“Respond to reality.”
-Steve Magness
Having MAGMA FOMO or a hard time keeping your mind steady? There’s an entire #behavorial process for that. It’s not easy. If it was, more people wouldn’t be getting crushed in Crypto again after chasing those big Bear Market lower-highs in April.
If you’re trying to preserve, protect, and compound your hard earned capital across the Full Investing Cycle, that won’t be easy either. Today’s quote is one of Magness’s mental “Toughness Maxims” from his outstanding #behavioral book Do Hard Things:
“For most of us, we’re not only responding to the actual stress but the reverberations of it. Tough individuals learn to match perception with reality so that they marshal the appropriate response instead of an exaggerated one.” (pg 173)
Back to the Global Macro Grind…
On yesterday’s Macro Show I had to respond to an exaggerated and emotional response from a gentleman named Ron. He asked for help, but I couldn’t give it to him. If I can’t see the timing/sizing mistakes you make with your portfolio, how can I help you?
Instead, I did what I do, daily. I tried to steady people’s minds, focus on the process, and coach people through the next play.
Being a Player/Coach isn’t easy either. Especially when it “feels” like it’s going to be a tough day (after losing money in the prior day), I sometimes get frustrated with the divide between my mental balance and the Macro Show QA’s exaggerated one.
But that’s a good thing. Forcing me to react to other people’s problems gives me coaching moments!
Those moments aren’t all good (#AG) like AI. Nope. That’s not reality. Responding to reality means A) executing on my process no matter what you are “feeling”, and B) trying to coach you through executing on YOUR process and navigating your feelings.
So let’s get on with where I started answering Ron’s question = The Cycle #SlowingFaster update:
A) US Retail Sales have #slowed -580 basis points from their non-TRENDing monthly acceleration in JAN
B) US Industrial Production Growth has #slowed from +1.5% in JAN to +0.24% in APR
These 2 FEATURES in our GIP Model are the 4th (Retail Sales) and 2nd (Industrial Production) ranked:
A) Features in the model are RANKED in terms of MARGINAL IMPACT on the GIP (Growth, Inflation, Policy) Model
B) WHEN the heavy weights in the model #slow faster, our US GDP Nowcast #slows faster
The real-time Nowcast summary of all 30 FEATURES in the GIP Model are as follows:
A) Real US GDP #slowing from +1.56% year-over-year growth in Q123 to +0.99% year-over-year in Q2
B) Real US GDP quarter-over-quarter SAAR slowing to -2.78% headline in Q2 vs. +1.10% reported in Q123
Why the Atlanta Fed is still up at +2.89% q/q SAAR for Q2 is beyond me. I don’t have time to deal with their issues. Tell them to get some of that fancy AI stuff the Old Wall is enamored with and get with the HedgeyeAI program.
Yes, we’ve been using AI since the beginning of Hedgeye’s inception. Our GIP Nowcast Model is Bayesian “smart” and retrains itself for marginal impact of data surprises. Most incoming data for April and May are surprising us to the DOWNSIDE.
Yep, had to go all CAPS on you there, Ron. I hope you don’t mind. I want you to A) understand the process and B) be coachable.
“But, but, KM … I don’t diversify my short book and I’m loaded to the gills in short QQQ and TSLA.” Yep, I get it. That’s neither a process nor a portfolio. So keep on grinding and #GetBetter.
Ex-7-MAGMANT (adding NVDA and TSLA) FOMO stocks, Global Macro Markets have agreed with #CSF (Cycle Slowing Faster):
- CURRENCIES: USD made a fresh 2-month HIGH yesterday for April and May
- COMMMODITIES, as an Asset Class, continues to crash with Copper crashing to new CYCLE LOWS this morning
- CREDIT, continues to trade by appointment, with gaps down in CCC Bonds, Junk (JNK), etc. again yesterday
Oh, but Ron wants to only talk about stah-ks! Yep, let’s do that by US Equity Sector Style for MAY-to-date:
- Energy (XLE) is down -5.8%
- Real Estate (XLRE) is down -4.6%
- Basic Materials are down -4.4%
Our Industrials (XLI) Core #Quad4 Short was down another -1.2% yesterday. Our Financials (XLF) Core #Quad4 Short was down another -1.2% yesterday too. And our Short Consumer (via Retail Sales #Slowing) via Retail (XRT) is below the March lows.
Whether Ron captured Retailers (XRT) crashing -20.2% from WHEN Retail Sales #accelerated in JAN to WHERE The Cycle is #slowing faster now isn’t clear to me. But it’s crystal clear in my Long/Short Book that I did.
So, with a steady process and still mind, I’ll keep trying to coach you all through how to risk manage Phase III of The Bear Market.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets
UST 10yr Yield 3.34-3.75% (neutral)
UST 2yr Yield 3.86-4.43% (bullish)
High Yield (HYG) 73.61-74.78 (bearish)
SPX 4069-4196 (bearish)
NASDAQ 12,153-12,768 (bearish)
RUT 1 (bearish)
Tech (XLK) 148-159 (bearish)
Gold Miners (GDX) 31.00-34.91 (bullish)
Staples (XLP) 74.02-77.76 (bullish)
Shanghai Comp 3190-3301 (bearish)
Nikkei 29,371-31,525 (bullish)
VIX 16.06-20.22 (bullish)
USD 101.54-103.96 (bullish)
EUR/USD 1.073-1.095 (bearish)
USD/YEN 134.77-139.99 (bullish)
Gold 1 (bullish)
Copper 3.57-3.79 (bearish)
Bitcoin 25,901-27,911 (bearish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
