“Know what you don’t know (and trust in what you do).”
-Bob Iger 

I’ll kick off 2020 with where I signed off for 2019, with another great quote from a CEO whose stock (DIS) you could have bought on sale earlier this week. Why is it that so many Americans like to buy things on sale other than Commodities, Treasuries, and Stocks?

The aforementioned quote kicks off Chapter 3 of Iger’s Ride of a LifetimeLessons Learned From 15 Years As CEO of The Walt Disney Company. Knowing what we don’t know in life is manifest. Trusting our process in this profession is critical.

What is it that you do? Instead of giving you a token list of “predictions for 2020”, I’ll challenge you this morning. I challenge you to think for yourself, define your process, and (always) evolve it. If you do that, your 2020 to-date is already off to a great start.

2020 To-Date - Dnnq9V4XgAAq6Ot

Back to the Global Macro Grind…

My 2020 morning-to-date started at 4:30AM EST. Nothing about my process (other than my 5 month old puppy annoying me at my feet this AM) has changed. I’m grinding through all of the macro market moves/signals. Darius & Drake have the economic data.

My positioning for 2020 to-date reflects every decision I made in my P.A. (personal accounts) on Tuesday of this week. My Tuesday to-date positioning was the outcome of my Monday to-date.

Other than Wall Street calendar year-end (“year to date”) compensation counting, what does the YTD really mean to someone like me who has a Full Cycle Investing & Risk Management #process?

A: not a lot

What matters to the compounding of our net wealth is allocating to new:

A) Asset Classes
B) Sector Styles … and
C) Factor Exposures

At the Quad (or cycle) Turns. The simplest recent example of that was going from short (or underweight) Commodities and Energy Stocks to long of them 3 months ago when our cyclical call on INFLATION went from bearish to bullish.

There was no start of 2019 or “year-to-date” consideration in that “call.” If you get The Cycle turns right, you won’t get the draw-downs wrong (like those who were Long US Dollars and Short Commodities & Energy Stocks did in December).

No change to my #Quad3 Asset Allocation this morning (Top 4 Sector Styles = Energy, Tech, REITS, Utes). And, for shorter-term Risk Managers who manage actively, for 2020 morning to-date, top-down (macro) here’s where I’m at in Real-Time Alerts:

A) Long Biotech (IBB) from the low-end of the Risk Range earlier this week
B) Long LT Treasuries (TLT) from the low-end of the Risk Range into Tuesday’s close
C) Still Long Inflation Protection (TIP) after adding to my position lower on November 7, 2018

Other than the bubble in Junk (JNK) Bonds, which I’m short, straight up, against TIP this morning, I have no index or ETF shorts on of consequential size. I took down exposure to my index shorts on Mon/Tue, widening my net exposure, big time.

How could I have a bearish view on US #GrowthSlowing (i.e. #Quad3) and do such a wild and crazy thing? Well, I did, so it doesn’t quite matter how “intellectually congruent” my short-term positioning is relative to my intermediate-term outlook.

The risk management #process said buy Biotech, Disney (DIS), and Guardant Health (GH) on red this week, so I did.

I can (likely will) take down my net exposure on green this morning, so that’s the beauty of using a fractal fading of my own “bearish views.” Especially with people chasing their 2020 “year-to-date” bogey this morning, I can sell on green, higher.

Is this too much transparency? Again, in the spirit of challenging you this morning, I challenge you to show all of Wall Street every move you make and force yourself to explain why. No matter what you tell people you do, that is what you are doing!

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

UST 10yr Yield 1.79-1.95% (bearish)
UST 2yr Yield 1.54-1.64% (bearish)
SPX 3173-3255 (bullish)
Utilities (XLU) 63.48-65.01 (bullish)
REITS (VNQ) 89.90-92.99 (bullish)
Energy (XLE) 58.48-60.92 (bullish)
Tech (XLK) 88.75-92.70 (bullish)
VIX 11.52-15.07 (bearish)
USD 95.90-97.16 (bearish)
GBP/USD 1.29-1.33 (bullish)
Oil (WTI) 59.70-62.15 (bullish)
Gold 1 (bullish)

Best of luck out there today,

KM

Keith R. McCullough
Chief Executive Officer

2020 To-Date - Chart of the Day