“It’s called the description-experience gap.”
- Maria Konnikova
After AAPL goes straight up, basically every day, for a month, Hoodies gotta be “feeling” it, no? Just a little? I’m long Tech (XLK) and QQQ (and AAPL obviously as a result). Other than some back-pain this morning, I’m not really feeling anything.
Post the DNC, and now getting into Pump’s RNC, wow are there a lot of political feelings out there! Thankfully, I’m part of neither party so I’m feeling nothing on that emotional level either. As Konnikova goes on to remind us in The Biggest Bluff:
“In study after study, people fail to internalize numeric rules, making decisions based on “gut feelings” and “intuition” and “what feels right”, rather than based on the data they are shown.” (pg 15)
Back to the Global Macro Grind…
What’s interesting about Maria Konnikova is that she had absolutely no idea how to play poker, never mind win at the professional level, until after spending 5 years on her doctoral thesis at Columbia on… wait on it… stahks!
“I asked thousands of people to play a simulated stock market game, under time pressure… and what I found was that, over and over, people would overestimate the control they had over events…
The more they overestimated their own skill relative to luck… the less they learned from what the environment was trying to tell them.” (pages 13-14).
Now ask 70-80 MILLION of the people who just started trading stocks since April how they feel?
Then ask the people who have no money to speculate on stocks (i.e. the 50% of Americans who had < $1000 in savings coming into COVID) how they’re feeling about their real cost of living this summer…
With Natty Gas (long RRC in the PA) ripping towards $2.60 (+45% in a month), I’m thinking they were feeling a little hot!
Oh, you don’t like paying for air-conditioning? Go live in a tent. Stock market is up. That’s all that matters. And who really cares how this ends until we get to another month-end payout? Long Tech and Commodity inflation has been awesome!
On that score, here are the Top 3 Things I’m seeing my non-linear environment trying to tell me this morning:
Newly minted all-time SPY and NASDAQ highs as US Gov Dollar Devaluation remains the story…
- USD (short) – down another -0.4% this morning vs. both the Euro and the Pound on promises of Fiscal Spending to oblivion and beyond + PE Powell’s speech in Jackson Hole on Thursday that’s broadening the base of inflation in both Commodities and real cost of American living – no worries, we “rich” people are all good though (we own what’s inflating)
- COMMODITIES (long) – Corn (which was one of the few major Softs Inflation holdouts in the last month) has joined the #InflationAccelerating party (in your portfolio) in the last week, inflating another +1.7% this AM with Soybeans (Long SOYB), Cocoa (NIB) inflating another +1.1%, etc. = Broadening Inflation as US Equity Inflation is narrowing
- GOLD (long) – correcting -0.4% with another Counter @Hedgeye TREND bounce in Global Bond Yields this morning (Swiss 10yr Yield +5bps to -0.49%, ooh-lala) as GLD’s implied volatility discount (-20%) stands in sharp contrast to SPY’s implied vol PREMIUM of +60% this AM. Most Macro Tourists chased the Gold chart at the highs 1-month ago
Whatever you do, please don’t chase.
Especially in the Commodities Asset Class, where there are no CNBC narratives or salesmen giving you their latest “picks”, you have plenty of time to wait for a good hand to play. Commodities take turns signaling immediate-term TRADE #oversold.
On that score, in Real-Time Alerts yesterday, here’s how I played my hand (or #process):
- Sold some Oil (BNO) on green
- Bought some Sugar (CANE) on red
- Bought more Rare Earths (REMX) on red
While it’s so easy a mathematical Mucker can do it, this is actually one of the hardest things for amateurs and tourists to do:
A) Sell some (on green) towards the top-end of the @Hedgeye Risk Range … so that
B) You can buy more (on red), after corrections, towards the low-end of the Risk Range
If that’s all you did differently vs. the thousands of Konnikova subjects or millions of Hoodies chasing cruise line stocks (I re-shorted Norwegian Cruise Lines, NCLH, yesterday on green too), you won’t overvalue your “feel” vs. the math.
In my daily Risk Ranges product, poker fans who are seeing the cards they have (rather than the ones they want and/or need to see) will see 3-of-a-kind of Lower-Highs in the top-end of my Risk Ranges for AAPL, MSFT, and TSLA this morning.
That’s new. Pay attention to the particular.
Immediate-term @Hedgeye Risk Range with TREND signal in brackets:
UST 10yr Yield 0.55-0.71% (bearish)
SPX 3 (bullish)
RUT 1 (bearish)
NASDAQ 10,919-11,428 (bullish)
Tech (XLK) 112.33-119.43 (bullish)
Financials (XLF) 24.03-25.54 (bearish)
Shanghai Comp 3 (bullish)
VIX 21.18-27.99 (bearish)
USD 92.26-93.83 (bearish)
Oil (WTI) 41.76-43.48 (bullish)
Nat Gas 2.16-2.68 (bullish)
Gold 1 (bullish)
Silver 25.23-28.63 (bullish)
Copper 2.81-3.06 (bullish)
MSFT 207-215 (bullish)
AAPL 468-506 (bullish)
TSLA 1 (bullish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
