“Never, ever invest in the present.”
- Stan Druckenmiller
If you want to do that, just watch CNBC.
Druck was one of the all-time greats because A) his North Star is Macro (not micro stock picking) and B) he can trade. While some people don’t like it when I criticize certain hedge fund managers, they earned it. Many just aren’t good at short selling.
If you want to succeed at the highest level of The Long/Short Game, never, ever, short and hold.
Back to the Global Macro Grind…
AFTER the NASDAQ crashes -28% from its #Quad2 Cycle Peak (that’s where it closed yesterday), that is NOT the time to load the boat on your shorts. That’s WHEN you Cover-SOME!
As I get fatter, moodier, and older, you’ll also note I need to use LESS words.
If/WHEN I go all CAPS on you, you know I’m trying to make you PAY ATTENTION. And if you’re in the minority of Long/Short managers who have been crushing it for the last 7 months of #Quad4, you can just giggle at my “tone.” Lol
What does Covering-SOME mean?
A) Covering-SOME
B) I went from -23% net SHORT (Friday) to -12% net SHORT pre-open
C) I took my Core Tech (XLK) SHORT to my MINIMUM
If you’re not trading around your Core Shorts, that’s going to be a major (and likely emotional) problem for you.
If you don’t DEFINE what SOME and/or your MIN/MAX is, you’re not going to play at the highest level of The Short Selling Game either. So let’s take some time to define what those words mean on the SHORT side in my risk management #process:
A) SOME means covering 25, 50, or in some cases (like yesterday) 100 basis points of a Core Short Position
B) At the Long/Short Portfolio Level, this year my MAX net SHORT = -25%
C) At the Core Position Level (for Equities and Commodities) my MIN is 0.5% and my MAX is 3.0%
Those MIN/MAX levels are what we call Beta Adjusted. If you don’t know what that means, look it up.
Yes, I trade around my short positions aggressively mainly because:
A) I can
B) I don’t have a boss and/or any exposure rules other than my own
C) I love trading
‘But, but… you’re bearish… and last week… and the Yield Curve callout yesterday…’
Yep, all true. But it’s also true that whatever you need/want me to be doesn’t matter. My positioning is what it is. It has nothing to do with my economic outlook (10s/2s just hit a new Cycle Low at -26bps this morning which is as bearish, economically, as bearish gets).
At 0.53% this morning, that’s the size of my Tech (XLK) Short. On Friday it was 3.0% fully loaded with my short-term puts. Even though it’s one of my “highest conviction” Core Shorts (has been for 7 months), that’s it. That’s the current position. Now I can add to it again.
Some people would love to see every move I make in my accounts. Some people would hate it. I know I’m already the most transparent and accountable “trader” you could have followed for the last 15 years. That doesn’t mean I’m the best either.
Some people think calling me a “trader” is an insult. Lol. Imagine being a #FullCycle Investor who shorts and can’t trade!
My dirty little Mucker (that’s with an M) Trader secret is that I’ve already traded 63 times this week. Is that a lot? I don’t know. Ask Steve Cohen how many times he’s traded. To me, he’s the Babe Ruth of Long/Short Equity trading.
‘But, but… why Mucker… why did you cover-some?’
I’m only going to write this down one more time (because I have to go prepare my inventory of what I want to sell/trade this morning after covering ALL my NVDA yesterday): WHEN matters more than WHY!
All CAPS and EXCLAMATION points means I’m REALLY trying to get your ATTENTION NOW!!!
And don’t worry. Most of what I’ve become and what I do is a function of every mistake I’ve learned from. I’ve made almost every mistake you’ve either made or continue to make, and done so very publicly for 15 years. #TIMESTAMPED
Power-User Coaching Notes: WHEN the # of SHORTS in Real-Time (Coaching) Alerts gets cut in HALF on red #PayAttention. WHEN I sell MOST of my LONGS and add 15-20 SHORTS in Real-time (Coaching) Alerts on green #PayAttention.
At a bare minimum, WHEN I get it all wrong, you’ll get to see me get squeezed! And, if you pay really close attention to my Risk Ranges, you’ll notice days like yesterday when BOTH GOOGL and MSFT closed close to the LOW end of their Risk Ranges.
That’s WHEN you COVER-SOME more aggressively.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets
UST 30yr Yield 2.96-3.20% (bullish)
UST 10yr Yield 2.74-3.09% (neutral)
UST 2yr Yield 2.92-3.30% (bullish)
High Yield (HYG) 73.36-77.38 (bearish)
SPX 3 (bearish)
NASDAQ 11,051-12,093 (bearish)
RUT 1 (bearish)
Tech (XLK) 126-139 (bearish)
Utilities (XLU) 68.01-70.99 (bullish)
Shanghai Comp 3 (neutral)
VIX 22.11-28.51 (bullish)
USD 105.74-108.66 (bullish)
Oil (WTI) 93.02-101.51 (bearish)
Nat Gas 6.40-9.17 (bullish)
Gold 1 (neutral)
Copper 3.15-3.47 (bearish)
MSFT 248-268 (bearish)
GOOGL 102-114 (bearish)
Bitcoin 18,479-24,507 (bearish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
