“Most of the time championship golf requires a careful, deliberate, dedicated mindset.”
-Nick Faldo
Does your process have a careful, deliberate, and dedicated mindset? Or, like a Tourist watching The Game, are you constantly being triggered “intellectually” and emotionally when it’s time to execute?
The aforementioned quote came from another #behavioral book I read over Thanksgiving break titled Golf Flow – Master Your Mind, Master The Course, by my new friend Dr. Gio Valiente (see our recent Real Conversation on @HedgeyeTV).
Faldo was explaining how he won the 1996 Masters. “The Game didn’t come easy to me that week, and the level of sustained concentration required to coach myself through each and every shot tested the full capacity of my mental toughness.”
Back to the Global Macro Grind…
Has The Game come easy to you in 2022? Have you had to maintain sustained concentration? Has your decision-making been deliberate? If winning at the highest level of The Game was easy, most of your competitors wouldn’t be losing.
Yesterday’s -1.5% drop in the SP500 (SPY) was the 57th Bear Market day of 2022 (where SPY was down -1% or more). If that sounds or “feels” like a lot, it is. It’s the most material concentration of down days since the US entered its last recession in 2008.
Did you make money in 2008? We did. If “making the turn” (from a bull to a bear market) on the back 9 of Augusta was easy, everyone on the PGA Tour would be like the people selling you subscriptions on Twitter: #CrushingIt.
Why was the no-volume Thanksgiving Friday a SELL/SHORT day and yesterday a BUY/COVER day?
A) On Friday, NASDAQ was green and approaching the top-end of its Risk Range within its Bearish TREND
B) Yesterday, AAPL was bright red and approaching the LOW-end of it’s $142-149 Risk Range
I used QQQ and AAPL as examples instead of SPY because I am short of both in The MFO Long/Short Book.
I didn’t use SPY because I haven’t been short it all year long. I’ve had much better US Equity Index and Sector Style shorts (QQQ’s #Quad4 Crash is currently -31.2% from The Mother of All Bubbles highs).
In The Chop Bucket, there are what I call “investable” Sector Style LONGS that are embedded in SPY (but not in QQQ) like my current Top 3 Sector Style (defined mathematically by Signal Strength) Longs:
- Healthcare (XLV)
- Staples (XLP)
- Defense (ITA)
With mainline US Equity Volatility (VIX) out of the “un-investable” F-Bucket (i.e. VIX > 29) I’m also LONG #Quad4 Factor Exposures that work at this stage of The Cycle:
- Low and/or Anti-Beta (BTAL)
- Visibility on Cash Flow (BUL)
- Gold Miners (GDX)
When I say yesterday was COVER/BUY day, that means I was covering-SOME Core Shorts (QQQ, XLK, etc.) and buying what was down (both BUL and GDX were down) because that’s what the discipline of the risk management #process requires.
Everything I do to my Long Only and Long/Short Books is incremental. Everything an amateur golfer looking for “big drives” does is all-or-nothing. If you want to make money in up/down tapes, you have to be incremental and disciplined.
Define discipline in The Chop Bucket (VIX 20-29):
A) If it’s a 3 foot putt (i.e. right near the LOW or TOP end of my Range), I’ll move 50-100 basis points of capital
B) If it’s a 6 foot putt (i.e. close enough that I can make it but not my highest probability), I’ll move 25 basis points
Those are my rules. They are defined by knowing My Game. You need to get to know yours:
A) Define your MIN and MAX position sizes
B) Define your rules on how you execute incrementally in basis points of capital at risk
I guess I could write a book about all of this and try to be famous for it. For me and My Game, that would be boring. I don’t do this to be famous. I do this (executing for my career, every market day) to win at the highest level.
That’s what I want for me and my family’s hard earned capital. That’s what I want for you.
Becoming a Player Coach has been the greatest challenge of my going on 24 year professional career. Playing The Game is getting less hard by having to be consistent in terms of how I try to coach it. I am grateful for the opportunity you’ve given me.
Today is #GivingTuesday. We’ve had a great year and we have a lot to be thankful for. Hedgeye will match up to $100,000 in donations to our Hedgeye Cares charity today. Thanks for being part of #HedgeyeNation.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets
UST 10yr Yield 3.61-3.97% (bullish)
UST 2yr Yield 4.32-4.62% (bullish)
High Yield (HYG) 72.86-75.29 (bearish)
SPX 3 (bearish)
NASDAQ 10,803-11,299 (bearish)
RUT 1 (bearish)
Tech (XLK) 126-135 (bearish)
Consumer Staples (XLP) 72.90-77.34 (bullish)
Healthcare (XLV) 132-138 (bullish) `
Shanghai Comp 3051-3162 (bearish)
VIX 19.96-25.98 (bullish)
USD 105.51-110.17 (bullish)
Oil (WTI) 73.89-83.78 (bearish)
Nat Gas 5.61-7.99 (bullish)
Gold 1 (bullish)
AAPL 142-149 (bearish)
Bitcoin 15,466-17,144 (bearish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
