“Turn off the TVs and work hard on your proficiency.”
- General Kowalski
Lieutenant General James Kowalski served as one of our bravest from 1 and finished his career as the Deputy Commander of United States Strategic Command. Like all of us, he had his issues. Thank God he didn’t lead with FOMO.
Amidst all of the Perma Bull about bottoms and flying V’s, I am proud to lead from the front-lines as your Risk Manager. It’s one thing to be bullish on Tech (we are in #Quad3), it’s entirely another to be chasing performance and oblivious about Cycle Risk.
Kowalski’s deliberate leadership style was highlighted in another good book by Daniel Coyle called The Culture Code. Kowalski said “this is not a training problem – this is some people out there having a problem with discipline.” (pg 42)
Back to the Global Macro Grind…
Does anything that happened in the past matter to your portfolio this morning? I don’t think it does.
Whether it crashed and “recovered” or it continues to make all-time highs because you weren’t pro-cyclically exposed at precisely the wrong time in March, all that matters is what you do next. What are you going to buy or sell today?
When you’ve been doing this for over 20 years on both the buy-side and in the Hedgeye Fishbowl, you get used to only being as good as your last Full Cycle Investing decisions. Fortunately, I wouldn’t get away with drawing dots in the future up into the right.
As a matter of longer-term Asset Allocation decision-making #process, every 3 months my teammates and I give our subscribers a Full Investing Cycle presentation called our Macro Themes Deck. Today, we’ll be hosting that call at 11AM EDT @HedgeyeTV.
Here are our Top 3 Macro Themes for Q3 of 2020:
- Recession Stagflation
- Earnings: Deep #Pod4
- USD, Commodities, EM
I’ll humbly submit that the 110 slides (pre-appendix) of content that I’ll present are going to provide for the best 40 minute reality check on The ROC (rate of change) of The Cycle that you can pay for.
Unlike me, who struggles sometimes with backward looking Proctology Macro, both Darius Dale and Christian Drake keep getting better and better at helping clients visualize cycles. I’m really excited to introduce what we call Micro Quads today, for example.
Since my job is also to make The Hedgeye Call and summarize the content, here’s what we’re currently thinking:
- Recession Stagflation – means going from the sharpest, short-term, Depression in US history… into a Recession
- Deeep #Pod4 – should ring in Hedgeye Jedi ears like our Deeep #Quad4 call did in January (it’s terrible for earnings)
- Short USD, Long Commodities, and Long Certain EM – yep, these are disciplined calls that we’ve made many times
In other words, whether you’re “bullish” or “bearish”, there’s a lot to do in terms of Asset Allocation, Sector Style, and Factor Exposure pivots during A) Economic Stagflation and an ongoing B) US Profit Depression.
Turn off your Old Wall TVs and work hard on what’s going to happen next. What happened yesterday is Old Wall news.
Immediate-term @Hedgeye Risk Range with TREND signal in brackets:
UST 10yr Yield 0.64-0.79% (bearish)
SPX 2 (bearish)
RUT 1 (bearish)
NASDAQ 9470-10,212 (bullish)
Tech (XLK) 97.63-105.75 (bullish)
REITS (XLRE) 34.16-37.10 (bullish)
Financials (XLF) 22.32-25.06 (bearish)
Shanghai Comp 2 (bullish)
VIX 28.32-41.64 (bullish)
USD 95.90-97.99 (bearish)
Oil (WTI) 35.46-41.66 (neutral)
Gold 1 (bullish)
Copper 2.54-2.68 (bullish)
MSFT 188-204 (bullish)
AAPL 334-365 (bullish)
AMZN 2 (bullish)
Bitcoin 9176-9797 (bullish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
