“Whenever you wish, you can liquidate pleasurably.”
-David Sokolin
Since I’ve been both generating and raising cash as of late (Hedgeye cash flows without helicopters and I’ve been booking some gains in my biggest position, the Long Bond), in investor meetings I keep getting asked (sometimes told) “if there’s any alternative to stocks?”
For those of us who have been investing in real estate, private companies, gold, platinum, wine, an NHL team, etc., that’s an easy question to answer. With Italian wines in particular, #EuropeImploding has provided for some fantastic buying opportunities this year.
If you want a primer on investing in IGW (Investment Grade Wines), the aforementioned quote comes from a great book that my wife Laura got me, titled Investing In Liquid Assets. As David Sokolin likes to say, “with wine, there’s no such thing as a losing investment”… if you’re underwater, you eventually win by drinking it! Long 2010 Brunello vs. Short QQQ.
Back to the Global Macro Grind…
I guess the people who are in the business of marketing “stocks” for their long-term-compensation-run might say that you can #drink every time you’ve bought the all-time high in SPY for the last 17 years too. That’s cool, if you do it with other people’s money.
Otherwise, I think that big secular shifts in technology, transparency (bid/ask spreads in wine are readily available on LIVEX in London), and information have really opened up opportunities for people to truly invest for the long-run, across cycles, and asset classes.
Truly investing? Yes. To be able to buy low, sell high, and compound returns (without sucking up epic draw-downs), across asset classes… you need to pay for the truth. What you watch on CNBC is free for a reason.
As Ray Dalio would ask: “what is the truth” this morning, according to the people with no skin in the game (central planners)?
- BOJ (Bank of Japan) – is now backing off on the helicopter comments in exchange for the “double fiscal thrust” ones?
- BOE (Bank of England) – is now seeing most anti-money printing hawks, capitulate to CTRL+Print
- Italian Banks – are now seeing “bank rescue” moneys from Italian Pension Funds
Macro market reaction to that?
- JAPAN - Yen Up +1.5%, Nikkei Down -1.4% (and remains in #crash mode, -21.7% from the #BeliefSystem 2015 high)
- UK – Pound Down -0.3%, FTSE +0.1% as the FTSE now has an inverse correlation of -0.78 to GBP/USD (3-month duration)
- ITALY – EUR/USD flat, MIB Index Down -1.8% (and remains in #crash mode, -31.9% from 2015 Global Equity #Bubble high)
Yeah, for people who have “no alternative to stocks” as a mantra, hopefully they’re not lying to you and suggesting that “stocks” no longer include Global Equities. Not that it matters to them, but June 24 was the biggest 1-day loss in Global Equity Market Cap, ever.
And ever, in truthful terms, remains a long time.
For a very long time, as long as I have been in this profession really (17 years), brokers and academics have tried to sell me on trailing returns instead of the draw-down risks associated with buying the peaks in those returns.
When some people read that, they’ll immediately call me something nasty… like a “market timer”… or maybe a wussy who isn’t willing to book gains before losing 20-70% of my hard earned money, every 5-7 years.
Oh well, there’s a lot of bull in the political market of calling people names, I guess.
But in all seriousness, if you have no idea on the timing of economic, profit, and credit cycle risks (early-cycle, mid-cycle, late-cycle), Buy- And-Hold in something you really believe in makes a lot of sense. I don’t “trade” my Hedgeye Equity, for example.
If you don’t do any rate-of-change analysis, you’d never care about “buying opportunities”, right? As long as you had “flows” (other people’s money), you’d just buyem’, every day, month, and year, no matter what the price. And eventually, #drink heavily.
Don’t do that.
And I’m not telling you to chase charts and just “buy, buy, buy” in many of the things we’ve liked for the past year either:
- Long-term Government Bonds continue to signal immediate-term overbought
- Municipal Bonds (MUB) have had a heck of a move and aren’t where I’d buy more yet either
- Utilities (XLU) are signaling the same at +22% YTD
You see, I’m a little polarizing to the Old Wall because I go both ways. In its purest definition, I am a free-market liberal. I’m conservative and entrepreneurial. And I really don’t give a damn if I’m not nailing everything all of the time, at all-time highs.
When I look at my world of investing opportunities, I don’t think there’s ever been a time in my life when I’ve been so excited. Whether it’s investing in Malaysian Equities (EWM) or big cap, low-beta, Energy Stocks (OXY) with safe-yields, there’s so much to do on sales.
One of the most exciting things of all is watching bubbles balloon up into the skies of a #BeliefSystem that is starting to go bad. Looking back, there have been so many epic buying opportunities born out of bubbles imploding that I can hardly wait for the next one.
When they don’t wish, they will liquidate. As a long-term investor, I have plenty of patience to wait pleasurably for that!
Our immediate-term Global Macro Risk Ranges are now:
UST 10yr Yield 1.46-1.63%
SPX 2129-2179
Nikkei 150
VIX 11.72-16.69
USD 96.31-97.99
YEN 103.15-107.31
Oil (WTI) 42.28-45.13
Gold 1311-1354
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
