“If only it weren’t for the people… earth would be an engineer’s paradise.”
- Kurt Vonnegut
If only it weren’t for Old Wall consensus… fading Macro Tourists would be fleeting.
Adam Grant uses Vonnegut’s classic creative disruptor quote to introduce chapter 10 of Think Again titled “That’s Not The Way We’ve Always Done It – Building Cultures Of Learning At Work.”
I don’t know about you, but I love learning how not to think like consensus does.
Back to the Global Macro Grind…
Remember the time that the cover of Barron’s had a bunch of boats and headline “risks” about “bottlenecks”? That all happened during the #Quad3 in Q3 real GDP sequential slowdown.
Whether it was “semiconductor channel checks in Malaysia” or “credit card data at TJX on inventories”, hedgies who sold and/or shorted Semis (SMH)… or Ford (F) for that matter… got run right over on those backward looking narratives.
Remember the time I made my big “call” to buy Apple (AAPL) on the bottleneck news? Wow, maybe I should call myself Captain Stock Picker, shut down Hedgeye and re-launch my 2 and 20 comp package? lol
Hopefully we’re all learning from all of our mistakes. Chasing narratives (like buying AAPL from me when I sell-some at the top-end of my Risk Range today) on “Apple Car news” is not what you do. You front-run Quad Shifts via the numbers.
Quad Shift? “Mucker, Qu’est-ce que c’est, le Quad Shift?
A) Le Quad Shift is when you shift from one economic Quad to another
B) Get Les Quad Shifts right, you get de alpha, eh!
Yes, I could read/write and do les mathematiques better than most freshman @Yale back in the mid-1990s. That helped smooth my GPA after getting a C+ in first year English Lit. I had to learn how to stop with de eh’s , eh.
While US Options Expiration (today) may very well be skewing the Sector Style & Factor Exposures in the very short-term (like a 2 day duration), it’s worth reviewing what a basic #Quad2 to #Quad1 Quad Shift looks like:
A) Tech (XLK) and Consumer Discretionary Stocks (XLY) ramp to new Cycle Highs… while
B) Energy (XLE) and Financials (XLF) go on sale alongside Commodities, as an Asset Class
If you back out Oil (like the Biden Econ guys), Agriculture Commodity Inflation ramped to new #Quad2 in Q4 Cycle Highs yesterday. Wheat is inflating to new Q4 highs again this morning and Lumber has inflated +38% in a week!
‘Oh, but Mucker, if you back out your homeland’s supply shock/bottleneck news in BC, Lumber isn’t inflating.’
Yep, got it. But where’s that unique intellectual thought in my P&L this morning? Last I checked, no money manager gets paid for having good SAT scores. It’s always about putting de alpha pucks in de net, eh.
All dat said, I have an open mind to INFLATION’s Cycle peaking. I don’t think I’ve ever reminded Old Wall on this, but I’ve been long of Commodities and INFLATION #accelerating for 17 going on 18 months (since June of 2020).
Why? Well, because that’s what cycle’s do. And when cycles cycle, you get an economic Quad Shift.
I obviously still think it’s a little early to be making the aforementioned Asset Allocations moves or I wouldn’t be buying the damn dips in both Energy Stocks and the Financials (XLF) at the low-end of my Risk Ranges this morning.
But what I think is irrelevant. What The Machine (the market) thinks is what matters. It’s what makes me move.
In the meantime, watching my NASDAQ (QQQ), Tech (XLK), and Consumer Discretionary (XLY) longs melt-up to more all-time highs is cool. Yesterday’s NASDAQ close of 15,993 was the 45th all-time closing high of 2021.
If only it weren’t for things like The Machine & Quad Shifts… the US stock market would trade on “valuation.”
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets:
UST 10yr Yield 1.46-1.67% (bullish)
UST 2yr Yield 0.41-0.57% (bullish)
SPX 4 (bullish)
NASDAQ 15,626-16,177 (bullish)
RUT 2 (bullish)
Tech (XLK) 164.01-171.66 (bullish)
Utilities (XLU) 66.03-67.71 (bearish)
Energy (XLE) 56.34-59.29 (bullish)
Financials (XLF) 39.28-40.50 (bullish)
VIX 15.05-18.85 (bearish)
USD 93.66-96.40 (bullish)
EUR/USD 1.123-1.152 (bearish)
Oil (WTI) 77.01-84.66 (bullish)
Nat Gas 4.61-5.50 (bullish)
Gold 1 (bullish)
Copper 4.23-4.51 (bullish)
AAPL 151-161 (bullish)
Bitcoin 56,368-70,002 (bullish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
