McCullough: A Lot Of Money To Be Made On U.S. Dollar Correlations

09/10/20 03:44PM EDT

Below is a brief excerpt transcribed from Thursday's edition of The Macro Show hosted by Hedgeye CEO Keith McCullough

McCullough: A Lot Of Money To Be Made On U.S. Dollar Correlations - 9 10 2020 2 17 49 PM

Here's a little tip.

Use the risk management tools that you have (the Risk Ranges in particular) to make good decisions from both a timing and sizing perspective.

So when the U.S. Dollar gets overbought what do you do?

First you short the dollar and secondly you look at what starts to fall out the other side of it.

McCullough: A Lot Of Money To Be Made On U.S. Dollar Correlations - 9 10 2020 2 19 25 PM

The U.S. Dollar made another classic bounce to lower highs within a bearish trend ever since we made this call at the end of May and then into June when we made the call on the Commodity breakout. You need to understand that the other side of these inverse correlations doesn’t have to necessarily be “STAHKS.”

Cotton is up 1.3% this morning, so why are you sitting there frothing at the mouth with FOMO trying to capture a 10 handle move in SPY’s?

That’s not what we want to do. Wheat is up over a full percent. Realize that these are the things that are inversely correlated to the U.S. Dollar.

What you’ll find here with the inverse correlation to the SPY’s on a 15 and 30 day basis isn’t what it once was.

McCullough: A Lot Of Money To Be Made On U.S. Dollar Correlations - 9 10 2020 2 20 00 PM

That’s what happens. Correlations go away. And as these correlations go away and the emergence of stagflation becomes more clear.

The question now isn't whether we have Quad 3 stagflation or not, it's now whether the economic environment goes into #DeepQuad3.

There are plenty of “stock only” people who are now focusing on the "rotation to value or financials."

We’re more broader than that and we are better than them. That’s why we’re short U.S. Dollars and making money on a lot of things that are inverse to the Dollar.

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