“I’m still convinced that it was the one big mistake of my climbing career.”
- Ed Viesturs
You loving Mount #Quad4 yet? I never fall in love with Asset Allocations… but The Game gets less hard when the Long Side of the book starts working. On May 3rd I wrote an Early Look titled “Buying Bonds.” And I did.
What did you do? Unlike what have turned out to be The Crypto Clowns of #NoVision who not only didn’t make it down the mountain (did you see the Avalanche, AVAX Coin, yesterday?), you are transparent and accountable about your positioning.
So is Ed Viesturs. in a great chapter of No Shortcuts To The Top titled “Twofers and True Love”, he goes back to his biggest MISTAKE. Even though NO ONE saw it, he doesn’t run from it. He owns it.
“To this day, Scott’s and my ride in the avalanche before I was able to self-arrest and stop us both remains the kind of close call I hope I never have again…” (pg 99)
Don’t forget the risk management lesson in Asset Allocation: getting to the top is OPTIONAL – getting down is MANDATORY.
Back to the Global Macro Grind…
With 1/3 of my family’s hard earned capital in Fixed Income, WHEN am I going to climb towards 50%?
A) I don’t know
B) When I know, I’ll let you know
While it’s really hard to get #OldWall 2.0 Crypto Clowns to say 3 simple words like “I was wrong”, it’s really easy for humble #HedgeyeNation to say 3 of the most important words on the mountain: “I don’t know.”
Think about it. We’re back on K2 with Viesturs this morning:
A) We’re inside our tents at Camp III = 24,300 feet… and
B) K2’s Summit is up at 28,250 feet
Are we going to opine on the “valuation” of the Summit and/or what we “feel” like today? Or are we comfortable being uncomfortable not knowing “why” the weather is doing what it’s doing and mostly focused on WHEN our timing is right?
WHEN do we buy more Bonds and/or Bond Proxies (currently we’re long XLU and AMLP)?
A) When they’re on sale … and we go big (for the Summit towards > 50% Asset Allocation)
B) WHEN they are approaching the LOW-END of our Risk Ranges
Prior to this decision to climb Mount Fixed Income in early May, I knew I was going for it – going for the 60/40 Portfolio:
A) 60% Cash
B) 40% everything else (with the target of 33% Fixed Income)
Today, that’s what this looks like in The MFO (Mucker Family Office, eh):
- USD = 10%
- BNDX
- BAB
- SHY
- TLT
- XLU
- GLD
- VWOB
- AMLP
Those Asset Allocations are ranked in terms of SIZE (with USD being my largest position at 10%). I re-rank these positions, daily. If you subscribe to our Institutional or Macro Pro subscription, Jonesy lists the “re-rank” in his Morning Shift research note.
Examples of re-ranks:
A) AMLP ramped towards the top-end of my Risk Range yesterday so I sold-SOME on green
B) BNDX corrected towards the low-end of my Risk Range in the last week so I grossed it up on red
And yes, you dirty little Irish-Canadian Mucker (that’s with an M), you’re double dipping with the USD and Cash position, eh?
Why is Gold all the way back down to the #7 slot? A: it signaled immediate-term TRADE overbought 2 days ago and has immediate-term downside in my Risk Range towards $1795/oz. That’s when the weather should be good to buy more.
Now what if you can run the mountain Long/Short? A: even better.
In my Long/Short Book I’m having a much better year than in my Long Only (retirement and kids accounts). Why? Lol. Being Long the lowly Gold vs. Short NASDAQ and Crypto has been one of the epic Long/Short alpha climbs of my 23 year career.
Did you see what happened to Ethereum, Solana, and the aforementioned Avalanche Coins yesterday? #OMG… look at those signals… and look at those ETH, SOL, AVAX, LUNA Risk Ranges at the bottom of today’s EL!
How about High Yield (HYG) and Junk (JNK)?
While far less sexy than wearing your LUNA Coin Tat in the Hamptons this summer, those of us who are still playing The Macro Game at the highest Long/Short level are licking our chops this morning on Short Credit.
That’s it. Write it down. It’s time to take up your Short Positions too: Long Duration vs. Short Credit.
As REAL US GROWTH keeps #slowing at a faster pace, long-term US Treasury Yields fall and Credit Spreads WIDEN. Yep, High Yield (HYG) OAS Spread could/should easily WIDEN another +150-200bps from here.
And while today is not the day to buy-more Duration (BNDX, TLT, etc.), now is the time to short-more Credit (HYG, JNK, etc.).
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets:
UST 30yr Yield 2.92-3.15% (bullish)
UST 10yr Yield 2.69-2.98% (bullish)
UST 2yr Yield 2.44-2.70% (bullish)
High Yield (HYG) 75.51-78.76 (bearish)
SPX 3 (bearish)
NASDAQ 11,055-11,891 (bearish)
Utilities (XLU) 70.34-74.81 (bullish)
VIX 26.23-33.31 (bullish)
USD 101.24-105.11 (bullish)
Oil (WTI) 106.15-114.69 (bullish)
Nat Gas 7.76-9.28 (bullish)
Gold 1 (bullish)
Copper 4.09-4.34 (bearish)
Bitcoin 27,102-30,961 (bearish)
ETHUSD 1 (bearish)
SOLUSD 41.82-53.14 (bearish)
LUNAUSD 0.00-0.02 (bearish)
AVAXUSD 21.24-32.41 (bearish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
