This note was originally published at 8am on February 13, 2014 for Hedgeye subscribers.
“As teachers, we want to move people.”
That’s such a simple but solid leadership thought from Daniel Pink in the latest #behavioral book I’ve cracked open, To Sell Is Human (pg 39). “The capacity to sell isn’t some unnatural adaptation to the merciless world of commerce. It is part of who we are.”
Pink goes on to make an astute point about the information laden world in which we now live in, suggesting that the most successful companies are going to be “curators and clarifiers” of everything that’s being tweeted, googled, and facebooked at you “… helping to make sense of the blizzard of facts, data, and options…” (pg 56)
While we have plenty of work to do, lots of people to hire, and many improvements to make, that’s pretty much how we see Hedgeye helping you. We aren’t waking up every morning to punch clock. We want to synthesize and analyze every lick of information we can find, and move you to move when consensus won’t.
Back to the Global Macro Grind…
Moving you out of consumer growth stocks and into Commodities, Gold, and Bonds is where we’ve been at now for almost 6 weeks. That didn’t change at yesterday’s low-volume-lower-high for the SP500 either. That’s where we tried to move you more aggressively.
Getting people (including ourselves) to move isn’t easy. We get that. We also get that we need to build your trust in our process so that you understand why we are telling you that we think you should move and when.
Our communication process continues to evolve, but the best way for us to move you is:
- Get up at the top of the risk management morning and write you this strategy note every day
- Update you on the top trending Macro Themes that we don’t think are yet consensus
- Dynamically update (real-time) both our asset allocation and long/short position shifts
In terms of asset allocation shifts, you see that in the Early Look every day – the big ones in the last 2 months have been:
- Raising Commodities from 0% for most of last year to 15% this morning
- Raising Fixed Income from 0% for most of last year to 15% this morning
- Cutting our US Equity exposure from our top allocation for all of 2013 to 0% this morning
Yep. I’m un-elected too don’t forget. When I want to move you, I can cut to 0% too!
And that’s really the point. We get that each and every person reading this note has different risk tolerances and investment durations. But you don’t pay us to boil the ocean on every single thing for every single person. I think we’re more like your Big Macro weather insurance policy. When we want you to get out of something, we mean it.
On the long/short signaling shifts, the only way for me to show everyone what I really think and when is via #RealTimeAlerts:
- In the last 3-days (on the way up in stocks), I went from 4 LONGS, 6 SHORTS to 4 LONGS, 10 SHORTS
- Of the 4 LONGS, I sold equities like WWW and replaced them with bonds (yesterday bought BND)
- Of the 10 SHORTS, I re-shorted most of the names we covered when the SP500 was on its YTD lows
As you all know, I don’t always nail it in terms of my net positioning and long/short security selection. But that’s not the point about giving you 100% transparency in terms of what we do and when. The point is to help you A) understand why we are moving and B) hold us accountable to the timing of every move we make.
Back to the macro market, the most important things in my notebook this morning are as follows:
- US Dollar Index continues to breakdown, testing its YTD lows, confirming its bearish @Hedgeye TREND
- US 10yr Treasury Yield of 2.74% failed to overcome @Hedgeye 2.80% TREND resistance
- SP500 has immediate-term TRADE downside to 1728
- VIX has immediate-term TRADE upside to 20.41
- Yen continues to signal a bullish developing TREND vs USD (very bearish for the Nikkei, -10.8% YTD)
- CRB Commodities Index outperformed SP500 again yesterday, +0.5% to a fresh YTD high of +4.3%
In other words, if the both the research and risk management signals are:
- Bullish on Commodity #InflationAccelerating (our Top Macro Theme for Q114)
- Bearish on rate of change in US Consumption Growth
- Bearish on US currency and bond yields
Then why wouldn’t I try to keep moving you out of consumer growth equities and into commodities and bonds? Always right? No. Simple and solid. Yes. That’s what the insurance policy on your long-term investments should be.
Our immediate-term Macro Risk Ranges are now:
UST 10yr Yield 2.59-2.80%
Best of luck out there today,
Keith R. McCullough
Chief Executive Officer