Ep. 115 - We Sold Some Stocks!

Summary

In this Market Radar podcast, the hosts offer a sneak peek into their latest Quant deck report, analyzing market trends and discussing the NASDAQ's performance. They highlight Nvidia's impressive earnings and stock split, and touch upon PMI data's impact on market volatility. The conversation delves into the growth and inflation indicators, revealing a slight decline in growth strength while remaining positive. The team at Market Radar emphasizes their data-driven approach, adjusting their portfolio strategy based on model signals rather than emotions or market narratives. They also discuss sector performances, particularly utilities, in the context of potential Fed rate cuts and the current high-rate environment.

Takeaways

• 📈 The podcast discusses a sneak peek into the latest Quant deck report, indicating a shift in market conditions that could impact portfolios.
• 💾 Nvidia's earnings report and subsequent stock split caused significant market movement, highlighting the impact of mega-cap companies on market trends.
• 📊 PMI data release influenced bond yields and contributed to market volatility, showing the importance of economic indicators on investment decisions.
• 📉 Concerns about overall market earnings growth are emerging, suggesting that not all companies may sustain their rapid growth rates.
• 🎯 The NASDAQ experienced significant fluctuations, opening at a new all-time high but with mixed performance across different companies.
• 📊 Market Radar's Quant models are data-dependent, focusing on capturing market trends without bias or emotional decision-making.
• 💹 The market is currently in a bullish trend with a risk-on regime, suggesting that market outcomes should be higher over time unless there's a significant shift.
• 💸 The VIX environment has changed, with less fear and elevated volatility, indicating a potential shift in market dynamics.
• 📉 The Aries model within the RQF model has reduced equity exposure due to the second layer growth index nearing zero, signaling potential elevated volatility.
• 📊 The regime map indicates a positive state for both growth and inflation, suggesting a bullish environment for most assets, excluding bonds.
• 🏆 Market Radar emphasizes the importance of data-driven models over personal opinions or market narratives, focusing on actionable insights.

Q & A

What is the main focus of the Market Radar podcast episode discussed in the transcript?

The main focus of the episode is to provide a sneak peek into the latest Quant deck report, discuss the current market situation, and explain the actions taken by the Market Radar team in response to the market trends and data.

What significant event involving Nvidia was mentioned in the podcast?

Nvidia announced earnings and a stock split, which caused a significant price action, including a reversal that was initially triggered by the company's performance and announcements.

What economic data release was mentioned as affecting the market's movement?

The PMI (Purchasing Managers' Index) data release was mentioned as having an impact on the market's movement, as it sent yields up and contributed to market volatility.

How did the speaker describe the NASDAQ's performance during the week of the podcast?

The speaker described the NASDAQ's performance as having a lot of up and down action, with a particular focus on the day when Nvidia's earnings and stock split announcement caused significant price movement.

What is the significance of the VIX environment mentioned in the podcast?

The VIX environment is significant as it indicates the market's expectation of volatility. The speaker mentioned that the VIX environment has changed and is not staying elevated, suggesting a reduction in fear and hedging activities compared to previous periods.

What action did the Market Radar team take regarding their QQQ position according to the transcript?

The Market Radar team sold out of their QQQ position by 45%, raising 45% of NAV into cash, in response to the market conditions and their models' signals.

What does the speaker mean by 'price discovery territory' in the context of the NASDAQ reaching a new all-time high?

The term 'price discovery territory' refers to a situation where the market is at uncharted levels, and there is no historical reference point for pricing assets. It suggests that the market is in a phase where it is determining new values for assets.

What is the role of the 'Aries model' within the RQF model as described in the podcast?

The Aries model is a three times leveraged long bonds or long equity model within the RQF model. It decides whether to go long on bonds or equities, and if there is no position, it stays in cash. It also has a second layer growth index filter to manage risk when growth expectations are choppy.

What is the significance of the growth index and second layer growth index in the Aries model?

The growth index and its second layer are significant as they help determine the model's position sizing. When the second layer growth index reaches zero, the model takes some risk off the table, either reducing long equity exposure if the index is positive or long bond exposure if it is negative.

What does the speaker suggest about the current state of inflation and growth in the market?

The speaker suggests that while growth has been weakening and inflation remains strong, it does not necessarily indicate an imminent shift to a stagflationary environment. The key is to monitor what happens next, as the market could potentially shift towards expansion or experience inflation weakness.

What is the speaker's view on the performance of the utilities sector being a deflationary signal?

The speaker believes that the utilities sector's performance is not necessarily a deflationary signal. Instead, it is a reflection of the current environment where the Federal Reserve's policy rate is high, and there is potential for rate cuts, making utilities attractive due to their dividend yields.

How does the speaker describe the approach of Market Radar in terms of data dependency and risk management?

The speaker describes Market Radar's approach as data-dependent, meaning they build and follow models that are unique and dynamic. They aim to manage risk by taking signals from the models without being influenced by emotions or biases, focusing on capturing returns and adjusting positions accordingly.

Outlines

00:00

📈 Market Trends and Nvidia's Impact

The podcast begins with a discussion on the NASDAQ's recent performance, highlighting the volatility and the significant price action, especially around Nvidia's earnings report and subsequent stock split announcement. The hosts mention the PMI data's influence on yield and express concerns about the market's earnings growth. They delve into Nvidia's growth rates, noting the company's impressive revenue growth but also the unlikelihood of sustaining such high rates. The conversation shifts to the broader market trends, emphasizing the bullish trend and the risks of market tops being overemphasized. They also discuss the market's reaction to new all-time highs and the change in the VIX environment, suggesting a reduced fear and a different market sentiment compared to previous periods.

05:01

📊 Analyzing Market Indicators and Volatility

The second paragraph focuses on the changes in market indicators and volatility, particularly the destruction of the linear pattern in front-month volatility. The hosts discuss the range-bound market from March to April and how the shakeout post-Israel conflict and FOMC meeting helped to even out the volatility curve. They examine the SVIX, showing how it has been making new highs, and connect this to the allocations in their portfolio. The conversation also touches on the system's analysis, presenting the seventh slide of their Quant deck, which shows the percent strength of inflation and growth. The hosts explain that while growth has been positive, it has been slightly declining, which is not necessarily bearish but indicates a potential shift in the market regime.

10:03

💹 Portfolio Adjustments and Model Explanation

In this segment, the hosts discuss their recent portfolio adjustments, specifically their decision to sell out of their QQQ position by 45%, moving the funds into cash. They clarify that this move was not based on emotions or all-time highs but was a strategic decision based on the Aries model within the rqf model. The Aries model, which is a three times leveraged long bonds or long equity model, had decided to size down due to a second layer growth index approaching zero, signaling potential elevated volatility. The hosts explain that this is a risk management strategy when using leverage and that it is not indicative of a bearish market but a precautionary measure.

15:05

📉 Market Regime Analysis and Future Predictions

The hosts analyze the current market regime, discussing the positive states of growth and inflation, and caution against interpreting this as stagflation without considering the degree to which the market is in such a state. They express their belief that the market could shift towards expansion and that there may be some upcoming inflation weakness. However, they emphasize that their models are data-dependent and that they do not let personal feelings or biases influence their decisions. They also reflect on past predictions and how their model's objectivity has led to better outcomes, rather than following the crowd or emotional decisions.

20:07

🏭 Sector Performance and Utility Outperformance

This paragraph delves into the performance of different sectors, particularly utilities, which have been outperforming recently. The hosts suggest that this could be due to the weakening growth and the Federal Reserve's tight policy. They discuss the potential for rate cuts and how this could impact utilities, which are seen as attractive for their dividends, especially if the risk-free rate offered by the Fed is lower. They also touch on the performance of energy stocks and how they are similarly affected by interest rates and dividend yields, suggesting that the current environment is favorable for both utilities and energy stocks.

25:07

📊 Market Trends and Risk Management

The hosts review the major trends in the market, noting that most sectors are bullish except for real estate, which is neutral, and bonds, VIX, and gold, which are bearish. They discuss the importance of not being overly bearish in such a market environment and highlight the unique approach of their system, which reduces cross-correlations and focuses on different data sets. They also talk about the system's ability to adapt to changing growth expectations and the importance of risk management, emphasizing that their goal is to capture as much of the market's movements as possible.

30:08

💼 Risk and Reward in Macro Trading

In the final paragraph, the hosts discuss the nature of risk and reward in macro trading, emphasizing that outsized returns require a certain level of volatility. They caution against comparing their model's performance to traditional investment funds and stress the importance of understanding the risks involved. They also address the audience directly, advising them to do their own research and understand what they are investing in, rather than blindly following advice. The hosts wrap up by inviting questions and providing contact information for further engagement.

Keywords

💡NASDAQ

The NASDAQ is a major American stock exchange known for its large number of technology and internet-based companies. In the video, it is discussed in the context of market movements and significant events such as Nvidia's earnings and stock split announcements, which influence its performance.

💡Nvidia

Nvidia is a leading technology company known for its graphics processing units (GPUs). The video highlights Nvidia's significant earnings report and stock split announcement, noting its impact on the market, as the company's strong performance can drive market trends, especially in the technology sector.

💡PMI Data

PMI (Purchasing Managers' Index) data measures the economic health of the manufacturing sector. In the video, hotter-than-expected PMI data is mentioned as a factor that influenced market yields and contributed to market volatility, impacting investor sentiment.

💡Volatility

Volatility refers to the degree of variation in trading prices over time. The video discusses how changes in volatility, as measured by the VIX, impact market dynamics, investor behavior, and risk management strategies, particularly highlighting a period of lower volatility.

💡Risk-on Regime

A risk-on regime is a market condition where investors are more willing to take on risk, typically resulting in higher asset prices. The video describes the current market environment as being in a risk-on regime, suggesting that the overall trend is bullish unless there is a significant shift in underlying conditions.

💡Quant Deck

A Quant Deck is a set of quantitative analysis tools and reports used to assess market conditions. The video provides a sneak peek into the latest Quant Deck report, explaining how it tracks inflation and growth strength to inform investment decisions and market predictions.

💡Growth Index

The Growth Index measures the strength of economic growth. In the video, it is used to track the overall health of the market, with recent data showing a peak and subsequent decline, indicating potential changes in market conditions and guiding investment strategies.

💡Inflation

Inflation is the rate at which the general level of prices for goods and services rises. The video discusses the strength of inflation as a key metric, explaining its impact on different market regimes and asset classes, particularly in the context of a bullish market environment.

💡Leverage

Leverage refers to the use of borrowed capital to increase the potential return of an investment. The video describes the use of leveraged positions in their models, particularly in the context of their decision to raise cash and reduce leveraged exposure to the NASDAQ in response to market signals.

💡Utilities Sector

The Utilities Sector includes companies that provide essential services such as electricity, water, and natural gas. The video notes that utilities have been a top performer, typically seen as a safe investment during deflationary or risky periods, and discusses how this performance relates to current market conditions.

Highlights

Introduction of a sneak peek into the latest Quant deck report.

Discussion on being later in the investment cycle and its implications for portfolios.

Analysis of NASDAQ's performance and Nvidia's earnings impact on the market.

Explanation of PMI data's influence on market yields and investor sentiment.

Nvidia's growth rates and the implications for mega-cap companies.

Market's reaction to Nvidia's dividend hike and stock split announcement.

Market's bullish trend and the significance of new all-time highs.

VIX environment analysis and its impact on market volatility.

SVIX volatility trends and their effect on market behavior.

Quantitative analysis of inflation and growth strength in the market.

Shift in growth index and its potential impact on market trends.

Strategic reasons for raising cash in the RQF portfolio.

Explanation of the Aries model and its role in sizing down equity exposure.

Market radar's data dependency approach to model building and decision-making.

Utilities sector outperformance as a market indicator.

Fed policy implications on utilities and the potential for rate cuts.

Market's bullish sectors and the importance of trend analysis.

Risk management strategies and the importance of volatility in achieving outsized returns.

Closing remarks on the importance of following models and data over emotions.

Transcripts

[Music]

all right guys welcome back to another

Market radar podcast this week we're

going to do something a little bit

different and we're going to give you a

sneak peek into the latest Quant deck

report and explain what we're seeing

happening in our system under the

surface we normally don't do this but we

think that we're later in the cycle um

we're not

uh so much at the pivot Points that are

very material for your portfolio so we

think that we um bringing this up and

talking about it will be a good

discussion but let's just start off with

the NASDAQ right like what an

interesting week so far here man look at

this this is a lot of nothing action and

a lot of a lot of up and down especially

today well we had um Nvidia earnings and

they announced the split um that we just

completely

reversed what even caused that

reversal um I think that there was a I

mean I just look price action alone is

obviously the first Factor here but I

think uh there was some hotter than

expected data that sent yields up at

some point today uh it was the uh PMI

data that came out this morning and I

think just overall people are a little

concerned with um the rest of the

Market's earnings growth I mean Nvidia

is doing real well obviously uh but you

know you also have these comp issues

with Nvidia and I I it's this is not the

Market's not down because of Nvidia but

it's something to pay attention to right

so like if we take a look at Nvidia uh

nvidia's phenomenal day up 9% for me for

uh Mega cap this is phenomenal right um

this is kind of a a a rare event to see

a mega cap do this um and for like the

way this company Grows Right like their

growth rates if you if we take a look at

their revenues um what's going to happen

here at some point they're not going to

have this and we can just open up their

financials they're not going to have

this sort of like rapid Revenue growth

rate like where they're growing 100%

plus year a quarter over quarter on a

year quarter over quarter annualized on

an annual basis they're growing like

100% right they're not going to continue

this 100% year-over-year growth rate

it's going to Peak at some point and I

think like the fact that Nvidia put up

this quarter the way that they did

caught people by some by some caught

people by surprise on top of the fact

they announced a dividend hike in a

stock split I think all of that alone is

just juic the juice the price pretty

much to the best best they could and the

rest of the market um was up but nowhere

near on the open nowhere near as much as

Nvidia and kind of sold off the rest of

the day so I think that um the Market's

just in this range of price action right

now look we we opened up at a new

all-time high

so some people like to say um we are now

in price Discovery territory

yeah right no but you get my point like

some people like to say okay that's

that's something that is um markets

eventually top right a top has to be in

for a bare Market to start and I think

that claiming that and trying to make

that your base case at every point in

this environment is nonsense right I

think we got to just look at it like

this the market is in fact in a bullish

Trend we are in a risk on regime so the

risks or I should say the outcomes of

the of the market should be higher over

time unless something changes unless

something is broken or or dislocates

within the system or the trends and I

think just new alltime high today that's

bullish okay where we closed we didn't

close at the lows could we go to Mid

Vamp very possible could we go back down

to lower Vamp that's even possible I

think it's going to be kind of difficult

after we already had that little selloff

just a couple mons ago I would agree the

market had a breather and we don't have

that same pressure and especially when

you look at the vix we're definitely in

a different vix environment now it's not

staying elevated there isn't that fear

that we had back then before that drop

even happened there was just a fear that

everyone was just hedging up all the

time every little dip people were buying

Hedges we're not in that environment

anymore and is that something that could

actually breed a sell off though if

people aren't expecting another one well

100% eventually what's going to happen

is V volatility is going to become tooo

complacent right and then you're going

to have some sort of Vault Spike as we

always do people going get caught off

guard people oh my God the new bare

Market starting and unless the regime

changes you're not really going to get

that pivot you're going to get a dip

that gets bought up even if it's if it's

a vshape or slow or u-shape it's the

Dip's going to get bought up unless the

regime shifts right and until that

happens I think um dips are dips have

we've been very vocal about this dips

being viable um and I think you're 100%

right like the Vault structure has

changed too here you could see just the

basic destru linear destruction here on

front month volatility in the last like

month or right I want to say like 25

days has ever since the last of fromc

has been pretty apparent right and I

think that we kind of broke out of this

this garbage range going from March

through through the end of April after

that whole Israel conflict and and fomc

that we needed that pretty much scare

and and capitulation that we saw in the

in just indices right look look at the

NASDAQ that draw down we needed this to

shake out that b trade to S kind of even

out the curve and give you that normal

style of volatility um uh compression

back like if we take a look at svix like

you'll see right so from January um it

just actually played out exactly like we

were talking about during that whole

period where svix was uh chugging along

sideways like that we we were talking

about we need some sort of V blowout to

get us out of this and that's exactly

what happened and ever since that

happened sfix is able to make new highs

now and it's yeah it's been it's been

going up Super quickly and the members

have been long this those who are

following along with the rqf portfolio

this is one of the allocations in it um

so that's that position is catching up

now yeah I I 100% agree and like

honestly you could just see right like

it's just very visual when it comes to

short ball like this was range bound

chop chop chop and we were expecting

some sort of like ShakeOut basically a

shake out for the real breakout and so

far we had that I just I thought maybe

the ShakeOut could be a little worse

than it was it was actually quite

controlled compared to what we are used

to in short Vall and um it rolled back

up efficiently and pretty aggressively

once we took once we were able to really

secure above mid Vamp here end of April

uh shortall hasn't looked back so H

let's go let's go back to actually um

what I was speaking about earlier though

the the system right so I want to

explain what we're looking at here so

this is the seventh slide of our Quant

deck and this is what we produce on a

daily basis what it shows is the percent

strength of inflation and the percent

strength of growth now this is not the

same as saying um you know inflation has

a 70% chance of printing an X number and

growth has a 19% chance of printing a y

number or however you may see it right

like it's this is not 19% chance we're

going to print uh 3% real GDP this is

just the strength of growth overall and

we want the strength of growth to be

positive because if growth has positive

strength it's going to be generally good

for the markets and if inflation has

positive strength you end up in this

positive growth in inflation regime

known as inflation and that has that

historically is a very bullish Mar a

very bullish environment for almost all

assets outside of bonds and that's what

we've been seeing for months now pretty

much all year right I mean um there was

a good part of this year where we were

drifting up and down uh fighting between

expansion and inflation but it was it's

been risk on this whole year and we've

been either either fighting expansion

inflation or stronger inflationary

characteristics and weaker inflationary

characteristics but within the

inflationary regime now we're seeing

something so shift here where um growth

is gliding down slight a bit yeah we hit

a top in growth um you can see in that

chart on the left the growth index we

hit a top about a month and a half ago

yeah it's been grinding slower ever

since right and like you could see it

just here right like if we take a look

here

326 um we were sitting up here and you

know 75 and 75 right pretty much in that

on that uh Apex there and we've been

rolling down and I think that

this is not necessarily bearish A lot of

people are going to say like oh well

growth is falling that's not it doesn't

work like that growth kind of is growth

in our system remember this is not real

GDP growth this is not what we're

tracking here so our growth metric is

somewhat a little bit cyclical right so

it comes in these waves where where

it'll get a little weaker get a little

stronger with the high frequency data

that it's being fed it's not the same

it's not so uh point for point that you

see unlike maybe the uh Atlanta fed GDP

now tracker for example and

I want to also go back to the to the QQQ

because I want to make this clear I did

a uh podcast earlier this week with Mr

spreads and I think he's going to put

that up on X at some point later this

week or um this weekend long story short

is I did reveal some of this information

there so I only felt it was right that

we reveal some of this information to

the to our loyal listeners here that you

know take their time out of their week

take some time out of their week to um

give to us and and learn what we have to

say and explore what we have to say with

the market so on

May on May 17th so last not this Friday

or when you guys might be listening to

this not today last Friday um we sold

out we we ra we sold out of our uh QQQ

position or our leverag QQQ position by

45% we raised 45% of nav into cash so we

still are leverage long the NASDAQ at

the moment we're still leverage we're

still long unleveraged Bitcoin and we're

still long short volatility so So

currently we have a 45% cash position in

the account but we're pretty much

allocated um accordingly throughout the

rest of the models and what we did was

we raised cash for one specific reason

it has nothing to do with all-time highs

it has nothing to do with feelings and

this is going to give you a kind of a

real-time understanding of how this

works so I'm going to scroll down to the

Aries system uh the Aries model within

the rqf model so how this works is like

this the rqf has Aries Astria and

Hercules Aries is our three times

leveraged n long bonds or long Equity

model so it's going either long one of

them it won't long both of them at the

same time and if there is no position it

will just stay in cash it was at 60% of

nav into three times leverage NASDAQ

going into the into last week it closed

last week with 15% at three times

leveraged equities so we ended up

trimming 45 to 46% of nav putting it the

simply put one of the models out of our

three models decided it was best to size

down into the into the end of last week

and we did so accordingly without

question now what caused the model to

size down a lot of people have been

wondering this and maybe if you don't

know what any of this is you're

wondering why is the model sizing down

if growth is strong well the the key at

Market radar is we build models that are

unique and dynamic and don't we do our

best to not cross

contaminate conditions across our models

to prevent a scenario where let's just

say one one condition is somewhat out of

balance it's not it's there's an

abnormality it doesn't screw up the rest

of the portfolio and one of those

conditions is within the Aries model

that

trades bonds or equities and Aries three

times so if you think of it Aries times

three Aries 3 times Leverage is what we

use in the rqf but Aries by itself is

just long t long QQQ long TLT Aries 3x

is tqqq and TMF for those that don't

know tqqq is the 3 times leveraged

NASDAQ ETF and TMF is a three times

leveraged TLT ETF but back to it so what

happened the second layer growth index

basically the we have the growth index

that we showed you guys just earlier

here up here it is excuse me right here

we have a subv or I should say a higher

frequency version of this which we call

the second layer that runs in the

background and what it does is when that

growth index gets down to zero what we

do is we immediately take some risk off

the table so if that if that growth

index is

basically at zero on in positive

territory then we're going to take some

and we're long the NASDAQ we're going to

take some long Equity exposure off and

if that is in negative territory and it

climbs up to zero meaning we have

negative growth expectations negative

growth strength and it comes up to zero

we are going to take some Bond exposure

off the table so it's a very simple

filter otherwise we are 100% long um or

not long at all so there's only three

option the reason we added this second

layer growth index is because when

you're trading with three times leverage

you're going to have volatility Andre uh

you really need to be careful when

you're using leverage you can't like

obviously when when things are going

well it feels great but you don't want

to be three times leveraged when the

NASDAQ drops 10% that's not a fun time

correct and that the the

environment when're the second layer

growth index being at 0% doesn't mean

the NASDAQ is going to sell off

necessarily but there just is a higher

chance that there could possibly be

elevated volatility and so that's what

the system has been picking up with

growth starting to decline here still

being elevated so that's why we still

stay allocated in tqqq but just not a

full size because there is that

possibility of elevated volatility

coming up here correct and that's

something that we um we manage on a on a

Model by model basis right so that

second layer growth index is something

that is purely for the leverage portion

of rqf the other models do not have that

filter so I want to bring this back up

to where we were uh just a few minutes

ago in the regime map you could see here

growth has has been weakening somewhat

still positive X still positively or

still in a positive state of of growth

strength and inflation is in a positive

State as well so now some people might

be saying oh my God

stagflation right they're looking at

this saying up this is stagflation

growth is fading inflation is strong

again do not extrapolate the narratives

in the media for what our models might

say if we are to say in stagflation the

the the degree of where we are in

stagflation is very material do are we

sitting on the Zero line are

we floating

down deeper than that or are we you know

really in the bottom corner so I think

that the key here is going to be what

happens next we could very well just

turn right up and and glide higher and

just stay in this inflationary or even

shift over to expansion I do think that

there's there's some builtup inflation

weakness that is that I mean I built I

built these models so I kind of have

understanding of what is going to be in

what the model is looking at and where

the model is looking towards and I have

this idea that or I have this

understanding that there could be some

inflation weakness coming up but we

don't run the models at Market radar

it's what the mod we do what the models

say um I just have a feeling like we

could be shifting more towards expansion

but um those are just feelings and those

don't really matter as much as the real

data being printed so that's what we

focus on right I mean I remember at the

start of the year we thought the bond

trade was going to be the most likely

occurrence but we didn't run the model

and uh a lot of the members also were

anticipating the bond Trade A lot of

people were anticipating the bond trade

just all over Wall Street and that's why

everyone got caught so far off guard

when equities started just rallying and

making new highs and people were just in

disbelief the system never fell for that

the system told us okay it's time to

Long equities so we just listened to the

system even though we thought Bonds were

going to be the trade we don't listen to

our emotions because this system is way

smarter than we are right well the way

it works is like this the idea is that

we wanted to the objective with Market

radar has always been data dependency

right so we want to build something and

we want people to look at something what

you guys do with this is up to you but

we want you to come to something knowing

that there isn't someone looking at this

and giving you a biased opinion this is

not a research report that's written

with bias meaning I think even though in

has been moderating right I feel that

inflation is going to materially re

accelerate right that is not that

there's a lot of research reports like

that that do exist in this current

environment where people are expecting

you know a second wave a massive second

wave and I we never have done that we

never will do stuff like that because it

doesn't really do anyone any good

because it's not actionable and if it is

actionable and you're taking action on

stuff like that you're likely trapping

yourself in pretty poor position so

um po positions not a not a position

like like poor Equity positions right or

or asset allocations so I I think that

taking that step back and looking at the

at a in in a datab base View and a more

of a holistic approach where it's like

okay I need to understand the direction

of what's going on and then kind of

position around it um has yielded great

results for us and I think that is a key

that defines what we do and and makes us

stand out in the in this environment

where everyone's looking to have an

opinion and be right I'd rather be wrong

but catch the pivot and catch the pivot

right than be wrong and indefinitely

right like i' I'd rather admit that I'm

wrong now to catch a pivot and be right

than sit there and just worrying about

admitting that I'm wrong because that

image doesn't mean anything it matter we

we do this we play this game to make

money we don't play this game for our

egos a lot of people do but we

personally aren't here for E for an ego

contest we're here to make money so if

we do what we have to do we execute what

we have to do we have to execute and we

just roll forward with the waves and we

try and ride as many of them as possible

so I want to leave the the um this

section of the podcast I want to go into

um a question here uh little side side

question so um you can see the best

sectors on the left bottom left there

utilities has been a massive

outperformer lately and that's typically

a deflationary play you utilities do

well during deflation during risky times

money gets allocated towards utilities

correct what do you see with that being

an outperformer right now what is that

telling you well I think that number one

um look the systems obviously been

falling right for the last month and a

half in terms of growth right so like to

see this catch a bid in the last month

and a half it makes sense right like the

growth's weakening um utilities are

outperforming by by a fat margin uh the

other thing is is I think we're in an

environment where like look the fed's

really really tight in terms of policy

and we could debate that we that's a

fruitless debate though right they have

oh is the Fed really restrictive is it

too lose too tight the fed's a five and

a quarter right now right so the fed's

up there in terms of policy rate

compared to what we've seen in the last

couple of decades now the FED is at five

and a quarter and there the option here

is there's going to be a rate cut or

there's going to be rate a rate cutting

cycle at some point right um and that's

why utilities are moving because we're

pricing in rate Cuts then we're pricing

out rate cuts and the the Market's

looking for OB the utility markets are

looking for rate Cuts because what ends

up happening the reason why these

utilities get bid in a rate cutting

environment is the utilities are seen

are are pretty much only attractive for

their dividends right you buy utility

for that dividend growth you don't buy

utility for you're not buying the

utility company for the same reason

you're buying AMD or Nvidia or any of

these other Tech names right because

you're looking for that stability those

pay payments and whatnot and those

payments the your yields on utilities

are going to be correlated to what the

you can get a risk-free rate of or of

return on at at the FED right so if the

fed's going to drop that rate below

especially below the rate of utilities

or what utilities are yielding then

money is going to flow from there or

portion of it is going to flow there

into utilities because it's it's more

attractive yield especially if the FED

drops rate significantly then even on a

risk risk adjusted basis the yield

attractive so even more money gets gets

push there right so I think that even

though we're in an environment where um

like you said look utilities are are

more of a safety demand they catch a

safety bid they're not really like a

growth bid but I think that when you're

facing a situation where like the FED

could cut rates with the market at

all-time highs and without us being in

an actual recession it's like a win-win

situation where like look we spent the

last two years or most most of the last

two years because it's kind of broken

off the last year right but the most of

the last two years in a positive stock

Bond correlation to the downside because

the FED hiked so aggressively but what

happens if you have a situation where

the FED can reduce rates materially

without a recession I'm not saying that

they're going to but if they do if they

happen to do so right you're going to

again get a positive stock

correlation stock stock Bond correlation

to the upside now so everything gets

kind of that bid utilities bonds and

equities right so I think that to some

degree there's an there's a stat a state

of people or state of capital that looks

at utilities is almost like a risk-free

trade here right because look if you get

a recession rates are coming down right

so it's going to boost the demand for

for utilities or their

attractiveness if you don't get a

recession and the FED Cuts interest

rates marginally it's still good for

utilities right the only situation is

where the FED has to hike aggressively

and obviously the Market's not even

considering that right now and it's just

doesn't make sense for the FED to do

that right now so I think that like

utilities are in that win-win situation

where real estate has it's a little bit

different right you're talking about

it's just a different ball game debt

loads and whatnot are not the same right

um You have this situation where

commercial real estates obviously under

different pre performing vastly

different compared to like a utility

company and we can we don't even need to

go into like the balance sheet

breakdowns and the leverage ratio

between the two the two um the sectors

you could just look at it based on how

the comp how the sector have been

performing right like overall the basket

companies the reason utilities are

getting demand is again they're the more

robust um s they're the the the more

robust sector in this higher uh than

normal rate environment especially in a

scenario where the FED can cut rates

either with or without a recession so I

don't think this should scare you is

what I mean to say right looking at

utilities as the top performance not

really a sign that the Market's looking

for deflation coming up soon it's more

of just the environment we're in is just

it's it's kind of a win-win situation

for utilities whether or not we do get

deflation or whether or not we just get

rate Cuts but somehow are able to just

get that soft Landing scenario of course

like I'll tell you this much if the

market was really getting amped up on

deflation the third best performing

sector would not be

energy right like this this would not be

up here so that's already one warning

sign of look and again energy is also a

very heavy um sector eliminated with

interest rates right with uh with

dividend yields right um

so I think that because it's a very

utilities and energy are very dividend

focused again in a situation where like

you get softer softer growth maybe

softer inflation softer labor market

right or maybe somewhat High to Sticky

inflation softer growth um software

labor market so on and so forth and they

can bring rates down you again just

increase the attractiveness of the

dividend yields on the energy stocks and

therefore again even though you don't

have a real recession you kind of make

the divid you kind of make energy more

um lucrative and I think all in all this

is not I like if we take a look at the

major Trends right on this report this

is not bearish literally every sector

but real estate is bullish and real

estate is neutral so that it's very hard

to be bearish

bonds are bearish vix is bearish gold is

bullish come literally everything here

about real estate is everything that

needs to be bullish in a in a real bull

market is bullish here outside of real

estate and I think that we'll start to

see stuff here change even before may

maybe the system picks it up first right

because the system and the trends aren't

really correlated at all so the trends

can flip without the system flipping the

system can flip without the trends

flipping uh and that's what makes our

our whole approach very unique right we

don't we don't we try and reduce the

crosscorrelations of things vastly so

we're not just looking at different

versions of the same data so like if the

system starts to weaken a bit I would

assume we would start to see some

breakdowns in some in some Trends maybe

like Industrials right growth growth

stuff Industrials

um uh discretionarily

but it's not nowhere it's not anywhere

near where we have to start getting

super scared and the model is just

saying look there's a situation where

maybe Q The Q's can dip maybe maybe they

go down to lower Vamp or maybe they just

go down to Mid Vamp or maybe they don't

go down at all the system is trained to

remove risk when the growth expectations

get somewhat choppy like they are right

now they're not they're not negative but

look they're not as high as they once

were and if that's the case we take some

risk off the table if we to buy in

higher because growth rebounds and we

just there was a system mishap which the

system isn't Flawless there is no system

that is that's perfectly fine we don't

care doesn't matter where we buy or

where we sell we we don't really care

like oh did we buy time the top did we

time the bottom irrelevant what matters

to us is this we are trying to take as

much or capture as much of this of these

stats as possible this is the systems

performance going back to

2016 um or I should say rqf right the

the Quant fund model that runs all three

strategies simultaneously together in

one portfolio these returns are what

we're trying to

capture and to do that we have to

execute as the signals come we cannot

sit here and capitulate and say you know

what um stocks are down too much I want

to get out no that's not how it works if

that if you're in a position where uh

the last draw down which I think was

what what was it 15 16% on rqf yeah yeah

it wasn't too bad no it was like 16% now

people like oh my God 16% you've been

following um if if you think 16% draw

down in your account is horrible you've

been macro pilled we can debate that all

we want and now your age matters and

this isn't financial advice either right

but your age does make a difference if

you're 75 16% draw on is not ideal but

the problem most of you guys are going

to run into in this macros space again

please do your own research on this

understand what you're doing don't just

blindly follow anything these are

hypothetical models we follow them with

real money in the um in the Discord chat

WE Post daily screenshot of a real

trading account that executes live and

we post monthly Recaps on our X page of

the performance each month based on the

real-time positions that we execute in

that account but that doesn't mean you

should be following it step for step

long story short if people in the space

are going to experience something that

they are going to go to people they're

going to come into the space maybe they

want to grow money aggressively right

and they're going to come across people

that are institutional service providers

meaning they're selling research reports

for institutions you cannot approach an

institution a real institution not a

hedge fund like some money manager and

tell them you have a model that has um

an average draw down of 9% when the

spy's average draw down is 4% he's going

to tell you that's garbage right he's

not going to even look at the returns

he's going to tell you that's garbage

because at the end of the day they have

they're the ones that are advising and

have to take telephone calls or whatever

client conferences when the Market's

down and their clients emotions are in

shambles they don't want to deal with

the volatility what ends what ends up

happening in this macros space is you

have these veteran people that have run

through the mill they they have all this

experience in in low variance or call it

Vol volatility controlled portfolios

maybe 60 40 but then split out um that

60 isn't just aggressive equities it's

it's like it's split nine ways Seven

Ways to Sunday right whatever whatever

it is and they have this this super low

ker model but has a super low draw down

and I'm not talking about really low but

maybe 7% Ker right yeah but it's like

what's the goal here the goal here is to

make money and if you want to have a 40%

ker you're gonna have to take some risk

that's that's just the way it goes

correct and I think people in the people

in the industry what they do is they

they are they're trained in a way that

when they resell their products out to

retail on on Twitter maybe they they are

so used to this investment um investment

fund or investment advisory approach

where in reality our goal is look if we

can make if if this is the ker 46% a

year even if this Ker's cut in half 25%

a year and this is the draw down metri

and these are the draw down metrics this

is fine I'm I'm okay with this I you

need volatility to generate if there

there is not it's it's ma it's nearly

impossible to generate

outsized Equity substantial outsized

Equity returns without inducing

substantial volatility in the process on

unless you're making markets that's a

different story but we're not market

makers and most likely anybody listening

to this podcast is not a market maker so

that's our approach to this

look size

accordingly take the risks that you're

willing to handle adjust accordingly

manage your own risks for us 9% average

draw down 16% draw Downs is

nothing on on $10 million it's $1.6

million at 16% right sounds like like a

lot because it's big numbers right but

to over time to

generate 4.6 million a year or $4.6

million that year and risking 1.6

million makes a lot more sense than just

risking 1.6 million to maybe make 1

million right so that's the key here you

want without the kager and without the

outsize performance these draw Downs

become dangerous like if your if your

ker is like 9% and you have a 9% average

draw down that's least

we look to we accept these returns or

this risk because the returns have been

excessive and we we will continue to

accept accept this volatility if the

returns continue to prove to be

excessive if that changes obviously the

landscape changes and that's where I

think we can wrap this podcast up this

weekend uh this week excuse me if you

guys have any questions feel free to

reach out to us on X at the market radar

or go to our website at market-

radar.com

thank you so much and we'll see you guys

next week

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