth and inflation prints suggest we’re maybe nearing the end of the zero rate regime sometime in the next year, but Bauer believes the market has discounted as much. More important is how to play stronger inflation, and Bauer - who has been long semiconductors (SMH) through their big run of the past few months - believes there’s plenty more upside to come.

Markets don’t always have to make sense, reminds Bauer. U.S. bond yields until recently had been headed sharply lower, but at the same time the dollar was showing plenty of strength. Apparel stocks have been taking off of late, even amid stores about companies extending work-from-home, and chatter about at least some schools continuing with remote learning.

And of the dollar (USDOLLAR), Bauer expects it to continue rising - not because its a “bastion of strength” - but because it’s being measured against other currencies like the euro and yen that have even larger flaws.

Links of interest:
Prosper Trading Academy

Micron CFO discusses continuing supply chain shortages as semi stocks pull back

Apparel stocks are taking off - why the sector looks appealing

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This week’s Alpha Trader podcast features hosts Aaron Task and Stephen Alpher talking with Ryan Detrick, chief market strategist at LPL Financial.
Among the topics covered:
Appearing on Alpha Trader right in the middle of the March 2020 panic, Detrick cooly explained that the market had more than priced in an earnings disaster, making stocks a buy. Fast-forward 17 months, and we’re in the middle of what might be one of the best earnings seasons ever. So yes, things are a bit perky right now, but the major structural bull market remains intact, says Detrick, expecting stocks to continue to outperform bonds over the next 6-12 month timeframe

The bond bears may have thrown in the towel, but Detrick sees yields creeping higher throughout the rest of the year alongside a still-growing economy and rising inflation expectations. He thinks 1.75% on the 10-year Treasury (vs. the current 1.18%) isn’t out of the question

As to whether we’re entering a new 70s-style period of galloping inflation, Detrick isn’t so sure. He notes the continuation of many of the same factors that have held inflation in check - technology and the Amazonization of the economy, to name two - for the last decade. That doesn’t mean we won’t continue with some strong inflation prints for the next year or two as the economy continues to emerge from the 2020 recession

Turning to favored areas, Detrick and team continue to modestly favor value vs. growth for the rest of 2021. And that leads to favoring cyclical sectors like financials, industrials, and materials.

Links of interest:
This earnings season is an upside record-breaker

Detrick’s March 10, 2020 appearance on Alpha Trader

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This week’s Alpha Trader podcast features hosts Aaron Task and Stephen Alpher talking with Mark Dow, author of the Behavioral Macro Blog, and a former hedge fund manager.

Among the topics covered:
The China regulatory crackdown is clearly not good news for that country’s tech names, and suggests not great relations between Beijing and D.C., but it need not be a headwind for additional records for the S&P 500

While it’s entirely possible that we’ve already passed the peak growth phase of the current economic recovery, that doesn’t mean solid growth won’t continue for several more quarters or years. Along those same lines, Dow believes that inflation may have peaked as well

A lot has been made about what the recent big drop in long-term Treasury yields might be saying, but Dow believes that price signals in the government bond market aren’t what they used to be. Find out why

Dow’s explanation of the monetary policy transmission pipes. The Cliff’s Notes: It’s a closed system, i.e. the Fed’s “printing” of money ends doesn’t go into the economy, it stays in the Federal Reserve deposits of the banks. It’s for this reason that those predicting the next great inflation keep getting it wrong.

Links of interest:

Behavioral Macro blog

The China regulatory crackdown in an fund - The KraneShares CSI China Internet ETF


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This week’s Alpha Trader podcast features hosts Aaron Task and Stephen Alpher talking with Blu Putnam, chief economist at CME Group.
Among the topics covered:
Making sense of the continued decline in long-term yields even as inflation surges

Why we’ve probably already seen the peak in economic growth for this recovery cycle

A defense of the Fed’s “transitory” inflation argument

Alternative data sources like international travel numbers, sports attendance, and restaurant seating might give the first clue about how the Delta variant affects the growth outlook

Why modern banking means the link between the money supply and inflation has been irrevocably broken, and ...

Why 70s-style wage-push inflation isn’t an issue in today’s digital economy

Links of interest:
What does the bond market know as 10-year yield tumbles
10-year Treasury yield drops below 1.2% for first time since February

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This week's Alpha Trader podcast features hosts Aaron Task and Stephen Alpher talking with Fari Hamzei, the founder of Hamzei Analytics and Timer Digest's Top Timer for the past three, five, eight, and ten year periods.
Among the topics covered:

Any number of indicators clearly point to stocks in need of at least a modest correction (5%-7%), but the market continues to grind to new records

Hamzei is on the lookout for a catalyst that might give the all-clear signal for an aggressive short. What that might be is uncertain, but Hamzei suggests the Robinhood IPO might make a blowoff top event in the same way the Coinbase IPO marked the peak for bitcoin earlier this year.

Hamzei is playing his current bearishness by being long put spreads on the Nasdaq 100 (QQQ) and the SPDR S&P 500 (SPY), but things are uncomfortable. The question he's wrestling with now: Roll the positions forward, or cut bait? Another consideration is the start of earnings season - Hamzei is mulling whether it makes sense to get a little bit long to take advantage of what should be strong results

Task and Alpher mull Tuesday's inflation report which showed a 13-year high for the headline rate (5.4%) and a 30-year high for the core rate (4.5%). The bond market snoozed right through those big prints, with the 10-year Treasury yield remaining near a multi-month low at 1.36%. What gives? Is the bond market discounting an as of yet unforeseen economic slowdown? Or has all price discovery been lost thanks to the Fed's massive monthly asset purchases? Whatever it might be, Alpher reminds that a fast inflation print isn't necessarily a good reason to sell bonds. After all, the previous CPI high came in 2008 amid one of the great deflationary episodes in market history.

Links:

Hamzei Analytics

Bonds snooze, bitcoin slides, gold perky as inflation rises to 30-year high


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This week’s Alpha Trader podcast features hosts Aaron Task and Stephen Alpher speaking with Nancy Davis, founder and CIO of Quadratic Capital, and manager of the Quadratic Interest Rate Volatility and Inflation Hedge ETF (IVOL).
Among the topics discussed:
No one can be certain of the inflation outlook - be it the Fed’s “transitory,” or somewhat more persistent than that, or of the runaway type

No matter the outlook, we’re all naturally “short” inflation, so should look to have at least some exposure to higher inflation in our portfolios

The IVOL holds about 85% of assets in inflation-protected Treasurys (TIP), and uses the remainder of assets to go long fixed-income volatility

The benchmark Bloomberg Barclays Aggregate Bond Index (ETF version: [[AGG]]) has no inflation protection among its holdings, and - through its high allocation to MBS - is actually short volatility

The recent rally in Treasurys - which has sent the 10-year yield down to 1.36% - doesn’t make a whole lot of sense given strong economic growth and perky inflation. Is a slowdown on the way, or are investors too aggressive in pricing in rate hikes, or have central bank asset purchases erased the idea of price discovery?

Why gold is overrated as an inflation hedge

Links:
The Quadratic Interest Rate Volatility and Inflation Hedge ETF

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This week’s Alpha Trader podcast features hosts Aaron Task and Stephen Alpher speaking with Scott Redler, chief strategist at T3 Live and the T3 Trading Group.
Among the topics discussed:
Don’t get hurt with opinions, says Redler, a pure technical trader. He keeps his eye on the 8- and 21-day moving averages for the S&P 500, Nasdaq 100, and Russell 2000. When above, says Redler, that means “risk on,” and he’ll look to buy individual names with the best technical setups.

Redler is unconcerned that equity markets continue to make new record highs even as falling long-term yields might suggest some trouble ahead. For now, says Redler, stocks are unconcerned about what the bond market might be saying. Again - don’t get hurt with opinions. At some point it might be an issue, but for now the direction for stocks remains higher.

Among recent small- and mid-cap buys thanks to good technical setups are Skillz (SKLZ), Sunpower (SPWR), Churchill Capital (CCIV), and NIO (NIO).

Crypto has charts as well, and Redler sees a battle being waged on bitcoin (BTC-USD) around the $30K level. It’s fallen below that level a couple of times in the past few weeks, but has quickly bounced. That tells him there’s a pretty good chance last week’s $28.8K is the lowest we’ll see for a few months.

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This week’s Alpha Trader podcast features hosts Aaron Task and Stephen Alpher talking first with Jim Iuorio, director at TJM Institutional Services, and then with Brent Schutte, chief investment strategist at Northwestern Mutual Wealth Management.

Among the topics covered:


Why Iuorio believes China’s crackdown on Bitcoin (and Beijing seems to mean it this time) makes the long-term thesis even more compelling, even as the bulls are likely to experience more pain in the near-term.

Last week’s modest hawkish surprise from the Fed was probably not that big of a deal, says Iuorio, but it caught a lot of inflation trade longs too far out over their skis. Hence, we saw big reversals in bond prices, gold, commodities, and the dollar, not to mention the banks.

It wouldn’t surprise Iuorio if Fed Chair Jay Powell - speaking later this week - pushes back against any ideas that he’ considering tighter policy anytime soon.

“Investment success in this expansion is likely to be the result of ignoring recent history,” says Brent Schutte, as a combination of fiscal and monetary policies will shift concern about deflation and sluggish economic growth to inflation and speedier growth.

Schutte also believes that markets are making a bit too much about the FOMC meeting last week. The “dots” may have been shuffled around a bit, but there’s been no hint of any imminent policy change.

Whether one agrees with it or not, markets are de facto part of the Fed’s mandate these days, says Schutte. Ultimately, that’s going to have the central bank well behind the curve on inflation, and that’s going to be good for stocks - particularly the cyclicals, value names, and small caps.


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This week’s Alpha Trader podcast features hosts Aaron Task and Stephen Alpher talking with Sylvia Jablonski, co-founder and CIO of Defiance ETFs.
Among the topics covered:
The conundrum of falling long-term Treasury yields as inflation moves higher
Jablonski’s expectation that the inflation scare will be transitory, and won’t derail the continuation of the reopening trade
Why the recent underperformance of FAANG names like Apple and Amazon provides a great buying opportunity for long-term oriented investors
Her take on Paul Tudor Jones calling the current state of fiscal and monetary policy “batsh*t crazy,” and where she thinks the might be the best way to play the inflation trade
Why Jablonski thinks cryptocurrency might be a generational opportunity, and she holds Bitcoin (BTC-USD) and Ethereum (ETH-USD) in her personal portfolio.
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