“Respect is earned every day by waking up early and challenging yourself.”
-David Goggins

Goggins also likes to say “embrace the suck.” I like that. Because sometimes I suck. And sometimes you gotta suck it up for a little while before you win big.

WHEN are you going to get those Buying & Selling Opportunities? My #VASP (Volatility Adjusted Signaling Process) sometimes “sees” opportunities coming; sometimes they surprise me. That’s The Game. I embrace uncertainty too.

I like how Goggins thinks about the WHEN: “There are 86,400 seconds in a day. Losing just one of those seconds can change the outcome of your day and, potentially, your life.” -Never Finished (pg 93)

What I Was Buying (Yesterday) - 02.06.2023 liquidity cartoon

Back to the Global Macro Grind…

God willing, I’ll wake up with two feet on the floor (and eventually two hands on the keyboard) again tomorrow morning with another opportunity to execute on my Full Investing Cycle #process.

Yesterday all I did was what “Perma Bears” who aren’t perma anything do: buy and cover on red.

WHEN I was selling and shorting on green last Thursday, I didn’t know when I was going to buy and cover-some. Not unlike a professional athlete, poker player, etc., I’m trained to read and react to The Game I am in, not the one I’d like to be in.

Here’s how the Net Exposure of my Long/Short Book has moved in the last week:

  1. Last Tuesday I went to +3.9% Net Long
  2. By Thursday I was -5.3% Net Short
  3. This morning I’ll open at +3.9% Net Long

While I do have a rule to not run more than -25% Net Short, I don’t “target” Net Exposure. I’ve worked for people who did and did not make me do that. I do better with a KM No Net Exposure Rule.

While Real-Time (Coaching) Alerts is NOT a portfolio, it coaches you through what I am thinking directionally with more transparency and detail than I’ve provided in 15 years of doing this Hedgeye gig.

In sharp contrast to Phase I of The Bear Market that we called from JAN-JUN of 2022 where I’d routinely be running -10 to -25% Net Short, in Phase III of The Bear, I’ve been in this +/- Single Digit Range. That makes sense for two big reasons:

  1. We’re in what I call The Chop Bucket for US Equities (VIX 19-28 Range for front-month Volatility)
  2. We have plenty of NEW LONGS in our Core Asset Allocation Model that I didn’t have in Phase I of The Bear

I’ll review 2 of the Top Asset Allocations I was making on red in the last 2 days on our Mid-Quarter Macro Themes Update presentation LIVE @HedgeyeTV at 11AM ET (ping  if you’d like Macro Pro access):

  1. Buying Precious Metals and related Mining Exposures
  2. Buying China and Hong Kong related Equities

Since Gold was up (small) off the low-end of my Risk Range yesterday, let’s focus on WHEN and WHERE I was focusing my incremental buy orders (remember, I buy/sell EVERYTHING INCREMENTALLLY in basis points of capital at risk):

  1. China Internet (KWEB)
  2. Hong Kong (EWH)
  3. Quantamental China (RAYC)

The guys and gals at Raliant Quantamental China Equity (RAYC) don’t need to send me some champagne for the recent pop in volume in their ETF (that’s WHEN I was adding to it in our Macro Pro subscription) because:

A) I don’t drink champagne… and
B) I’ll eventually short China … and they won’t like that, ha

In all seriousness, our recent turn on China was born out of serious bearishness. We’d been bearish on China for 2 YEARS while their economy was #slowing in Quads 3 and 4. The Bull case is primarily built on:

A) 8 QUARTERS of easy comps (or comparative base effects)… and
B) Key Features in our proprietary GIP Model Nowcast already #accelerating

On that part B) of The Bull Case, here are 2 very recent ROC (Rate of Change) #accelerations:

  1. China Services PMI ramping from 41.6 in DEC to 54.4 in JAN!
  2. China Domestic Air Traffic for 2023 YTD has #accelerated +17.8% year-over-year

If you think I won’t go bullish on the USA when the data is #accelerating like that, you’re either out of your mind or new to Hedgeye (so thank you for joining us this morning!).

Want some hot picks? You know I’m like a fractal god of stock picking (when entering #Quad1) right? Lol. Here are the Top 3 China Stock Picks that marry my #VASP Signals with Felix Wang’s fundamental China Pro Research product:

  1. Pinduoduo (PDD)
  2. New Oriental Education (EDU)
  3. Miniso Retail Group (MNSO)

Oh I know, like TSLA and AAPL, “everyone owns these” already. #not

And no, these aren’t like the Hot-take Dan Ives CNBC Growth Stock Market Crash picks of 2022. They’re Hedgeye-Style Longs that change in terms of how I rank-order what we call their Risk Range™ Signal Strength every trading day.

So don’t get married to them like my risk management process is married to Felix. They’re just today’s stock picks.

Don’t tell anyone, but I was also buying-SOME TLT yesterday. I’ve had a very promiscuous relationship with that ticker for the last while, so be careful with this one heading into the omnipotent “Powell” chat with my former boss (Ruby) today.

WHEN on both IEF (7-10yr Treasuries) and TLT (20yr) is very straightforward and is usually the answer on WHY I execute on anything. They were at the LOW-ends of their respective Risk Range™ Signals yesterday.

The big WHY (fundamentally) will not be spoken of accurately by Ruby (Carlyle’s David Rubenstein) or Powell today. They want/need to believe in rainbows, puppy dogs, and “soft-landings.”

You need a good hard landing for TLT to melt-up from here. My #VASP Signal is starting to sniff that out.

Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets

UST 30yr Yield 3.53-3.71% (bearish)
UST 10yr Yield 3.35-3.64% (bearish)
UST 2yr Yield 4.10-4.46% (bullish)
High Yield (HYG) 74.99-77.12 (bearish)            
SPX 3 (bearish)
NASDAQ 11,119-12,222 (bearish)
RUT 1 (bearish)
Tech (XLK) 130-143 (bearish)
Healthcare (XLV) 130-134 (bearish)
Defense (ITA) 112-116 (bullish)                                 `              
Shanghai Comp 3 (bullish)
VIX 17.72-21.09 (bullish)
USD 101.12-104.55 (bullish)
Oil (WTI) 72.30-78.80 (bearish)
Nat Gas 2.26-3.04 (bearish)
Gold 1 (bullish)
Silver 22.11-24.70 (bullish)
Bitcoin 20,443-23,888 (bearish)

Best of luck out there today,

Keith R. McCullough
Chief Executive Officer

What I Was Buying (Yesterday) - TuesdayCOD