Grateful, Thank You

"Feeling gratitude and not expressing it is like wrapping a present and not giving it." 
-William Arthur Ward

‘Tis the season to be grateful.

Most of us have been blessed with the gift of opportunity in life. What we make out of future opportunities is driven by both our work ethic and the company we keep. That’s why I’m always grateful for my family, friends, and firm. I couldn’t do this without all of them.

While we could do The Quads and manage our own money inside a closed OODA loop, we’ve chosen to do this out loud at the top of every risk management morning alongside all of you. Fully loaded with cartoons and tweets, we love playing The Game this way.

Thank you for giving us the courage and confidence to do it differently. Thank you for inspiring us to build a better way. We’re grateful for your patience and partnership.

Best of health and happiness to you and to yours this holiday season,

KM

Back to the Global Macro Grind…

Yep, it’s 2 days before Christmas… but it’s still Macro Monday @Hedgeye! So let’s keep this tight and to the point this morning.

Here’s what the Global Currency market did last week:

1. USD Dollar Index bounced +0.5% but remains Bearish TREND @Hedgeye with #Quad3 manifesting in December-to-date
2. EUR/USD corrected -0.4% last week and remains Bullish TREND @Hedgeye 
3. Yen was -0.1% vs. USD last week and remains Bearish TREND @Hedgeye  
4. GBP/USD corrected -2.5% last week and remains Bullish TREND @Hedgeye (good spot to buy more = $1.29)
5. Russian Ruble was up another +0.9% vs. USD last week to +9.7% year-over-year and remains Bullish TREND @Hedgeye  
6. Chinese Yuan was down -0.2% vs. USD last week to -1.7% year-over-year and remains Bearish TREND @Hedgeye  

While the uniquely American cable TV style FOMO for “stocks” remains obvious into compensation-year-end, the rest of the world’s macro markets have been consistent in differentiating between countries and their respective Quads (Russia Bullish, China Bearish).

It may not yet be obvious to people chasing the Dow and CNBC headlines in points, but being long #InflationAccellerating has been a much better place to be than “stocks” for December-to-date:

1. CRB Commodities Index (19 commodities) is +4.7% for December-to-date vs. SPY at +2.6%
2. Oil (WTI) has ripped for a +9.6% December-to-date gain
3. Energy Stocks (XLE) led US Sector Style gainers (again) at +1.7% last week to +4.2% for December-to-date

Oh, you have friends who don’t like “December-to-date”? Tell them that there’s this modern day thing in macro called The Machine. And it really likes chasing 1-month price momentum. So January-to-date should see more of this #Quad3 in December-to-date follow through:

1. Industrials (XLI) were DOWN -0.3% last week to -0.7% for December-to-date
2. Financials (XLF) were DOWN -0.1% last week to +1.8% for December-to-date
3. Germany’s DAX was only +0.3% last week to +0.6% for December-to-date

If they don’t want to talk about what’s DOWN (oh yeah, all caps bro) on an absolute or relative basis this December, they probably don’t want to talk about what they had clients crashing in last December.

We are grateful for who doesn’t subscribe to our Full Cycle Investing process too. That’s what makes a market.

How many people that you compete with morning-to-date risk manage their Full Cycle Investing process through the lens of the volatility of the price (instead of the simple moving average of price)?

Oil’s Volatility (OVX) continued to crash last week. At -4.6% on the week and -31.0% for December-to-date, that’s why being long of Oil and/or Energy Stocks (XLE) is crushing the consensus position of net SHORT US Equity Vol (VIX) which was only down -0.9% last week.

“Feeling” bullish on something and not expressing it mathematically… is like wrapping a “potential” idea in a qualitative narrative and not putting it on, at The Cycle turn (when the “moving averages” haven’t yet confirmed it), in size.

Our immediate-term Global Macro Risk Ranges (with intermediate-term TREND signals in brackets) are now:

UST 10yr Yield 1.77-1.96% (bearish)
SPX 3141-3235 (bullish)
Energy (XLE) 59.27-62.17 (bullish)
Shanghai Comp 2 (bearish)
DAX 13045-13427 (bullish)
VIX 11.45-16.70 (neutral)
USD 96.45-97.65 (bearish)
EUR/USD 1.10-1.12 (bullish)
USD/YEN 108.27-109.99 (bullish)
GBP/USD 1.29-1.33 (bullish)
Oil (WTI) 58.40-61.72 (bullish)
Gold 1 (bullish)

Best of luck out there today. Happy Holidays,

KM

Keith R. McCullough
Chief Executive Officer