“Get comfortable being uncomfortable, or find another place to fail.”
- Tim Grover
I love that quote. I love how Time Grover coaches too. He says that he “can tell everything about a guy within the first 3 days of working with him.”
“Forty-eight hours, that’s the test. If he keeps showing up despite the pain and exhaustion, we’re good to go. If he tells me he can’t make it… he’s in the wrong place. There are plenty of trainers who will work that way.” -Relentless, pg 49
Over 20 years ago, I never thought I’d be as mentally challenged as I was an aspiring professional athlete. I failed at achieving that goal. That was a great place to fail. In this arena, every day I grind to win.
Back to the Global Macro Grind…
When coaching people through The Macro Show, I often remind players that it’s when I start failing (read: I start losing money) that I start realizing that we’re in a Quad Shift.
These aren’t “feelings” or epiphanies from God. They’re timestamped losses. Everyone can see them. And I like that.
I hate losing more than I like winning. That’s why I built my #process to take transparent and accountable losses as learning opportunities. Always get better. Always find a better way.
As The Game evolves, the next winning Macro TREND does. I think I see a big one developing right now. It’s summarized in the title of this Early Look: Sell Oil, Buy Bonds.
From a Quad Shift perspective this big Asset Allocation pivot should be easy to communicate:
A) Sell Commodities
B) Buy Fixed Income
When you look at the grid of our proprietary Quad Map, think about it this way:
A) The right side of the grid = Long INFLATION (Quads 2 & 3)
B) The left side of the grid = Disinflation or Deflation (Quads 1 and 4)
Simplifying the complex about all of Global Macro Asset Allocation doesn’t get any simpler than that. You can explain this to the rawest rookie in The League. Timing Quad Shifts is where successful seasoned veterans play The Game.
Instead of the “why, why, why?” and Variant Narratives you’ll get from MSM on what’s moving markets, why not start by asking yourself the most important question in investing: when?
And where do I look to find the when? A: 6, 10, 11, 13, 14, 15, 16, 19, 20, 23, 24.
Those aren’t lotto numbers. Those are the slide numbers that Quad Drago Malesevic just updated in my team’s Global Macro Themes deck. I just woke up to them this morning.
No, I don’t wakeup to some sell-side “call” or Macro Tourist headline of the day WHEN I decide to make a move. I wakeup to playing my game. I play my #process.
As many of you know, our proprietary Bayesian Inference #process is built upon Stochastic Principles. If you look at the detail on slide 19 you can see what we call the Conditional Probabilities of The Quads, by quarter:
A) Conditional Probability of Quads 2 or 3 for Q1 of 2022 = 6.1% and 10.5%, respectively
B) Conditional Probability of Quads 1 or 4 for Q1 of 2022 = 30.8% and 52.6%, respectively
Therefore it’s either going to be #Quad1 or what we call a Narrow #Quad4 in Q1 of 2022. If it’s not, I’ll fail, fast. If it is either, that’s Goldilocks for the Asset Allocation decisions I’m making today. I’ll be buying Gold on my #VASP too.
*As a reminder, with #Quad2 hitting for 5 out of the last 6 quarters, I was buying Oil and Selling T-Bonds & Gold
What if I’m “early” in buying longer-term Treasury Bonds and/or positioning for disinflation (i.e. buying TLT & BNDD)?
A) Conditional Probability of a deeper #Quad4 hitting in in Q2 of 2022 = 93.8%
B) Conditional Probability of another #Quad2 hitting in Q2 of 2022 = 0.1%
Well, then I’m early. But I prefer being on time. And I have a risk management (read: timing) #process for that.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets:
UST 10yr Yield 1.39-1.52% (neutral)
UST 2yr Yield 0.56-0.71% (neutral)
SPX 4 (bullish)
NASDAQ 14,936-15,760 (bullish)
RUT 2131-2242 (bearish)
Tech (XLK) 164.76-175.85 (bullish)
Housing (ITB) 76.00-84.15 (bullish)
REITS (XLRE) 48.04-50.32 (bullish)
VIX 18.04-23.53 (bearish)
USD 95.88-96.79 (bullish)
Oil (WTI) 68.05-72.88 (bearish)
Nat Gas 3.58-3.99 (bearish)
Gold 1 (bullish)
Copper 4.18-4.39 (bearish)
Bitcoin 45,613-51,274 (bullish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
