“Coddiwomple” is not a word many people are familiar; it means to travel in a purposeful manner towards a vague destination. I can’t think of a single word that better describes investing in financial markets, writes Landon Whaley Monday.

Markets are headed toward vague destinations, we don’t know where they’re headed. Despite this reality, if we want to be successful investors, you and I must remain purposeful in the way we approach markets as they move towards their vague destination.

With that in mind, this week I’d like to coddiwomple through the opportunity being provided by Mario Draghi and the ECB…

One could argue that central bankers are the most powerful people in the world, above and beyond even presidents and dictators. These guys and gals hold the fate of financial markets and economies in their hands and yet the way they evaluate data and make policy decisions is downright frightful.

In his speech at the Frankfurt European Banking Congress, head ECB-er, Mario Draghi reiterated the ECB’s plan to end asset purchases next month. And while he acknowledged the economy had hit a “soft patch,” he went on to say, “there was no reason why the current expansion should abruptly come to an end.”

Good grief Super Mario, have you sampled a bit of German economic data recently? To say it’s a dumpster fire would be an insult to dumpster fires. Germany is the economic locomotive that pulls the entire eurozone with it, and on quarterly basis, Germany’s economy just contracted in Q3, putting it just one quarter away from a recession.

I agree with Draghi on one point: economic expansions don’t end abruptly, which is why we focus exclusively on the slopes, or trends, in economic data. If Draghi had this same “slope” mentality (or was a WGR client), he would know that eurozone growth has been slowing for the past year. There is absolutely nothing abrupt about Germany’s 11 months of slowing growth that has brought its economy face-to-face with a likely recession.

What makes his perspective even more mind-blowing is that when discussing the “soft patch,” he has his blame-thrower out in full force pointing at everything from the weather to sickness as the reasons for the Eurozone’s Fundamental Gravity #3/4 environment. 

I couldn’t make this stuff up if I tried, weather and sickness? Has the EU been in the midst of Typhoon Tip for the better part of 11 months? Have EU citizens been coughing and feverish for the entirety of 2018?

This isn’t just about Germany, the entire eurozone has been experiencing Fundamental Gravity #3/4 environments all year long. Italy entered its FG4 environment in Q3 2017 and Spain followed suit in Q4 2017 with Germany and France joining the growth slowing party in January 2018.

Even if Draghi doesn’t believe in the hard-economic data, markets are telling him in real time this isn’t a soft patch: German equities have crashed -22.8% since January, French equities are down -15.5%, Italian equities have lost a crash worthy -24.3% since peaking in April and finally, Spanish equities peaked on January 26 and have since declined -20.0% just breaching crash territory.

Folks, equity markets don’t crash in a “soft patch” catalyzed by weather and sickness. They crash as a result of prolonged FG3/4 environments, period.

It’s clear to me that Draghi has made up his mind to shift policy, come hell or high water. This guy being hell bent on delivering change is blinding him to the Fundamental Gravity #3/4 data that has been rampant throughout 2018. If data continues to deteriorate here in Q4, then Draghi is about to make one hell of a policy mistake.

When, not if, he pushes the eurozone economy off that proverbial recessionary cliff, we’ll be there patiently waiting for shortable bounces in these equity markets to profitably pad our P/L to start to 2019. I’d be remiss not to mention that the problem of central bankers asleep at the wheel isn’t just an international problem. We’re dealing with it here in the U.S. and it’s causing all sorts of Headline Risk, which we’ll discuss on Wednesday, November 21.

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Watch Landon Whaley’s 3 Ideas for Investing and the meaning of coddiwomple in a short video here.
Recorded: MoneyShow Dallas Oct. 5, 2018.
Duration: 6:42.

Watch Landon Whaley discuss When Markets Cycle  in a short video here.
Landon Whaley: We have a generation of investors and asset managers who know only one market. The reality is markets and economies cycle and catch people off guard.
Recorded: MoneyShow Dallas Oct. 5, 2018.
Duration: 5:51.

Landon Whaley interviews Adrian Manz: How I approach stocks here.
Recorded: MoneyShow Dallas Oct. 5, 2018.
Duration: 7:48.

Landon Whaley interviews trader Jackie Ann Patterson: How I got started trading and how I approach it with my Truth about ETF Rotation here.
Recorded: MoneyShow Dallas Oct. 5, 2018.
Duration: 6:14.

Landon Whaley interviews John Carter: How I started trading here.
Recorded: MoneyShow Dallas Oct. 5, 2018.
Duration: 5:37.