“One’s destination is never a place but rather a new way of looking at things.”
- Henry Miller
How’s that for another new way to say the same thing about how we do Macro? Loved it. It’s a quote from a chapter about “Staying The Course” within one’s #process from a coaching book I recently reviewed called Coach The Person, Not The Problem:
“No matter what you are exploring while coaching, you must be clear about where the conversation is going.”
This dissenting “conversation” that the market has been having with establishment econs (like those at the Fed) has been crystal clear. It’s not been “transitory.” It has been TRENDING in ROC (rate of change) terms to new Cycle Highs.
Back to the Global Macro Grind…
Oh, great, the dude at the Atlanta Fed just told Old Wall media that “by definition it’s not transitory.” Now we have the greenlight and can all get long of inflation and chase Commodities at new Cycle Highs!
Sadly, that’s not a real joke. Plenty of large Asset Allocators have completely missed being long of inflation via Commodities, as an Asset Class, since June of 2020. The CRB Commodities Index has inflated +95% since…
And now, right down to the smallest RIA in the League, people are asking themselves what to do with Old Wall 60/40 Asset Allocations if we get a reopening & re-acceleration in Real GDP growth (I.e. #Quad2) in Q4?
Ha, kidding. At least 80-90% of RIA’s don’t know what either The Quads are or how we do dynamically weighted Asset Allocation.
For the many of you who do subscribe to our non-equally-weighted-pie-chart #process of dynamically re-weighting your Asset Allocations for changes in Asset Price Volatility and pending ROC economic conditions, we appreciate all of your questions.
One question I keep getting on Institutional Client calls is: “so when do we get out of Commodities, Energy Stocks, etc.?” My answer generally looks like this:
A) I don’t know
B) When my signal knows, I’ll let you know…
C) In the meantime, keep riding this 17 month @Hedgeye TREND
Having a valuation-driven or deterministic “destination” on where the CRB Index, Oil, etc. “stops going up” is not the way my risk management #process works. For years I have struggled with ways to coach and communicate this basic way of looking at things…
And I’ve come to realize that my communication problem has more to do with the Old Wall baggage people have in their process vs. the deep simplicity of my decision making one.
And that is 100% ok with me. The more people need to “feel” words like “conviction” or “certainty”, the more I am going to be comfortable being uncertain about WHY something stops going up and keep focusing on WHEN the market signals when.
Today, you’re going to have a BIG Macro Tourist Day on INFLATION with the US CPI report. What are you going to do with that?
A) Nothing?
B) Change your Asset Allocations?
C) Change you narrative about inflation?
Alex, I’ll take A) for another 3 Bitcoins if they are on the offer at the low-end of my Risk Range.
I already know what TRENDING INFLATION is doing in my proprietary NOWCAST. I don’t need Steve Liesman and the banjo player @CNBC to give me a tip on that, ha.
What I am going to be doing is more of what I have been doing since making the explicit Asset Allocation Pivots in both the USA and globally during our Q4 Macro Themes presentation (which was on September 23rd, 2021):
- Buy the damn dips in a broadening basket of Commodity Allocations – Cocoa (NIB), Uranium (URA), and Coffee (JO)
- Buy a new EM (Emerging Markets) basket of countries like Thailand (THD), Israel (EIS), and Indonesia (IDX)
- Buy US Small Cap Value (IWN) because A) it’s a Long in #Quad2 and B) I like the weights in the basket
When I say “I like” something, that doesn’t mean I have a personal relationship with it. It means it’s A) Signaling Bullish @Hedgeye TREND and B) back-tests as a Long or Short in the pending Quad.
Did I like what Uranium (URA) and my Cameco (CCJ) longs did in my PA yesterday? Yeah, enough to sell-SOME of both because they ripped to the top-end of my Risk Range. So I sold some of both and bought more Cocoa (NIB) and IWN with the proceeds.
Instead of buying the Russell (IWM), the IWN Value basket has some of my biggest PA names, so I’m really double dipping for The MFO (Mucker Family Office) accounts there because my wife doesn’t like it when I put stock picks in the kids accounts.
But send some of these tickers to your “technician” friends and ask them what they think: CAR, RRC, M, OVV, etc.
Then tell them a story before they go to bed (best time for a new narrative if they need one) about those charts being a transitory re-opening and re-acceleration DEMAND trade that is inversely correlated to US covid case counts.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets:
UST 10yr Yield 1.45-1.64% (bullish)
UST 2yr Yield 0.26-0.36% (bullish)
SPX 4 (bullish)
RUT 2 (bullish)
NASDAQ 14,265-14,802 (bullish)
Utilities (XLU) 63.18-65.73 (bearish)
Energy (XLE) 52.09-57.83 (bullish)
Financials (XLF) 37.40-40.10 (bullish)
VIX 17.05-23.87 (bearish)
USD 92.84-94.53 (neutral)
Oil (WTI) 74.92-81.91 (bullish)
Nat Gas 5.18-6.23 (bullish)
Gold 1 (bearish)
Copper 4.08-4.43 (bullish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
