“Be genuine. Be honest. Don’t fake anything. Truth and authenticity breed respect and trust.”
- Bob Iger
Authenticity is one of Bob Iger’s Top 10 Principles of leadership that were just published in a great book I’m in the middle of reading titled The Ride of a Lifetime – Lessons Learned From 15 Years As CEO of The Walt Disney Company.
I’m generally not a fan of generic “Top 10” ways to lose weight or be an effective leader because being yourself shouldn’t be on someone else’s list. That said, I’ve always had a lot of respect for both Iger’s leadership style and the content company he runs.
I have 2 days left until I enter year 12 of building my own content company alongside my teammates. While our 2019 successes should be considered a culmination of many years of grinding together, on many levels I still think we’re just getting started.
Back to the Global Macro Grind…
It’s both month and year-end, but it’s also Macro Monday @Hedgeye! For those of you who are new to our process, welcome. On the 1st day of the week we review weekly macro market moves within the context of our multi-duration and multi-factor model.
Let’s start with the ongoing Phase Transition in the Global Currency market:
- US Dollar Index was down another -0.9% last week and is -1.5% in the last month after breaking bad to Bearish TREND
- EUR/USD was +0.8% last week and is currently Bullish TREND @Hedgeye
- Yen was flat vs. USD last week and remains Bearish TREND @Hedgeye
- GBP/USD was +0.6% last week and remains Bullish TREND @Hedgeye
- Brazilian Real was +1.4% vs. USD last week, is +5.4% in the last month, and is also Bullish TREND now
- CHF/USD was +0.8% last week, is +2.5% in the last month, taking Swissy back to Bullish TREND @Hedgeye
As a reminder, a Bullish-to-Bearish Phase Transition @Hedgeye is something big that is moving from one state to another, primarily because The Quads are changing.
For example:
A) USD is undergoing a Bullish-to-Bearish Phase Transition because the US economy has exited #Quad4 and entered #Quad3
B) Commodities (as an asset class) are undergoing a Bearish-to-Bullish Phase Transition because that’s what #Quad3 is
Fundamentally, #Quad3, which we’ll review in our Q1 Macro Themes presentation next week is when:
A) Inflation is #accelerating … and
B) Real Consumption Growth is #slowing
With the CRB Commodities Index making fresh 3-month highs last week, that’s one big reason why both US Retail Sales and US Consumption Growth hit 7-month lows.
If you’ve been long Commodities and Energy Stocks for the last month (i.e. as USD started to break bad to Bearish TREND), you’ve beaten any of the major US Equity Indices:
- CRB Commodities Index reflated another +1.2% last week and is +3.8% in the last month
- Oil (WTI) reflated another +2.1% last week and is +6.3% in the last month
- Coffee reflated another +1.4% last week and is +11.9% in the last month
Other than Hedgeye, what Global Macro hedge fund process got long of Cocoa, Coffee, and Commodities during #Quad3 in Q4 of 2019? Hoping there are many of you running those hedge fund strategies, because you’re crushing your competition at the turns.
Over 4,000 hedge funds have been liquidated in the last 5 years of the 11 I’ve been publishing very obvious Global Macro Themes that have been based on both the ROC (rate of change) of the data and Phase Transitions in The Quads.
What did they miss? And who is missing this move in both Tech and Energy Stocks?
A) Tech (XLK) was up another +1.1% last week and is +3.9% in the last month
B) Energy (XLE) was up another +0.5% last week and is +3.7% in the last month
Since both Tech and Large Cap are Sector and Factor Overweights in #Quad3, I could have been long what consensus is long (Tech) and have been right for the right rate of change reasons, but I chose to pivot into Commodities and Energy (XLE) instead.
The Quads provide a framework for you to funnel into where everything else in your process tells you the probability is rising for a positive rate of return.
If, for whatever reason that isn’t rate of change driven, you don’t like Energy and your process said buy AAPL, great – so did my Quads & Signal (AAPL + GOOGL + FB have been Bullish @Hedgeye TREND in my Risk Ranges product, daily, throughout Q4).
For my own money, I love being long what the crowd isn’t, at The Quad turns. Thank goodness I wasn’t short AAPL vs. that!
That’s just being honest on why I chose to get loud on Long Energy over everything else, including Tech. I also don’t like being long late cycle #EarningsSlowing (Software component of Tech), when I can be long an #acceleration (Commodities) instead.
Our immediate-term Global Macro Risk Ranges (with intermediate-term TREND signals in brackets) are now:
UST 10yr Yield 1.78-1.95% (bearish)
SPX 3175-3253 (bullish)
NASDAQ 8 (bullish)
Energy (XLE) 59.40-62.67 (bullish)
Tech (XLK) 88.47-92.42 (bullish)
VIX 11.82-15.12 (bearish)
USD 96.25-97.51 (bearish)
EUR/USD 1.10-1.12 (bullish)
USD/YEN 108.61-109.78 (bullish)
GBP/USD 1.28-1.32 (bullish)
USD/CHF 0.97-0.98 (bearish)
Oil (WTI) 59.42-61.99 (bullish)
Gold 1 (bullish)
AAPL 275.00-291.29 (bullish)
FB 200-212 (bullish)
GOOGL 1 (bullish)
Best of luck out there this week,
KM
Keith R. McCullough
Chief Executive Officer
