We got very active, very aggressive… and bought big, chunky…”
- Who said that?

Oh, don’t go there. Don’t go all political on me. Don’t be thinking that was him yesterday. He’d have bought much much bigger!

That was actually Blackstone’s Tony James. That’s how he characterized what he and Schwarzman (and their partners) did in 2003. That’s when Blackstone and plenty others on the Buy Side became kings of levered long investing.

That’s why I’ve been citing King of Capital all week. As you know, I believe in God and The Cycle. I don’t believe economic gravity can be centrally-planned away. The best time to get long Private Equity was on the other sides of the 1991 and 2001 recessions.

President Pump! - Trump cartoon 11.14.2016  2

Back to the Global Macro Grind…

Before some of you light your hair on fire about the title of this morning’s Early Look, let me have a little fun with some alliteration and a great nickname for a man who is indeed “absolutely tremendous” at pumping just about anything that could get “stocks” up.

This is the 3rd proper End of The Cycle I’ve traded through in the last 20 years.

Bear market days (and weeks) are long and hard. While staying long and strong bull markets like US Treasuries (and Gold) for the last 1.5 years has been relatively easy to do, trading Tech shorts isn’t for the faint of heart. It’s also a daily grind. That said:

“….. Could be as high as 15 Million Barrels. Good (GREAT) news for everyone!”
- President Pump

Haha! I sincerely love it when he goes ALL CAPS on something that’s moving the market. Whether you like the guy or not, he’s really good at it. In terms of having short-term market impact, I mean.

Quite seriously, he might be the absolute and very best, ever, at it.

Forget the 10M barrels (or less) that Putin or his central-planning peeps didn’t discuss with the Saudis, Trump just made up the 15M number and went ALL CAPS with it. Oil/Energy markets raged, like only bear market bounces can, to the upside.

Now what?

Well, I’ll give you a 3-part answer within my refreshed $18.68-27.34 @Hedgeye Risk Range for WTI:

A) Economically, both the USA and the World is still in DEEEEEP #Quad4 (using 5 E’s because Pump used 5 DOTS in the tweet)
B) Quantitatively, all that intraday +30% bear market ramp in the Oil price did was perpetuate epic Oil Volatility
C) Fundamentally, we’ll host a call on this at 2PM EDT with our Energy Policy Expert, Joe McMonigle from Washington, D.C.

Per Joe’s note to Institutional Clients last night:

“Trump reached for the oil market red phone Thursday with the Saudi Crown Prince and a couple days ago with President Putin. It’s potentially a very big deal if the cuts of 10 million barrels a day or more that Trump tweeted are possible but there remains many details to be known. It’s very positive that the world’s top three oil producers are talking about stabilizing oil markets but demand declines from coronavirus impacts are casting a huge shadow in the oil sector. While production cuts won’t solve everything, it will at least place some kind of catalyst in markets for a floor because the market currently has nothing to stop prices from going lower except eventual production shut downs.”

And what do you do with that? Well, that’s just McMonigle’s introduction to the discussion based on the little facts that substantiate Pump’s tweets. What will matter most on Joe’s call is what his contacts in the Middle East are saying about what’s really going on.

No matter what comes out of our conference call, I’m just going to:

A) Trade my Risk Range on both Oil and Energy Stocks (XLE)… because
B) With Oil Volatility (OVX) at 160, I don’t believe anything anyone says relative to my math

Having been trained as a fundamental, bottom-up, Buy Side analyst at a world class hedge fund, you can be rest assured I wasn’t always this way. In 2000-2001, when I was shorting US Consumer Stocks, I’m not quite sure I even knew what 10M barrels a day meant.

That said, if a CEO went ALL CAPS on me in a 1-on-1 meeting, I’d know exactly what to do! Ha

When I started buying “great companies” in 2002 at 5-6x EBITDA (Nike, McDonald’s, etc.) I really didn’t get a looksy from the Fed, a big Fiscal mouthful from Mnuchin, or Bush tweets either. I just bought “stocks” when the ROC (rate of change) went from bad to less bad.

Eventually, by 2003, US Employment & Consumption growth went from less bad to good. Then, between 2004-2006, #GrowthAccelerating got really really good. And I got “very active, very aggressive”… “buying big, chunky” positions in our hedge fund portfolios…

Boy did I feel smart. I felt like Captain Stock Picker! Where else do you think I made up that nickname? So stop panicking and panting at the site of the next grand central market plan. Don’t fight gravity. This game is a lot easier when you get the Full Investing Cycle right.

Immediate-term @Hedgeye Risk Range with TREND signal in brackets:

UST 10yr Yield 0.56-0.93% (bearish)
SPX 2 (bearish)
RUT (bearish)
Tech (XLK) 70.51-84.85 (bearish)
VIX 49.02-70.98 (bullish)
USD 97.41-103.29 (bullish)
EUR/USD 1.06-1.10 (bearish)
GBP/USD 1.15-1.26 (bearish)
Oil (WTI) 18.68-27.34 (bearish)
Gold 1 (bullish) 

Best of luck out there today,


Keith R. McCullough
Chief Executive Officer

President Pump! - 100