“Figure it out. Put your craziness to work. Innovate, don’t imitate.”
- Tim Grover
If that’s the way Grover coached both MJ and Kobe, now you know why they played that way. They were unique.
“One of my non-negotiable core values is trusting my instincts, and believing what I know. I might be wrong, but I want a chance to be right. And I’d rather decide for myself than allow others to decide for me.” -Winning, pg 40
Whether it’s been in building Hedgeye alongside my teammates or ultimately making every “call” we’ve ever made in macro, I have to play that way too. Everyone knows it’s my process. Whether I’m right or wrong, I own it.
Back to the Global Macro Grind…
In this political day and age, wouldn’t it be nice if more people owned it? You know, instead of whining and making excuses, be transparent and accountable about every win and loss. They all happen.
As Grover also says, “winning does not negotiate.”
Who owned the NASDAQ (QQQ) before it ramped to another all-time closing high yesterday? Who stayed long of REITS (XLRE)? They made all-time highs too. How about pivoting from short to long Utes (XLU)? #winning
Why did that happen? Three words now instead of two: Quad Three Ripping!
In the USA, that is. If you’re looking for the Made in America Risk Range™ Signals and Quads™ and are into the whole #Quad4 Deflation “call” thing – we got a big time confirmation of that in Japan overnight:
A) Household Spending #slowed another -3.2% sequentially after slowing -2.1% last month
B) Core Inflation deflated to -0.5% year-over-year in JUN vs. +0.2% in MAY
Back to the USA, disinflating from its recent Cycle Peak of +5.4% headline inflation has not happened yet never mind move to DOWN -0.5% deflation!
Ahead of today’s US Jobs Report, we’ve already seen Cycle Data for July that is the furthest thing you can find vs. our definition of #Quad4 Deflation:
A) ISM Services (i.e. Consumption Growth) ripped to a new Cycle High of 64.1 in JUL vs. 60.1 in JUN
B) US Jobless Claims got pounded to new Cycle Lows yesterday
Here’s how our in-house Doctor Quad Drake depicted the US Jobs Cycle:
|
“After a 2-week pitstop at the countertrend station for a quick refresh of speculative labor market angst, Initial Claims resumed their TREND descent, dropping back below 400K and just north of the pandemic low at 385K. Continuing Claims breached 3M to the downside for the first time as benefit expiration and reemployment have/will continue to pressure the numbers lower. PEUC Claims fell -89K as benefit expiration continues to play out for pandemic related UI beneficiaries while Total Claimants fell -181K to 12.975M.” |
In Micro Quad terms, that means the US Labor Cycle remains:
A) Early (not mid) Cycle… and
B) In Micro #Quad2
Does that mean the current #Quad3 Sector Style and Factor Exposure ramps can fractally Phase Transition back into #Quad2 by Q4 of this year? Oh yes.
Per our all-star DOR, Daryl Jones, “the probability of #Quad2 continues to rise in our proprietary GIP Model.”
I reviewed the math on that probability rising on yesterday’s Q3 Mid Quarter Update call. All US GDP would need is an incremental +12 basis points of real growth vs. where it is nowcasting as of this morning.
INVENTORIES (super early cycle) ripping off their cycle lows could/should deliver that real growth by a much wider margin than 12 basis points. In Q2, US Inventories were reported well below where they’re currently tracking.
‘Oh, so KM, what you’re really saying is that you’re front-running both your models and your analysts?’
Yep, I built my signaling process to do just that.
That’s not new. Like all Portfolio Managers and players who have played The Game at the highest level on the buy side, I’ve been doing that for a long time.
I’ve hired/fired and coached/trained a LOT of analysts. Not every analyst likes it when I front-run them. Some love it. Some feel like they need to be right. Some just trust my decision making instincts and do their job.
On this team, we don’t do feelings. I make the macro calls. And I own them.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets:
UST 10yr Yield 1.17-1.38% (bearish)
SPX 4 (bullish)
RUT 2184-2256 (bearish)
NASDAQ 14,601-15,007 (bullish)
REITS (XLRE) 46.01-47.17 (bullish)
Tech (XLK) 151.95-155.88 (bullish)
Utilities (XLU) 65.71-67.94 (bullish)
VIX 15.80-19.83 (bearish)
USD 91.62-92.69 (bearish)
Oil (WTI) 67.69-75.11 (bullish)
Nat Gas 3.85-4.22 (bullish)
Gold 1 (bullish)
Bitcoin 36,412-42,140 (bullish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
