“People don’t understand that the hardest thing is actually doing something that is close to nothing.”
-Marina Abramovic
On this day in 1929, MOMA (Museum of Modern Art) opened in New York City. This was also the day, in 2007, that changed my life forever. I became a father. My son Jack was born. And Hedgeye was conceptualized shortly thereafter.
The aforementioned quote came from one of the more remarkable Life-Cycle Asset Allocations to #patience that the modern era has ever seen. In 2010, in The Artist Is Present, Marina Abramovic “sat silently in a chair, completely still, for a total of 750 hours over 79 days directly across from 1,545 strangers, without aid, without distraction…” -Stillness Is The Key, pg 23
If I wanted to, I could go back 15 years to my son’s and firm’s births and count the hours I have sat silently, executing in my portfolios, without aid or distraction. I won’t because I want to be present this morning. I have to be. It’s the only way. Once I am done with the Early Look, I get distracted by panic, questions, and noise. The discipline is in not staying distracted.
Back to the Global Macro Grind…
Welcome to another Macro Monday @Hedgeye where it won’t be about “the election” or the latest “pivot” or “bottom” picking of your META disaster. It’s all about the stillness of the measuring and mapping process.
Let’s start with the Global Currency market:
- US Dollar Index was +0.1% on the week to +17.5% YTD and remains our #1 Asset Allocation in Global #Quad4
- EUR/USD was -0.1% on the week to -12.4% YTD and remains Bearish on both our TRADE and TREND durations
- Yen bounced +0.7% vs. USD last week but remains in #Quad4 Crash Mode at -21.5% YTD
- GBP/USD resumed its #Quad4 Crash, down -2.0% last week to -15.9% YTD
- Argentina’s Peso continued its #Quad4 Crash, down another -1.6% last week to -16.0% in the last 3 months
But, but… I got a note from the Old Wall saying “upside to the 200-day Moving Monkey, but stopped out around Friday’s intraday lows of 3700… and the election… and”…
Stop it.
Sit there, breathe, and think clearly about how long it takes for both a Full Investing Cycle to both peak and bottom. These are ROC (rate of change) processes that, most importantly, include time and space… not CNBC Talking Points.
If anything the new narrative (and hope) that China is going to “re-open” in March (it’s still early November, eh), made the lingering Global #Quad3 Stagflation linger longer before we get to back to back to back #Quad4s, globally.
A Stagflating #Quad4 is a ROC #slowing of GROWTH and INFLATION where Commodities don’t properly collapse and LABOR remains Late Cycle Sticky. Here’s what the Commodities component of that did last week:
- CRB Commodities Index reflated +5.5% on the week to +24% YTD
- Oil (WTI) reflated +5.4% on the week to +33% YTD
- Copper reflated +7.5% on the week to -16% YTD
Oh, great. So let’s try to be like a Macro Tourist and follow the narrative (instead of the numbers). If Xi canned the covid lockdowns tomorrow, Oil will breakout back above $100, maybe > $125? And Fed does 75 not 50 in December?
Dammit!
All the while, the Bond Market nailed it (again) last week with a massive PIVOT (higher) in Bond Yields:
- UST 2yr Yield ramped +24 basis points last week to a new CYCLE HIGH of 4.66%
- UST 10yr Yield popped +10 basis points last week to +53 basis points in the last month
- UST 30yr Yield ripped +15 basis points last week to +55 basis points in the last month
As my Partner, Josh Steiner, explained in last Friday’s Early Look, Part 3 of that move is wreaking nasty havoc on everything US Housing. If China re-opens tomorrow, how does an 8-9% US 30yr Mortgage sound to demand, wealth effect, etc.?
What continues to sound great is The Sound of Silence in our #Quad4 US Equity Long/Short Book:
- Short: Tech (XLK) was down another -6.6% last week, crashing -17.9% in the last 3-months
- Short: Consumer Discretionary (XLY) down another -5.2% last week, crashing -17.7% in the last 3-months
- Long: Energy (XLE) up another +2.4% last week taking its Full Investing Cycle 3-month gain to +27.6%
Remember the time, 3-months ago, that the “bottom was in” per many Old Wall narratives?
In a perverse way, we’re actually long the hope-trade via Long Energy and Short Bonds. Hope is a great principle to maintain in a home when raising a family, but it is not a risk management process for your hard earned capital.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets
UST 30yr Yield 4.05-4.40% (bullish)
UST 10yr Yield 3.94-4.29% (bullish)
UST 2yr Yield 4.37-4.77% (bullish)
High Yield (HYG) 71.20-74.25 (bearish)
SPX 3 (bearish)
NASDAQ 10,216-10,877 (bearish)
RUT 1 (bearish)
Tech (XLK) 117-129 (bearish)
Energy (XLE) 84.90-91.97 (bullish)
VIX 23.95-30.04 (bullish)
USD 109.56-113.67 (bullish)
EUR/USD 0.971-1.003 (bearish)
USD/YEN 145.81-150.02 (bullish)
GBP/USD 1.114-1.161 (bearish)
Oil (WTI) 84.63-92.93 (bullish)
Copper 3.30-3.70 (bearish)
META 67-115 (bearish)
Bitcoin 18,617-21,240 (bearish)
Best of luck out there this week,
KM
Keith R. McCullough
Chief Executive Officer
