Repetitive Drills

“Even in his repetitive drills he had a way of making the mundane seem important.”

-David Maraniss (on Vince Lombardi)

 

That quote comes from an inspirational excerpt on page 212 of “When Pride Still Mattered” where David Maraniss boils down the deep simplicity of Lombardi’s coaching process. If you’re trying to lead a country, company, or family this morning, I confidently submit that consuming this perspective is well worth your time. America needs you, The People, to lead us out of this mess.

 

Vince Lombardi was “the football variation of a masterly novelist who could take the muddle of everyday life and bring clarity and sense to it, and allow readers to see, for the first time what was in front of their eyes all along. Bart Starr was on the edge of his seat, listening – getting it for the first time. All the crap was gone; this was right to the bone, simple, yet so refreshing and exciting.”

 

“Everything was accounted for, labeled, identified, put in order, fundamental and sound. You could tell that the coach believed in what he was doing. His tone of voice, his posture, his manner – it all made you believe. It all made sense.”

 

So let’s grind. This globally interconnected marketplace all makes sense – you just need to account for “everything”:

  1. US TREASURIES – across the curve, 2s, 10s, and 30-year UST yields are making fresh YTD lows this morning in the face of a very wrong bet by some of our industry’s losing teams that suggested there was US “credit risk” coming down the pike. Not today.
  2. US DOLLARS – had a breakout day yesterday, trading right back above an important line of immediate-term support ($74.11 on the US Dollar Index) as clarity on the “Debt Deal” found her way into the market’s currency expectations.
  3. US EQUITIES – not good folks; not good – but are you surprised? With “Debt Deal” being replaced by “Growth Slowing” in this morning’s headlines, many a macro market observer has come to realize that more than just US politics makes globally interconnected risk go round.

Perversely, since La Bernank has addicted the entire Institutional Investing Community to chasing yield, what’s good for America’s currency is quite bad, in the immediate-term, for stocks and commodities.

 

We’ve labeled this The Correlation Risk (USD up = stocks and commodities down). Sadly, Bernanke and Geithner have been negligent in addressing this massive tail risk to the American people when under oath.

 

So what do you do with that?

  1. Short the Euro
  2. Short European Equities
  3. Sell US Equity and Commodity exposure

People want “clarity” in this market place. There it is.

 

On yesterday’s proactively predictable opening market strength, I sold down my US Equity exposure in the Hedgeye Asset Allocation Model to 0%. That’s ZERO. Like my long exposure to European Equities – ZERO.

 

As of yesterday’s close, here’s how the Hedgeye Asset Allocation Model is positioned:

  1. Cash = 52% (up from 43% last week)
  2. Fixed Income = 18% (Long-term Treasuries and US Treasury Flattener – TLT and FLAT)
  3. International Currencies = 12% (US Dollar and Canadian Dollar – UUP and FXC)
  4. International Equities = 12% (China, India, and S&P International Dividend ETF – CAF, INP, and DWX)
  5. Commodities = 6% (Silver – SLV)
  6. US Equities = 0%

Now the Hedgeye Portfolio (14 LONGS and 12 SHORTS) is a different product obviously than long-only asset allocation. Neither of these products are perfect. No one’s risk management process in this business ever will be. We get that – but every move we make is based on a repeatable process that changes as the math does. And, believe me, the coach over here believes in what he is doing.

 

My goal is simple. I want to win. And my team will stand here alongside you on the front lines of Global Macro market risk, just as we did during the thralls of 2008, so that you don’t lose your hard earned net wealth. We don’t make excuses. We make moves.

 

Since January 2011, we have led the debate that Global Growth Slowing was going to equate to lower than expected US Equity returns. Every morning since, we have been banging the drums with our often Repetitive Drills to remind you what we are seeing and when.

 

That doesn’t mean I am going to own US Treasuries (TLT), Flatteners (FLAT), or Silver (SLV) forever. I could sell them all today and nothing will have changed unless I deviate from the process in order to make those decisions. If the process changes, I better know why. And I damn well better be able to explain it to my troops.

 

In a world where people have no reason to believe their country’s leaders…

 

In a world where politics trump objectively scored performance…

 

That’s the best we can do as leaders. We have to be accountable. We have to make sense.

 

My immediate-term support and resistance ranges for Gold, Oil, and the SP500 are now $1611-1637, $94.11-96.21, and 1, respectively.

 

Best of luck out there today,

KM

 

Keith R. McCullough
Chief Executive Officer

 

Repetitive Drills - Chart of the Day

 

Repetitive Drills - Virtual Portfolio


People's Bank of China Spins China’s Bad-Loan Data

PBoC Deputy Governor Yi says China's non-performing loan problem has “pretty much stabilized." "Yi is spinning. China’s bad-debt problem remains serious," write Benn Steil and Emma Smith, Council on Foreign Relations.

read more

UnderArmour: 'I Am Much More Bearish Than I Was 3 Hours Ago'

“The consumer has a short memory.” Yes, Plank actually said this," writes Hedgeye Retail analyst Brian McGough. "Last time I heard such arrogance was Ron Johnson."

read more

Buffalo Wild Wings: Complacency & Lack of Leadership (by Howard Penney)

"Buffalo Wild Wings has been plagued by complacency and a continued lack of adequate leadership," writes Hedgeye Restaurants analyst Howard Penney.

read more

Todd Jordan on Las Vegas Sands Earnings

"The quarter actually beat lowered expectations. Overall, the mass segment performed well although base mass lagging is a concern," writes Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan on Las Vegas Sands.

read more

An Update on Defense Spending by Lt. Gen Emo Gardner

"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.

read more

Got Process? Zero Hedge Sells Fear, Not Truth

Fear sells. Always has. Look no further than Zero Hedge.

read more

REPLAY: Review of $EXAS Earnings Call (A Hedgeye Best Idea Long)

Our Healthcare Team made a monster call to be long EXAS - hear their updated thoughts.

read more

Capital Brief: 5 Things to Watch Right Now In Washington

Here's a quick look at some key issues investors should keep an eye on from Hedgeye's JT Taylor and our team of Washington Policy analysts in D.C.

read more

Premium insight

[UNLOCKED] Today's Daily Trading Ranges

“If I could only have one thing of the many things we have it would be my daily ranges." Hedgeye CEO Keith McCullough said recently.

read more

We'll Say It Again: Leave Your Politics Out of Your Portfolio

If your politics dictates your portfolio positioning, the Democrats and #NeverTrump crowd out there have had a hell of a week.

read more

Cartoon of the Day: 'Biggest Tax Cut Ever'

President Donald Trump's economic team unveiled what he called last week, "the biggest tax cut we’ve ever had.” Before you get too excited about that hang on a sec. "Trump Tax Reform ain’t gettin’ done anytime soon," Hedgeye CEO Keith McCullough wrote in today's Early Look.

read more

Neurofinance: The Psychology Behind When To Sell A Bull Market

"Most momentum investors stay invested too long, under-reacting and holding tight after truly bad news finally arrives to break the trend," writes MarketPsych's Richard Peterson.

read more