“Never be so focused on what you’re looking for that you overlook the thing you actually find.”
I’m often better at finding the right numbers than the right words. So bear with my literary attempt to qualify the panic and/or FOMO that was in my inbox yesterday. Sometimes there simply are no words.
What is the FOMO? Those actual words are FEAR OF MISSING OUT. Yes, I’m going ALL CAPS on you this morning because in ROC (rate of change) speak, the FOMO accelerated, big time, yesterday.
I get it. The all “YTD” perf caps matter to many. That’s how many are measured. Most importantly, YTD performance is how many people get paid. I had FOMO when we made The Cycle turn call in on SEP 27, 2018 and, again, at the end of APR 2019 too.
Back to the Global Macro Grind…
I’m not like the many. I run both a company and my personal accounts. No one manages my hard earned money other than me.
My #1 job is not to lose either my money or the moneys I have to compensate my people. That means don’t blow-up and/or draw-down when the many do.
That’s why every FOMO question I got from Institutional Investors in Toronto, Ontario yesterday was answered within the lens of my #FullCycleInvesting process. People don’t pay me for a “YTD return.” They pay for my team’s risk management #process.
What if the “YTD” started on AUG 30 of 2018?
A) That’s when the Russell 2000 #timestamped its all-time closing high. If you’ve been chasing every lower-high in that broad index of US Equities, you’re still down -9.2% and need to be +10% (from here) to get back to break-even
B) That’s also when Gold’s #FullCycleInvesting bottom was in (you short Gold when real yields are breaking out to the upside – you buy it when The Cycle turns and Real Yields fall)
C) That’s also when you could have started buying legitimately “cheap” US Equity Sector Styles like US Housing (ITB) and REITS (VNQ) which were horrendous places to have been while the US economy was in Quad 2
So why on God’s good earth would you change your #FullCycleInvesting Asset Allocations to Treasuries, Gold, Bond Proxies, etc. this morning if that’s when you sold all your Quad 2 exposures and bought what I own?
Because of “charts”, FOMO, etc?
In Moving Monkey (Average) terms, the Netflix (NFLX) chart “looked good” before the company reported reality last week, did it not? Heck, even Tesla (TSLA), “looked like it could breakout” until Elon had to tell the truth last night!
In the words of your favorite President of all-time, “believe me”, lots of Institutional Money Managers chase single-factor (simple moving average of price) charts.
In those “technical” terms, at the US Cycle Triple Peak (GROWTH, INFLATION, and PROFITS all peaked in Q3 of 2018):
A) Not 1 major Asset Allocation or Sector chart of what I told you to get out of “looked bad” on SEP 27, 2018
B) Not 1 major Asset Allocation or Sector chart of what I told you to re-allocate to “looked good” on SEP 27, 2018
But, especially for people who don’t have #FullCycleInvesting process, it’s those very “charts” that perpetuate the FOMO.
So what, specifically, would I fade in FOMO terms on the US Equity market open this morning (I say US Equities because the rest of Global Macro looks very different than the all-time closing high in Semis charts – see Dr. Copper, KOSPI, Oil, etc. for details):
- Russell Value (IWN)
- Financials (XLF)
- Industrials (XLI)
And I’d size them in that order too. Why not short the juice (NASDAQ) in size here? Even though our 4 Quadrant playbook says SELL Tech in Quad 4, my risk management signaling process prefers shorting things at lower-highs vs. all-time highs.
Why short something like FAANG when:
A) I can tell you to short the 1 component of FAANG (Netflix) that our bottom-up risk management and Independent Research process tells us is a short right now … and
B) My daily @Hedgeye Risk Range product has been signaling Bullish @Hedgeye TREND on FB, AAPL, and AMZN for months?
On the other side of those Top 3 Things to do this morning in US Equity space, I’d buy more:
- Utilities (XLU)
- REITS (VNQ)
- And any stock my analyst A) likes that is B) at the bottom end of its @Hedgeye Risk Range
Why not buy more Treasuries and/or Gold here? That’s simple. They’re not for sale and/or at the bottom-end of their respective @Hedgeye Risk Ranges today. Unlike FOMO, #patience is core to my risk management #process too.
Our immediate-term Global Macro Risk Ranges (with intermediate-term TREND signals in brackets) are now:
UST 10yr Yield 1.99-2.13% (bearish)
SPX 2 (bullish)
RUT 1 (bearish)
NASDAQ 8116-8350 (bullish)
Utilities (XLU) 59.44-61.34 (bullish)
REITS (VNQ) 86.95-90.25 (bullish)
Financials (XLF) 27.71-28.67 (neutral)
VIX 11.60-15.92 (neutral)
USD 96.20-97.62 (bullish)
EUR/USD 1.10-1.12 (bearish)
Oil (WTI) 53.73-57.99 (bearish)
Gold 1 (bullish)
FB 197-207 (bullish)
NFLX 284-339 (bearish)
TSLA 224-265 (bearish)
Best of luck out there today,
Keith R. McCullough
Chief Executive Officer