“How fierce the look the exiles wear… the treasured wrongs of fifty years are in their hearts today.”
- Thomas Davis
That’s a line from an Irish war poem called “Fontenoy.” Don’t worry about me going off about being Irish again this morning. I think you get the revolutionary drumbeat in my heart. I hope you have a deep sense of your family’s history too.
My history as a Short Seller in the Hedge Fund industry is what it is too. Some managers only short stocks. Others short Macro and Sector hedges against their long books of stock picks. To each their own. It’s what makes The Game great.
Being great at this on the short side has always been a goal of mine. I don’t consider it an ideal. I consider it risk management. I don’t know about you, but I don’t want to see my family’s hard earned net wealth drawdown by 20-80% during #Quad4.
Back to the Global Macro Grind…
If you’re running a hedge fund, being down 20% in a year is really hard to do. If you have a North Star of a Go Anywhere Global Macro Risk Management #process like ours, that is.
If my grave says “chubby Irish guy who never missed making a #Quad4” drawdown or market crash call, I’d be cool with that.
To be a big time stock picker in the hedge fund business is often an episodic-and-non-TRENDING title. As time, space, and cycles change, so does The Game. Those that think their unique stock picks are bigger than The Quads learn the hard way, fast.
At this time last year, about 3-4 months into our SELL China call, a big timer Tiger guy blew up in Asia.
Why? That was simple. He was levering up LONG into a #Quad3 Chinese Stagflation that has ultimately oscillated between a rock and a hard place now (between #Quad3 and #Quad4) for going on 16 months.
As you can see in today’s Chart of The Day, #Quad3 Stagflation is the best time to short Chinese GROWTH stocks. The Shanghai Composite Index is down -22% from where we got people out of China.
So, since we’re all so bloody smart in this business, how do back-tested realities like that and/or other BIG ones like:
A) Don’t Short HIGH SHORT INTEREST Stocks in #Quad2… or
B) Don’t Buy FINANCIAL LEVERAGE heading into #Quad4
Get outright ignored? I can tell you right now that whoever has been Macro Unaware this year should be apologizing to their investors. People pay them big money to pay for risk management tools (like #VASP Signals & The Quads) that aren’t VAR!
Those very #VASP (Volatility Adjusted Signaling Process) tools don’t just help you with WHEN to sell. As importantly, they guide you, dispassionately and mathematically, on WHEN to cover-SOME of those Core #Quad4 Short positions.
That last part is the part of The Game that’s the toughest for many who have tried Short Selling. Yesterday’s US bloody red US stock market open was a great emotional example of that:
A) AFTER getting smoked for 3 weeks, SPY, QQQ, IWM, etc. all got very close to the low-ends of my Risk Ranges … and
B) Once the top-end of my Vol of Vol Range on VIX, VXN, and RVX held, US Equity Beta (stocks) bounced, big time
When I call that a “textbook bounce off the LRR” (low-end of the #VASP Risk Range™ Signal), almost 100% of people who pay #HedgeyeNation smile. And almost 100% of people who hate me in the Hedge Fund industry say I’m full of something smelly.
So you’re saying some hedge fund guys hate me, eh? lol
If you only saw my collection of hate mail going back to 2008 (when I was making the US stock market crash call and sending out “Crash” and “Cover” blast emails to Wall Street’s Captain Stock Pickers) you’d be smiling at some of that too.
When I write “Sell” or “Cover”, the words are explicit and my #timestamped actions are crystal clear.
No, that doesn’t mean I get every one of those actions “right.” It simply means that I’m the only one dumb enough to show you every move I have made since 2008.
What I did on Friday/Monday in Real-Time Alerts is simply executing on that Short Covering #process:
A) At the LOW end of my Risk Ranges I covered ALL my Equity Shorts with Germany (DAX) being the last one out … and
B) Then I started sending out new SELL Signals on green into yesterday’s close… while
C) Adding, incrementally, to my Index and ETF Shorts, into the close as well
And, yes, there are some Coaching points to be made on that:
- Real-Time Alerts is NOT a portfolio
- It’s become a Real-Time Coaching tool that helps you make good decisions when it matters
- If Macro ETF signals aren’t going out while I am acting incrementally in my own book, that’s because we have a percentage of amateur RTA subscribers who need/want me to be perfect with that product, so I wait for the best spot on those
If there is such a thing, what is “the best spot”?
A) TRR – top-end of my Risk Range™ Signal…
B) LRR – low-end of my Risk Range™ Signal
But running real money like I do in both my MFO (Mucker Family Office) Long/Short Book and/or my Long Only Retirement accounts doesn’t seek perfection on timestamps. It seeks to execute incrementally against the color of the screen.
If this doesn’t all make sense to all of you, I totally understand. I’m entering year 23 of this ride and I’ll be coaching power-users through the process at our Hedgeye LIVE Conference next month in Greenwich, CT. I’m looking forward to seeing you all there.
It’s my responsibility to coach the process that I built. I’ll keep doing that so that you love the process instead of loathe it like our competition on the bid/ask does! How fierce the look those in #HedgeyeNation wear vs. ye Olde Wall.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets
UST 30yr Yield 2.76-3.01% (bullish)
UST 10yr Yield 2.59-2.97% (bullish)
UST 2yr Yield 2.30-2.77% (bullish)
High Yield (HYG) 79.12-80.82 (bearish)
SPX 4 (bearish)
NASDAQ 12,708-13,595 (bearish)
RUT 1 (bearish)
Tech (XLK) 141-150 (bearish)
Shanghai Comp 2 (bearish)
VIX 21.02-30.74 (bullish)
USD 99.71-101.95 (bullish)
Oil (WTI) 95.14-106.57 (bullish)
Gold 1 (bullish)
Copper 4.36-4.65 (bearish)
Silver 23.51-26.82 (bullish)
MSFT 269-291 (bearish)
GOOGL 2 (bearish)
Bitcoin 38,113-42,008 (bearish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
