“Maybe everyone can be better at whatever work they do.”
-Ben Lindbergh & Travis Sawchik
Imagine you worked for (or with) someone who wasn’t open to that idea? Stock “ideas” are everywhere in this profession, but published iterations, evolutions, and improvements in investment processes, not so much.
That’s a good thing. Where would your Full Cycle Investing returns be if 80-90% of people you compete with don’t measure and map The Cycle in ROC (rate of change) terms? Since you’re paying for this, you and I are on the same team, don’t forget. I’m here to help you.
The aforementioned quote comes from an awesome #process book I’m in the middle of studying called The MVP Machine: How Baseball’s New Nonconformists Are Using Data To Build Better Teams. It’s a big time process evolution from Moneyball (written in 2003).
“For information friendly teams, Bannister continues the pursuit of perfection has shifted from ‘finding bodies that are already doing things well’… to asking ‘how can you leverage the data and what we’ve learned’ to making your team better.”
“If experienced players in a centuries-old sport can be better than they thought, it suggests something exciting” (pg 11). If you aren’t excited about applying our process to yours, you absolutely should be. You have an opportunity to crush your competition!
Back to the Global Macro Grind…
Crush or be crushed. That’s pretty much how I feel when I send out my 1st tweet of every morning. Top of the risk management morning to you all. For those of you who shorted Transports (IYT) on my Real-time Alerts signal yesterday, morning-to-date is going great!
Why?
A) Transports (IYT) were making a lower-long-term-cycle-high
B) Transports (IYT) were signaling immediate-term TRADE #overbought (top-end of my Risk Range)
C) Transports (IYT) have a 9% weight in Fedex (FDX)
Yep, unlike most “stocks” into the year-end-and-compensation-to-date (post December), Fedex (FDX) had to report reality last night. Their “guidance” can be summarized by 2 words: QUAD THREE:
"Our revised guidance reflects lower-than-expected revenue at each of our transportation segments and higher-than-expected expenses”
Oh, ‘but there’s this about FDX and that’ says Captain Stock Picker. Oh, I bet. I heard all of the fundamentalist’s details on why Oracle (ORCL) recently went down, hard, after reporting #Quad3 reality (slowing revenues, rising expenses) too.
Where do you think I came up with the ROC process on GROWTH and INFLATION to begin with?
I was a Captain Stock Picker myself! That’s why investment teams with a “bottom-up” bias use our Quads to augment their stock and sector picking process. I’m the only publishing strategist who did their job, both as an analyst and as a PM.
To review why it’s all about getting The ROC (rate of change) right:
- In Macro, it’s the ROC of GROWTH and INFLATION (on a trending basis) that matters most
- In Stock Picking, it’s the ROC of REVENUES and EXPENSESE that matters most
Oh, now were getting into the holiday process-improvement spirit, aren’t we!
Where could either you or the analysts you depend on have been better on a stock like FDX or ORCL? Let’s start with not starting with “valuation.” Fedex (FDX) went from looking “cheap” (a lot higher) to trading at 250x trailing 12 month earnings, after the stock crashed.
Instead, start with The Quads:
A) What economic Quad is the economy in and …
B) Where is the rate of change (ROC) going on revenues and earnings next
IF and when we signal that the US economy is going to accelerate (like we did in early 2009, early 2013, and 2H of 2016 – i.e. the only years where the Old Wall forecasts for “higher interest rates”, throughout the economic accelerations, was actually right)…
And IF a cyclical company like Fedex (FDX) has guided to numbers that are finally realistic. THEN you are buying something like FDX when you should have back when the US economy was bottoming in 1H of 2016:
A) From Q1 of 2016 at $125/share to the peak of the “globally synchronized recovery” (Q1 of 2018) to $274/share
B) Then from $274 to where it will open this AM ($150/share), i.e. down -45% from The Cycle high…
If, if, then = process. Yes. A +120% Q116-Q118 gain to a Q118-Q419 -45% loss by literally knowing nothing other than where The Quads were? That should work for anyone looking to get better at what it is that they do when picking stocks.
Our immediate-term Global Macro Risk Ranges (with intermediate-term TREND signals in brackets) are now:
UST 10yr Yield 1.73-1.92% (bearish)
SPX 3124-3206 (bullish)
RUT 1 (neutral)
NASDAQ 8 (bullish)
Energy (XLE) 58.22-61.70 (bullish)
VIX 11.50-16.72 (neutral)
USD 96.30-97.69 (bearish)
Oil (WTI) 57.87-60.95 (bullish)
Nat Gas 2.15-2.43 (bearish)
Gold 1 (bullish)
Bitcoin 6 (bearish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
