“His primary leadership asset: his ability to teach people how to think and play at a much higher level.”
-Joe Montana (on Coach Bill Walsh)
That’s from the Foreword that one of the best (and most coachable) NFL players of all time wrote about his coach, Bill Walsh, in The Score Takes Care Of Itself.
Montana went on to write: “Bill raised everybody’s standard, what we defined as acceptable. Perfection was his acceptable norm, and he got us thinking we could achieve it by teaching us what perfection was and how to reach it.”
This game is different than professional football. While perfection will rarely be achieved, mastering and refining your Full Investing Cycle & Risk Management #Process is the goal. You can play at a much higher level.
Back to the Global Macro Grind…
How do you risk manage your portfolio at the highest level?
A: you don’t play The Game at the level you were originally taught!
Instead of creating and evolving his game-changing “West Coast Offense”, imagine Bill Walsh came to the San Francisco 49ers and introduced the 50-day Moving Monkey Offense?
You can slap laser-eyes on buy-and-HODL and call “DCA” something innovative and new, but it’s not. Wall Street will always be in the business of selling you paper. They almost never get YOU #out.
Your #1 job is to not only risk manage that reality, but to preserve and protect your hard-earned capital.
With inexperienced players freaking out about what “went moon” for them (NVDA had a minor -6% correction from last week’s highs but something like SMCI has crashed -22% in 2 days), let’s just keep playing OUR game.
There are 3 main Focus Areas in Risk Managing OUR portfolios:
A) What current Asset Allocations are we going to buy or sell incrementally?
B) What current Asset Allocations are we going to get #out of, if any?
C) What Asset Allocations could we add to our portfolios?
Risk Managing Focus Areas A & B goes together. Let’s use some real-time examples in my portfolios (using our new Portfolio Solutions product and moves I’ve made in the last few weeks):
- On red on FEB 12, I was buying-MORE of our Core Asset Allocation to India (via INDA and SMIN)
- On green, on FEB 15, I was selling-SOME of our Core Asset Allocation to Uranium (URA, URNM, NLR)
- In the last 2 days, I’ve been buying-MORE of my US Dollar (UUP) Asset Allocation
These were all risk managed decisions that were disciplined, and rules based.
Since the in-game decision to buy-MORE India near the LOW-end of my Risk Range™ Signals worked, few of you will want to review that. It’s your human nature to focus on things that aren’t working now!
That said, the risk management decision to REDUCE my Gross Long Exposure to Uranium worked:
A) In addition to getting #out of my Small Cap Uranium (URNJ) Asset Allocation before yesterday’s decline…
B) I sent out a Real-Time Alert on URA after it broke my #VASP’s immediate-term TRADE Signal support
C) Prior to yesterday’s declines, I had already reduced my URA, URNM, and NLR positions to my MINs
What are my MINs (Minimum Position Sizes) for Commodity Asset Allocations? A: 1%.
If you do not have basic Portfolio Construction Rules like MIN and MAX Position SIZES by Asset Class embedded in your Risk Management #process, you’re not even in The League never mind playing in it at the highest level.
Focus Area B: what would take me #out of my remaining Uranium Asset Allocations?
A) A breakdown through my #VASP’s (Volatility Adjusted Signaling Process) TREND Signal Support Level
B) For URA for example, my TRADE and TREND #VASP Levels are 29.36 and 27.75, respectively
Nope, I don’t boil the ocean over the decision and/or read a white paper on the long-term (bullish) supply case for Uranium. If it breaks TREND, I sell it all. Just like checking down covered receivers, that’s it.
There is no natural and/or religious law saying I can’t buy whatever I sell back btw.
That said, my hard-earned capital has competition. If Jerry Rice is in double-coverage, why wouldn’t I check that option down and throw it to Roger Craig?
Instead of buying-more Uranium as it is losing Risk Range™ Signal Strength, why not consider throwing some hard-earned capital to something we’ve had on the bench (thankfully) for a long-time like China or Copper?
Yes, that’s Focus Area C! I’ll check-down those TRADE and TREND Risk Range™ Signals in both my Top 3 Things this morning and on The Macro Show.
I’m out of Early Look writing time. The #process must go on. For me it’s always onto the next play.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets
UST 10yr Yield 4.04-4.38% (bullish)
UST 2yr Yield 4.36-4.71% (bullish)
SPX 4 (bullish)
NASDAQ 15,550-16,055 (bullish)
RUT 1 (bearish)
Shanghai Comp 2 (neutral)
BSE Sensex (India) 71,103-73,301 (bullish)
VIX 12.79-16.31 (bullish)
USD 103.70-104.91 (bullish)
EUR/USD 1.070-1.081 (bearish)
Oil (WTI) 74.17-79.38 (bullish)
Copper 3.68-3.91 (neutral)
Uranium (URA) 27.50-31.27 (neutral)
MSFT 398-421 (bullish)
AAPL 179-187 (bearish)
GOOGL 139-151 (bullish)
NVDA 677-750 (bullish)
Bitcoin 49,908-53,212 (bullish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
