“No battle was ever won by spectators.”
- John Le Carre
That quote, alongside many from The Man In The Arena, is one of my all-time favs. Unlike most people who have no timestamps but major in rear-view looking US Stock Market Proctology, I have to make the best call I can on macro markets every day.
While the “calls” I make might get you to take action in your portfolio in the short-term, what I’m really doing, with the help of my teammates, is help teach you what a Full Investing Cycle #process is, for the long-term.
In order to do both (be transparent and accountable in the short-term but maintain a long-term discipline), I need to have what American Capitalist, Tom Bulleit (as in the bourbon), calls Maniacal Patience. That’s always my most important behavioral Asset Allocation.
Back to the Global Macro Grind…
While it’s kind of funny to watch, there’s no process in what I affectionately call Perma Bull Wall Street talking points. They’re everywhere – your inbox, on Twitter, and @CNBC…
Generally they are one way (“stocks only go up”) and one dimensional. Be honest, who on Ye Olde Wall got you to buy both Treasuries (across the curve) and Gold in Q4 of 2018 and actually stayed with both the whole way?
Moreover, if you’re one of these guys like Mike Wilson at Morgan Stanley who has effectively been calling for what we call #Quad2 since the beginning of 2020 (pre-crash), were you short Gold and Treasuries with that economic recovery call too?
Albeit only in one Asset Class, Wilson is actually one of the better strategists we compete with – he made a great call on the US Earnings Cycle Peaking in 2018. We did too. But we actually got the timing right (to the month, “#Quad4 in Q4 of 2018”)
Again, don’t confuse people “making calls” and giving you “picks” with a Full Cycle Investing #process.
Are we a little competitive about this? A: Damn right we are! There’s no crying on Wall Street. Here’s what my Partner, Darius Dale (aka Quadzilla) tweeted about Wilson yesterday:
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Mike Wilson just told you the market cycle started on MAR 23rd. Did your NAV start then? What he didn't tell you is that he came into the year with an implicit Quad 2 view, just like most of Wall St. I'm finding it hard to reconcile his call on cyclicals. Ours is clear: #Quad3 |
Is that fair? Surely many of his fans will come to his defense. But what is there to defend? If you’re long #Quad2, you’re definitely long Small Caps and the Financials. You’re short Treasuries and Gold too. We remain on the other side of all that.
I get it, Wilson isn’t a Global Macro guy. Most Old Wall research isn’t either. They’re in silos. What would Wall St. 2.0 prefer?
Here’s what this Global Macro Investor and Strategist sees in his Top 3 Things this morning:
Lots of alpha being generated now on both the long and short side of Asset Allocations, Sector Styles, and Factor Exposures…
- RUSSELL (short) – the gift that keeps on giving = Short SMALL CAP Leverage (and the Financials) vs. Long Gold, Tech, Quality – Russell 2000 (IWM) resumed its Full Cycle Crash (-20% from cycle peak) yesterday and is already down -9% from June 8th where the crowd chased the charts (and I said Phase 2 of the Crash of 2020 was about to begin)
- 10YR (long) – sees the non-V-shape US Recession very clearly this morning with the UST 10yr Yield diving down to 0.58%, compressing The Curve to +44bps on 10s/2s – like our core Full Cycle Investing Long position in Gold earlier this week, this makes Treasuries immediate-term TRADE overbought within their Bullish @Hedgeye TREND (since Q4 of 2018)
- COMMODITIES (long) – continue to ensure that the “flation” part of recessionary US Stagflation is intact. Both Corn and Copper inflating another +0.5% this AM with Oil correcting towards the low-end of my Risk Range where I plan on buying some – broadening my Asset Allocation to Commodities is an exercise in patience (wait for corrections in each Commodity towards the low-end of my Risk Ranges)
Please forward me their Twitter handle if they exist, but I have yet to see anyone say they are long of both Treasuries AND Commodities, at the same time. That probably means they aren’t long Treasury Inflation Protection (TIP or IVOL) either.
Will our “call” to Short US Dollars and Buy EM, China, and Commodities in June 2020 be as “big” as our “call” was to buy Treasuries and Gold in Q4 of 2018? I don’t know and I don’t care.
What I care most about is A) having the discipline to stay with my Full Investing Cycle #process and B) pivot in/out of Asset Classes, Sector Styles, and Factor Exposures when the singularity of my process tells me to, not when someone is just talking.
Immediate-term @Hedgeye Risk Range with TREND signal in brackets:
UST 10yr Yield 0.57-0.69% (bearish)
UST 2yr Yield 0.13-0.18% (bearish)
SPX 3009-3176 (bearish)
RUT 1 (bearish)
NASDAQ 9952-10,736 (bullish)
Tech (XLK) 102.57-109.58 (bullish)
REITS (XLRE) 33.54-36.29 (bullish)
Financials (XLF) 22.08-23.54 (bearish)
Shanghai Comp 3184-3551 (bullish)
VIX 26.92-35.06 (bullish)
USD 96.17-97.70 (bearish)
Oil (WTI) 38.02-41.57 (bullish)
Gold 1 (bullish)
Copper 2.70-2.87 (bullish)
Bitcoin 8 (bullish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
