“I have been told by many people that I have an unusual way of looking at the world.”
-Dan Ariely
Fore those of you who know it’s really ok to think differently about life, markets, etc., you’ll enjoy reading any or all of Dan Ariely’s books. His TED talks have been viewed more than 15 million times. That’s more often than I’ve said #Quad4 in the last 15 years.
The aforementioned quote comes from the opening chapter of Predictably Irrational – The Hidden Forces That Shape Our Decision Making. One of the proud members of #HedgeyeNation sent it to me. His name is John Unger.
Unger introduced himself to our team at HedgeyeLIVE from his electric scooter. He has a disease called Ataxia which effects muscle control, walking, speech, etc. He wrote me a personal note saying “thank you for understanding.” No. Thank You, John.
Back to the Global Macro Grind…
Not unlike Unger, Ariely has a physical disability. “On what would otherwise have been a normal Friday afternoon in the life of an 18yr old Israeli, everything changed irreversibly in a matter of a few seconds.”
“An explosion of a large magnesium flare, the kind used to illuminate battlefields at night, left 70% of my body covered with third-degree burns – the next 3 years found me wrapped in bandages in a hospital…”
And some of us think we have it tough when we don’t nail every top and bottom in markets, eh?
What Unger and Ariely also have in common is that they don’t think like the herd of human beings that spend their waking hours whining on Twitter and/or blaming people for the poor decisions that THEY make.
From Annie Duke’s How To Decide to any of Ariely’s books that I have cited over the years, I’m learning how to make better decisions against the herd alongside you. Fading our feelings is critical. So is being comfortable being uncomfortable.
That last part is a good one-liner that should get you thinking. But do you physically and/or mentally deal well with discomfort?
I think I’m better than bad at that, mainly because I have forced myself into a position of discomfort trying to not only educate #HedgeyeNation on my risk management #process but also trying to answer the questions of “WHY” to Institutional Investors.
If I decided to be far more comfortable (i.e. run my own money and sit here in silence every day), I wouldn’t like a life like that.
That said, the “WHY” doesn’t matter to me as much as it does to the people who pay to hear me say “I don’t really know why, but… WHEN my #VASP (Volatility Adjusted Signaling Process) knows something new, I’ll let you know.”
A recent example of that has been “Buying Bonds” for the last month (here’s how the sequence of decision-making played out):
A) At this hour of the morning of May 9th, the UST 10yr Yield was ticking to new Cycle Highs at 3.17%
B) 24 hours later (same hour of my morning) on May 10th, the UST 10yr Yield was straight down to 3.02%
C) In my notebook I wrote “1st LH” – that means first LOWER-HIGH (LH)
So, I look at Boomer (my dog) and said “cool, eh bud”… and onto the next sequence:
A) May 11th (same hour of the bloody morning), UST 10yr Yield is straight down again to 1.92%
B) In my notebook I wrote “Day2 LH” = Day 2 of Lower-Highs…
C) And I also note that these “NEW” lower-highs are lower vs. the prior Cycle Highs from Q4 of 2018
What happened in Q4 of 2018? PE Powell, more of a rookie Fed Head at the time, RAISED RATES into a #Quad4 Slowdown. Despite RAISING RATES, longer-term RATES started to fall as Real GROWTH in the US economy #SLOWED.
Yep, gotta go all CAPS on you for a bit this morning. Because, epic new Cycle Highs in US INFLATION Nowcasted in our proprietary GIP (GROWTH, INFLATION, POLICY) models are now #SLOWING REAL GROWTH expectations at a faster rate and:
A) June 6th (yesterday) the UST 10yr Yield popped to yet another LOWER-HIGH of 3.04%
B) This morning (same bloody hour, what a life!) the UST 10yr Yield dropped -3bps to 3.01%... and
C) Long-term Bond Yields are still making major LOWER Long-term SECULAR highs vs. Q4 of 2018
Since I bought a boat-load of TLT’s yesterday (after I sent out a Real-Time Alert), I just looked at Boomer again and said “cool.”
Will I be “right” and make money having made that decision? I don’t know. What I do know is WHEN I made the decision to add to a relatively new position (1 month old) in Fixed Income, I know why I made it.
And I don’t mean I know “WHY” in a way that I need to try to become the next Lacy Hunt in explaining myself. I know why I put my family’s hard earned capital in play WHEN I did it.
What else did I do in both my Mucker Family Office and my Long/Short book yesterday in conjunction with the Bond Yield Signal?
A) Bought more Gold (down Bond Yields = Up Gold) on sale
B) Bought back some Gold Mining Exposure via GDX and Single Stocks I like (all were also on sale)
C) Went from -23% net SHORT in my Long/Short Book on last week’s US Equity market up day to -4% net SHORT
Less net SHORT? But why, why, why – does that mean you think the “bottom is in” for #Quad4?
Nope. It just means I A) covered some SHORTs and sold some puts after making money on them (remember the epic HYG and JNK #overbought signals from last week?) and B) bought some Longs from the aforementioned ABCs and related Fixed Income.
I also signaled buy on Prison Stock (CoreCivic, CXW) in Real-Time Alerts. Why? Look at Crypto Crashing (Bitcoin down another -7% again this morning). You gotta be bullish on some #OldWall 2.0 fraudsters going to jail, no?
Really CXW was about WHEN. It was at the low-end of my Risk Range™ Signal and it’s a Bond Yield sensitive REIT that Rob Simone likes during #Quad4. Yes, I realize that I have a unique way of making cross-Asset-class decisions. And I like communicating that.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets
UST 30yr Yield 2.91-3.20% (bullish)
UST 10yr Yield 2.64-3.08% (bullish)
UST 2yr Yield 2.39-2.78% (bullish)
High Yield (HYG) 75.85-79.80 (bearish)
SPX 3 (bearish)
NASDAQ 11,112-12,417 (bearish)
RUT 1 (bearish)
Tech (XLK) 130-145 (bearish)
Utilities (XLU) 71.99-75.68 (bullish)
VIX 23.20-30.56 (bullish)
USD 101.43-103.09 (bullish)
USD/YEN 126.62-132.98 (bullish)
Oil (WTI) 110.87-120.91 (bullish)
Nat Gas 8.15-9.45 (bullish)
Gold 1 (bullish)
Copper 4.14-4.53 (bearish)
Bitcoin 27,607-31,916 (bearish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
