“He maximized what the entire roster could contribute on the defensive end.”
- Clayton Geoffreys on Gregg Popovich
Most people don’t think about their hard earned money that way. Many live in a uniquely American culture of chasing the offense. From fantasy football to the 75M people who just started buying call options with no fees, it’s all about the “picks” and the upside.
In real life, unless you’re part of the 1% who gets bailed out by their beloved Fed every time they make what could be a fatal mistake chasing their benchmarks, principles like discipline & defense matter every bit as much as having a productive offense.
Forget the short-tenured CEOs, coaches, and hedge fund PMs out there, there are very few coaches out there who have delivered returns and/or results like San Antonio Spurs Coach Popovich has over a +20 year duration. That’s because “Pop” has his #process.
Back to the Global Macro Grind…
Pop’s process isn’t about super stars and CNBC stock “picks.” Similar to generating alpha away from the Dow, in points, he’s been a pioneer in finding European Factor Exposures that can deliver within his system.
“While skill, talent, and athletic abilities are what defines a NBA superstar, they are not what makes a player a champion… Popovich focusses on players that have already given up their personal needs to contribute to the greater cause of the team.”
- Geoffreys
Do you currently get paid to work on a team like that? My players do. And, like Michael Jordan plainly stated at the end of episode 7 of the Last Dance (great documentary about what it takes to be on a championship team, instead of being a star):
“If you don’t want to play that way, don’t play that way.”
I’m obviously not MJ. I am a 5’9 Mucker. But I can assure you that I will put both my team and process up against anyone in the world, at the top of every risk management morning, and win, over time.
Does that sound or “feel” a certain way to you? As you may have noticed, I don’t really care.
What I really care about is both the #process I’m building and the players that can not only evolve it, but build upon it. The core foundations of my process have always stood on the shoulders of giants (Einstein, Mandelbrot, etc.).
The next generations of my team’s process will stand on the shoulders of my teammates.
That’s enough about leadership, principles, and process for this morning. Let’s get right back into playing the next game. First, as a follow up to yesterday’s Apple note, AAPL Vol didn’t breakout. Instead, NASDAQ Volatility (VXN) continued to break-down!
So it was indeed another well earned day of winning, for the right reasons, for the teams and portfolios positioned for #Quad3:
A) Tech (XLK) Up +1.3% to a fresh all-time closing high
B) REITS (XLRE) Up +1.1%, right on time, from the low-end of my Risk Range
C) Treasuries Up (across the curve) after another terrible US Jobless Claims report
On the other side of that:
A) Financials (XLF) were down another -0.9%, taking their #crash to -21% since FEB
B) High Yield OAS Spread rose back above +500 over as Treasury Bond Vol (MOVE) index broke down
C) European Stocks continued to look like US Bank Stocks (i.e. bloody awful)
In other words, if your team or portfolio is Long NASDAQ vs. Short FTSE and/or European stocks, #WellDone. FTSE down again this morning and down -4.2% in the last month – Italy down too (MIB Index down -4.7% in the last month) and Spain is a bloody mess.
There’s lots of alpha to generate on the long/short side of Global Macro Country exposures – Long China vs. Short Europe has been a beauty too. Post a 2-day correction, the Shanghai Comp was +0.5% and I remain long of the KBA (A-Shares) in my PA.
If your average (and “believe me”, their longer-term Full Cycle Investing returns are below average) Old Wall portfolio manager “can’t go there” on China or Long Commodities, that’s fine. For your family’s hard earned wealth, you can.
Immediate-term @Hedgeye Risk Range with TREND signal in brackets:
UST 10yr Yield 0.53-0.71% (bearish)
UST 2yr Yield 0.11-0.16% (bearish)
SPX 3 (bullish)
RUT 1 (bearish)
NASDAQ 10,829-11,346 (bullish)
Tech (XLK) 111.47-116.99 (bullish)
REITS (XLRE) 35.25-36.74 (bullish)
Utilities (XLU) 59.11-61.72 (bullish)
Financials (XLF) 23.99-25.52 (bearish)
Shanghai Comp 3 (bullish)
VIX 20.73-28.02 (bearish)
USD 92.19-93.91 (bearish)
Oil (WTI) 41.22-43.63 (bullish)
Nat Gas 2.07-2.51 (bullish)
Gold 1911-2041 (bullish)
Silver 25.12-29.42 (bullish)
Copper 2.79-3.05 (bullish)
MSFT 204-216 (bullish)
AAPL 440-479 (bullish)
Bitcoin 11,431-12,153 (bullish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
