“This is an approach book. This is a playbook.”
- Matthew McConaughey
For years now, people have been asking me for a #process book that resembles mine. Yeah, they’ve tried to read Mandelbrot… and they’ve fallen asleep reading Infinite Powers and The Volatility Surface… so they want something different.
They want something with less numbers, and more narrative… something more human, eh.
Good news: my wife, Laura, found them something real good in this Greenlights book from my fellow Irishman from Uvalde, Texas. McConaughey is a #process guy. He’s also a hilarious and real-life guy. Best of luck to you all out there in 2021!
Back to the Global Macro Grind…
Oh yeah, baby. It’s a Greenlights Global #Quad2 Macro Monday @Hedgeye… are you ready for it?
As is customary with the numbers part of the #process, I’ll start with what drives the “Everything (ex-Treasuries) Up” portfolio this morning – and that’s the Global Currency (Down Dollar) @Hedgeye TREND that remains firmly intact:
- US Dollar Index is signaling lower Cycle Lows this morning after being down another -0.3% last week
- EUR/USD was up another +0.2% last week to +1.2% in the last month and remains Bullish TREND @Hedgeye
- Yen appreciated another +0.2% vs. USD Dollar last week and remains Bullish on our TREND duration as well
- GBP/USD was up another +0.8% last week to +1.9% in the last month and remains Bullish TREND @Hedgeye
- Canadian Dollar appreciated +1.1% last week vs. USD and also remains Bullish TREND
- South Korean Won was up another +1.3% vs. USD last week and remains Bullish TREND as well
Yep, those damn Canadians are feeling almost as sweet as the South Koreans (in real purchasing power terms) as their hard earned currencies are going to make travelling to Texas as cheap as it has been in years!
South Korea’s stock market (we call her Dr. KOSPI) was howling at the moon, closing up another +2.5% to a new Cycle High overnight. Is that what happens alongside Dr. Copper ripping in Global #Quad2? Yep, #Greenlights.
Down Dollar also drives our Long Emerging Markets Asset Allocations (since June), don’t forget:
A) Emerging Markets (MSCI Index) were up another +2.9% last week to +5.5% in the last month
B) India’s stock market was up another +2.0% last week to +7.2% in the last month (long INDA)
C) Russian Stocks are up another +3.6% (not a typo) this morning to +12.1% in the last month
But why? Just like being long INFLATION via Commodities, as an Asset Class (since June), it’s Down Dollar #Greenlights:
- CRB Commodities Index (19 Commodities) inflated another +1.4% last week to a new Cycle High
- Oil (WTI) inflated another +0.6% last week, inflating +8.5% in the last month = Bullish #Quad2 TREND
- Corn inflated +7.3% last week taking its 1-month inflation to +15.0% (and is up another +2.5% this AM)
But ask the guy living in McConaughey’s Dad’s old Texas trailer if there’s food inflation… I dare you to tell whoever answers the screen door that the Feds said there’s no real-world inflation #accelerating (you might want to bring a gun).
For those of you who can’t afford $22 sushi rolls for dinner, eat some inflating Soybeans, and like it. They inflated another +3.7% (in Devalued Dollars) last week and have inflated +12.7% in the last month alone.
Oh, you have Old Wall friends who don’t want to talk about that real-world stuff, eh?
How about we get back to talking about Stahks! While being long either GROWTH or INFLATION (which is Value) has pounded the qualitative sentiment bears in the last month, the US Equity Sector Styles that have sucked wind have been:
- Utilities (XLU) down -0.9% in the last month
- REITS (XLRE) down -1.1% in the last month
- Consumer Staples (XLP) down -0.1% in the last month
Yeah, they were all up last week. And yes, you should be underweight (being a polite Canadian this morning) or short them this morning vs. the plethora of Full Cycle Asset Allocations Global #Quad2 likes.
Rate Sensitivity is what you should have “rotated” out of, not out of GROWTH.
The biggest Asset Allocation mistake you can make either this morning or throughout Global #Quad2 is being long Duration (and/or Deflation). With Treasury Bond Volatility (MOVE Index) moving +16% higher last week, the Long Bond is still headed lower.
Do you need Old Wall Economists and the Fed to tell you there’s inflation before it runs away from you performance wise? Heck, even the beloved “Break Even” on the UST 10yr Yield is up +16 basis points in the last month to 1.99%.
Write that down. And don’t forget that it’s the numbers that drive Wall Street’s future narratives, not the other way around.
Immediate-term @Hedgeye Risk Range with TREND signal in brackets:
UST 10yr Yield 0.91-0.98% (bullish)
SPX 3 (bullish)
RUT 1 (bullish)
NASDAQ 12,701-12,951 (bullish)
Tech (XLK) 127.32-131.25 (bullish)
Utilities (XLU) 60.25-63.00 (bearish)
VIX 20.37-25.15 (bearish)
USD 89.46-90.63 (bearish)
EUR/USD 1.215-1.233 (bullish)
USD/YEN 102.67-103.81 (bearish)
GBP/USD 1.342-1.369 (bullish)
CAD/USD 0.78-0.79 (bullish)
USD/CHF 0.87-0.89 (bearish)
Oil (WTI) 46.99-49.38 (bullish)
Gold 1 (neutral)
Copper 3.50-3.63 (bullish)
TSLA 649-723 (bullish)
Bitcoin 25,170-30,739 (bullish)
Best of luck out there this year,
KM
Keith R. McCullough
Chief Executive Officer
