Macro Dragon: Tactical Risk-Off Paths & Bitcoin +13% with a solid close above $10,000

Macro Dragon: Tactical Risk-Off Paths & Bitcoin +13% with a solid close above $10,000 by Michael McKenna
Macro Dragon = Cross-Asset Daily Views that could cover anything from tactical positioning, to long-term thematic investments, key events & inflection points in the markets, all with the objective of consistent wealth creation overtime.
(These are solely the views & opinions of KVP, & do not constitute any trade or investment recommendations. By the time you synthesize this, things may have changed.)

Macro Dragon: Tactical Risk-Off Paths & Bitcoin +13% with a solid close above $10,000 

Top of Mind…

  • Regime: First things first, KVP will re-flag the regime piece he has been talking about for a while – this is key for understanding the big picture, meta trends, asset allocation & strategic moves that we are likely to be in for a long-time, potentially years.

  • Bottom line, the probability of pathways leads to a continued risk-on bias in almost all assets classes (EQ, Bonds, RE, CMDs + precious metals in particular) with a structural multi-year bearish skew on the USD & volatility in general

  • So if you have not made time for these two pieces, please do:

    Macro Dragon: Re-Up Part IV-A… Higher Probability Pathways… Monetary Policy, Scenario Planning, Liquidity & Regime

    Macro Dragon: Re-Up Part IV-B… Higher Probability Pathways… Fiscal Policy, Infrastructure & Asset Allocation

  • Potential Tactical Risk-off, Scenario One: A key potential near-term risk off over the next two months – if its playing out, should play out by E-Sep – is one where the probability has been rising every day. Yes, KVP thinks that the chance of a phase one deal break is much great than 50%, with a layer cake of tailwinds to Trump, as a re-election strategy

  • See again…


  • Phase One Deal Break Coming? One thing that continues to stand out is the daily rising probability of the Phase One Deal break scenario, that KVP covered with Peter Garnry on the Saxo Market Call last wk – it just makes so much sense for trump to pull that plug as an election strategy…

Playbook here would be massive opportunity for heavy tactical risk-off (which is likely to be short in time, so be that tactical shorts or lightening ), coupled with a strategic opportunity to buy the dip (cover the shorts &/or get longer & stronger). Obviously the near-term skew is likely to be US assets of CH/Asia Assets – i.e. the liquidity flows in the US on both the monetary & fiscal side will be dwarfing anything we are likely to see out of China.

Yet again, remember the strategic long-term skew given the regime we are in, KVP firmly believes anytime you are playing risk-off without an event, you are in essence standing against a tsunami of liquidity that has never been seen before & that is not going to let up anytime soon.

  • Potential Tactical Risk-off, Scenario Two: This is something else, who’s probability is increasing everyday that we originally flagged the risks of social instability in the US way back in Apr23 Apr 2020 Macro Dragon: Social Instability…
  • What is interesting now is the protests, both peaceful & with clashes are increasing across more cities in the US. Its next to impossible to get a really good gauge of the signal from the noise, given media incentivization for click bait & sensationalization. What is clear to KVP though are at least two things currently:

    One: If one takes a step back & thinks about all the guns in the US of A, these protests, even those with clashes, have been remarkably peaceful. Both from a protest perspective & from an authorities perspective. There is however a serious pathway, that is greater than 50%, that we get to a tipping point whereby ballistics start to be used by both sides. Can you imagine the fall out if we have say 10 protestors get shot & killed, as well as 10 members of the different federal agencies…

    Two: This could be a scenario that Trump is gunning for. He has sent in federal employees irrespective of the local authorities requesting additional help, or even being aware or forewarned of additional resources in their cities. Trump’s angle here is playing on people’s fear & need for stability – the bigger the potential fall-out from future clashes on non-peaceful demonstrations, the potentially better light some segments of voters will see Trump. Remember, this is the age of spin, it is about perception – & social media warps & +10x the perception on anything extreme. Making the outliers look a lot more plentiful & higher probability than they are.


  • Potential Tactical Risk-off, Scenario Three: Lastly, the longer Congress (Reps) holds further fiscal response of the US hostage – the likely bigger probability of a bigger & more emotional turn-out at protests across the country. Worth noting that it does also raise pressure on Powell & Mnuchin to do more.


  • From KVP’s standpoint, republicans are potentially cutting their own throats – i.e. we know that either presidency will be spending over the next 4yrs – or at the very least Trump’s throat.

    They are though – tacitly or knowingly – going to be stoking the social instability fires. If they are doing this knowingly as an election strategy built on fear vs. law & order – it is the paragon of high stakes, with the livelihood of millions of Americans at stake. Note the last cheque of $600 in benefits has been paid out in the US.


  • Any delays or perceived delays in continued liquidity support form the fiscal or/& monetary side, could give a near-term pause on risk-on asset, to risk-off price action.


  • Bitcoin: We’ve been talking about the precious metals complex, gold, silver, miners, etfs, credit spreads, etc for months now. We also mentioned Bitcoin & crypto a few wks back, well last night was big for Bitcoin. We got a +13% pop that took us over the critical $10,000 resistance level to a close of 11, 043 – this technically is a very big thing deal in the Dragon Chartbook. This $10K was like golds $1750/60… its really all about $15K & more importantly the $18-20K lvl being the next key resistance….

    This ship is about to leave the harbor & if you think the precious metals price action has been blazing, you better strap in your seatbelt… because when crypto gets going… its going to be Dyno-mite! And again, remember that we got the trackers – just ask your friendly Saxo RM or GST. Here was the Dragon last check in on Bitcoin.

    14 May 2020: Macro Dragon: Checking-in on Bitcoin… Legendary Trader Paul Tudor Jones, is in Love, with Bitcoin & Gold…


  • Market Call: Appreciate quite a few of you, were missing this. With the Saxo Market Call tip of the Spear John Hardy back on deck, the market call is back up & running. Catch the latest one from o/n where Hardy & our CIO & Chief Strategist Jakobsen talk summer jitters, violent riots in Seattle, precious metals, US politics among other things that are top of mind. Gold hits all time high with heady cocktail of risks in the week ahead

To Keep In Mind Today 

(again light wk, all about 2Q US GDP, Aussie 2Q CPI, Fed & CH PMIs)

  • EZ: Spanish Unemployment Rate
  • US: CB Consumer Confidence, Richmond Mfg. Index

Start-End = Gratitude + Integrity + Vision + Tenacity. Process > Outcome. Sizing > Idea.

This is the way