“Scientists should be judged not by their bold predictions but by their records of achievement.”
-Dr. Leroy Hood
Can you imagine Americans were able to judge both the Federal Reserve and Wall Street (often one and the same thing) on their records of achievement in predicting either the 2021 breakout in non-transitory INFLATION and/or the last 2 US Recessions?
While Hedgeye is 15 years into building out our objective, data (and AI) driven, measuring & mapping #process for every time-series that ticks, our independent and apolitical research has just begun. We are the alternative to the Old Wall’s predictions.
Not dissimilar from our experience in this profession, Dr. Hood goes on to explain: “The several key paradigm-shifts that brought us here followed quite logically from the preceding one, although in no case was it possible to see the next until the last had materialized. This movement, from shift to shift, sometimes reminds me of the endlessly undulating Beartooth Mountains of Montana where, until you reach the next ridgeline, you cannot imagine what terrain may lie ahead.”
-The Age of Scientific Wellness (pg 33)
Back to the Global Macro Grind…
Why don’t you risk manage your money the way you should be measuring, mapping, and risk managing your health?
Why, especially in the age of the beloved AI (which allows us to measure and map ALL of the rate of change data, stochastically, in real-time), would you take someone’s qualitative narrative over the numbers?
We know why they would. “They” being the “Elites” and/or the establishment of policy and money makers who are constantly re-ordering the deck chairs to get themselves re-elected or paid…
But why would YOU do that to yourself and/or your family and hard-earned capital?
We won’t. We didn’t do it when we started Hedgeye calling the 2008 Crash. We didn’t do it when we went Long INFLATION last time in Q2 of 2020. And we certainly won’t do that now.
No matter what their unelected Fed tells us… no matter what they tell the Fed to do (begging for no more rate hikes)… we are going to keep doing what our Bayesian Inference #process tells us to do as we reach the next ridgeline.
What does Long Inflation look like in my Long Only Portfolio?
Here’s a LIVE Shot of the Top 10 positions in the MFO (Mucker Family Office) Long Only Account as of yesterday’s close (positions rank ordered by SIZE):
- FDRXX (Fidelity Gov Cash Reserves)
- TBIL (UST 3-month Treasury Bill ETF)
- TFLO (iShares Treasury Floating Rate Bond ETF)
- XOP (Oil & Gas Production & Exploration)
- UUP (US Dollar)
- SCJ (Japan Small Cap)
- EWJ (Japan MSCI)
- XLE (Large Cap Energy)
- PSCE (Small Cap Energy)
- SMIN (India Small Cap)
In addition to being Long US Inflation Re-accelerating, did I mention we’ve been Long both India and Japan this year?
These aren’t “YTD” positions. These Asset Allocations to both India and Japan are CTD, or Cycle-To-Date, that happened at different points of 2023 with both economies measuring and mapping into #GrowthAccelerating economic Quads (Quads 1 &2).
In the last month alone, these Global Equity Allocations have pounded broad US Equity Allocations:
A. Japan’s Nikkei is +5.7% in the last month
B. India’s BSE Sensex is +4.5%
In the last month, our #1 US Equity Index Short since going bearish on the USA’s Full Investing Cycle back in JAN of 2022 (i.e. the Russell 2000) is down -1.4%. What’s much worse is:
A. Russell 2000 (IWM) is in the midst of another -8.5% DRAWDOWN since AUG 1, 2023
B. Russell 2000 (IWM) remains in Full Cycle Crash mode, crashing -24.9% from its NOV 2021 Cycle Peak
Instead of chasing performance and “buying the laggards” at the end of July, if you were going to be Long US “Stocks” you’ve been much better off being Long of the right SECTOR STYLES and FACTOR EXPOSURES that are explicitly linked to Inflation Accelerating:
- Energy Stocks (XOP, XLE, and PSCE)
- MLPs (AMLP is currently my 14th ranked Asset Allocation)
- Uranium (URNM, URA, and NLR are also Core Asset Allocations)
As I’ve mentioned in prior Early Looks, Macro Shows, Coaching Sessions, etc., as Long Only Asset Allocations appreciate in value, I sell-SOME and re-invest that hard-earned capital in either Risk Free +5% returns (FDRXX, TBIL, TFLO) or things that are correcting.
Immediate-term example: Japanese Equities corrected -0.87% overnight, so I’ll buy-more of those today. I currently have 28 Asset Allocations. You can see them all daily (i.e. what I’m buying and selling) in our Institutional Research and Macro Pro subscriptions.
In my Long/Short Book, I have plenty of Core Shorts on the other side of being Long Inflation. Despite SPY doing nothing yesterday, these Sector Styles generated plenty of alpha: Regional Banks (KRE), US Retailers (XRT), and Real Estate (XLRE).
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets
UST 30yr Yield 4.31-4.46% (bullish)
UST 10yr Yield 4.21-4.38% (bullish)
UST 2yr Yield 4.92-5.09% (bullish)
High Yield (HYG) 74.25-74.95 (bearish)
SPX 4 (bearish)
NASDAQ 13,539-13,962 (bearish)
RUT 1 (bearish)
Tech (XLK) 167-175 (bearish)
Energy (XLE) 89.90-93.65 (bullish)
Utilities (XLU) 61.12-65.51 (bearish)
Shanghai Comp 3100-3165 (bearish)
Nikkei 32,242-33,597 (bullish)
BSE Sensex (India) 66,253-68,312 (bullish)
DAX 15,575-15,897 (bearish)
VIX 13.12-16.33 (neutral)
USD 104.33-105.46 (bullish)
CAD/USD 0.729-0.745 (neutral)
Oil (WTI) 85.94-93.21 (bullish)
Oil (Brent) 89.13-95.68 (bullish)
Gold 1 (bullish)
Copper 3.65-3.85 (neutral)
AAPL 170-181 (bearish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
