“I must die or be better.”
While I’m not quite thinking about it that way this morning, at the top of every risk management morning I only want to get better. As naturally flawed human beings, both personally and professionally, we have nothing but upside from here.
While I’d like to think our lengthening list of LONG ideas have nothing but upside from here, that’s not reality. Developing bull markets aren’t linear. Like any fractal pattern in life, they are rough, crinkly, and complex.
Bull markets? Haven’t I been labelled The Bear? Who’s more bullish than we are … on Treasuries (EDV, TLT, SHY), Housing (ITB), REITS (VNQ), Utes (XLU), and Gold and Gold Miners (GLD and GDX)?
Back to the Global Macro Grind…
While the Old Wall is good at labeling people as bulls or bears, it’s really bad at understanding that there’s always a bull and bear market somewhere in markets.
That’s right, if you are:
- Bullish on a country’s GROWTH #accelerating, you BUY what goes up in either Quad 1 or Quad 2
- Bearish on a country’s GROWTH #decelerating, you BUY what goes up in either Quad 3 or Quad 4
It’s ok if you are new to our Global Asset Allocation and Risk Management #process. While we’re the ones who built the 4 Quadrant Model, I really didn’t know what to do in each of the 4 Quads until the last 5-10 years either.
For the first 10 years of my career, I was more like a Captain Stock Picker with a ROC (rate of change) macro overlay. Today, I’m a lot better than that. I’m 100% macro aware of both the incoming ROC data and market data that I measure and map.
Do you want to get better? Or do you want to just sit there and tell yourself what the market “feels” like today?
I, like you, have a lot of feelings. I used to make many more long/short decisions based on some of those feelings than I do today. I reduced the “feel” part of my game because it was adding to my mistakes.
That’s why every market-timing (buy or sell) decision I currently make is based on math, not feelings:
- If something we’re bullish on is at the low-end of the @Hedgeye Risk Range I buy more
- If something we’re bearish on is at the top-end of the @Hedgeye Risk Range I short more
As a real-time example, here are my unemotional #timestamps (Real-Time Alerts) from yesterday:
- BUY Extended Duration Treasuries (EDV) on red
- BUY REITS (VNQ) on red
- BUY Gold Miners (GDX) on red
- BUY US Housing (TOL) on red
- BUY O’Reilly (ORLY) on red
If you want to know why on ORLY, ask Brian McGough. He’s my long-time Partner @Hedgeye. He and my other analysts give me the tickers and I put them in my machine. At the low-end of the range, I buy what they like.
If you want to know why on the Macro Long Positions, you already know why. Daily, I’ve been writing and yapping about the reported economic reality of #PeakCycle US Growth, Inflation, and Profits since no one else did back in SEP 2018.
If you want the latest macro-economic data points that refute or support these long positions (“where could you be wrong?”) we publish those daily for a premium price as well. Here are most of the most important ones from the last 24 hours:
- US Pending Home Sales for JAN #accelerated +4.6% month/month (Lower rates in January catalyzed the largest sequential jump in signed contracts since 2010)
- China’s Manufacturing PMI for FEB #slowed to its lowest level of The Cycle (49.2 FEB vs. 49.5 JAN)
- South Korea’s Industrial Production #slowed to +0.1% in JAN from +1.6% in DEC
- France’s GDP #slowed to +0.9% in Q418 from +1.3% in Q318 #EuropeSlowing
- Canada’s Inflation (CPI) #slowed to +1.4% in JAN from +2.0% in DEC
So that gives birth to yet another Hedgeye LONG position – Long Canada (EWC) as it goes into Quad 1 eh! It also reminds you that trumpeting tweets about Chinese “deals” didn’t do a damn thing for the data in FEB.
Is that partly why the KOSPI (South Korea’s stock market index) got smoked for a -1.8% loss overnight? Or was that and the Philippines down -2.3%, Indonesia -1.3%, and Singapore -1.2% all about Trump (and not The Cycle) too?
While it’s true that perma bulls and bears eventually die in your inbox. They always come back to life if they stay with a non-data-driven-feel process. Perma Gold Bulls got slaughtered (Quad 2) at this time last year. Now they’re relevant again.
Our immediate-term Global Macro Risk Ranges (with intermediate-term TREND signals in brackets) are now:
UST 10yr Yield 2.61-2.71% (bearish)
UST 2yr Yield 2.44-2.54% (bearish)
SPX 2 (neutral)
RUT 1 (neutral)
REITS (VNQ) 82.90-85.55 (bullish)
Housing (ITB) 34.17-36.20 (bullish)
Gold 1 (bullish)
Best of luck out there today,
Keith R. McCullough
Chief Executive Officer