“Rejection is a sharp pain that dulls over time. Regret is a dull pain that sharpens over time.”
- Anonymous
2021 was a cabaret of conflictions, macro cross-dynamics and (superficially) counterintuitive outcomes.
For macro tourists, their capacity to panic react or otherwise remain hostage to the cycling of Covid Headline FUD remained a wonder of 2021 psyops.
In practitioner space, it was mostly binary. If you were bearish each of the 60 some odd equity benchmark ATH’s, Friday marks a fixed (albeit wholly random) calendar point to exhale and reorient.
If you embraced the historic multi-quarter reflationary bonanza and reveled in the implicit BTFD green lighted by our Quad 2 forecast …. take a moment to bask in the warm glow of realized macro alpha, it gets harder from here.
Back to the Global Macro Grind ….
Rather than again reiterate our expectation for Quad 1 or Shallow Quad 4 (which mean mostly the same thing wrt allocation implications) or attempting to fabricate nuance and manufacture content in the face of a domestic eco calendar with zero top shelf releases, I’ll simply go with the pseudo-random stream of consciousness strategy this morning in hopes of chef’ing up a selection of year-end macro and mental morsels ….
ATH …. in ATH’s! Not quite … we got 69, and looks like we’ll fall just short of the record 77. It’s wholly counterintuitive given the macabre macro backdrop in which it occurred, but it’s really just par for the post-GFC course and serves as the latest example that markets are now (at least partially) administered and in some version of a state of permanent exception(h/t Kocic) ….multi-decade inflation highs and near all-time lows in rates anyone?!
RIP John Madden the voice and personality of football for a generation.
Meme-orable: The notion that memes have transcended amusing social media sideshow to emerge as the apex object in society, capable of creating, cultivating and propagating collective interest and action found compelling confirmation over the past year – unsurprising in the context of our increasingly attention deficited, hyper-whimsical populous base and as covid accelerated the convergence of the lines between our digital and ‘meat-space’ selves.
Inflection Detection: For the first time, Oculus sold more headsets than Microsoft sold Xbox’s. If you think that doesn’t fit into the larger mosaic of crypto and digital asset centric predominance then, well, ‘good luck’ (Taken voice!). If you still haven’t ventured into VR or don’t own one, you should probably just get the Quest 2. You may or may not want to be a serf in Zuck’s centralized kingdom, I get it, but you can separately continue to actively support the decentralized build out and just switch allegiance when alt tech matures a bit.
I Am Legend: This is apropos of nothing except to turn the dagger on why SBF is a deca-billionaire at twenty and you (‘you’ as in every other person ever) are not. SOL, of course, went to dutifully gain 8,567% over the next ten months. That is some legendary shit right there ….
Illegal Activity: As you contemplate your tax obligations, bear in mind that you are required to officially report and pay taxes on all your illegal activity and stolen property. Yes, the below is actually from the IRS website. h/t @litquidity.
Washed Up (crypto tax edition): If you haven’t cleaned house or set the tax table wrt to your crypto portfolio, this is your last gentle reminder that crypto is not yet subject to wash sale rules. See HERE for more but, in short, you can, unlike in equities, sell any losing positions for tax loss harvesting and immediately buy those positions back. It seems likely this rule goes away in pretty short order.
Read. Write. Own. …. If you need a double distilled mind map for contextualizing web3.0 (and the evolution from Web1 (read) → Web2 (write) → Web3 (own)), that has probably become the benchmark definition. Take the innovation & “good stuff” from the current reality, decentralize it and give ownership to the users and builders of the platforms and shift the value accrual away from mega-cap monopolistic tech. The mass appeal associated with that pivot and why the pendulum should continue to swing in this direction should be intuitive, particularly given the socio-political tinder box of increasing inequality and the prevailing anti-establishment/anti-institution zeitgeist domestically and globally.
Now, allow me to partially recycle some prior thoughts in the service of providing some amateur philosopher year-end motivation.
Looking Better, Living Longer, Having More …. Almost without exception, every New Year’s Resolution can be bucketed into one of those 3 broad categories. The macro-ticians @Hedgeye, we humbly concede, are no exception. More data, more machine learning, more measuring, more mapping, more innovation, more meritocratic analytical mojo. That ‘Having More’ constellation again remains our collective aspiration in 2022
Rejection vs Regret: Cross-walking our headline quote to the professional domain, it’s important to remember that bear markets (in markets, in tech (& crypto) cycles, etc) are where process building and innovation occur … in the darkness, devoid of price distractions and the trappings of speculative excess. In the darkness the light of the next cycle is built. Do your best to risk manage against regret. Doing your best work on your worst day forges greatness. Continue to build … build your business, build the love and relationships that surround you, build your vision and path to self-actualization.
Life Filter: By and large, we reflect back what we absorb. By optimizing your exposure to interesting and stimulating things, you optimize the energy exchange (back to yourself) associated with it ... a kind of perpetual, life mojo machine that requires only that you make the simple but intentional decision to plug into it to enjoy the innervation.
The Macrolorian (in honor of and reverence to today’s launch of Boba Fett) … “It’s not what you’re looking at that matters, it’s what you see”. As you get older your eyesight gets worse, but your ability to see through people and situations gets disproportionately better. Macro is not about divining good/bad (absolute), it’s about front-running better/worse. Macro alpha remains rate of change centric.
If you detach yourself from the daily myopia and attempt to dispassionately observe the entirety of the above as it hurdles towards some collective intersection and Cambrian explosion, it really is amazing.
It’s why living in a simulation is so great!
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets:
UST 10yr Yield 1.40-1.53% (neutral)
UST 2yr Yield 0.61-0.77% (bullish)
SPX 4 (bullish)
NASDAQ 15,003-16,025 (bullish)
RUT 2146-2286 (bullish)
Tech (XLK) 165.21-178.56 (bullish)
Consumer Discretionary (XLY) 191-210 (bullish)
Housing (ITB) 76.39-83.28 (bullish)
REITS (XLRE) 49.01-51.40 (bullish)
Best of luck out there and Happy New Year.
To growth,
Christian B. Drake
