Please be advised that we are removing Utilities (XLU) from Investing Ideas today.
The note below from CEO Keith McCullough recently issued in Real-Time Alerts provides some contextual analysis behind the decision on everything yield-based.
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With TLT doing it's job (again) +1% on the day in another down US stock market tape, this is not an easy signal for me to send out - and maybe that is precisely the point...
I spend a lot of time thinking about what our GIP Model (Growth, Inflation, Policy) is signaling. When we have heightening convictions on what we call a Phase Transition (going from bearish to bullish TREND or vice versa), we make that call.
Updated examples of that are as follows:
1. GROWTH - signaled bullish (growth accelerating) coming out of 2012, then bearish (slowing) here in 2015
2. INFLATION - signaled #Deflation in Q3 of 2014 and have not yet signaled any Phase Transition from that TREND
The problem with making a call on POLICY (from here into the Fed meeting next week) is that I have no idea what the Fed is going to do. My confusion on POLICY risk should not to be confused with:
A) What they should have done - started raising rates in SEP 2013, so that they'd have room to cut, eventually and/or
B) What they should do now - nothing as tightening into a slowdown isn't modern day monetary policy rules
What scares the hell out of me is that they still don't know what they want to do - and they have to decide within a week.
Will that decision be based on what the US Equity Futures do in the next 3 hours or 3 days of trading? Or will it be based on "proving they can" despite Fund Fund Futures saying they shouldn't?
Consensus Macro may not, but we know growth (globally and locally) is slowing. We don't know what Janet Yellen is going to do with that. So I'd rather take down some Treasury Bond market exposure to an open-the-envelope event, then revisit on the event.
I've never gone broke getting out of the way when I wasn't highly convicted in the next move. This SELL (some) signal is consistent with both my track record in markets and life in general.