“At last things seemed to be going our way.”
-Ed Viesturs
That’s the opening-volley sentence in a book I’m in the middle of right now titled No Shortcuts To The Top, “Climbing The World’s 14 Highest Peaks”, by the only American to climb all “eight-thousander” peaks. Ed Viesturs did it with no supplemental oxygen.
A good hedge fund friend and long-time client, Marty Kollmorgen, sent me the book. When we chatted at #HedgeyeLIVE, he said, “you know Viesturs is just an endurance animal… but it’s really a risk management book.” So true, Marty. So true.
While its getting harder to find the truth in both Old Wall and “3.0 Crypto” Media these days, it’s not hard to find it when “setting off for the summit of K2, at 28,250 feet the 2nd highest mountain in the world.”
When you’re 54 days into that climb, risk can happen slowly, then all at once.
Back to the Global Macro Grind…
The analogue, of course, is a market one. Especially in bear markets, short-term market climbs to Big-Lower-Highs have a central tendency to crush Perma Bulls and Macro Tourists alike. Neither emotional type would do as well as Viesturs on K2 either.
At the age of 62 and 47, respectively, why are guys like Viesturs and I still alive? A: We don’t die during #Quad4 avalanches. “But, but, KM… everyone is bearish… and the market is up +2% today… and…”
I see your panic. I hear your voice. I will give you supplemental oxygen when coaching you, but I will not allow you to continue to allow your “feelings” to infect your decision-making.
Take three deep breaths and start selling again.
Yep, that’s it. Now that those very short-term VIX options have expired this morning (and the commensurate short-term SPY squeeze to Big-Lower-Highs is in), you can do this.
Do what? Go from NOT shorting stocks (my #VASP Signal, or the weather, wasn’t right for an ascent of your gross short exposure) at this time last week, to getting the green light this morning. Get back out there on the mountain like a real bear does.
What gives an experienced bear who’s consistently made money at high F-Bucket Altitudes of Volatility a green light?
- Big-Lower-Highs … that are
- Approaching the TOP-end of my Risk Range™ Signals… within
- Bearish @Hedgeye intermediate-term TRENDs
In Fractal Math, we call those Similar Sets. If those are happening in a developing (and deepening) #Quad4, they’re relatively easy to see. If you haven’t read Into Thin Air by Jon Krakauer, read that. And ask Ed Viesturs what he saw that the now deceased didn’t.
*Ed opted to not go for another all-time Everest high. He decided to go down while both “experts” and tourists went up.
Looking for examples of things that fit the aforementioned Fractal Pattern? Here are 6 #VASP SELL Signals:
- Russell 2000 (IWM) at a big-lower-high – it’s volatility went out at 33 (and it’s price has crashed -25% from Cycle Peak)
- Yeti (YETI) – small cap that just got hammered to lower-lows on its EPS report and bounced on decelerating volume
- Gildan (GIL) – another small cap that also got spanked post reporting reality in May – McGough is The Bear here too
- British Pound (FXB) – big bounce to lower-highs against my #1 climber on the Long side of #Quad4 (US Dollar Viesturs)
- US Retailers (XRT) – equal weight ETF that’s crowded with tourists and a great one to trade if you can fade them
- German Stocks (DAX) – 3 #Quad4s in a row and a bunch of people who have no idea what #Quad4 weather is…
Coaching Notes on those 6 positions:
- Shorting SMALL CAP and HIGH BETA Factor Exposures
- Shorting US Consumption Growth as both low and high income consumers in America lose their confidence
- Shorting something that most US Equity centric investors won’t be in (Germany and the UK)
For those of you who want to play the Short Selling and/or Risk Management Game at the highest level, on that last point, did you have a sherpa (mine’s name is Floki) take a peek outside this morning before you pushed for the summit?
On K2, Camp III is at 24,300 feet. Can you breathe with no oxygen (at pending VIX 36) and make good decisions?
After Floki gave me my morning coffee, he whispered that the “Pound is getting pounded, Sir Mucker… and the UK 10yr Gilt Yield just blew through @Hedgeye TRADE support, becoming the 1st major Sovereign Long-term Yield (ex-Japan’s) to do so.”
Really? What does that mean? It means that one of the riskiest parts of the Global #Quad4 mountain (the United Kingdom) is seeing a deepening of #Quad4 Real Consumption Growth #Slowing (highest inflation levels since Thatcher, eh).
And that slowing is finally trumping whatever the BOE (Bank of England) thinks they’ll achieve with more rate hikes. Is that a movie coming to an American theater near you? Remember Viesturs in Everest on IMAX in 1996? You need the right climber with you.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets:
UST 10yr Yield 2.79-3.14% (bullish)
UST 2yr Yield 2.53-2.77% (bullish)
High Yield (HYG) 75.55-77.99 (bearish)
SPX 3 (bearish)
NASDAQ 11,106-12,321 (bearish)
RUT 1 (bearish)
VIX 25.22-36.09 (bullish)
USD 102.52-105.11 (bullish)
GBP/USD 1.212-1.257 (bearish)
Oil (WTI) 99.62-116.58 (bullish)
Gold 1 (neutral)
Copper 4.06-4.32 (bearish)
Bitcoin 25,219-33,116 (bearish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
