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Being Good

This note was originally published at 8am on June 12, 2013 for Hedgeye subscribers.

“I am not remotely interested in just being good.”

-Vince Lombardi

 

If you can’t tell I like winning, you probably haven’t met me yet. I think I hate losing more than I love winning. The only way not to be average in this game is to play on a great team. I am not remotely interested in just playing on a good one.

 

What makes a good analyst? What makes a bad one? What makes an average PM? What makes a great one? After playing on 3 big buy-side teams, then building my own here while we collaborate with client teams, I can tell you that greatness in this profession comes down to one very basic thing – having a repeatable, but flexible, process.

 

Once you have that – you have to do what Lombardi did. You have to find it within you to lead your teammates to believe in both the process and themselves. I’ve had the privilege of playing on a championship team on the ice. When individuals find a way to put the collective goal above themselves, you have an opportunity to drink from the cup.

 

Back to the Global Macro Grind

 

It’s not cocky, arrogant, or whatever else someone who just wants to be good thinks you are when you get up every morning and tell them you are going to beat them. For some of us, that’s just the goal. Expecting to win is a culture – don’t apologize for it.

 

I was on the New York CFA Society’s Big Data panel for a 2 hour debate last night in NYC. The panel was a typical mix between academia, industry, and market practitioners. One academic guy was from Morgan Stanley. One industry guy was from IBM.

 

Harry Blount (CEO of Discern) was moderating the panel. He’s a former sell-side analyst building an independent research firm and he gets the game. He asked us to A) define Big Data and B) explain how we use it.

 

For me, this was a relatively easy exercise. Building, evolving, and explaining my multi-factor, multi-duration approach to real-time risk management is what I do. For some of the academic guys in the room, it was very difficult to understand what I was saying – primarily because they don’t do what I do.

 

What is it that you do?

 

That’s how I ended the book Rich Blake and I wrote about the early stages of my hedge fund career. For those of you who have read the book, you know that I have a lot of issues. Most humans do. It’s just hard to put those flaws on paper.

 

My career has been good, not great. And I don’t want it to end that way. That’s why I ended the book with what I go to bed with and wake up to every morning of my market life – questions...

 

And, oh do I have a lot of big ones in my notebook this morning:

  1. What if the US Dollar snaps my intermediate-term TREND line of $81.21?
  2. What if the USD/YEN cross breaks down through 95.85 TREND support?
  3. What if the SP500 continues to signal a series of lower-highs versus her all-time high of 1669?
  4. What if the VIX continues to signal a series of intermediate-term higher-lows?
  5. What if Tim Tebow wins a Championship with Belichick?

That last question found its way into my notebook after I saw the headline in the New York Daily News this morning “God Help Us!” Losers question champions. That’s fine. That is what they do. And what we want to do is answer the bell come game time.

 

I am not interested in being labeled a perma bull or perma bear. I am not interested in what the tired aristocracy of the Old Wall thinks about my style either. To win championships as a Global Macro Strategy team, we need to focus on results.

 

Being right requires being flexible. When the quantitative TREND signals change, we need to start questioning our positions. When the signals are head-fakes, we need to remove all confirmation bias from the research and make a call on that and timestamp it too.

 

This will change, but for now, if you want to get Global Equities right, you have to get the US Dollar right:

  1. Intermediate-term TREND correlation between USD and SPY on a 6 month duration = +0.84
  2. Intermediate-term TREND correlation between USD and EuroStoxx600 (6mths) = +0.81
  3. Intermediate-term TREND correlation between USD and Emerging Markets (6mths) = -0.54

Fortunately, this has been the upshot of our Global Macro Themes for the last 6 months. As the US Dollar A) stabilized then strengthened from its 40 year low and then B) broke out across longer-term durations = good for US and European stocks = bad for Emerging Market stocks (the aforementioned inverse correlation is to the MSCI EM Index).

 

So, what if the US Dollar starts to break-down from a TREND perspective? What happens if Bernanke doesn’t “taper” as the bond market now expects him to in September? What happens if the Japanese completely screw this up faster, instead of slower?

 

Anything can happen out there. That’s why I think Belichick likes Tebow inasmuch as I like hiring players who have the intangibles that I cannot teach. To be the change in strategy, I need players who are disciplined but flexible – and who expect to win.

 

What am I going to do with this leadership rant and all these questions today?

  1. Let Mr Market answer them for me
  2. If he answers the questions faster, I’ll move faster
  3. If he answers the questions slowly, I’ll take my time

Managing risk, slow and fast – that’s what great players in this game do. If you just want to be good at this, don’t be flexible. It’s a lot less work and your day will be a heck of a lot less introspective. I am not remotely interested in promising you certainty.

 

Our immediate-term Risk Ranges for Gold, Oil, US Dollar, USD/YEN, UST 10yr Yield, VIX, Nikkei, and the SP500 are now $1362-1411, $100.28-105.09, 80.79-82.36, 95.85-99.53, 2.14-2.23%, 14.84-17.98, 12,603-13,815, and 1607-1658, respectively.

 

Best of luck out there today,

KM

 

Keith R. McCullough
Chief Executive Officer

 

Being Good - DXY

 

Being Good - vp 12


June 26, 2013

June 26, 2013 - DTR

 

BULLISH TRENDS

June 26, 2013 - 10yr

June 26, 2013 - VIX

June 26, 2013 - dxy

 

BEARISH TRENDS

June 26, 2013 - spx

June 26, 2013 - dax

June 26, 2013 - nik

June 26, 2013 - yen

June 26, 2013 - oil

June 26, 2013 - natgas

June 26, 2013 - gold

June 26, 2013 - copper


THE M3: MACAU LEGEND IPO; LVS CFO LEAVING

THE MACAU METRO MONITOR, JUNE 26 2013

 

 

MACAU LEGEND CUTS IPO SIZE BY MORE THAN HALF Macau Business

Macau Legend has cut its initial public offer shares to 934.8 million from an earlier 2.05 billion.  The company cites that current market conditions have changed.  The offer price range remains unchanged at HK$2.30 (US$0.3) to HK$2.98 each. The price determination date is now July 2. Trading is expected to start on July 5.


Macau Legend, headed by David Chow Kam Fai, was previously looking to raise up to US$786 million (MOP6.3 billion) through its IPO on the Hong Kong Stock Exchange.  Now, it could raise up to US$358 million.

 

LAS VEGAS SANDS SAYS CFO KAY LEAVING Bloomberg

Kenneth Kay will leave effective July 31.  The company didn’t give a reason. Kay will provide transition services as part of a six-month consulting agreement, the Las Vegas-based casino and resort company said in a filing yesterday.


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THE HEDGEYE DAILY OUTLOOK

TODAY’S S&P 500 SET-UP – June 26, 2013


As we look at today's setup for the S&P 500, the range is 54 points or 1.77% downside to 1560 and 1.64% upside to 1614.                 

                                                                                                              

SECTOR PERFORMANCE


THE HEDGEYE DAILY OUTLOOK - 1

 

THE HEDGEYE DAILY OUTLOOK - 2

 

EQUITY SENTIMENT:


THE HEDGEYE DAILY OUTLOOK - 10


CREDIT/ECONOMIC MARKET LOOK:

  • YIELD CURVE: 2.16 from 2.20
  • VIX closed at 18.47 1 day percent change of -8.16%

MACRO DATA POINTS (Bloomberg Estimates):

  • 7am: MBA Mortgage Applications, June 21 (prior -3.3%)
  • 8:30am: GDP Q/q, 1Q final, est. 2.4% (prior 2.4%)
  • 8:30am: Personal Consumption Expend., 1Q final, est. 3.4%
  • 8:30am: GDP Price Index, 1Q final, est. 1.1% (prior 1.1%)
  • 10am: Fed’s Fisher, Lacker testify on financial regulation to House Financial Services Committee
  • 10:30am: DOE Energy Inventories
  • 11am: Fed to buy $2.75b-$3.5b debt in 2020-2023 sector
  • 1pm: U.S. to sell $35b 5Y notes

GOVERNMENT:

    • 10am: Supreme Court will rule on Prop. 8, Calif. initiative banning same-sex marriage, and DOMA, a law denying federal benefits to legally married gay couple
    • 10am: Sen. Finance Cmte hearing on future of health care
    • 10am: House Budget Cmte hearing on energy development for economic growth, jobs
    • House Finl Svcs Cmte holds hearing on possibility of further taxpayer-funded bailouts resulting from Dodd-Frank; FDIC Vice Chairman Thomas Hoenig testifies
    • 10:30am: Senate Budget Cmte holds hearing on consequences of federal budget decisions on future generations
    • 1:30pm: House Energy and Commerce panel on energy, power holds hearing on the renewable fuel standard

WHAT TO WATCH

  • Gold hits lowest since Sept. 2010, silver lowest since Aug. 2010
  • China swaps drop a 4th day as PBOC eases cash squeeze
  • Democrat Markey wins Mass. Senate race for Kerry’s seat
  • Las Vegas Sands says Kay will leave as CFO
  • Draghi says deficit cuts in euro area should be growth friendly
  • EU resumes battle of how to impose losses at failing banks
  • Wal-Mart India head leaves 7 mos. after local CFO suspended
  • Australian PM Julia Gillard calls Labor party leadership vote
  • Marc Rich, commodities trader, died aged 78 in Switzerland
  • Stratasys plans acquisitions for 3-D printers that use metals
  • China starts investigation to ensure accuracy of eco. data
  • Square to process payment online, taking on PayPal: WSJ

EARNINGS:

    • General Mills (GIS) 6:58am, $0.54 - Preview
    • Lindsay (LNN) 7am, $1.80
    • UniFirst (UNF) 8am, $1.38
    • Monsanto (MON) 8am, $1.59 - Preview
    • AGF Management (AGF/B CN), 8am C$0.16
    • Herman Miller (MLHR) 4pm, $0.36
    • Paychex (PAYX) 4:01pm, $0.38
    • Bed Bath & Beyond (BBBY) 4:15pm, $0.93 - Preview
    • Progress Software (PRGS) 4:15pm, $0.22
    • HB Fuller (FUL) 5:25pm, $0.70

COMMODITY/GROWTH EXPECTATION (HEADLINES FROM BLOOMBERG)

  • Marc Rich, Fugitive Commodities Trader During 1980s, Dies at 78
  • Gold Bear Market Hits Hardest in South Africa Mines: Commodities
  • Australia Cuts Iron Ore Estimate as China’s Expansion Slows
  • Gold Slips to 34-Month Low as Precious Metals Slide on Fed View
  • Copper Seen Dropping on Slower Chinese Growth as Stockpiles Gain
  • Gold’s Slump Signals Fed Can’t Fuel Inflation: Chart of the Day
  • Government to Call Meeting of Malaysian Palm Planters Over Haze
  • WTI Crude Drops as U.S. Supplies Remain Near Three-Decade High
  • Rubber Declines to Lowest in Nine Months on China Demand Concern
  • Soybeans Decline on Concern USDA May Raise U.S. Acreage Estimate
  • Coal Crippled by Supply in Worst Quarter in Year: Energy Markets
  • France Says ‘Satisfied’ With Farm Ministers’ Agreement on Policy
  • Europe-to-U.S. Gasoline Arbitrage Cargoes Increase 64% in Survey
  • China’s Corn Crop Seen Rising to Record as Imports Set for High

THE HEDGEYE DAILY OUTLOOK - 5

 

CURRENCIES


THE HEDGEYE DAILY OUTLOOK - 6

 

GLOBAL PERFORMANCE

 

THE HEDGEYE DAILY OUTLOOK - 3

 

THE HEDGEYE DAILY OUTLOOK - 4

 

EUROPEAN MARKETS


THE HEDGEYE DAILY OUTLOOK - 7

 

ASIAN MARKETS


THE HEDGEYE DAILY OUTLOOK - 8

 

MIDDLE EAST


THE HEDGEYE DAILY OUTLOOK - 9

 

 

The Hedgeye Macro Team

 

 

 

 

 

 

 

 

 

 


Keith's Top-7 Tweets Today

Takeaway: A quick snapshot of Hedgeye CEO Keith McCullough's top tweets today.

Learn from every mistake, but wake up expecting to win the next game

@KeithMcCullough 3:59 PM

 

Keith's Top-7 Tweets Today - tweet

 

I've tried over-trading low-volume whip arounds plenty of times - its no way to live

@KeithMcCullough 3:44 PM 

 

Do what you do, let everyone else waste their day trying to be someone else

@KeithMcCullough 3:41 PM

 

$TSLA remains one of the markets new Generals; no resistance to all-time highs

@KeithMcCullough 3:30 PM

 

Where I come from, respect isn't allocated to an aristocracy of perceived wisdom - it's earned, every day

@KeithMcCullough 10:44 AM

 

We need to get rid of all these losers whining, and get on with winning - let rates rise for God's sake

@KeithMcCullough 10:14 AM

 

To be fair, this is a legacy #OldWall problem - most are pigeon holed into being bullish or bearish, in boxes

@KeithMcCullough 8:21 AM


Trade of the Day: CAKE

Takeaway: We bought The Cheesecake Factory (CAKE) at 3:11 PM at $40.86.

Hedgeye Restaurant Guru Howard Penney remains “The Bull” on The Cheesecake Factory. We got a nice pullback to TREND support here that we can start nibbling at. Let them eat CAKE.

 

Trade of the Day: CAKE - CAKE


Daily Trading Ranges

20 Proprietary Risk Ranges

Daily Trading Ranges is designed to help you understand where you’re buying and selling within the risk range and help you make better sales at the top end of the range and purchases at the low end.

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