“It was supposed to be a year. It became a new life.”
- Maria Konnikova
We’re getting great feedback on this late-summer-time read about a PhD behavioral psych teacher turned poker pro. The Biggest Bluff has a lot to do with your emotional state and decision making process as you risk manage Global Macro markets.
“Hardly ever do we have a chance to learn an entirely new skill, to immerse ourselves in novicedom, not only with the guidance of the best experts, but in an area where the skill-chance continuum is so balanced, so redolent of life, as poker.” (pg 30)
Clearly all of the Old Wall experts saw 5 stocks becoming 25% of the SP500 coming on JAN 1 of this year. But the rest of us are still novices at seeing that factor exposure manifest in fractal terms. Long live playing the next hand that the market gives us.
Back to the Global Macro Grind…
The SP500’s all-time high streak ended at 6 straight yesterday with Total US Equity Volume #accelerating +16% vs. the prior (up) day. Meanwhile our fav major US Equity Index Long (NASDAQ) ramped another +0.7% to a new all-time closing high.
All the while, the dog (i.e. the Russell) closed down -1.04% on the day, taking its Full Cycle Loss to -10.3% from its Cycle Peak.
That’s just stahks! though. From Gold ramping back towards $2000 this am and my Bitcoins inflating back towards $12,000 with the US Dollar Short clocking a 2-year low. There are plenty of “the nuts” to play against the weak “Value” & Financials (XLF) ones.
“From managing emotions, to reading other people, to cutting your losses and maximizing gains…” -Konnikova
You can do this. You don’t have to chase.
When we made the “call” to buy Zoom (ZM) in our INVESTING IDEAS product back in May, I wasn’t thinking V-Shaped Recovery or any bs narrative like that. I was thinking:
A) My partner and analyst, Ami Joseph, thinks we’re going to see a POD 1 (revenue) #acceleration and …
B) ZM’s stock is at the low-end of my Risk Range within its quantitative Bullish @Hedgeye TREND
Provided that the analyst is right and he doesn’t have a bluff hand or need to beg and pray for some unelected person in government to buy his chips upon his busting, these are relatively easy calls to make, especially with the economy in #Quad3.
As a reminder, in #Quad3:
A) Large components of the old and/or cyclical economy are in negative year-over-year growth mode
B) The Fed is devaluing the Dollar and Inflation is accelerating in those devalued Dollars
C) Cost of living rises on a real basis and Real Interest Rates fall
D) Long Organic Growth (ZM) crushes ye Olde Wall (pick Citigroup, for example, just because I’m short that one)
And, if you really have to be long “value”, then you should have bought one of the many value “calls” there were in the Gold, Mining, and Commodities space. That’s been the best bang for your Burning Bucks in terms of “cyclical” exposures.
Long Airline Stocks (JETS), since June’s big lower-high? Not so much.
As professional poker legend (8 World Series of Poker bracelets), Erik Siedel, taught Maria in her Day 1 Lesson #1. “Pay attention” (pg 32). That’s right. Don’t navel gaze at the Dow, in points. Stop looking at your phone.
Start studying The ROCs (rates of change) across the entire, non-linear, Global Macro ecosystem.
Measure and map the rates of change of Growth (and company revenues) and Inflation (and company costs). If you get those ROCs right, you’re going to get a lot more right than those hustling you for a quick pick proctology exam.
No matter how you’ve played pre the crash to “off the bottom”, the only thing that matters is how you play the next hand.
In August, I closed out 67 hands (signals in Real-Time Alerts). I had 38 longs and 29 shorts and batted 76% despite tourists in the casino saying you can’t make money on the short side.
MAX gain was +7.2% with an AVG gain of +1.8%. MAX loss was -5.7% with an AVG loss of -1.5%.
I really don’t care what people think about how I play the game. It’s not for everyone. I play it out loud for all to see. If you learn something from it, great. It’s how I learn the most (from my very public mistakes, especially). Thank you for that learning opportunity.
Immediate-term @Hedgeye Risk Range with TREND signal in brackets:
UST 10yr Yield 0.59-0.76% (bearish)
UST 2yr Yield 0.11-0.16% (bearish)
SPX 3 (bullish)
RUT 1 (bearish)
NASDAQ 11,129-11,896 (bullish)
Financials (XLF) 24.12-25.55 (bearish)
VIX 21.79-27.44 (bearish)
USD 91.90-93.37 (bearish)
Oil (WTI) 42.15-43.68 (bullish)
Nat Gas 2.35-2.80 (bullish)
Gold 1 (bullish)
Silver 25.93-29.52 (bullish)
Copper 2.92-3.07 (bullish)
Bitcoin 11,209-12,008 (bullish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
