“Poor putters leave more puts short of the hole.”
-Mark Broadie
Leaving puts short is like keeping losers in your portfolio. There’s no way for the ball to go in the hole unless you get it there. Similarly, there’s no way to generate returns on a position if it is losing your money.
Both in putting and portfolio risk management, these sound like simple things to do – putt to and through the hole and let your winning positions ride. Simply said but, for many stock pickers, very hard to do!
Being a good putter doesn’t mean you’ll be a great golfer inasmuch as being a good stock picker doesn’t mean you’ll be a great portfolio manager. There’s a LOT that goes into running your and/or other people’s money at the highest level of The Game.
Back to the Global Macro Grind…
What’s a major difference between a PGA Pro playing at the highest level and most of you? They make more puts because they are putting from closer to the hole!
“PGA Tour pros hit half of their shots to within 21 feet of the hole; a typical 90-golfer hits half to within 45 feet.”
-Mark Broadie
Like your Quad Shifts and Factor Exposure pivots, approach shots matter more than any other thing on the PGA Tour.
“Among the top 40 PGA Tour pros, approach shots accounted for 40% of their scoring advantage, driving accounted for 28%, the short game 17%, and putting 15%.” -Every Shot Counts, pg 125
So yeah, you need to be a good putter (and have good stock picks)… but if The Singularity of Your Process doesn’t repeatedly put you in position to make those puts, you’re losing The Game vs. those that can.
‘But, but… the analyst (or the caddie) really likes this stock pick (putt).’
So what? It’s a 36 footer, downhill, with a big break and we just picked up 3 club #Quad3 wind for Small Cap, as a Factor Exposure. Oh, so you’re saying there’s a chance?
Now, to be clear, there’s always a chance. But the probability was not one that I was betting on yesterday:
- Russell 2000 (Small Cap Factor Exposure) was down another -1.2% yesterday
- Russell 2000 is now down -6.9% from its #Quad2 Cycle High
- Russell 2000’s Full Cycle Return peaked, twice, in MAR and JUN of 2021 (i.e. during #Quad2)
Since July… and again yesterday, LARGE CAP and/or QUALITY has been pounding the players hoping to sink 36 footers:
- Large Cap Tech (XLK) was up another +0.2% yesterday vs. SPY (beta) -0.5% and Russell -1.2%
- Large Cap Tech (XLK) is right at its all-time and Cycle Highs (i.e. 1 foot from the hole)
- Large Cap Tech (XLK), which works in both Quads 2 & 3, has a Full Cycle Return that you’re still riding
Again, cut your losers, and ride your winners.
And when the volatility of The Game picks up, buy-MORE of those winners. Don’t sit their like a Valuation Expert hemming and hawing about whether or not you already “missed it”… you are standing over a 3 foot putt, put it in the hole!
It took me a long time to see The Game this way, getting bigger in my winners on the way up, that is.
LOTS of people on Wall Street are really smart. Their brains are trained to believe that they can find the next big idea and/or that their losing idea is going to make a big comeback. But The Game’s alpha scores believe otherwise.
When it comes to managing your hard earned net wealth, start thinking like a Risk Manager, instead of a stock picker.
We’ll be providing a full Global Macro review of where to be positioned (long and short) for the coming months and quarters on our Q3 Mid Quarter Update presentation, LIVE @HedgeyeTV today at 11:30 AM ET. Ping for access.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets:
UST 10yr Yield 1.16-1.34% (bearish)
UST 2yr Yield 0.16-0.23% (bullish)
SPX 4 (bullish)
RUT 2164-2247 (bearish)
NASDAQ 14,581-14,890 (bullish)
REITS (XLRE) 45.84-46.97 (bullish)
Tech (XLK) 151.75-155.08 (bullish)
Shanghai Comp 3 (bearish)
Nikkei 27,5 (bearish)
VIX 15.77-19.88 (bearish)
USD 91.69-92.82 (bearish)
GBP/USD 1.369-1.402 (bullish)
Oil (WTI) 68.06-74.99 (bullish)
Nat Gas 3.85-4.18 (bullish)
Gold 1 (bullish)
Bitcoin 33,019-42,610 (neutral)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
