Editor's Note: Below is a complimentary Early Look written today by Hedgeye CEO Keith McCullough. Click here to learn more.
“Out of clutter find simplicity.”
That’s one of the many great business-builder quotes from Marc Benioff in Behind The Cloud – The Untold Story of How Salesforce.com Went From Idea to Billion-Dollar Company – and Revolutionized an Industry.
I’m just finishing the book now, but Benioff actually wrote it in 2009. No matter what you think of the guy as a person (I don’t know him), as an entrepreneur and innovator, his growth story is an incredibly powerful one. No matter what happens to CRM from here, he took on the establishment of the software industry, and won.
As a leader, he hammers home a lot of principles that resonate with me. He says we should all “have the courage to pursue our innovation before it is obvious to the market.” That might sound simple. Executing on it, repeatedly, is not. You have to foster a culture that isn’t afraid to fail fast, recover, and re-accelerate. I’m working on that too.
Back to the Global Macro Grind…
Where do we go from here? What’s the next @Hedgeye Best Idea? Who is the next best hire? How are we going to keep pushing the envelope on not only the creation of original content, but how we present and deliver it?
So much to do.
When it comes to idea generation (particularly on the long side), there isn’t a lot of clutter to simplify. Especially when it comes to long-term sovereign bonds and/or any “safe-yield” equity (that looks like a bond), reality is that they’ve all gone up into the right.
To a degree, that’s accelerated our business. Lower and Slower-For-Longer used to be our original idea, inasmuch as the willingness to buy “expensive” and short what’s “cheap” was. Now, the deep simplicity associated with #GrowthSlowing is priced in.
So where do we go from here?
If growth was accelerating, I’d have a ton of “new” ideas. I’d basically reverse all of what I own and short it (Ex-Hedgeye and my wine). But it’s not. So I stay the course. Keep the winning team on the field, and pick my spots.
How do you pick your spots?
- Wait and watch for macro “events” that knock the Long Bond, Gold, Utilities, etc. to the low-end of their risk range
- Wait and watch for the Old Wall to “upgrade” stocks and/or asset classes we don’t like to the top-end of their range
- Wait and watch during the Morning Research Meeting for legitimately “new” ideas that I haven’t yet considered
And, all the while, grind…
That’s it really, so the rest of this note will be a line by line copy of my notebook this morning. That’s the grind.
I do the same thing, every morning. I measure and map price/volume/volatility, across asset classes and across durations. Eventually something simple jumps off the page as “new.” And new is what I’m looking for…
- US Dollar Index is testing the low-end of my 94.50-96.60 risk range and remains bullish TREND
- UST 10yr Yield is in the middle of my 1.45-1.62% immediate-term risk range and remains bearish TREND
- SP500 tested and held the low-end of my immediate-term 2153-2178 risk range (bullish TREND)
- Nasdaq tested and held the low-end of my immediate-term 5038-5196 risk range (bullish TREND)
- US Equity Volatility (VIX) backed off the top-end of my 11.77-15.32 risk range (bullish TREND)
- Utilities (XLU) are still in correction mode (bullish TREND), with a risk range of 51.04-52.99
- Financials (XLF) are still in squeeze mode (bearish TREND), with a risk range of 23.13-23.99
- Japanese Equities bounced off the low-end of my risk range and remain bearish TREND
- Chinese Equities bounced off the low-end of my risk range and remain bearish TREND
- Malaysian Equities bounced off the low-end of my risk range and remain bullish TREND
- Spanish Equities bounced off the low-end of my risk range and remain bearish TREND
- Italian Equities bounced off the low-end of my risk range and remain bearish TREND
- Russian Equities bounced off the low-end of my risk range and are testing a bearish TREND break-down
- Commodities (CRB Index) have already broken down back into bearish TREND mode
- Oil (WTI) bounced off the low-end of my $38.71-41.90 immediate-term risk range and remains bearish TREND
- Gold is correcting off the top-end of my $1330-1380 immediate-term risk range and remains bullish TREND
- Platinum is correcting off the top-end of my risk range and remains bullish TREND
- Copper failed at the top-end of my immediate-term risk range and remains bearish TREND
- EUR/USD failed at the top-end of my $1.09-1.12 risk range and remains bearish TREND
- GBP/USD failed at the top-end of my $1.29-1.34 risk range and remains bearish TREND
I’ll stop there. You get the point. Again, all I’m doing, every day, is measuring and mapping the immediate-term moves relative not only to themselves, but in the context of the entire macro market message… and then contextualizing it across durations.
This is Global Macro. There’s a lot of clutter. And lord knows there are a lot of politicized, ideological, and linear opinions that clutter the clutter. But, if we can have the patience to wait and watch, we’ll eventually find simple opportunities.
I’m not finding one today that I’d consider new. So here’s to what tomorrow might bring!
Our immediate-term Global Macro Risk Ranges are now:
UST 10yr Yield 1.45-1.62%
Oil (WTI) 38.74-41.90
Best of luck out there today,
Keith R. McCullough
Chief Executive Officer