“You are an expert. But are your judgments verifiable?”
- Daniel Khaneman
Now we enter the CYA part of The Game where plenty of strategists, economists, and tweeters will say they saw this coming. However, if you’re a portfolio manager and/or running your own money it doesn’t matter what you say. It’s what your returns do.
In one of the great #behavorial books I’ve reviewed in the last year, Noise, Kahneman calls the aforementioned Old Wallers “respect-experts.” As in we, The Muckers & People out here in The Arena, owe them respect, regardless of outcomes.
Where I was raised, respect is earned, not allocated. Kahneman agrees: “intelligence is only part of the story… HOW people think is important. Perhaps we should pick the more open-minded person rather than the smarter one.” (pg 235)
Back to the Global Macro Grind…
If you do not have an open mind to how fast asset prices can go down during a #Quad4 F-Bucket Breakout in Volatility, you better start thinking faster, and be less slow.
For the purposes of keeping it clean this morning lets call the F-Bucket something that I don’t really call it. Let’s call it the Fast Bucket, where the faster realized Volatility rises the faster the LOW-end of my Risk Ranges fall.
That’s why I also call the F-Bucket, the “Un-investable Bucket.” That’s where even the stock picks that recently worked get crushed.
Oh, but, but, KM likes Gold and Gold Miners. Yeah, alongside being Long our #1 Asset Allocation (US Dollars), Gold did its job for us in the portfolio yesterday, beating the #Quad4 pants off anything GROWTH Equity and Crypto, but Gold Miners went down again.
So did Healthcare (PINK) and Defense Stocks (ITA). One of those broke @Hedgeye TREND support (PINK). One did not.
I know, The Macro Show Queue (questions get up/down votes) will be hyperventilating about Longs that went down at VIX 34, but those aren’t my questions. I have no questions about that. That’s what happens in the #Quad4 F-Bucket.
And that’s why I will continue to SELL on green, taking DOWN Gross Long exposure to any fancy idea I had when the VIX wasn’t in the 30s. Why? Because that’s what I always do. And it works.
If you think a few of my Longs were bad, consider the alternatives that a LOT of The People are still bag Hodling:
A) Bitcoin down -7% (and remains Bearish TREND @Hedgeye)
B) Tesla (TSLA) down -11% on Margin Call Musk risk (TREND support was $987)
C) Consumer Discretionary (XLY), which is basically AMZN and TSLA, down -5.1%
And, unlike most, when my Longs break @Hedgeye TREND support (like PINK did, but GDX did not), I stop myself out of them. Those are called SELL orders. That’s how I raise even more Cash before the market makes new lows.
If that bothers people, I don’t have time to care. That’s the risk management #proces. Since calling it in ‘08, it always has been.
While I can always improve how I coach the #process, the best way to coach it is to just let everyone watch me make my plays and pivots in real-time. I’ve turned Real-Time Alerts into Real-Time Coaching Notes for that very reason.
Additionally, I’ve added the #OUTBucket to our Risk Range™ Signal product.
What does that mean? That means what it says. I am #OUT of the position personally. And if you’d like to stay with that position that is totally up to you. The current #OUT Bucket includes:
1. Energy (XLE) = (Neutral TREND)
2. Healthcare (PINK) = (Bearish TREND)
And, no, I didn’t take Energy out yesterday. It was #out before its recent beat-down from its Inflation Cycle Peak.
Open question that brings me back to the beginning of this note: who gets you out? I’m not going to complain like I used to about the lack of transparency and/or accountability from Telecom Tom Lee or the Old Wall itself on this.
That was so last #Quad4 ago.
What I am going to do is do what I have been doing. I am going to keep building both a better #process and a #BetterWay. Better communication tools, better cartoons, better hair? Whatever it takes!
At this point, a debate as to whether or not Deep #Quad4 risks were going to hit hardest in Q2 of 2022 doesn’t matter. Non-verifiable experts still don’t get it, but it’s here. And when it’s over, I’ll let the greatest expert of all (the market) let me know.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets
UST 10yr Yield 2.64-2.96% (bullish)
UST 2yr Yield 2.31-2.78% (bullish)
High Yield (HYG) 79.02-80.70 (bearish)
SPX 4133-4355 (bearish)
NASDAQ 12,309-13,216 (bearish)
RUT 1 (bearish)
Tech (XLK) 137-148 (bearish)
Gold Miners (GDX) 34.06-42.52 (bullish)
Utilities (XLU) 72.54-77.70 (bullish)
Shanghai Comp 2 (bearish)
DAX 13,663-14,237 (bearish)
VIX 23.95-36.23 (bullish)
USD 99.90-102.54 (bullish)
EUR/USD 1.060-1.088 (bearish)
Oil (WTI) 96.38-108.21 (bullish)
Gold 1 (bullish)
Copper 4.41-4.66 (bearish)
Silver 23.01-26.75 (neutral)
MSFT 267-290 (bearish)
AMZN 2 (bearish)
FB 171-201 (bearish)
GOOGL 2183-2517 (bearish)
TSLA 821-987 (bearish)
Bitcoin 37,913-41,843 (bearish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
