“I decided to check for myself if the player could systematically win.”
-Edward Thorp 

That’s a quote from one of the best market practitioner books I read last year, A Man For All Markets, by Edward Thorp. In the aforementioned quote Thorp was explaining how he initially thought about card-counting. 

“The belief that the casino must come out ahead in the long run was supported by conventional wisdom, which argued that if Blackjack could be beaten, the casinos would have to either change the rules or drop the game.” (pg 64) 

The conventional wisdom from fundamentalists on the Old Wall is that “you can’t forecast the macro”, but you can get “edge” in knowing companies, their catalysts, valuations, etc. 

Since I employ an Independent Research Team of analysts doing the latter, I obviously agree that there is edge in security selection. I wholeheartedly disagree that you can’t use macro to tilt your stock and credit picking prowess in your favor. 

Timing matters. 

Back to the Global Macro Grind… 

Can You Tilt The Odds In Your Favor? - z 03.23.2018 investing cartoon

I don’t qualitatively disagree that you can use ROC (rate of change) Macro to tilt the odds in your favor. Especially at major pivots in the ROC of GROWTH and INFLATION, it’s an empirically back-tested fact.

This might upset some people or leave others in disbelief (mainly because our profession struggled mightily over the course of this time period), but here are recent results of using a macro process to augment my security selection: 

  1. 55 of my 60 closed positions in Real-time Alerts going back to mid-NOV of 2018 were winning bets
  2. Of the 5 losing positions the losses were -0.53%, -1.7%, -1.7%, -0.67%, and -0.63% 

No, I’m not saying I’m God’s gift to risk management. I’m not suggesting that I go on absolute and relative runs like this all of the time either… 

I’m trying to humbly submit that players could have systematically won for the last 2-4 months while their competition was complaining and/or losing. The run our subscribers went on wasn’t based on luck. It was based on process. 

For those of you who need to know I can be as wrong as anyone else, my shorts have been mostly wrong for the past 3 trading days. I was wrong for parts of early OCT of 2018 and early NOV 2018 too. 

Anyone with a probability based process knows that to be really right, you have to be a little wrong sometimes too. Everyone also knows that being really wrong for a long period of time puts you out of business.

Unless you’re a CNBC pundit with no #timestamps or audited returns, that is! 

So what are the odds that my SELL signal on the SP500 (SPY) at 12:52PM yesterday ($258.50 #timestamp) is going to be right? 

  1. In the very short-term, the odds are very high (because the US Futures are down -13 handles right now)
  2. In the less-very-short-term, i.e. 1-3 weeks I think they’re high, or I wouldn’t have sent you the signal
  3. In the intermediate-term (TREND), I don’t know – I’ll be working with new short-term timestamps by then 

What an Old Wall type might suggest is that there’s a 91.7% chance I’m going to be right because that’s been my intermediate-term batting average. That would be an asinine assumption born out of frequency theory. 

Good Baseyian boys and girls know that the best barometer for future probability is born out of the most recent data and/or data points. Looking at the incoming data this morning (recession in France!), I like my chances on the short side… 

Or I wouldn’t have tilted to 2 LONGS and 12 SHORTS yesterday in Real-Time Alerts.

“But what if you’re wrong?” The answer to that often asked question is simple –“well, then I’m wrong.” A better question that I rarely get asked is “what if you’re really right?”

I’m not Ed Thorp or Ray Dalio or whoever. I’m just me. And all I have to bet on every morning is my process. I equate this to being an elite athlete. Some prepare for games like winners do, but they don’t expect to succeed at game time. 

Can you imagine what Tiger Woods shots would look like if all he thought about was “what if my swing is wrong”? I can. Look at how he played when he lost both his process and confidence…

“But what about a trade deal?”
“But what about the bottom being in and the Macro Tourist gallery being in play?”
“But can’t we go a lot higher?”


If you don’t have confidence in your process, you need to learn from your mistakes and change that. Everything I’ve seen manifest out of our Macro Process in the last 3 years in particular suggests you can tilt the odds in your favor, big time. 

If and when that changes, you’ll know. Every word I write is here for you to read. Every #timestamp is there to audit. If changes to my game are required to win the game, I’ll do my best to make them. The Game is always changing. 

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

UST 10yr Yield 2.56-2.82% (bearish)
UST 2yr Yield 2.39-2.63% (bearish)
SPX 2 (bearish)
NASDAQ 6 (bearish)
Industrials (XLI) 62.01-67.68 (bearish)
Housing (ITB) 28.86-33.77 (bullish)
Shanghai Comp 2 (bearish)
Nikkei 199 (bearish)
DAX 103 (bearish)
VIX 18.05-33.67 (bullish)
USD 94.70-96.25 (neutral)
Oil (WTI) 42.76-52.26 (bearish)
Gold 1 (bullish) 

Best of luck out there today,


Keith R. McCullough
Chief Executive Officer

Can You Tilt The Odds In Your Favor? - Chart of the Day