“I didn’t bet on the race, so I won.”
- Julian Van Winkle III
That was a great quote in the introduction of a great American Capitalism book that I finished this weekend: Pappyland – A Story of Family, Fine Bourbon, and the Things That Last.
At 43 years of age, headed to his 10th Superbowl, it appears that TB12 (Tom Brady) has had a professional #process that lasted like a fine Kentucky bourbon too!
Congrats to the Bucs, Chiefs, and all of you Full Cycle Investors who are still long of Global #Quad2.
Back to the Global Macro Grind…
Welcome to another Macro Monday @Hedgeye! For those of you who are new to our multi-factor, multi-duration risk management #process, welcome. For those of you wily veterans of the Signals & Quads, welcome back.
As a matter of #process (did I mention that word yet?) I like to start with the Global Currency market:
- US Dollar Index was down another -0.6% last week and remains Bearish on both our TRADE and TREND durations
- EUR/USD was up another +0.7% last week to +3.0% in the last 3 months and remains Bullish TREND
- Japanese Yen was +0.1% vs. USD last week and remains Bullish TRADE and TREND as well
- GBP/USD was up another +0.7% last week to +4.6% in the last 3 months and remains Bullish TREND as well
- New Zealand Kiwi appreciated +0.8% vs. USD last week to +7.7% in the last 3 months = Bullish TREND @Hedgeye
Yes, I am sure that The People of New Zealand who work hard for their Kiwis appreciate the appreciation of their hard earned currency vs. the world’s reserve currency.
Despite the US Dollar depreciating, again, some of the major Commodities finally corrected from their Cycle Highs last week:
- CRB Commodities Index corrected -1.4% last week to +13.9% in the last 3 months and remains Bullish TREND
- Oil (WTI) corrected -0.3% last week, taking its 1 & 3-month inflations to +10.8% and +26.0%, respectively
- Corn corrected -5.8% last week, taking its 1 & 3-month inflations to +12.9% and +19.7%, respectively
- Bitcoin corrected -8.1% last week, taking its 1 & 3-month inflations to +42% and +154%, respectively
Yes, I called Bitcoin a commodity. Please don’t cancel.
Did you buy some on the correction? Buying literally any Commodity on corrections towards the low-end of its Risk Range has worked since our Full Investing Cycle process went A) Bearish on USD and B) Bullish on Commodities back in JUN 2020.
I call them Commodities because A) they are and B) have the historical volatility that is…
If you’d prefer to call Lumber (or Bitcoin) an asset, that’s cool with me. Commodities are assets and the asset price of Lumber inflated another +20.1% last week, taking its 3-month inflation to +73.6%.
Whatever you do, do not call that inflation!
What else inflated for #Quad2 investors who didn’t bet on covid and/or Old Wall talking points last week?
A) Emerging Market Equities (MSCI) enjoyed Down Dollar, appreciating another +2.6% last week to +22.6% in 3 months
B) Dr. KOSPI appreciated (or inflated) another +1.3% last week to +37.1% in the last 3 months
C) Taiwanese Stocks (EWT, long since June) appreciated another +2.6% last week to +24.0% in the last 3 months
What did not generate a pre-dividend return of +22.6-73.6% in the last 3 months?
A) Long-term Treasuries with the 10yr UST Yield +17 basis points in the last 3 months
B) Gold is down -2.5% in the last 3 months
C) Utilities (XLU) are down -2.7% in the last 3 months
That means that if you have friends who keep betting on ponies called Deflation and Duration, they’re losing the Full Investing Cycle race. Boy did those Inflation Accelerating horses coming flying around that Global #Quad2 turn in November!
Immediate-term @Hedgeye Risk Range with TREND signal in brackets:
UST 10yr Yield 1.05-1.18% (bullish)
SPX 3 (bullish)
RUT 2098-2186 (bullish)
NASDAQ 12,945-13,662 (bullish)
Tech (XLK) 126.94-133.99 (bullish)
Energy (XLE) 41.09-44.98 (bullish)
Financials (XLF) 29.88-31.75 (bullish)
Utilities (XLU) 61.30-63.60 (bearish)
VIX 20.65-24.96 (bearish)
USD 89.74-90.84 (bearish)
EUR/USD 1.207-1.225 (bullish)
USD/YEN 103.21-104.28 (bearish)
GBP/USD 1.353-1.378 (bullish)
Oil (WTI) 51.39-53.99 (bullish)
Gold 1 (bearish)
Copper 3.57-3.70 (bullish)
Bitcoin 29,667-39,790 (bullish)
Best of luck out there this week,
KM
Keith R. McCullough
Chief Executive Officer
