“It’s about moving the needle bit by bit and making those changes sustainable.”
- David Goggins
Do you wake up at the top of every risk management morning executing on the same data-driven process? Or does your wakeup time and series of clicks you make in the 1st two-hours of your work day vary?
I don’t spend a lot of time worrying about what other people do. I know what I do every morning. I try to improve it bit by bit. Consistency and discipline are critical components to my daily decision-making process. So is risk managing the biases embedded in my mind.
No, this isn’t easy. Life isn’t either. As Goggins goes on to explain in a great book I’m finishing called Can’t Hurt Me, “the first step towards a calloused mind is stepping outside your comfort zone on a regular basis” (pg 101). Being market-signal & data-dependent does that for me.
Back to the Global Macro Grind…
Got whip-saw inflation accelerating to decelerating market signals? In the last month alone you’ve had to deal with a non-WWIII Iranian Oil shock to the upside (remember $64 WTI?) and a Coronavirus -23% crash in that same major macro market price to the downside.
What could possibly go wrong?
It’s a good thing that the classic #LateCycle “just buy stocks” meme was unaffected by that. The deep “it’s all about liquidity” narrative paid off with yet another all-time closing high for SPY yesterday (while I was booking more gains on the short side of the Russell 2000).
All the while in big Global Macro market Signal + Quad terms:
A) The US Dollar continues to make fresh YTD highs #Quad4
B) The 10yr US Treasury Yield continues to signal #Quad3 to #Quad4
C) The Yield Curve continues to compress
D) Commodities continue to signal #Quad4
“Booking gains on the short side”?
Yes, unlike most of your fav Old Wall strategists made famous for their big round number “S&P year-end targets”, I not only trade my p.a. (personal accounts) around my macro process, but I #timestamp every macro move I make for you to see every day.
Oh yeah. Sometimes that makes me look like a real idiot too. Imagine your adventures in timestamping if you showed our entire profession every single move you’ve made for 12 years?
And, sometimes, it doesn’t.
The +1.4% gains I booked on the short side of my SMALL CAP (IWM) exposure yesterday was:
A) My 2nd successful in/out (dirty words: market timing) move of 2020 and
B) My 6th straight win on the short side of IWM in a row
The +1.8% gain I booked (in Real-Time Alerts) on the long side of DURATION (Long-term Treasuries, TLT) yesterday was actually the 11th straight win for the home team, in a row.
The point here is neither how sweet I must be in timing IWM and TLT, nor how bad I can be shorting whatever stock isn’t going down when SPY makes an all-time high. The point is that I do this on an open and transparent content platform to be accountable to my mistakes.
For those of you who know people who are never wrong, those are the people who don’t evolve.
Being a loser is different than losing an opportunity to learn something. I know, with 100% certainty, that I will get something wrong today. What I don’t know is why I’ll get it wrong. Both new market moves and incoming data will determine that.
My Bullish @Hedgeye TREND signal on SPY hasn’t been wrong. It’s been right. It’s also been more right to be long a Full Investing Cycle portfolio of Treasuries, Gold, Utes, REITS, and Housing stocks vs. SPY going back to when we made that asset class rotation call in Q418.
For me at least, it would also be wrong to wakeup later than my competition, look at the SPY Futures, and actually “feel” something.
While that used to be harder to do (when I had no process), I’ve calloused my mind to focus on where I’m positioned and/or could be.
It’s selfish, I know. And so is not losing money when the consensus crowd does (they’re short USD and Treasuries right now) on Wall Street.
Our immediate-term Global Macro Risk Ranges (with intermediate-term TREND signals in brackets) are now:
UST 10yr Yield 1.49-1.68% (bearish)
SPX 3 (bullish)
RUT 1 (bearish)
Utilities (XLU) 67.33-69.40 (bullish)
REITS (VNQ) 94.01-96.96 (bullish)
Consumer Staples (XLP) 63.05-64.97 (bullish)
Tech (XLK) 96.39-102.52 (bullish)
Shanghai Comp 2 (bearish)
DAX 13112-13730 (bullish)
VIX 13.46-18.85 (bullish)
USD 97.50-98.99 (bullish)
Oil (WTI) 48.60-53.36 (bearish)
Nat Gas 1.72-1.94 (bearish)
Gold 1 (bullish)
Copper 2.48-2.61 (bearish)
Bitcoin 83 (bullish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
