“We’re at the level of using mercury to treat syphilis.”
- Robert Sternberg
While renowned American psychometrician, Robert Sternberg, is the author of The Triangular Theory of Love, I’m not going there… or going to try to help treat those types of multi-factor-promiscuity-problems this morning!
When it comes to Fading Feelings (critical skill to generate alpha, across cycles) though, he’s the guy who also came up with the Triarchic Theory of Successful Intelligence. Aren’t you “feeling” smarter already?
“He compares the lack of progress in intelligence testing to the enormous leaps made in other fields, like medicine” (The Intelligence Trap, pg 26). But we know that we’re making progress on the #behavioral Skill Factor in investing, every day.
Back to the Global Macro Grind…
“The SAT determines who gets into a good university, and then who gets into a good job – but all you get are good technicians with no common sense.” -Sternberg
And you thought I triggered the really smart people!
As many of you know, I had the lowest SAT score in my class @Yale. While there are some technical reasons for that (like this Canadian knucklehead Junior Hockey Player thinking the math test was in metric instead of…)…
I do take a lot of pride in my score. In ROC (rate of change terms), I had nothing but upside from there.
On Wall Street lots of people come and go. It’s really the Street Smart people that stick around the longest, though. You know - The People who have both the mental humility to learn (quickly) from mistakes and the ability to constantly evolve their #process…
Since my early bosses had a GARPY (Growth at a Reasonable Price) bias, I developed one too. I’d always want to buy “cheap” stocks and short “expensive” ones. When expensive got more expensive, we’d do a lot of complaining about that on The Morning Call.
Now that I know what Factor Exposures (like Long Momentum, MTUM, for example) trump my prior schooling, I understand that, sometimes, I should only like a stock if its “expensive”… and really like a short if its “cheap”, and getting cheaper.
Enough about that part of my education as a stock picker. Like I said, I still having nothing but upside!
What’s the tremendous and emotionally intelligent (rather than triggered) Full Cycle Investor thinking this morning? For starters, here are my Top 3 Things:
Looks like Day 3 of a pseudo-Global-Equity-correction to gross up #Quad2 long exposures again…
- US SMALL CAPS (bullish) – no correction in the Russell 2000 yesterday which pinned another all-time closing high at 1922 as Russell Vol (RVX) continues to signal lower-lows; small cap stock pickers should be absolutely crushing it into year end with #Quad2 being the mecca for this Factor Exposure
- SECTORS – the “correction” in US Equities is more-so in the Sectors you want to be short in #Quad2 – despite Rates Down yesterday, Utilities (XLU) were down another -0.5% vs. our fav new Sector Style (Energy) +3.1% on the day; Industrials (XLI) corrected -1.0% yesterday – that’s another great spot to be shopping for small and mid-cap longs
- RATES – no “breakout” for linear-econs in the headline US CPI yesterday… but, if you’re Long #InflationAccelerating in your Full Cycle Investing accounts, Commodities (CRB Index) ramped to a new Cycle High of 161 anyway! From here to 0.85% on the UST 10yr Yield, I’ll be shorting Deflation/Duration (long-term Treasuries)
Putting some Small Cap Captain Stock Picker “Picks” on the page for you this morning (i.e. what’s currently in Real-Time Alerts):
A) 3 NOV-DEC de-SPAC’s – Mountain Pass (MP), EOS Energy (EOS), and Shultze Special Purpose Acquisition (SAMA)
B) 1 JAN de-SPAC idea by Howard Penney and Jay-Z – Subversive Capital Acquisition (SBVCF)
C) 1 Cannabis Long by Penney – Harvest Health & Recreation (HRVSF)
Oh yeah, bud. Howard (who didn’t have 1600 on his SAT either) and I are former US College Athletes turned Stock Jocks who are freaking awesome Captain Stock Pickers in #Quad2, eh!
How about some Mid-Cap picks?
A) Expedia (EXPE) was a beauty by our guy who went to another school in CT (Todd Jordan) yesterday (think ABNB vs. Vrbo)
B) Short USD, Long Dollar Trees (DLTR) was signaling #oversold yesterday (McGough pick – not clear if he even finished college)
C) Brinks (BCO) continues to work for The Jay Van Sciver (who did go to Yale, and had a very high SAT – Chemistry Major)
Oh yeah, I know that you know. I know that you know that I know that BCO is really a small cap, eh.
And yes, I know Brian graduated from somewhere on Staten Island. I also know that if Josh Steiner left Hedgeye, he could start a Wall Street School that is even smarter than Cornell. Here are a few of his picks that we signaled buy (on red in RTA) yesterday:
A) Fiserv (FISV) which was down on KKR selling some to Full Cycle Investors at $112
B) Visa (V) which was down just because the Financials were – and btw, they are longs in #Quad2 as well
As an Independent Research Team, we’re probably “feeling” a little too good about our picks these days. Then again, that’s what Darius would have nowcasted about us in #Quad2 anyway. We’ll be at the level of back-testing Mercury in our Quads soon.
Immediate-term @Hedgeye Risk Range with TREND signal in brackets:
UST 10yr Yield 0.85-1.00% (bullish)
SPX 3 (bullish)
RUT 1 (bullish)
NASDAQ 12,106-12,621 (bullish)
Tech (XLK) 122.90-127.36 (bullish)
Energy (XLE) 36.72-42.92 (bullish)
Utilities (XLU) 61.69-63.81 (bearish)
VIX 19.75-22.98 (bearish)
USD 90.20-91.83 (bearish)
Oil (WTI) 44.36-46.98 (bullish)
Gold 1 (bearish)
Copper 3.42-3.59 (bullish)
AAPL 119-126 (bullish)
GOOGL 1 (bullish)
Bitcoin 17,392-19,908 (bullish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
