I guess I am one of the fortunate ones who managed to join your new service early on before you raised the price. Your posts are very instructional and useful.
A couple of quick question related to this subscription and specifically to this last post.
1) Will you ensure your "long term ETF portfolio" is constructed to avoid the three mistakes you mention in this post, ie. that you will ensure the portfolio is: hedged across multiple macro baskets, diversified across multiple macro themes within a basket, and avoid proxies ?
2) You mention: "think in probabilistic terms and try to add cheap positions that will deliver convex returns if your base case doesn’t realize." - does this mean in your long term ETF portfolio you will be recommending specific convex tail risk insurance implementations as well?
I suspect not many people here know what PCA analysis is, and perhaps only a few want to know. It is not a very easy subject, not b/c it's so hard technically (if you know enough math) but b/c it is usually poorly explained. As a student, I gave up on people who tried to explain it to me in an hour and ended up reading a whole book.
For those who wants to understand what PCA does, I highly recommend a brilliant post written "for a grandmother" by a statistician. It is by far the best non-technical introduction that you will ever find.
PCA / Factor Analysis are statistical methods we (psychology students +) were taught because they are crucial to the creation of psychometric tests or surveys for research. You want to establish which questions or statemente load onto the same construct. For example, if you make a survey assessing both anxiety and depression levels, you want to make sure that the questions/items that address peoples' experiences of either anxiety or depression are distinct and don't overlap so you have confidence that the results are pointing in the right direction. I am kind of drunk now, but I know what that's all about. PhD in psychology and statistics here 😅
Structural equation and multilevel modelling on large datasets using R was what I was up to before I retired.
Anyone can call a function in R or python programmed by someone else. You understand PCA if you can explain why principal components are eigenvectors of the covariance matrix. In my experience, most people cannot, including those who use it every day. I can no longer do it myself 25 years after but I used to be able to.
Another great podcast Alf. I'm very glad I've signed up to your service for 2023. Some thoughts/comments on your podcast:
1. 'Don't put all eggs in 1 basket': For a pure equity investor does investing in 1 Global ETF fund count if the fund invests across multiple markets (US, Japan, EU etc.) and contains >3k stocks?
2. Drip- feeding cash into investments: Your podcast last week focused on the probability of recession in 2023. If you accept this view then any thoughts on over what period an investor should drip-feed cash back into stocks: 12/24/36 months?
3. If an investor just restricts themselves to Stocks & bonds then should a truly long term investor (10+ years), requiring no income, just restrict themselves to Stocks?
Ah bad proxy trades, reminds me of buying puts on SPY and calls on GLD right before Trump won the election. A good lesson in making sure your exposure is properly targeted.
Don’t be stupid? What if that can’t be helped? I’ve been looking for a “Smart Trades for Stupid People” article for some time, we are an underserved community here Alf
Perhaps you could expand on gold being a real rates play and not an inflation play (I have learned that myself through trial and error and loss of capital).
Thanks for the quick write-up on your 3 core principles. Hoping to see more like these over time that are easier to digest for anyone newer to the world of macro investing!
Hi Alf,
I guess I am one of the fortunate ones who managed to join your new service early on before you raised the price. Your posts are very instructional and useful.
A couple of quick question related to this subscription and specifically to this last post.
1) Will you ensure your "long term ETF portfolio" is constructed to avoid the three mistakes you mention in this post, ie. that you will ensure the portfolio is: hedged across multiple macro baskets, diversified across multiple macro themes within a basket, and avoid proxies ?
2) You mention: "think in probabilistic terms and try to add cheap positions that will deliver convex returns if your base case doesn’t realize." - does this mean in your long term ETF portfolio you will be recommending specific convex tail risk insurance implementations as well?
Thanks and keep up the great work!
Hi, and thanks for being a subscriber!
1) Absolutely yes!
2) That's rather going to be a feature reflected in the Tactical Trades for All-Round Investors
I suspect not many people here know what PCA analysis is, and perhaps only a few want to know. It is not a very easy subject, not b/c it's so hard technically (if you know enough math) but b/c it is usually poorly explained. As a student, I gave up on people who tried to explain it to me in an hour and ended up reading a whole book.
For those who wants to understand what PCA does, I highly recommend a brilliant post written "for a grandmother" by a statistician. It is by far the best non-technical introduction that you will ever find.
https://stats.stackexchange.com/questions/2691/making-sense-of-principal-component-analysis-eigenvectors-eigenvalues/140579#140579
PCA / Factor Analysis are statistical methods we (psychology students +) were taught because they are crucial to the creation of psychometric tests or surveys for research. You want to establish which questions or statemente load onto the same construct. For example, if you make a survey assessing both anxiety and depression levels, you want to make sure that the questions/items that address peoples' experiences of either anxiety or depression are distinct and don't overlap so you have confidence that the results are pointing in the right direction. I am kind of drunk now, but I know what that's all about. PhD in psychology and statistics here 😅
Structural equation and multilevel modelling on large datasets using R was what I was up to before I retired.
Anyone can call a function in R or python programmed by someone else. You understand PCA if you can explain why principal components are eigenvectors of the covariance matrix. In my experience, most people cannot, including those who use it every day. I can no longer do it myself 25 years after but I used to be able to.
Another great podcast Alf. I'm very glad I've signed up to your service for 2023. Some thoughts/comments on your podcast:
1. 'Don't put all eggs in 1 basket': For a pure equity investor does investing in 1 Global ETF fund count if the fund invests across multiple markets (US, Japan, EU etc.) and contains >3k stocks?
2. Drip- feeding cash into investments: Your podcast last week focused on the probability of recession in 2023. If you accept this view then any thoughts on over what period an investor should drip-feed cash back into stocks: 12/24/36 months?
3. If an investor just restricts themselves to Stocks & bonds then should a truly long term investor (10+ years), requiring no income, just restrict themselves to Stocks?
Hi Alan, thanks for being a subscriber!
1. One Global ETF would count as all eggs in one basket only if you oversized the exposure to that very macro factor (long equities)
2. I expect the stock market to bottom around Q3-Q4 2023
Ah bad proxy trades, reminds me of buying puts on SPY and calls on GLD right before Trump won the election. A good lesson in making sure your exposure is properly targeted.
Ouch that must have hurt!
Don’t be stupid? What if that can’t be helped? I’ve been looking for a “Smart Trades for Stupid People” article for some time, we are an underserved community here Alf
It's tough also for me not to be a stupid macro investor, don't worry :)
I'll do my best to service all of you
When you suggest going “long” .. like in fourth quadrant, how “long” is long put..6mo. or 12mo. or more?
Thanks AlF
Hi Michael!
Quadrant 4 actually allows you to be long basically no asset.
That's rather long puts as a protection for your risk assets.
The time horizon really varies depending on the cycle.
Excellent work, Alf. Once again, thank you.
Thanks!
Great article Alf. Thanks for the trading tips!
My pleasure!
Perhaps you could expand on gold being a real rates play and not an inflation play (I have learned that myself through trial and error and loss of capital).
Yep, something I should do. Thanks for the feedback!
Very interesting.
I hope we have a lot more on this topic next year.
Thanks for the quick write-up on your 3 core principles. Hoping to see more like these over time that are easier to digest for anyone newer to the world of macro investing!
Thanks for your feedback!
hi Alf, when is the monthly subscription open? Thanks.
Hi!
After December 11 all early birds discounts will be over, and I am considering opening full-priced monthly and yearly subscriptions
Look forward to the monthly subscription, appreciate!
Hi Alf, wondering about TLT and when is the timming to jump and buy.... would it be that we lost the oportunity when it reached 92 late october?
Hi Jose!
Be patient, I will release my ETF Portfolio and tactical trade ideas in January :)
Ciao Alf,
gold as a real interest play ... I get it but I am wondering, on what maturity, 5yrs, 10yrs?
Generally short-dated real rates, 5-10y max
All good points on which I have been focusing recently. 👍
Glad I could help, Woody
Haha this is great. There's nothing like a good reminder not to get cute. Thanks Alf
Thanks, Justin :)