“My desire has been to walk the talk.”
-John Wooden
I thought that was an important career quote from a book a subscriber sent me titled Coach Wooden, One-On-One. Wooden said that to Jay Carty when he was 92 years old.
I’m 48 years old. When I’m on the wrong side of the grass and not tweeting, writing, and/or coaching on The Macro Show, my desire will have been to walk the talk too. I will not chase. I will execute on the Full Investing Cycle #process.
What other people do is up to them. That’s what makes for a career in The Game. In my 24th year, I’ve never chased a “YTD” performance bogey. That’s probably why the most I usually lose is around -3% of my hard-earned pile when I’m “wrong.”
Back to the Global Macro Grind…
If I were to be able to ask Wooden what being “wrong” means, he’d answer that’s when you deviate from your #process. If you asked Nick Saban, he’d tell you the same thing.
Why do so many people have -30% drawdowns of their hard-earned capital?
A) They don’t have a #process
B) They just chase
What does being “right” mean?
A) Having a repeatable #process that has worked across multiple Full Investing Cycles… and
B) Executing on that, irrespective of what the crowd is chasing
Example:
A) Japan’s economy enters a #Quad1 economic #acceleration and my #VASP Signal says buy …
B) Japanese Stocks were up another +1.8% overnight to new Cycle Highs and +12.4% in a month
Does it really matter that Japanese Stocks are at the highest price since 1990? To me, it doesn't. Does the “YTD” return of Japan matter to me, or that it’s smoking SPY in the last month? A: Nope. The only thing that matters to me is:
A) WHEN did The Cycle turn #Quad1 …
B) WHEN did I buy the Asset Allocations (EWJ, SCJ, EWJV, JPXN)
WHEN I get #out can happen whenever it happens.
Example:
A) I was Long Commodities as an Asset Class from Q2 of 2020 until Q3 of 2022…
B) That Asset Class has crashed towards Cycle Lows (-23%) since
‘But, but… KM… AI … and QQQ… and TSLA has been up for 12 straight days.’
A: I don’t care.
While it would be nice if everyone’s hard-earned capital reset at ATH (all-time highs) every JAN 1 for the next “YTD”, that’s not what happens to YOUR capital. WHEN you get in/out matters more than anything else.
From WHEN I got #out of #Quad2 GROWTH exposures like QQQ, Crypto, etc., the NASDAQ is still down -16.2%. That means the bag-holders who owned it the whole way down only need to be up almost 20% to get back to that Peak Cycle Breakeven.
Not withstanding the thing that matters most (i.e. WHEN I cut my QQQ Short position to its MIN of 0.50% and covered the TSLA Short in RTA on May 25), I don’t have a #process and/or successful business if I have crashes and drawdowns like these:
- Bitcoin is still down -62% from its #Quad2 Cycle Peak
- Oil has crashed -45% from its #Quad3 Inflation Cycle Peak
- Russell 2000 is still -23% from its #Quad2 Cycle Peak
While QQQ is a very small position, my IWM (Russell) Short is my largest US Equity Index Short position. I don’t run it at MAX like an idiot would AFTER is crashes to the LOW-end of my Risk Range. I cover-SOME there and will re-load on it again today.
If you’re not using my #VASP (Volatility Adjusted Signaling Process) Signal Strength to make informed decisions SIZING your Diversified Short Book against your Longs, you’re not playing The Game the way I coach it.
Example:
A) As all who #PayAttention to the #process know, I don’t have a short position in Tech (XLK) which was +2.2% yesterday
B) I do have Core Short Positions in Banks (KRE), Real Estate (XLRE), and Energy Stocks (XOP)
All 3 of those Core Shorts were red yesterday. Those shorts helped me only lose 4 basis points of my hard-earned capital in my Long/Short Book yesterday. What your Long/Short Book did is what it did. We can always #GetBetter.
As for the incessant (and uniquely American) FOMO about a small collection of #BubbleCaps that A) many owned the whole way down and B) still own: I don’t care. That’s not being “insensitive.” They don’t care about me being Long Japan either.
For those of you who can only “invest” in a very narrow list of securities like MAGMA-NT, why weren’t you Long the ones I’ve signaled Bullish @Hedgeye TREND on? At a bare minimum, my #process says DO NOT SHORT those #VASP Signals!
What I really care about is you and your hard-earned capital. In observing the last 2x the uniquely American Performance Chase got this loud and the VIX was UP with SPY and QQQ punching new 1-month PRICE MOMO highs:
A) FEB 2, 2023
B) NOV 5, 2021
I’ll let you all look up what happened for the next 6 weeks post FEB 2 (another US Bank Crisis and Bulls begging for a Fed bailout), and for the next 8 months post NOV 5, 2021 (again, Old Wall begging Powell to do what he still won’t, cut rates).
Again, when it’s all said and done, my desire isn’t to have been your cheerleader. It’s to have been your coach who, no matter what the FOMO out there, stays calm and carries on with his #process. That’s how we win Full Investing Cycle Championships.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets
UST 10yr Yield 3.58-3.82% (neutral)
UST 2yr Yield 4.33-4.66% (bullish)
High Yield (HYG) 73.52-75.03 (bearish)
SPX 4127-4353 (bearish)
NASDAQ 12,812-13,523 (neutral)
RUT 1 (bearish)
Tech (XLK) 163-171 (bullish)
Industrials (XLI) 96.47-104.99 (bearish)
Financials (XLF) 31.67-33.40 (bearish)
Shanghai Comp 3176-3255 (bearish)
Nikkei 30,905-33,103 (bullish)
VIX 13.93-20.28 (bullish)
USD 103.06-104.51 (bullish)
Oil (WTI) 66.90-71.81 (bearish)
Gold 1 (bullish)
Copper 3.59-3.84 (bearish)
Silver 23.16-24.65 (bullish)
MSFT 320-340 (bullish)
AAPL 177-185 (bullish)
META 261-277 (bullish)
GOOGL 120-128 (bullish)
TSLA 189-256 (bearish)
Bitcoin 25,707-27,451 (bearish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
