“Identify, rearticulate, and emotionally affirm the world according to…”
- Chris Voss
Per a former FBI Hostage Negotiator (Chris Voss), that’s how you want to talk to people who are on tilt. Triggering them to believe that you empathize with their belief-system helps you win the short-term negotiation.
“The moment that you’ve convinced someone that you truly understand their dreams and feelings, mental and behavioral change becomes possible…” -Never Split The Difference, pg 112
Yeah, so you’re saying I need to work on that part of my communication game vs. Bitcoin Maxis, Gold Bugs, etc.? haha
Back to the Global Macro Grind…
In many ways, in all of its compensation glory, the Old Wall is awesome at identifying, re-articulating, and emotionally affirming what many people want to hear.
No matter what the Quad, weather, or whatever, you know they’re going to tell you to “buy stocks” and ignore the embedded “value” in #Quad4 Umbrellas. Compared to used-car sales people, they’re really good at what they do.
Now try being me. Empathize with a liberally educated man who goes both ways. Hell hath seen no fury like me telling a former Gold Bug that there might be a few Cycle Things to consider in risk managing his position using signals and data.
But, that’s not always the case.
This morning, I wanted to formally thank all of our subscribers who don’t need me to identify with their former-perma-positions! I have never had this much positive feedback about having an apolitical, dispassionate, and data-driven #process.
Enough of the narrative, let’s get into some numbers on why I covered some of my Gold & Gold Mining Shorts yesterday:
- USD’s 2-day Counter @Hedgeye TREND bounce signaled that it was immediate-term TRADE #overbought
- US Dollar Index’s refreshed Risk Range was signaling a lower-Cycle-low of $89.51
- USD vs. Gold currently has an inverse correlation (on a 15-day duration) of -0.74
That’s called an immediate-term risk management decision by someone who doesn’t believe in just giving away money to The Machine because he “believes” Gold is an underweight (or short) during a breakout in nominal rates during #Quad2.
Empirically (not an opinion), on an INTERMEDIATE-term @Hedgeye TREND basis (3-months or more in duration):
- Gold has a POSITIVE correlation of +0.40 vs. USD … whereas
- Stahks! (SPY) has a trending inverse correlation of -0.89 … and
- My Bitcoins and Commodities have trending inverse correlations of -0.86 and -0.75, respectively
Note how I called them “my Bitcoins”… and how that may have made you “feel” like they are something I hold in high regard, or something I might hodl with at night…
But why is it that when I just bluntly say I’ve been:
A) Long Commodities since going bearish on USD in June … or
B) Short Treasuries since The Cycle signaled #Quad2 in November … that
C) Not many feelings are triggered, at all, about those Asset Classes?
Never mind Gold. No one, ever, became famous at any Old Wall investment bank being a Perma Bull on JGB or Long-term Treasury Bonds. No one on Twitter needs me to emotionally identify and empathize with selling their Treasuries either.
Back to another risk management reason on why I covered plenty of my Gold Shorts yesterday:
A) AFTER the down move, Gold’s implied volatility PREMIUM popped to +12% vs. 30-day realized
B) In context, if you were shorting Gold 1-month ago before it got tagged on this day in November, 2020…
C) Gold had a very complacent implied volatility DISCOUNT of -17% vs. 30-day realized…
And it was coming from the top-end of my Gold Risk Range back then too. So… no feelings here, folks… just data… what I’d like to see for another Selling Opportunity in Gold and/or Gold Miners is:
A) Gold moving back to the top-end of my @Hedgeye Risk Range while it…
B) Develops another implied volatility discount and …
C) I have every Gold Bug on Twitter chirping me from the cheap seats that Gold is above their Moving Monkey
‘Oh, dammit Mucker – you did it again – you triggered feelings about belief-systems about the “moving average” of things. Please don’t double down with some “ratio” or “valuation” comments this morning.’
The world, according to them, can be very sensitive at times. In the new year I’ll try to be a more empathic Mucker. But, in the meantime, there are just so many better things in Global Macro to buy. There are still two shopping days left!
Immediate-term @Hedgeye Risk Range with TREND signal in brackets:
UST 10yr Yield 0.89-0.98% (bullish)
SPX 3 (bullish)
RUT 1 (bullish)
NASDAQ 12,331-12,946 (bullish)
Tech (XLK) 124.51-130.72 (bullish)
Energy (XLE) 37.17-41.61 (bullish)
Financials (XLF) 27.99-29.01 (bullish)
Utilities (XLU) 60.44-62.35 (bearish)
Nikkei 267 (bullish)
DAX 13076-13760 (bullish)
VIX 20.64-25.66 (bearish)
USD 89.51-91.12 (bearish)
Oil (WTI) 45.66-49.38 (bullish)
Gold 1 (neutral)
Copper 3.48-3.64 (bullish)
Bitcoin 20,876-25,149 (bullish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
