“If you’re hunting for high achievement, motivation is what gets you into the game, but learning is what keeps you there.”
- Steven Kotler
Loved that thought from The Art of Impossible – A Peak Performance Primer.
Kotler goes on to write that “whether your interest is capital “I” Impossible (doing what’s never been done), or small “i” impossible (doing what you’ve never done), both paths demand that you develop actual expertise.”
What’s yours? What’s your #process? Always evolving. Always learning. I sincerely hope you know when you are wrong so that you can A) learn quickly from those mistakes and B) get onto the winning side of The Cycle.
On your #DecisionMaking process, here are some types of knowledge that will help you differentiate both your Full Investing Cycle Returns and timing (from Gary Klein who Kotler also cites in his book):
A) “Patterns that novices don’t notice” (hint: not 50-day Moving Monkeys)
B) “Anomalies that violate expectations”
C) “Differences that are too small for novices to detect” (pg 105-106)
Back to the Global Macro Grind…
While #Quad2 in Q4 performance in October was excellent, day 1 of November was more excellent. If you were Long Small Cap, as a Factor Exposure, that is:
A) Russell 2000 (IWM) was +2.7% on the day closing just inside of its all-time closing high of 2360
B) Russell Growth (IWO) and Russell Value (IWN) ramped to new #Quad2 Cycle Highs as well
I’ve explained why I am long Russell Value (IWN). In its Top 10 holdings are names that I own in my PA like Avis (CAR). What I like about that name in particular (they reported earnings last night btw) is that:
A) It’s “expensive”… and
B) It’s a consensus hedge fund short (20% short interest)
‘Pardon? What kind of a comment is that? You like “expensive” stocks?’
Yep. The Machine does too. Only a Signal & Quad novice wouldn’t notice this pattern. In #Quad2, “expensive” stocks get more expensive, and Captain Stock Picker in the hedge fund space (who shorts things on “valuation”) gets squeezed.
If you have friends who were short Gamestop (GME) when #Quad2 initially #accelerated in both Q4 of 2020 and Q1 of 2021, you get the fractal beauty of the pattern.
After novices saw GME “breaking down below the 50-day” in OCT, it ripped the eyelids off those baby bears yesterday too.
Cool. Now that I’ve made a bunch of new friends out there this morning, what else made the 1st day of November such an excellent one for those of you who are motivated to A) find a better way and B) achieve peak performance?
A) Consumer Discretionary (XLY) was up another +1.8% on the day to +14.2% for #Quad2 in Q4-to-date
B) Energy Stocks (XLE) inflated another +1.7% on the day to +12.2% for #Quad2 in Q4 to-date
For those of you who are running long/short, those Top Sector Styles in #Quad2 are mercy crushing something like “defensive” Consumer Staples (XLP) stocks which were only +0.1% on the day to +3.7% for Q4 to-date.
What’s also interesting (but not at all surprising) about “defensive” Sector Styles we don’t like, is that their absolute and relative Earnings Growth Rates are outright awful vs. the SP500 in the aggregate:
A) Consumer Staples: 20 of 32 SP500 companies have reported aggregate year-over-year EPS growth of +3.6%
B) Utilities: 6 of 28 SP500 companies have reported an aggregate year-over-year EPS DECLINE of -2.0%
So, even if your #process wasn’t The Signal & Quads, bottom-up you shouldn’t have been long these ROC (rate of change) US Equity Sector Earnings slowdowns.
*Data-driven process note: 295 of the SP500’s companies have reported an aggregate year-over-year EPS growth rate of +38.7%!
If you’re hunting for high achievement in Q4, stay with the numbers instead of other people’s narratives. If you need new numbers that aren’t mine, it looks like the Atlanta Fed Nowcast just started chasing ours yesterday for a big Q4 GDP #acceleration.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets:
UST 10yr Yield 1.51-1.71% (bullish)
UST 2yr Yield 0.40-0.54% (bullish)
SPX 4 (bullish)
RUT 2 (bullish)
NASDAQ 15,045-15,676 (bullish)
Tech (XLK) 157.28-162.88 (bullish)
Utilities (XLU) 65.48-67.72 (bearish)
Energy (XLE) 56.61-59.91 (bullish)
Shanghai Comp 3 (bearish)
DAX 15,501-15,908 (bullish)
VIX 14.17-17.59 (bearish)
USD 93.11-94.19 (bearish)
Oil (WTI) 82.04-85.09 (bullish)
Nat Gas 4.91-6.42 (bullish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
