“Take nothing on its looks; take everything on evidence. There’s no better rule.”
- Charles Dickens
One time (13 years ago) I presented my #process in front of all the PMs at a major NYC based Long Only firm. My friend’s feedback (one of the PMs in the room) was that the guy who ran the place liked the process but didn’t like how I looked…
So, that firm didn’t start paying us for real until 5 years ago (when we went from bearish to bullish on a Quad Phase Transition in the 2H of 2016). Clearly my hockey hair and “tone” didn’t work for the guy, but Bull Market Research sells!
How do you make your decisions on what you incorporate into YOUR investment #process?
Mark Broadie does an excellent job asking the same question about your golf game in Every Shot Counts: “How do you make your golf decisions? Many of us stand over the ball and decide based on our feelings…
… but what if you could base your decisions on something more convincing, on data and solid analysis?
Back to the Global Macro Grind…
ROC (rate of change) data doesn’t lie; people who pander to Wall Street do.
While Hedgeye’s nomenclature on things like “base effects” and The Quads has become more popular than my choice of hair products over the course of the last 5 years, that doesn’t mean there are always clean cut Quad Pivots to make.
That’s not to say I won’t make a crystal clear Quad Pivot move into #Quad4 (see Q4 of 2018 and JAN 30 of 2020 for those). It’s simply to remind you (thank God) that I didn’t make the #Quad4 “call” to short the NASDAQ here in Q3 of 2021!
What I’ve done, so far, is A) stay with the Singularity of The Signaling Process (which front-runs the market’s bet on the next INVESTABLE Quad) and B) had patience in executing particular pivots all the while.
Remember, in fractal math, the moving average of things does not matter – particular things at particular times do.
What have been the most important particular pivots we’ve made in Global Macro so far this year?
- CHINA: Pivoting from #Quad1 to #Quad3 (i.e. short Chinese Equities) in March 2021
- EUROPE: Pivoting from Long ALL of Europe (during Global #Quad2) to Long Germany vs. Short Spain (EWP)
- USA: Pivoting to Top Sector Styles being REITS, Tech, and Energy on June 22nd
Yeah, there were other particular pivots inside of Commodities, as an Asset Class, like Long Natural Gas (UNG) and out of Ag (CORN, specifically) … and I’m always touching my portfolio incrementally where I make plenty of mistakes…
But, for many of you at least, what really seems to matter is when we make a major Quad Pivot.
I get why. People want the process to be easier than it actually is to execute. I personally don’t find executing on the particulars difficult (I just hit the buy/sell buttons). It’s much more difficult to coach people through the pivots.
I guess that’s the difference between playing The Game at the highest level and coaching it. For many, I have to be Player/Coach. And I sincerely love that challenge. Thank you all for having patience with my coaching process!
Now onto some of the Particular #Quad3 US Pivots I’m already in motion on?
- Long Tech and/or Large Cap Quality Growth Stocks is the most obvious
- Long and Short things that work in BOTH Quads 2 & 3 (i.e. yesterday’s note on Long Energy, Short Staples)
- Long LARGE CAP (liquidity) vs. Underweight/Short SMALL CAP illiquidity
If you “missed” me “making the call”, you’re missing how The Game is actually played. I don’t make calls. I make moves.
Whether it was the re-ranking of Sector Styles on June 22nd (which I was doing in my own accounts, don’t forget, so I simply explained them on The Macro Show)… or adding Tech and REITS during our Q3 Macro Themes presentation in June…
Or me booking losses in smaller cap ideas that were not working for the last 3-4 weeks in Real-Time Alerts… it’s all there for anyone to see, if they are paying attention. I can’t make people pay attention, but I can execute.
On that last point about taking small (SMALL CAP) losses before they become bigger ones…
That’s exactly what happened the LAST time I bought Gold (GLD). It’s timestamped (all my moves have been since 2008), so you can see that after being long Gold for 2 years, my last buy in SEP 2020 was A) wrong and B) booked as a small loss.
That’s what I mean by letting The Game play out. I didn’t know when I was going to get out of Gold (or Small Caps, for now) until The Signaling Process told me that buying the damn dips was going make me lose my hard earned money.
So, I haven’t bought Gold or Utilities, yet… but I will be long of both when I’m fully committed to #Quad3. For now, on both, The Signaling Process says I should maintain my #1 Perma Asset Allocation to those buying decisions: patience.
Immediate-term @Hedgeye Risk Range™ with TREND signal in brackets:
UST 10yr Yield 1.29-1.53% (bullish)
UST 2yr Yield 0.19-0.28% (bullish)
SPX 4 (bullish)
NASDAQ 14,466-14,793 (bullish)
Tech (XLK) 147.03-153.11 (bullish)
Energy (XLE) 51.14-55.28 (bullish)
REITS (XLRE) 44.61-46.60 (bullish)
Shanghai Comp 3 (bearish)
Nikkei 27,903-29,064 (neutral)
DAX 15,427-15,882 (bullish)
VIX 14.14-18.63 (bearish)
USD 91.34-92.87 (bearish)
Oil (WTI) 72.16-76.22 (bullish)
Nat Gas 3.55-3.78 (bullish)
Gold 1 (neutral)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
Back to the Global Macro Grind…
ROC (rate of change) data doesn’t lie; people who pander to Wall Street do.
While Hedgeye’s nomenclature on things like “base effects” and The Quads has become more popular than my choice of hair products over the course of the last 5 years, that doesn’t mean there are always clean cut Quad Pivots to make.
That’s not to say I won’t make a crystal clear Quad Pivot move into #Quad4 (see Q4 of 2018 and JAN 30 of 2020 for those). It’s simply to remind you (thank God) that I didn’t make the #Quad4 “call” to short the NASDAQ here in Q3 of 2021!
What I’ve done, so far, is A) stay with the Singularity of The Signaling Process (which front-runs the market’s bet on the next INVESTABLE Quad) and B) had patience in executing particular pivots all the while.
Remember, in fractal math, the moving average of things does not matter – particular things at particular times do.
What have been the most important particular pivots we’ve made in Global Macro so far this year?
- CHINA: Pivoting from #Quad1 to #Quad3 (i.e. short Chinese Equities) in March 2021
- EUROPE: Pivoting from Long ALL of Europe (during Global #Quad2) to Long Germany vs. Short Spain (EWP)
- USA: Pivoting to Top Sector Styles being REITS, Tech, and Energy on June 22nd
Yeah, there were other particular pivots inside of Commodities, as an Asset Class, like Long Natural Gas (UNG) and out of Ag (CORN, specifically) … and I’m always touching my portfolio incrementally where I make plenty of mistakes…
But, for many of you at least, what really seems to matter is when we make a major Quad Pivot.
I get why. People want the process to be easier than it actually is to execute. I personally don’t find executing on the particulars difficult (I just hit the buy/sell buttons). It’s much more difficult to coach people through the pivots.
I guess that’s the difference between playing The Game at the highest level and coaching it. For many, I have to be Player/Coach. And I sincerely love that challenge. Thank you all for having patience with my coaching process!
Now onto some of the Particular #Quad3 US Pivots I’m already in motion on?
- Long Tech and/or Large Cap Quality Growth Stocks is the most obvious
- Long and Short things that work in BOTH Quads 2 & 3 (i.e. yesterday’s note on Long Energy, Short Staples)
- Long LARGE CAP (liquidity) vs. Underweight/Short SMALL CAP illiquidity
If you “missed” me “making the call”, you’re missing how The Game is actually played. I don’t make calls. I make moves.
Whether it was the re-ranking of Sector Styles on June 22nd (which I was doing in my own accounts, don’t forget, so I simply explained them on The Macro Show)… or adding Tech and REITS during our Q3 Macro Themes presentation in June…
Or me booking losses in smaller cap ideas that were not working for the last 3-4 weeks in Real-Time Alerts… it’s all there for anyone to see, if they are paying attention. I can’t make people pay attention, but I can execute.
On that last point about taking small (SMALL CAP) losses before they become bigger ones…
That’s exactly what happened the LAST time I bought Gold (GLD). It’s timestamped (all my moves have been since 2008), so you can see that after being long Gold for 2 years, my last buy in SEP 2020 was A) wrong and B) booked as a small loss.
That’s what I mean by letting The Game play out. I didn’t know when I was going to get out of Gold (or Small Caps, for now) until The Signaling Process told me that buying the damn dips was going make me lose my hard earned money.
So, I haven’t bought Gold or Utilities, yet… but I will be long of both when I’m fully committed to #Quad3. For now, on both, The Signaling Process says I should maintain my #1 Perma Asset Allocation to those buying decisions: patience.
