Excellent piece. We are in similar camps I've been adding this week to my favored inverse etf short as well. I remember not long ago that a point of contention at a presser was how far they were from positive real rates across the curve. It appears they have now achieved it. how do you believe this effect their outlook? https://blinks.bloomberg.com/news/stories/RGGSJRT0G1KW
Hi! Have recently posted a chart of the US real yield curve and last time I looked they weren't there yet - but the real discussion is how tight you want to be across the curve.
0% real rates is arguably not nearly tight enough to slow inflation down as they want to.
For the Tactical Portfolio you can already see the position %, which are the same for all: sized as to lose maximum 2% of AuM if a 1.5 monthly standard deviation move happens against me.
So sizes are adjusted to the underlying volatility of each instrument to achieve a fix loss of 2% of AuM if I am wrong (I'll trade bigger on EURUSD and much less size on Bitcoin, for example).
For the LT ETF portfolio, working on that - for now giving broad indications (overweight cash or bonds rather than high-beta stocks, etc).
A couple of weeks ago you made a call to buy TLT, which I did. It rallied nicely for about 10 days but is down practically to buy entry price. What happened and are you still bullish on TLT (TO THE MOON)? I really enjoy your material and Macro Trading show.
A podcast or article on some of your best & worst trades at ING along with lessons learned etc. Would be very informative and I'm sure help a lot of people with risk management.
Appreciate the article. What's your take on TLT, EDV? Would you start now investing in long bond etfs or wait for 10 year to hit higher level? If you prefer to wait, what would be your method to determine entry point ?
Check out Alf's video on Blockworks Macro, title: "The Fed Will Break Inflation's Back, No Matter What | Teddy Vallee" (start near the end at 40:52 .... go to 50:14 too and the 51:17)
Alf, Andreas and Teddy agree TLT is a good buy now.
I have been fading this rally. I thought I was losing my mind until I read your most recent update. I appreciate how you support your thesis with lots of relevant data.
Alf, great information as always. I can't thank you enough. I know everyone's risk tolerance is different but I'm curious as to the allocation size. Your etf portfolio has low beta, some tech, bonds with sizable cash. Can you divulge what you might consider a fair allocation for someone risk averse? Thanks again. David C
I'm with you. I thought we'd roll over, based on the charts, but it looks like the casino is back. Well, like I heard you say once... three times in investing and for me, it's time to go fishing! See you in Wyoming on the Green!
One Elephant in the room seems to be housing. Do you have a Macro view on US housing costs? etc.," If rates go lower it would seem that the huge pent up demand apparently in existence would be a boon for housing stocks. They have rallied with the rest, but what about the countervailing force of a slowing economy and possible layoffs etc.? Thanks ALF I saw you first on RV. Your English as a second language is truly remarkable.
All experts I listen to are telling more or less the same. Earnings decline, TLT long, this isn't over yet and so on. You, Steno, Snyder, Belkin and all the other guys with a shitload of knowledge and experience. All by far smarter than I am. But it would be really interesting to see when they are all wrong.
I don't wish it, because then I am wrong either. Just thinking about it.
I would like to present a trade to you which I am currently in, and perhaps you can tell me I am an idiot.
My thesis is that although I agree with your macro view, I hear that there is a lag between rate hikes and their effects on the economy. I have heard estimates of about 9 months or more before the economy is really affected, which is soon, but perhaps only beginning.
I have also heard that many hedge fund managers have "gone fishing" as you say and may not be as active for the month of August.
My thinking is that this leaves "dumb money" in charge for the time being. Dumb money which doesn't look further into the CPI data, or the jobs data as you present here and on boiler room.
The "merge" for Ethereum is the biggest narrative behind the crypto space at the moment, and I have been waiting for the "merge" trade since 5 years ago, in 2017. Crypto is also extremely narrative driven, and if you can find the narrative, you can find a rally (unless macro news is pulling the rug out from under you).
The "merge" date is sept 15-16.
My trade is to long Ethereum until the end of august, and get out. I am in the trade since a couple weeks ago and do not intend to ride to the very top, but to capture the meat of the move. I am 30 percent in of my entire NW.
I would never tell anybody he's an idiot based on a trade - it's all about the underlying analysis behind and the risk/reward, and there is some merit to what you said above
I am curious, some time ago you wrote you have a long term portfolio which accounts for 90% of your savings. (= 70 % MSCI world EUR hedged, 20 % USD Treasuries, 8% Gold, 2 % BTC) In this portfolio you invest regularly regardless of the market condition. 10 % of your savings are you tactical portfolio.
Is this long term portfolio still the same? Or why are you writing now in this article that your long-term ETF portfolio has a large position on USD Cash, Low exposure to risk-assets and Higher than usual exposure to 10y+ Government Bonds;
Shouldn't it be the case that the long term portfolios are hardly changed instead of tactical portfolios?
That's a beta-harvesting portfolio I used to have due to very tight compliance restrictions as I was running money for a bank.
Today, most of that portfolio has been migrated to my ETF-only structural portfolio - I am working on systematizing it via my macro models and I will share the details with you guys later this year.
Hi Alf, thanks for the reply, I understand. Following that i have a maybe provocative question: Also in earlier articles you said that almost all active fund managers perform worse than the overall markert. Now that you seem to have a more active long term portfolio where you decide what to overweight isnt this the exact same as an active fund manager? Or do you think the main reason why you think you will perfom better than the overall market is that you dont have to pay the high fees active Portfolio managers charge? Thanks for the inside!
Good question. It's indeed hard to overperform markets but I believe some of my macro framework could help delivering a better risk-adjusted performance.
Also, as you said, I don't pay any fees and I am very careful not to overtransact and leave too much bid/ask spread on the table.
Excellent piece. We are in similar camps I've been adding this week to my favored inverse etf short as well. I remember not long ago that a point of contention at a presser was how far they were from positive real rates across the curve. It appears they have now achieved it. how do you believe this effect their outlook? https://blinks.bloomberg.com/news/stories/RGGSJRT0G1KW
Hi! Have recently posted a chart of the US real yield curve and last time I looked they weren't there yet - but the real discussion is how tight you want to be across the curve.
0% real rates is arguably not nearly tight enough to slow inflation down as they want to.
So will Monday's post include the asset allocation %ages for the LT ETF and Tactical Portfolios you reference?
Eager to learn more on why fixed income as one of the best risk-adjusted asset classes for the near term.
Hi Penelope!
For the Tactical Portfolio you can already see the position %, which are the same for all: sized as to lose maximum 2% of AuM if a 1.5 monthly standard deviation move happens against me.
So sizes are adjusted to the underlying volatility of each instrument to achieve a fix loss of 2% of AuM if I am wrong (I'll trade bigger on EURUSD and much less size on Bitcoin, for example).
For the LT ETF portfolio, working on that - for now giving broad indications (overweight cash or bonds rather than high-beta stocks, etc).
A couple of weeks ago you made a call to buy TLT, which I did. It rallied nicely for about 10 days but is down practically to buy entry price. What happened and are you still bullish on TLT (TO THE MOON)? I really enjoy your material and Macro Trading show.
Chris
Hi! Yes, that trade belongs to the structural portfolio which means my time horizon is much longer (6-12 months and more).
I do believe 3.25% on 30y and 3.10% on 10y (where I bought in June as you can see in the article back then) are decent levels to accumulate.
A podcast or article on some of your best & worst trades at ING along with lessons learned etc. Would be very informative and I'm sure help a lot of people with risk management.
Fantastic idea!
Thanks Alf. I was wondering if you were still short and now we know. The big question, was 3639 the bottom? Sure feels like it. Thank you.
Hi Douglas! As my mentor once told me: ''Alf, tops and bottoms are for fools and liars'' :)
I stopped out some 7-8% ago in my Russell short so I might consider re-entering some bearish trades if I see the right risk/reward.
Appreciate the article. What's your take on TLT, EDV? Would you start now investing in long bond etfs or wait for 10 year to hit higher level? If you prefer to wait, what would be your method to determine entry point ?
Hi Jim!
I wrote an article in June where I communicated I started buying 10y+ EUR and USD bonds.
I believe bonds will deliver decent returns on a 6-12m+ horizon.
Check out Alf's video on Blockworks Macro, title: "The Fed Will Break Inflation's Back, No Matter What | Teddy Vallee" (start near the end at 40:52 .... go to 50:14 too and the 51:17)
Alf, Andreas and Teddy agree TLT is a good buy now.
I have been fading this rally. I thought I was losing my mind until I read your most recent update. I appreciate how you support your thesis with lots of relevant data.
Welcome, Jon.
And as always, I might be wrong!
Thank you for creating audio option!!!
Welcome!
Alf, great information as always. I can't thank you enough. I know everyone's risk tolerance is different but I'm curious as to the allocation size. Your etf portfolio has low beta, some tech, bonds with sizable cash. Can you divulge what you might consider a fair allocation for someone risk averse? Thanks again. David C
Hi David, I am working on systematizing the ETF long-term portfolio based on my macro models. It will be ready by year-end.
I'm with you. I thought we'd roll over, based on the charts, but it looks like the casino is back. Well, like I heard you say once... three times in investing and for me, it's time to go fishing! See you in Wyoming on the Green!
One Elephant in the room seems to be housing. Do you have a Macro view on US housing costs? etc.," If rates go lower it would seem that the huge pent up demand apparently in existence would be a boon for housing stocks. They have rallied with the rest, but what about the countervailing force of a slowing economy and possible layoffs etc.? Thanks ALF I saw you first on RV. Your English as a second language is truly remarkable.
Thanks, Richard. Although my Italian accent is pretty bad eheh
I do hope you will give me your view on the housing that I mentioned. Literally no one seems to be commenting on that that I am aware of.
Well, I can't sugar coat that one LOL. However, I worked through it.
Wow---- outstanding AND a very succinct macroperspective! Thanks for ALL your hard work--- --- ---
Welcome!
All experts I listen to are telling more or less the same. Earnings decline, TLT long, this isn't over yet and so on. You, Steno, Snyder, Belkin and all the other guys with a shitload of knowledge and experience. All by far smarter than I am. But it would be really interesting to see when they are all wrong.
I don't wish it, because then I am wrong either. Just thinking about it.
The value lies in the data-driven analysis behind macro, not in the ''trade'' itself in my opinion :)
Love your content Alf, you are a great teacher!
I would like to present a trade to you which I am currently in, and perhaps you can tell me I am an idiot.
My thesis is that although I agree with your macro view, I hear that there is a lag between rate hikes and their effects on the economy. I have heard estimates of about 9 months or more before the economy is really affected, which is soon, but perhaps only beginning.
I have also heard that many hedge fund managers have "gone fishing" as you say and may not be as active for the month of August.
My thinking is that this leaves "dumb money" in charge for the time being. Dumb money which doesn't look further into the CPI data, or the jobs data as you present here and on boiler room.
The "merge" for Ethereum is the biggest narrative behind the crypto space at the moment, and I have been waiting for the "merge" trade since 5 years ago, in 2017. Crypto is also extremely narrative driven, and if you can find the narrative, you can find a rally (unless macro news is pulling the rug out from under you).
The "merge" date is sept 15-16.
My trade is to long Ethereum until the end of august, and get out. I am in the trade since a couple weeks ago and do not intend to ride to the very top, but to capture the meat of the move. I am 30 percent in of my entire NW.
Am I an idiot?
I would never tell anybody he's an idiot based on a trade - it's all about the underlying analysis behind and the risk/reward, and there is some merit to what you said above
Thanks Alf for the article!
I am curious, some time ago you wrote you have a long term portfolio which accounts for 90% of your savings. (= 70 % MSCI world EUR hedged, 20 % USD Treasuries, 8% Gold, 2 % BTC) In this portfolio you invest regularly regardless of the market condition. 10 % of your savings are you tactical portfolio.
Is this long term portfolio still the same? Or why are you writing now in this article that your long-term ETF portfolio has a large position on USD Cash, Low exposure to risk-assets and Higher than usual exposure to 10y+ Government Bonds;
Shouldn't it be the case that the long term portfolios are hardly changed instead of tactical portfolios?
Thank you Alf!
Hi Georg!
That's a beta-harvesting portfolio I used to have due to very tight compliance restrictions as I was running money for a bank.
Today, most of that portfolio has been migrated to my ETF-only structural portfolio - I am working on systematizing it via my macro models and I will share the details with you guys later this year.
Hi Alf, thanks for the reply, I understand. Following that i have a maybe provocative question: Also in earlier articles you said that almost all active fund managers perform worse than the overall markert. Now that you seem to have a more active long term portfolio where you decide what to overweight isnt this the exact same as an active fund manager? Or do you think the main reason why you think you will perfom better than the overall market is that you dont have to pay the high fees active Portfolio managers charge? Thanks for the inside!
Good question. It's indeed hard to overperform markets but I believe some of my macro framework could help delivering a better risk-adjusted performance.
Also, as you said, I don't pay any fees and I am very careful not to overtransact and leave too much bid/ask spread on the table.
Thanks for all you do.
Have a great weekend.
My pleasure!