“If a man is to be obsessed with something, I suppose a boat is as good as anything.”
-E.B. White
Obsessed with what US Equity Futures do on every Trump Tweet and China “deal” headline? That’s a pretty stressful market life to live. Chill. Stay with The Cycle and your rules-based risk management #process.
Admittedly, after having a great August, it’s easier to be chill. I’ve had plenty of months in the last 20 years of risk managing my money, where it didn’t go so well. Stress #accelerating correlates with losing money, indeed.
The aforementioned quote comes from a book I cited earlier this week called The Emerald Mile. Below the quote is picture of a Grand Canyon river guide chilling out and reading a book in his boat. They called him The Factor. His name was Kenton Grua.
In 1983, Grua and his two teammates set the “speed record” for rowing through the Grand Canyon in just over 37 hours. No one knew the Colorado River like he did. Every rapid, rock, and turn. He measured, mapped, and studied it all prior to making any decisions.
Since I was at the Grand Canyon with my family this summer, I can’t help but bring this epic life-experience back to my own. No matter what the majesty and non-linearity of the Global Macro terrain, God willing I will never be distracted by the noise.
You either have a world class #process to run (and win) the race through a Full Investing Cycle or you do not. It’s not a speed race. It’s a deliberate race that requires discipline, patience, and yes, many critical decisions along the sine-curve’s way.
Back to the Global Macro Grind…
Got STPAD (short-term-performance-anxiety-disorder) or month-end US Equity Futures FOMO? Got a boss who just wants to you “buy stah-kks” (like he or she may have at the end of SEP, APR, or JUL)? Chill.
This morning’s Futures FOMO has multiple Macro Tourist headlines driving it:
- “China won’t retaliate”
- “Italy’s Conte has a mandate”
- “And you just gotta buy stah-kks!”
I get it. Most of you get it too. It is what it is. Old Wall Perma Bulls have to find something, anything really, to chase. It’s not about measuring and mapping the sine curves of GROWTH, INFLATION, and PROFITS. It’s about the narrative that gets them paid.
Even if you are shorter-term than most of our clients, during the 37-hour speed record that Grua set, do you think he’d have stopped and made time to consider a Trump Tweet or what some tourist was hollering at him from the shore?
C’mon. Let’s get real here. The best way to win the most short-term races is to not wreck your boat and drown along the way.
When it comes to Asset Management and intermediate to long-term Full Cycle Investing, the MOST important thing for you to do is not have a double-digit draw-down of your (or other people’s) capital. That’s how you drown.
One of the simplest set of short-term strokes within a complex body of moving macro market water to avoid draw-downs is:
- Sell/Short at the top-end of the @Hedgeye Risk Range
- Buy/Cover at the low-end of the @Hedgeye Risk Range
Unlike in prior cycles you can actively risk manage your strokes with little to, in some cases, ZERO commissions costs. I highly encourage you to manage your net wealth this way. In my personal accounts it costs me ZERO to risk manage TLT, for example.
Buy-some on red and sell-some on green? Last I checked, no one ever went broke booking gains.
“Oh but the taxes…” Yeah, I’ve heard about those. What’s been the tax of owning the Russell 2000 for the last -15.4% of its decline from this time last year vs. selling that for a big time Full Cycle Investing gain and rolling it into Gold (+25% since AUG of last year)?
More specifically, I hate taxes but love the #process that forces me to pay them – commissions can be free, but there’s a cost for discipline. Especially on the short side, I don’t short and hold!
I currently have 19 straight booked gains in Real-Time Alerts (doesn’t happen often btw, it’s just called running the river right) not because I’m Captain Stock Picker. It’s because:
- I’ve had the patience to wait for every lower SPY high since JULY and…
- Had the discipline and risk management #process to cover shorts at the low-end of my @Hedgeye Risk Ranges
This isn’t “bragging.” I’ll be the first to explain when and why I’m getting bagged too. The point about your risk management #process isn’t just how often it’s “right.” It’s whether or not it’s right for the right reasons when it goes right.
Since I covered my SP500 (SPY) short lower on a red day, the next short-term rapid exercise will be to re-short it at the top-end of my @Hedgeye Risk Range. Since the price, volume, and volatility of the water is ever changing, you’ll know when I take that hard stroke.
That too, I #timestamp transparently and accountably for you every day. I don’t do FOMO. I do my #process. Not unlike Grua and his boat, that is what I am obsessed with mastering.
Our immediate-term Global Macro Risk Ranges (with intermediate-term TREND signals in brackets) are now:
UST 10yr Yield 1.44-1.63% (bearish)
SPX 2 (bearish)
RUT 1 (bearish)
NASDAQ 7 (bearish)
Utilities (XLU) 61.00-62.74 (bullish)
DAX 1164 (bearish)
VIX 16.41-22.24 (bullish)
USD 97.42-98.49 (bullish)
Oil (WTI) 53.14-56.92 (bearish)
Gold 1 (bullish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
