“Two species are fictitious Econs, who live in the land of theory, and humans who act in the real world.”
-Daniel Kahneman
If you haven’t read Thinking, Fast and Slow, by Danny Kahneman, yet. That’s a must. I don’t think you can effectively manage other people’s money and/or your own without considering the behavioral overlays in your brain.
If you don’t have time to read the whole book (it’s 499 pages long), read the Conclusion that starts on page 408. That’s where Danny runs the ball right up the middle on Establishment Econs… and pretty much runs them right over.
His advice to all of those who have never run money and/or their own company but are enthralled with their linear economic theories of certainty is this: stop what you are doing and listen to those who are getting it more right than you’ve been.
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“You will make better choices when you trust your critics to be sophisticated and fair… and when you expect your decisions to be judged by how they were made, not only by how they turned out.” (page 417) |
Back to the Global Macro Grind…
Not everyone has the opportunity to live in a fancy fishbowl where a large and sophisticated audience is constantly auditing the objectivity of your process, decisions, and results. I do – and for that I’ll be forever grateful.
So, instead of telling you how bad the Italian economic data was this morning (actually, I’ll get to that), I just wanted to sincerely thank all of you who tuned into or Q4 Macro Themes Call yesterday. It was our biggest audience, ever.
Ever, as we all know, remains a long time. Even though Hedgeye is almost 10 years old now, I can still remember the first few Macro Themes calls like they were yesterday. Boy was my process rough to consume back then!
With time, space, and a lot of evolution, over the years my teammates have helped me make my Global Risk Management #Process much easier to understand, consume, and act on. I’d especially like to thank:
- Darius Dale
- Christian Drake
- Ben Ryan
- Matt Hedrick
- … and Daryl G. Jones
While I’ve become pretty comfortable being uncomfortable about macro-economic and market outcomes, in terms of both process and preparation, this team has made me as comfortable as any coach can be on Game Day.
While our Quarterly Themes call is the busiest day of the quarter, every day is Game Day @Hedgeye. Now that we’ve provided you with what we think are the most probable 3 Macro Outcomes that consensus isn’t fully prepared for…
It’s right back into the Top 3 Things that are moving in the Global Macro rabbit holes this morning:
- VIX – all-time remains a long time and the VIX finally registered a lower-all-time-low of 9.19 (prior all-time closing low was 9.36); impressively, since 30-day realized volatility on the SP500 has been smashed to 5.2%, implied volatility (vs. 30-day realized) on SPY still trades at a PREMIUM of +22% this morning (complacency and capitulation signals occur on implied volatility DISCOUNTS)
- RATES – fresh 5-year highs for the UST 2YR YIELD = +1.50% this morning as the UST 10yr Yield pushes toward the top-end of the @Hedgeye Risk Range = 2.26-2.40%; in spite of the hurricanes being in the numbers, this week’s US economic data has been huge (ISM =161 month high) so we’ll see if this US jobs report delivers the + surprise both USD and rates are looking for…
- ITALY – all is not green this morning (Italy’s MIB Index -0.8%) – the divergence developing in the Italian Consumption Data (vs. USA’s) is flat out ugly; this morning’s Retail Sales for Italy came in at -0.5% year-over-year vs. 0.0% last month; I don’t care what your local rear-view economist is telling you about it being “different this time” across Europe, those are bloody awful numbers
If you are a premium Institutional Research Subscriber, I have these Top 3 Things emailed to you usually by 6AM EST, every morning. That is, of course, unless one of my teammates writes this Early Look and I get to sleep in!
While I’ve never been much of a sleeper, our Head of Sales & Research (and my long-standing Defense partner @Hedgeye), Daryl Jones has been using an objective-data-driven approach to convince me that I need to change that part of my process.
Here’s one link to a DJ sleep article that I think you should read. It highlights the research findings of Matt Walker who runs the Center for Human Sleep Science at the University of California, Berkeley:
If you need more sleep… and you’re still paying for and/or wasting time on “research” that theorizes on what economies should be doing (as opposed to what the data is actually doing), that’s a great place to pick up some precious time.
As Danny Kahneman also reminds us in Thinking, Fast and Slow: “The central fact of our existence is that time is the ultimate finite resource.”
Our immediate-term Global Macro Risk Ranges (with intermediate-term TREND views in brackets) are now:
UST 10yr Yield 2.26-2.40% (bullish)
SPX 2 (bullish)
RUT 1 (bullish)
NASDAQ 6 (bullish)
XOP 32.69-34.80 (bullish)
RMZ 1146-1164 (bearish)
VIX 9.01-10.33 (bearish)
GBP/USD 1.30-1.35 (bullish)
Oil (WTI) 49.71-52.89 (bullish)
Gold 1 (bearish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
