“Maintaining an infinite mindset is hard. Very hard.”
Key takeaways
- At this point, with most players knowing information is already being leaked ahead of major corporate and US government decisions, this is getting ridiculous.
- We bought Utilities (XLU) before a +16.1% #Quad4 in Q3 to-date ramp and REITS (XLRE) before a +18.1% #Quad4 in Q3 to-date ramp
- You know why they need a -50 to -75 basis point panic Rate Cut? Most of their voters don’t own Gold, Bonds, Utes and REITS. Look at their “Target Date Funds”, they own NVDA, AAPL, and MSFT
The big picture
In sharp contrast to both elected US political leaders and unelected ones at the Fed, the rest of us who are leading families and firms have a generational opportunity to not only do “hard things”, but the right things for the right reasons.
In his #behavioral book The Infinite Game, Sinek presents an interesting framework for leadership: “Any leader who wants to adopt an infinite mindset must follow five essential practices” (pg 25):
- Advance a Just Cause
- Build Trusting Teams
- Study Your Worthy Rivals
- Prepare for Existential Flexibility
- Demonstrate the Courage to Lead
Check, check, check. And two more checks for a total of 5 out of 5 here in our #HedgeyeNation Community.
Our just cause to make both Wall Street and the US Federal Reserve transparent and accountable continues this morning. My teammates trust each other and you can trust their daily quest to find apolitical truths.
While some of our “rivals” need leaked information and cowbell from the Fed, we know how to beat them at their own short-term games. We will continue to be flexible in our positioning as we stand on the front lines leading by example.
Macro grind
When I say “short-term games”, I mean REALLY short-term. At this point, with most players knowing information is already being leaked ahead of major corporate and US government decisions, this is getting ridiculous.
The more obvious and ridiculous it gets, the more longer-term Full Cycle Investors are getting paid. All you had to know 3 months ago was that the Fed and its fanboys were going to have to deal with #Quad4 US economic data come SEP.
That’s right. We don’t “fight the Fed”, we front-run it.
You don’t have to wear Orange Jump Suit Risk to make money. You just need a real-time #VASP (Volatility Adjusted Signaling Process) that knows when other people are trading on inside information.
‘Oh, KM, that’s just not true.’ -Establishment Guy
LOL. What do you call > 154,000 INTC Weekly $21 Calls (that expire FRI) trading ahead of the AMZN news yesterday? Did you see the Elizabeth Warren letter to Powell begging for a 75 basis-point rate cut? INTC closed at $20.91, btw!
Back to front-running The Fed, here are 3 obvious ways to watch the game within The Game in real-time:
- Our US Dollar Signals
- Our UST 2yr Yield Signals
- Our Gold Signals
Instead of being forced to position for what was “expected” to be a -25 basis point cut in the middle of last week to a -50bps cut, going on -75bps (with no incremental economic data releases) political hack cut…
This is what Full Cycle Investors did 3 months ago to position for this proactively predictable Old Wall #behavior:
- We Shorted the US Dollar and made Long Euros (FXE) and Pounds (FXB) Top 5 Asset Allocations
- We bought UST Bonds, across The Curve (TBIL, BUXX, IVOL, TLT, EDV, IEF), and on every damn dip
- We loaded up Long a double-digit % Asset Allocation to both physical and paper Gold (AAAU & GLD)
And those were the “boring” Asset Allocation moves we made. Boring is where you wanted your hard-earned capital during the NVDA #Quad4 in Q3 Crashes of -27% (from the July high) and -21% (from the AUG bounce), respectively.
Our more “exciting” US Equity Asset Allocations were:
- Buying Utilities (XLU) before a +16.1% #Quad4 in Q3 to-date ramp
- Buying REITS (XLRE) before a +18.1% #Quad4 in Q3 to-date ramp
- Shorting Tech (XLK) before a double-digit Drawdown and a -2.9% #Quad4 in Q3 to-date loss
You know why they need a -50 to -75 basis point panic Rate Cut? Most of their voters don’t own Gold, Bonds, Utes and REITS. Look at their “Target Date Funds”, they own NVDA, AAPL, and MSFT (i.e., the XLK)!
And you know there are both short and long-term carrying costs to leaking these new Rate Cut expectations, right?
In the very short-term:
A) What would a panic Rate Cut of -50 to -75bps signal about the US economy?
B) What happens if Powell proves to have half a spine and sticks with the -25bps he wanted prior?
In the long-term:
A) We’re all dead, but…
B) In the meantime, Devaluing The Purchasing Power of The American People will be INFLATIONARY
The only way for us mere non-“elite” mortals to preserve & protect our pile against information leaks, political pushes, and The ROC (rate of change) of INFLATION, is to keep front-running The Fed.
Our levels
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets
UST 10yr Yield 3.58-3.80% (bearish)
Investment Grade (LQD) 112-114 (bullish)
SPX 5390-5660 (bullish)
NASDAQ 16,553-17,918 (bullish)
RUT 2060-2209 (bullish)
Shanghai Comp 2690-2816 (bearish)
Nikkei 35,050-37,949 (bearish)
BSE Sensex (India) 81,590-83,554 (bullish)
VIX 15.16-22.96 (bullish)
USD 100.09-101.61 (bearish)
Oil (WTI) 65.66-70.92 (bearish)
Nat Gas 2.13-2.45 (bullish)
Gold 2526-2623 (bullish)
Copper 4.01-4.30 (bearish)
Silver (SLV) 28.28-31.68 (bullish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
