“When I fought, I was neither emotional nor intellectual.”
-Rickson Gracie
When I trade, I am neither emotional nor intellectual. Given how emotionally tilted I could be in a hockey game, this didn’t just happen for me. The pandemic trading period got my game to where it’s today. Sitting in an empty office, just executing in silence, helped, a lot.
While Wall Street has a LOT of good Long Only and/or Levered Long Portfolio Managers that can sound intellectual about things like “Blockchain”, AI, and “the exponential age”, I’m just a low SAT scoring Mucker who grinds out The Cycle
As Gracie goes on to explain in Breathe – A Life In Flow, “Orlando Cani taught me how to empty my mind and use intuition instead of my brain. This gave me a huge advantage in the ring. I never thought about strategy. I just allowed myself to connect with my opponent on a profound level. The moment the bell rang, I didn’t expect anything or plan anything.” (pg 92)
Back to the Global Macro Grind…
I’m 48 years old and don’t have life or Cycle-Time to read nonsense from Telecom Tom or Old Wall’s daily process-less Talking Points. If I did, I’d have known that people were buying broken Bank Stocks on Friday “because First Republic was a bullish clearing event.”
I only have time every morning to clear my mind and write everything down on a fresh page in my notebook. I connect with the data at a profound and deliberate level of study. The moment that markets open, I don’t care what anyone else thinks or feels. I just execute.
After having my best day of the year, this is what I am going to reiterate about The Cycle-To-Date #CTD this morning:
- #Quad4 Profit Recession Reiterated
- #Quad4 Credit Event Reiterated
- Long Gold, Reiterated
That’s been on Slide 26 of the Q2 Macro Themes deck since March 29th. I didn’t panic-cover shorts into the March or April month-end markups like a rookie who’s never made money in a bear market in his life.
I waited for my buy/sell opportunities (I bought a LOT of Gold!) and I executed at the TOP and LOW ends of my Risk Ranges.
On the aforementioned Q2 Themes, Josh Steiner, Josh Balch, and I had a 1-hour call yesterday with one of the world’s best modern day Hedge Fund Managers (i.e., he was +16% last year running billions).
He rattled off about a dozen of the Credit Event slides by slide number and then asked, “what percentage of your clients don’t get this?”
A: “Good question. I don’t know,” I said.
He then proceeded to tell us that he had to fire a few of his “Financials” guys because they “clearly don’t get cycles and how long the credit part takes.” He laughed at a couple of my AI jokes and asked me if I saw some of the fancy Tech guys returns in bear markets?
I said I’ve seen some. But I haven’t seen the real show yet: Private Equity and Venture Capital Returns, properly marked.
Next Q: “When/where are the next shoes to drop?”
A: Q2 Private Equity Marks, Q2 Earnings Decels, and #Quad4 returning in Q4 of 2023”
That last part is what I’ll leave you with this morning. Steiner and Drago have updated our Nowcast Model for the following 4 quarters and the most glaring Quad Shifts (i.e. change in conditional probability of Quad projections) are for the US economy NOT to #accelerate into #Quad1 in either Q4 of this year or Q1 of next year. We now have #Quad4 for Q4 of 2023 and #Quad3 Stagflation for Q1 of 2024.
Maybe that’s why Profitless Tech (as a Factor Exposure) and Energy Stocks (XLE), as a Sector Style, led yesterday’s decliners at -4.6% and -4.4%, respectively, on the day. Maybe it’s not. Remember, I’m not the intellectual in your mail this morning.
I’m just the guy reading the numbers and executing on my battle-tested 24-year-old bear market process.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets
UST 10yr Yield 3.35-3.62% (bearish)
UST 2yr Yield 3.81-4.29% (bullish)
High Yield (HYG) 74.27-75.15 (bearish)
SPX 4038-4162 (bearish)
NASDAQ 11,730-12,217 (bearish)
RUT 1 (bearish)
Tech (XLK) 143-152 (bearish)
Gold Miners (GDX) 32.97-34.98 (bullish)
Utilities (XLU) 67.85-70.37 (bullish)
Nikkei 28,218-29,206 (bullish)
VIX 15.93-20.12 (bullish)
USD 100.87-102.03 (neutral)
EUR/USD 1.093-1.107 (neutral)
USD/YEN 133.01-137.73 (bullish)
CAD/USD 0.730-0.744 (bearish)
Oil (WTI) 69.56-76.89 (bearish)
Oil (Brent) 73.23-81.00 (bearish)
Gold 1 (bullish)
Copper 3.77-3.98 (bearish)
Silver 24.55-25.84 (bullish)
Bitcoin 26,864-30,045 (bearish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
