“There are 2 pains in life. There’s the pain of discipline and the pain of disappointment. If you can’t handle the pain of discipline, then you’ll never have to deal with the pain of disappointment.”
-Nick Saban
I may not be the most intellectual person you read and/or listen to in the morning, but I am the most disciplined. When I state that as a fact (according to me), realize I am comparing myself against a relatively low bar of competition: Old Wall Street.
When people think about other people, they’re usually thinking about themselves. No matter what you think about one of the world’s most winning coaches (Nick Saban)… or the star of the intellects, Elon Musk… they share some critical leadership skills: Attention To Detail, Accountability In Results, Consistency, Sacrifice, Discipline, and a #Process Oriented Approach.
When I interview what we call “content producers” (Sector Heads), I really only care about 2 things: who are you as a person? And what is your process? If you aren’t willing to consistently pay attention to detail and hold yourself accountable to both your process and results, I’ll keep looking for the next player that can.
Back to the Global Macro Grind…
What’s your decision-making #process? Is it consistent and deliberate? Do you execute it with discipline?
While I’ll never know everyone’s answers to those questions, I’m constantly questioning and evolving mine. As I approach Game 6,000 (number of trading days in The Game), I’m as disciplined as I’ve ever been.
And I still have to #GetBetter. Every day. Or someone good is going to send me a note like this in the morning!
Let’s bring this right down to decisions I’ve been making in my Portfolios:
A) The MFO (Mucker Family Office) Long Only Account
B) My Long/Short Book
Next to my God, family, and firm nothing matters more to me than the score I have in those two games.
Yes, I think of them as games. If I want to play something at the highest level, that’s who I am and how I think about it. My #1 goal in The Game is to preserve and protect my family’s hard-earned capital so that I can compound returns over time.
If I wanted to run OPM (other people’s money), I would.
Been there, done that. Many of you run money, and I respect that. Winning, across the Full Investing Cycle (and winning for many Cycles) is one of the hardest things to do on the planet. #DoHardThings (great book by Steve Magness).
Let’s do the Long Side of The Game first. What are some disciplined & process-driven decisions I’ve made recently:
- I’ve moved Gold all the way down to my #MIN (minimum Asset Allocation)
- I’ve moved Japanese Equities either #OUT (Small Cap, SCJ) or towards my MINs
- I’ve moved India (INDA) consistently #UP my re-ranked Asset Allocation (which is published daily in Macro Pro)
I don’t run OPM, but I run mine. I think I’m the only thick skulled-hockey-head who is numb enough to show you EVERY incremental ADD, SUBTRACT, etc. move in my Long Only account daily (we’re coming out with a weekly product for that too).
But KM ‘why, why… why aren’t you buying more Gold – don’t you love Japan – India, really?’
While some of the intellectual types who I have worked with over the years may have “thought” or “felt” differently about this (and failed), WHEN matters a lot more than WHY when running money:
A) WHEN my #VASP (Volatility Adjusted Signaling Process) changes, I change
B) I have no personal feelings and/or marketing relationships with any position
They’re all just tickers.
And while that may not sound “smart” enough for everyone in this profession, that’s a very good thing. It takes a LOT of time and reps playing The Game to realize that you aren’t smarter than the market. Have the humility to listen to The Market.
If an Institutional Client asks me WHY? I will obviously try to answer the question (my team spends a lot of time explaining what I’m doing and why). I’m just reinforcing that the pain of discipline is knowing that WHEN matters more than WHY.
So let’s quickly do WHY on Gold and Japan?
A) It’s the same answer for both
B) Both have seen their Vol of Vol Signals breakout alongside UST and JGB Bond Yields
Vol of Vol = the volatility of volatility in my PVV Signal (Price, Volume, Volatility). When volatility breaks out on either my immediate-term TRADE or intermediate-term TREND durations, I change my positioning.
Now let’s do India (INDA):
A) It’s the only major Global Equity market right now with a Bullish TRADE and TREND Signal
B) India reported another ROC #acceleration in their Services PMI to 61.0 for SEP (that’s nearing a 13 year high)
ROC = Rate of Change. Fractally and mathematically, that’s all my Volatility Adjusted Signaling Process cares about.
Now let’s do the Long/Short Book:
A) India (INDA) is my largest Global Equity Long position currently
B) My Top 10 Shorts (ranked in terms of sizing) = FXE, XLU, OXLC, HYG, JNK, AAPL, XLK, EWQ, XRT, XLRE
Before you lock those 10 shorts in, I have 24 Macro Shorts in my Diversified Short Book (vs. 23 Longs right now, which is down from 30 Longs only last week). And the re-ranked order of those Shorts move up/down a LOT.
“Why”: A: They’re just tickers. And I execute on those tickers with pure mathematical discipline.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets
UST 30yr Yield 4.54-4.99% (bullish)
UST 10yr Yield 4.44-4.85% (bullish)
UST 2yr Yield 5.00-5.17% (bullish)
High Yield (HYG) 71.94-73.56 (bearish)
SPX 4 (bearish)
NASDAQ 13,003-13,396 (bearish)
RUT 1 (bearish)
Tech (XLK) 160-166 (bearish)
Energy (XLE) 84.93-93.50 (bullish)
Utilities (XLU) 54.41-59.90 (bearish)
Shanghai Comp 3065-3142 (bearish)
Nikkei 30,501-32,253 (bullish)
BSE Sensex (India) 65,052-66,553 (bullish)
DAX 14,991-15,530 (bearish)
VIX 16.13-20.79 (bullish)
USD 105.27-107.14 (bullish)
EUR/USD 1.041-1.66 (bearish)
USD/YEN 147.96-150.15 (bullish)
GBP/USD 1.204-1.228 (bearish)
CAD/USD 0.722-0.737 (bearish)
Oil (WTI) 82.57-94.87 (bullish)
Nat Gas 2.81-3.05 (bullish)
Gold 1 (neutral)
Copper 3.50-3.73 (bearish)
Silver 20.46-22.99 (bearish)
AAPL 168-176 (bearish)
Bitcoin 26,107-28,305 (neutral)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
