“In the early 1990s, China embodied everything members of Congress believed the USA should stand against in the world.”
-Richard McGregor, Asia’s Reckoning
Was that just a cultural, economic, and political set of beliefs that cyclically went away? Or do American Macro Tourists chasing the latest “trade deal” headline from Mnuchin actually do so with a newfound secular faith in the Chinese Communist government?
No one ever said the Old Wall and all its media’s new narratives ever had to be objective, balanced, and/or consistent. It’s always about what story you can tell us that will keep “stocks” going up. After they fall, the FOMO goes away.
If I thought “stocks” were going down from yesterday’s intraday lows, I wouldn’t have covered shorts, sold some Treasuries and some Gold, and signaled buy a US listed stock that one of my analysts likes. That wasn’t FOMO. That was #process.
Back to the Global Macro Grind…
FOMO (fear of missing out) happens when you’re chasing “stocks” higher, after they move higher. The Hedgeye Risk Management #Process includes buying/covering on corrections and selling/shorting on rallies towards the top-end of the @Hedgeye Risk Range.
What I do from a shorter-term tactical (i.e. trading) perspective isn’t that complicated. People’s emotions are. What I do doesn’t always work. But it works much more often than it doesn’t. And, when it works, I know why.
Do you have a rules-based decision making #process? How do you risk manage (i.e. trade) around your core positions?
These are simple questions that don’t always have disciplined answers. I’ve worked with and observed plenty of money managers, high net worth individuals, brokers, etc. who have completely flamed out by going from being lucky to wrong for the right reasons.
If you want to be good at this for a long time (20-60 years), I have 2 words for you: #patience and #process.
What’s most fascinating about the super short-term FOMO phenomenon is that consensus doesn’t have it for what’s been working for the last 12 months:
A) Treasuries (across the curve)
B) Gold, Silver, Platinum
C) Bond Proxies (REITS, Utilities, Consumer Staples)
They had it for story stocks like NFLX and TSLA. In today’s Chart of The Day, you can see what the 12 month #FullCycleInvesting returns are for the ABC things vs. everything that’s pumped (to you) and dumped (on you) every day @CNBC.
God willing, the Old Wall and its FOMO Futures Now Media will be gainfully employed for many cycles to come!
What I can also see (in both my Institutional Client inbox and the QA portion of The Macro Show), is not only the FOMO but some panic with the aforementioned ABC Asset Allocations anytime they mildly correct.
Again, I have a risk management #process for that:
A) Sell-some at the top-end of the @Hedgeye Risk Range … so that you can
B) Buy-some back on corrections at the low-end of the @Hedgeye Risk Range
I publish those Risk Ranges (daily subscription product) so that you can make rules-based decisions. If you don’t like that you don’t get either the top or bottom end of the ranges to act on all of the time, that’s too bad. You need to be long of more #patience!
Back to the Chinese guys (yes, all their top decision makers are guys) who characterized USA’s recent trade negotiation demands as “attempts to colonize the Chinese economy… and give up China’s economic sovereignty”…
The PBOC (People’s Bank of China) guy (Yi Gang) is telling the world this morning that:
A) The PBOC is going to “avoid” doing another “massive stimulus” (like they did in 2016, pre Xi’s election for life)
B) The PBOC wants to keep Chinese Debt levels “under control” and “sustainable” (from their highs)
The timing and context of these comments always matters. They come on the heels of the slowest ROC (rate of change) of Chinese Industrial Production growth in 17 years. Growth continues to slow. Believe them.
On macro matters, I don’t believe Steve Mnuchin. For those of you who think that’s a political comment, it’s not. I didn’t believe Tim Geithner or Hank Paulson in 2008 either. My belief system is born and bred by the economic and market data, daily.
No, I don’t think you have to “make a call” that it’s 2008 either. Since I started the firm in 2008, I’ve always sold at the top-end of my ranges and bought/covered at the low-end of my ranges. That’s saved me from FOMO and helped me fade tourist hope/headlines.
Hope, as I’ve said for many years now, is not a risk management #process.
Our immediate-term Global Macro Risk Ranges (with intermediate-term TREND signals in brackets) are now:
UST 10yr Yield 1.59-1.89% (bearish)
SPX 2 (bullish)
RUT 1 (bearish)
Utilities (XLU) 62.31-64.36 (bullish)
REITS (VNQ) 91.47-94.29 (bullish)
Shanghai Comp 2 (bearish)
DAX 12066-12499 (bearish)
VIX 13.39-17.09 (neutral)
USD 97.51-99.10 (bullish)
EUR/USD 1.09-1.11 (bearish)
Oil (WTI) 53.08-62.47 (neutral)
Nat Gas 2.40-2.70 (neutral)
Gold 1 (bullish)
Copper 2.53-2.65 (bearish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
