Q1 Macro Themes Day

01/04/19 08:00AM EST

“Some broad themes brought me to where I am today.”
-Dean Kamen

Dean Kamen is an American engineer and inventor who created the Segway. That was back in 2001. If he invented it in the era of cool apps and “secular growers”, who knows how big the Segway’s market cap could have been? Maybe a mini-Tesla?

I’m not an engineer. I’m not going to fly you to Mars or help you burrow your way under-ground until you find the love of your virtual life in Ready Player One either. I’m just a markets and math guy. Some people call me “creative” too.

Last year, one well known former Master of the Hedge Fund Universe (#MHFU) called what I do wrong but “clever.” He didn’t like my macro themes (he was short the Dollar). His investors don’t like his returns from the last few years either.

Back to the Global Macro Grind…

Today is what we call Macro Themes Day @Hedgeye. Once per quarter, we present both our process and the Top 3 Things in Macro that are becoming more probable in our models that Wall Street consensus often still considers improbable.

Our Top 3 Macro Themes last quarter were:

  1. Quad 4 in Q4
  2. Cyclical Peaks
  3. Long Housing

The Top Thing that was common in all 3 of those things, was that we thought interest rates would A) stop going up and B) start going down, whereas Old Wall consensus thought rates would continue to “breakout” to the upside.

Q1 Macro Themes Day - z tlt lowdown

Mr. #MHFU guy was short Treasuries in Q4 too.

Clever, creative, or correct. People that don’t like me because they don’t like my position (vs. theirs) can call it whatever they want to call it. Back in the day in hockey arenas, I was called much worse!

I don’t know about you, but I don’t think I’m smarter than the market. When I was a hedge fund PM on the buy-side, I paid a lot of money for people with good data-driven processes to explain where I could be wrong.

Some people don’t do that at all. Especially with some of the struggling “Macro” PMs out there, you’ll see they have one thing in common: they start with what the data and markets should be doing vs. what both are actually doing.

What are some of their common mistakes?

  1. They always start with “valuation” instead of the rate of change in GROWTH and INFLATION
  2. They often talk about the “levels” of things like GDP, multiples, and spreads instead of their rates of change
  3. They don’t listen and/or don’t want to learn from people and processes that are getting it right

In sharp contrast, the “creative” content platform that my teammates and I have created over the course of the last 10 years not only forces me to learn fast from Institutional Investing clients who are paying us to hear about their views…

But it’s forced me to back-test and explain precisely what I do and how I’m coming up with my own views!

Having spent almost a decade on the buy-side, I realize what I just said I do is hard for people running money to do. That job description doesn’t entail getting up at 430 AM on most blessed market days to explain their process/positions to the public. 

Ironically enough, since I’m not as smart as some of these people who haven’t made money in the last decade thought they were, I wasn’t allowed to be dumb enough to keep making the same mistakes over and over and over again.

At the end of the day, I get things wrong and this isn’t about being or sounding “smart.” It’s about being right. And if you can be right when consensus is really wrong on big things like The Cycle, you’re going to have a wonderful career on Wall Street.

I’m looking forward to explaining both our process and Top 3 Macro Themes for Q1 of 2019 at 11AM EST (ping for premium access). They are as follows:

  1. Quad 4 Then Quad 3
  2. Earnings vs. Credit Cycle
  3. Long Ideas: Housing, Gold, etc. 

As always, my sincere thank you to the 99% of you who aren’t and haven’t been like Mr. #MHFU. You’re the ones asking us the hard questions. You’re the ones helping us evolve and improve our process. You’re the ones who are winning out there. 

Our immediate-term Global Macro Risk Ranges (with intermediate-term TREND views in brackets) are now:

UST 10yr Yield 2.54-2.83% (bearish)
SPX 2 (bearish)
NASDAQ 6196-6799 (bearish)
Shanghai Comp 2 (bearish)
Nikkei 19036-20404 (bearish)
VIX 21.33-36.66 (bullish)
USD 95.40-97.05 (bullish)
YEN 107.25-111.58 (bullish)
Oil (WTI) 42.28-48.95 (bearish)
Gold 1 (bullish)
Corn 3.70-3.83 (bearish)
AAPL 140.85-154.53 (bearish) 

Best of luck out there today,


Keith R. McCullough
Chief Executive Officer

Q1 Macro Themes Day - Chart of the Day

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