“When I was about eleven or twelve I set up a lab in my house.”
- Richard Feynman
When I was about eleven I started to learn how to do math in English. Up until then, since my Mom’s first language is French, my formal education was at a French (Canadian) only school. I went to English school in the 6th grade.
Maybe that’s why my first English Lit paper at Yale was deemed “un-grade-able”, lol. Who knows, eh! What I do know is that I’ve always learned from great teachers, coaches, and mentors who taught me how to do things by doing them myself.
The aforementioned quote comes from one of the great American thinkers of the 20th century. It’s the opening volley in a phenomenal book that a #HedgeyeNation subscriber sent me called “Surely You’re Joking, Mr. Feynman.”
Back to the Global Macro Grind…
I have an apology to make. I’ve wasted too much of my precious life time in 2021 dealing with what other people are doing and/or saying they’re going to do.
I’ll just get on with doing what I’ve always been doing, building out the vision of Hedgeye.
Surely, someone must be joking, if they’re saying they’re:
A) Buying Long-term Treasuries instead of #Quad2 US Equity Sector Longs like my 4 Horsemen… and/or
B) Whining about “inflation being transitory” while not having been LONG of INFLATION for the last year
What would really be a good joke is if I started making #FullCycle Asset Allocation “calls” based on economic reports like:
A) This morning’s headline CPI … and/or
B) April’s ISM “slowing” report
Never mind the fact that CPI and ISM are the 25th and 23rd ranked features (out of 30) in our proprietary GIP Nowcast Model. If I was silly enough to go all-narrative on you on either the ISM or ISM Services report in April, I’d have been dead wrong.
For those of you who haven’t counted the beans every morning in your own house, that’s what I do:
A) ISM re-accelerated in MAY vs. APR… and, more importantly (because it’s the 15th ranked feature in the GIP model)…
B) ISM Services (i.e. the consumption economy) #accelerated to a new CYCLE HIGH of 64.0 in MAY vs. 62.7 in APR
Macro Tourists must be joking if they’re going to sell the 4 Horsies (Financials, Materials, Energy, and Industrials) on a “less than expected CPI” number this morning, eh?
What happens if/when:
A) Monthly US Jobless Claims (the 3rd ranked feature in the model)… and/or
B) Non-farm payrolls year-over-year continue to #accelerate to new Cycle Highs in June and July?
Yes, the ROC (rate of change) of the US CPI number matters, but “making the call” on that #accelerating on a TRENDING basis (i.e. 3 months or more in duration) is a 1 YEAR OLD call by Hedgeye at this point.
What matters most in modern day macro isn’t getting 1 economic data point right, it’s getting the #FullCycle Return right!
Back to the “features” in the model, what I mean by “ranked” is that we’ve back-tested every single feature and they are ranked for marginal impact on the GIP (or The Quad) model.
Not unlike an 11-year old Feynman in his “lab”, where he learned that “I had a fuse in the system so if I shorted anything, the fuse would blow”… I’m just a 46 year old man working alongside his teammates to let you know when #Quad2 blows up.
En francais, on appelle ca le #Quad4.
In English, the numbers are the same as they are in French. When to “get out” of #Quad2? I have a singular signaling #process for that fully loaded, every morning, with dynamic and fractal Risk Range™ Signals.
I’ll let you know when I think The Machine thinks it knows.
Immediate-term @Hedgeye Risk Range™ Signals (with TREND signal in brackets):
UST 10yr Yield 1.48-1.69% (bullish)
SPX 4184-4248 (bullish)
RUT 2 (bullish)
NASDAQ 13,603-13,991 (bullish)
Energy (XLE) 53.26-57.91 (bullish)
Financials (XLF) 37.39-38.78 (bullish)
VIX 15.06-18.92 (bearish)
USD 89.57-90.43 (bearish)
Oil (WTI) 66.56-71.24 (bullish)
Nat Gas 2.99-3.20 (bullish)
Gold 1 (bearish)
Bitcoin 31,264-41,063
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
