Ep. 115 - We Sold Some Stocks!

Radar Podcast
23 May 202432:40

Summary

TLDRIn 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

  • πŸ“ˆ The podcast discusses a sneak peek into the latest Quant deck report, indicating a shift in market conditions that could impact portfolios.
  • πŸ’Ύ Nvidia's earnings report and subsequent stock split caused significant market movement, highlighting the impact of mega-cap companies on market trends.
  • πŸ“Š PMI data release influenced bond yields and contributed to market volatility, showing the importance of economic indicators on investment decisions.
  • πŸ“‰ 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.
  • πŸ“Š Market Radar's Quant models are data-dependent, focusing on capturing market trends without bias or emotional decision-making.
  • πŸ’Ή 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.
  • πŸ’Έ The VIX environment has changed, with less fear and elevated volatility, indicating a potential shift in market dynamics.
  • πŸ“‰ The Aries model within the RQF model has reduced equity exposure due to the second layer growth index nearing zero, signaling potential elevated volatility.
  • πŸ“Š The regime map indicates a positive state for both growth and inflation, suggesting a bullish environment for most assets, excluding bonds.
  • πŸ† 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

πŸ“ˆ 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

πŸ“Š 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

πŸ’Ή 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

πŸ“‰ 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

πŸ“Š 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

πŸ’Ό 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.

Mindmap

Keywords

πŸ’‘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.

πŸ’‘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.

πŸ’‘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.

πŸ’‘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.

πŸ’‘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.

πŸ’‘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.

πŸ’‘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.

πŸ’‘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.

πŸ’‘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.

πŸ’‘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

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[Music]

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all right guys welcome back to another

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Market radar podcast this week we're

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going to do something a little bit

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different and we're going to give you a

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sneak peek into the latest Quant deck

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report and explain what we're seeing

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happening in our system under the

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surface we normally don't do this but we

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think that we're later in the cycle um

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we're not

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uh so much at the pivot Points that are

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very material for your portfolio so we

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think that we um bringing this up and

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talking about it will be a good

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discussion but let's just start off with

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the NASDAQ right like what an

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interesting week so far here man look at

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this this is a lot of nothing action and

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a lot of a lot of up and down especially

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today well we had um Nvidia earnings and

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they announced the split um that we just

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completely

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reversed what even caused that

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reversal um I think that there was a I

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mean I just look price action alone is

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obviously the first Factor here but I

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think uh there was some hotter than

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expected data that sent yields up at

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some point today uh it was the uh PMI

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data that came out this morning and I

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think just overall people are a little

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concerned with um the rest of the

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Market's earnings growth I mean Nvidia

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is doing real well obviously uh but you

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know you also have these comp issues

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

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Market's not down because of Nvidia but

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it's something to pay attention to right

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so like if we take a look at Nvidia uh

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nvidia's phenomenal day up 9% for me for

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uh Mega cap this is phenomenal right um

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this is kind of a a a rare event to see

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a mega cap do this um and for like the

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way this company Grows Right like their

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growth rates if you if we take a look at

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their revenues um what's going to happen

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here at some point they're not going to

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have this and we can just open up their

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financials they're not going to have

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this sort of like rapid Revenue growth

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rate like where they're growing 100%

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plus year a quarter over quarter on a

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year quarter over quarter annualized on

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an annual basis they're growing like

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100% right they're not going to continue

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this 100% year-over-year growth rate

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it's going to Peak at some point and I

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think like the fact that Nvidia put up

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this quarter the way that they did

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caught people by some by some caught

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people by surprise on top of the fact

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they announced a dividend hike in a

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stock split I think all of that alone is

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just juic the juice the price pretty

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much to the best best they could and the

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rest of the market um was up but nowhere

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near on the open nowhere near as much as

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Nvidia and kind of sold off the rest of

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the day so I think that um the Market's

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just in this range of price action right

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now look we we opened up at a new

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all-time high

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so some people like to say um we are now

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in price Discovery territory

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yeah right no but you get my point like

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some people like to say okay that's

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that's something that is um markets

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eventually top right a top has to be in

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for a bare Market to start and I think

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that claiming that and trying to make

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that your base case at every point in

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this environment is nonsense right I

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think we got to just look at it like

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this the market is in fact in a bullish

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Trend we are in a risk on regime so the

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risks or I should say the outcomes of

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the of the market should be higher over

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time unless something changes unless

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something is broken or or dislocates

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within the system or the trends and I

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think just new alltime high today that's

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bullish okay where we closed we didn't

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close at the lows could we go to Mid

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Vamp very possible could we go back down

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to lower Vamp that's even possible I

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think it's going to be kind of difficult

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after we already had that little selloff

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just a couple mons ago I would agree the

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market had a breather and we don't have

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that same pressure and especially when

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you look at the vix we're definitely in

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a different vix environment now it's not

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staying elevated there isn't that fear

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that we had back then before that drop

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even happened there was just a fear that

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everyone was just hedging up all the

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time every little dip people were buying

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Hedges we're not in that environment

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anymore and is that something that could

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actually breed a sell off though if

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people aren't expecting another one well

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100% eventually what's going to happen

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is V volatility is going to become tooo

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complacent right and then you're going

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to have some sort of Vault Spike as we

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always do people going get caught off

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guard people oh my God the new bare

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Market starting and unless the regime

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changes you're not really going to get

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that pivot you're going to get a dip

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

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

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Dip's going to get bought up unless the

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regime shifts right and until that

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happens I think um dips are dips have

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we've been very vocal about this dips

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being viable um and I think you're 100%

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right like the Vault structure has

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changed too here you could see just the

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basic destru linear destruction here on

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front month volatility in the last like

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month or right I want to say like 25

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days has ever since the last of fromc

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has been pretty apparent right and I

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think that we kind of broke out of this

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this garbage range going from March

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through through the end of April after

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that whole Israel conflict and and fomc

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that we needed that pretty much scare

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and and capitulation that we saw in the

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in just indices right look look at the

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NASDAQ that draw down we needed this to

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shake out that b trade to S kind of even

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out the curve and give you that normal

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style of volatility um uh compression

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back like if we take a look at svix like

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you'll see right so from January um it

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just actually played out exactly like we

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were talking about during that whole

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period where svix was uh chugging along

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sideways like that we we were talking

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about we need some sort of V blowout to

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get us out of this and that's exactly

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what happened and ever since that

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happened sfix is able to make new highs

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

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going up Super quickly and the members

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have been long this those who are

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following along with the rqf portfolio

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this is one of the allocations in it um

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so that's that position is catching up

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now yeah I I 100% agree and like

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honestly you could just see right like

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it's just very visual when it comes to

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short ball like this was range bound

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chop chop chop and we were expecting

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some sort of like ShakeOut basically a

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shake out for the real breakout and so

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far we had that I just I thought maybe

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the ShakeOut could be a little worse

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than it was it was actually quite

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controlled compared to what we are used

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to in short Vall and um it rolled back

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up efficiently and pretty aggressively

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once we took once we were able to really

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secure above mid Vamp here end of April

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uh shortall hasn't looked back so H

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

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what I was speaking about earlier though

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the the system right so I want to

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explain what we're looking at here so

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this is the seventh slide of our Quant

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deck and this is what we produce on a

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daily basis what it shows is the percent

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strength of inflation and the percent

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strength of growth now this is not the

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same as saying um you know inflation has

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a 70% chance of printing an X number and

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growth has a 19% chance of printing a y

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number or however you may see it right

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

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going to print uh 3% real GDP this is

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just the strength of growth overall and

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we want the strength of growth to be

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positive because if growth has positive

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strength it's going to be generally good

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for the markets and if inflation has

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positive strength you end up in this

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positive growth in inflation regime

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known as inflation and that has that

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historically is a very bullish Mar a

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very bullish environment for almost all

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assets outside of bonds and that's what

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we've been seeing for months now pretty

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much all year right I mean um there was

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a good part of this year where we were

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drifting up and down uh fighting between

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expansion and inflation but it was it's

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been risk on this whole year and we've

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been either either fighting expansion

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inflation or stronger inflationary

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characteristics and weaker inflationary

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characteristics but within the

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inflationary regime now we're seeing

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something so shift here where um growth

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is gliding down slight a bit yeah we hit

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a top in growth um you can see in that

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chart on the left the growth index we

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hit a top about a month and a half ago

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yeah it's been grinding slower ever

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since right and like you could see it

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just here right like if we take a look

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here

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326 um we were sitting up here and you

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know 75 and 75 right pretty much in that

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on that uh Apex there and we've been

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rolling down and I think that

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this is not necessarily bearish A lot of

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people are going to say like oh well

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growth is falling that's not it doesn't

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work like that growth kind of is growth

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in our system remember this is not real

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GDP growth this is not what we're

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tracking here so our growth metric is

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somewhat a little bit cyclical right so

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it comes in these waves where where

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it'll get a little weaker get a little

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stronger with the high frequency data

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

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it's not so uh point for point that you

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see unlike maybe the uh Atlanta fed GDP

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now tracker for example and

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I want to also go back to the to the QQQ

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because I want to make this clear I did

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a uh podcast earlier this week with Mr

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spreads and I think he's going to put

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that up on X at some point later this

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week or um this weekend long story short

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is I did reveal some of this information

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there so I only felt it was right that

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we reveal some of this information to

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the to our loyal listeners here that you

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know take their time out of their week

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take some time out of their week to um

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give to us and and learn what we have to

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say and explore what we have to say with

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the market so on

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May on May 17th so last not this Friday

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or when you guys might be listening to

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this not today last Friday um we sold

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out we we ra we sold out of our uh QQQ

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position or our leverag QQQ position by

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

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still are leverage long the NASDAQ at

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the moment we're still leverage we're

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still long unleveraged Bitcoin and we're

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still long short volatility so So

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currently we have a 45% cash position in

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the account but we're pretty much

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allocated um accordingly throughout the

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rest of the models and what we did was

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we raised cash for one specific reason

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it has nothing to do with all-time highs

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it has nothing to do with feelings and

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this is going to give you a kind of a

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real-time understanding of how this

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works so I'm going to scroll down to the

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Aries system uh the Aries model within

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the rqf model so how this works is like

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this the rqf has Aries Astria and

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Hercules Aries is our three times

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leveraged n long bonds or long Equity

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model so it's going either long one of

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them it won't long both of them at the

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same time and if there is no position it

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will just stay in cash it was at 60% of

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nav into three times leverage NASDAQ

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going into the into last week it closed

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last week with 15% at three times

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leveraged equities so we ended up

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trimming 45 to 46% of nav putting it the

play11:29

simply put one of the models out of our

play11:31

three models decided it was best to size

play11:34

down into the into the end of last week

play11:36

and we did so accordingly without

play11:38

question now what caused the model to

play11:40

size down a lot of people have been

play11:42

wondering this and maybe if you don't

play11:43

know what any of this is you're

play11:45

wondering why is the model sizing down

play11:47

if growth is strong well the the key at

play11:50

Market radar is we build models that are

play11:54

unique and dynamic and don't we do our

play11:58

best to not cross

play11:59

contaminate conditions across our models

play12:02

to prevent a scenario where let's just

play12:04

say one one condition is somewhat out of

play12:07

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

play12:08

abnormality it doesn't screw up the rest

play12:10

of the portfolio and one of those

play12:13

conditions is within the Aries model

play12:15

that

play12:16

trades bonds or equities and Aries three

play12:20

times so if you think of it Aries times

play12:22

three Aries 3 times Leverage is what we

play12:25

use in the rqf but Aries by itself is

play12:28

just long t long QQQ long TLT Aries 3x

play12:32

is tqqq and TMF for those that don't

play12:35

know tqqq is the 3 times leveraged

play12:38

NASDAQ ETF and TMF is a three times

play12:40

leveraged TLT ETF but back to it so what

play12:44

happened the second layer growth index

play12:47

basically the we have the growth index

play12:49

that we showed you guys just earlier

play12:51

here up here it is excuse me right here

play12:55

we have a subv or I should say a higher

play12:58

frequency version of this which we call

play13:00

the second layer that runs in the

play13:01

background and what it does is when that

play13:04

growth index gets down to zero what we

play13:07

do is we immediately take some risk off

play13:08

the table so if that if that growth

play13:11

index is

play13:13

basically at zero on in positive

play13:16

territory then we're going to take some

play13:18

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

play13:21

take some long Equity exposure off and

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if that is in negative territory and it

play13:26

climbs up to zero meaning we have

play13:27

negative growth expectations negative

play13:29

growth strength and it comes up to zero

play13:31

we are going to take some Bond exposure

play13:32

off the table so it's a very simple

play13:34

filter otherwise we are 100% long um or

play13:38

not long at all so there's only three

play13:39

option the reason we added this second

play13:41

layer growth index is because when

play13:43

you're trading with three times leverage

play13:45

you're going to have volatility Andre uh

play13:48

you really need to be careful when

play13:50

you're using leverage you can't like

play13:53

obviously when when things are going

play13:54

well it feels great but you don't want

play13:57

to be three times leveraged when the

play13:59

NASDAQ drops 10% that's not a fun time

play14:03

correct and that the the

play14:06

environment when're the second layer

play14:09

growth index being at 0% doesn't mean

play14:12

the NASDAQ is going to sell off

play14:14

necessarily but there just is a higher

play14:17

chance that there could possibly be

play14:21

elevated volatility and so that's what

play14:23

the system has been picking up with

play14:25

growth starting to decline here still

play14:28

being elevated so that's why we still

play14:30

stay allocated in tqqq but just not a

play14:33

full size because there is that

play14:36

possibility of elevated volatility

play14:38

coming up here correct and that's

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something that we um we manage on a on a

play14:44

Model by model basis right so that

play14:45

second layer growth index is something

play14:47

that is purely for the leverage portion

play14:49

of rqf the other models do not have that

play14:52

filter so I want to bring this back up

play14:55

to where we were uh just a few minutes

play14:57

ago in the regime map you could see here

play14:59

growth has has been weakening somewhat

play15:02

still positive X still positively or

play15:04

still in a positive state of of growth

play15:06

strength and inflation is in a positive

play15:09

State as well so now some people might

play15:11

be saying oh my God

play15:13

stagflation right they're looking at

play15:15

this saying up this is stagflation

play15:16

growth is fading inflation is strong

play15:18

again do not extrapolate the narratives

play15:22

in the media for what our models might

play15:25

say if we are to say in stagflation the

play15:27

the the degree of where we are in

play15:29

stagflation is very material do are we

play15:31

sitting on the Zero line are

play15:34

we floating

play15:36

down deeper than that or are we you know

play15:39

really in the bottom corner so I think

play15:42

that the key here is going to be what

play15:45

happens next we could very well just

play15:47

turn right up and and glide higher and

play15:49

just stay in this inflationary or even

play15:51

shift over to expansion I do think that

play15:53

there's there's some builtup inflation

play15:54

weakness that is that I mean I built I

play15:57

built these models so I kind of have

play15:59

understanding of what is going to be in

play16:01

what the model is looking at and where

play16:03

the model is looking towards and I have

play16:05

this idea that or I have this

play16:07

understanding that there could be some

play16:08

inflation weakness coming up but we

play16:10

don't run the models at Market radar

play16:12

it's what the mod we do what the models

play16:13

say um I just have a feeling like we

play16:15

could be shifting more towards expansion

play16:17

but um those are just feelings and those

play16:19

don't really matter as much as the real

play16:20

data being printed so that's what we

play16:22

focus on right I mean I remember at the

play16:24

start of the year we thought the bond

play16:27

trade was going to be the most likely

play16:30

occurrence but we didn't run the model

play16:32

and uh a lot of the members also were

play16:34

anticipating the bond Trade A lot of

play16:36

people were anticipating the bond trade

play16:37

just all over Wall Street and that's why

play16:40

everyone got caught so far off guard

play16:42

when equities started just rallying and

play16:44

making new highs and people were just in

play16:47

disbelief the system never fell for that

play16:50

the system told us okay it's time to

play16:52

Long equities so we just listened to the

play16:54

system even though we thought Bonds were

play16:57

going to be the trade we don't listen to

play16:59

our emotions because this system is way

play17:02

smarter than we are right well the way

play17:05

it works is like this the idea is that

play17:08

we wanted to the objective with Market

play17:10

radar has always been data dependency

play17:12

right so we want to build something and

play17:14

we want people to look at something what

play17:16

you guys do with this is up to you but

play17:18

we want you to come to something knowing

play17:20

that there isn't someone looking at this

play17:22

and giving you a biased opinion this is

play17:24

not a research report that's written

play17:25

with bias meaning I think even though in

play17:29

has been moderating right I feel that

play17:32

inflation is going to materially re

play17:33

accelerate right that is not that

play17:36

there's a lot of research reports like

play17:38

that that do exist in this current

play17:39

environment where people are expecting

play17:41

you know a second wave a massive second

play17:43

wave and I we never have done that we

play17:46

never will do stuff like that because it

play17:47

doesn't really do anyone any good

play17:49

because it's not actionable and if it is

play17:52

actionable and you're taking action on

play17:53

stuff like that you're likely trapping

play17:56

yourself in pretty poor position so

play17:59

um po positions not a not a position

play18:01

like like poor Equity positions right or

play18:03

or asset allocations so I I think that

play18:07

taking that step back and looking at the

play18:08

at a in in a datab base View and a more

play18:11

of a holistic approach where it's like

play18:12

okay I need to understand the direction

play18:15

of what's going on and then kind of

play18:16

position around it um has yielded great

play18:18

results for us and I think that is a key

play18:21

that defines what we do and and makes us

play18:24

stand out in the in this environment

play18:25

where everyone's looking to have an

play18:28

opinion and be right I'd rather be wrong

play18:31

but catch the pivot and catch the pivot

play18:34

right than be wrong and indefinitely

play18:38

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

play18:40

wrong now to catch a pivot and be right

play18:42

than sit there and just worrying about

play18:44

admitting that I'm wrong because that

play18:46

image doesn't mean anything it matter we

play18:47

we do this we play this game to make

play18:49

money we don't play this game for our

play18:52

egos a lot of people do but we

play18:54

personally aren't here for E for an ego

play18:56

contest we're here to make money so if

play18:59

we do what we have to do we execute what

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we have to do we have to execute and we

play19:02

just roll forward with the waves and we

play19:04

try and ride as many of them as possible

play19:06

so I want to leave the the um this

play19:10

section of the podcast I want to go into

play19:12

um a question here uh little side side

play19:16

question so um you can see the best

play19:18

sectors on the left bottom left there

play19:21

utilities has been a massive

play19:24

outperformer lately and that's typically

play19:26

a deflationary play you utilities do

play19:29

well during deflation during risky times

play19:32

money gets allocated towards utilities

play19:35

correct what do you see with that being

play19:37

an outperformer right now what is that

play19:39

telling you well I think that number one

play19:43

um look the systems obviously been

play19:45

falling right for the last month and a

play19:46

half in terms of growth right so like to

play19:49

see this catch a bid in the last month

play19:50

and a half it makes sense right like the

play19:53

growth's weakening um utilities are

play19:55

outperforming by by a fat margin uh the

play19:58

other thing is is I think we're in an

play19:59

environment where like look the fed's

play20:01

really really tight in terms of policy

play20:04

and we could debate that we that's a

play20:06

fruitless debate though right they have

play20:08

oh is the Fed really restrictive is it

play20:09

too lose too tight the fed's a five and

play20:11

a quarter right now right so the fed's

play20:13

up there in terms of policy rate

play20:14

compared to what we've seen in the last

play20:15

couple of decades now the FED is at five

play20:18

and a quarter and there the option here

play20:22

is there's going to be a rate cut or

play20:24

there's going to be rate a rate cutting

play20:25

cycle at some point right um and that's

play20:28

why utilities are moving because we're

play20:30

pricing in rate Cuts then we're pricing

play20:31

out rate cuts and the the Market's

play20:33

looking for OB the utility markets are

play20:36

looking for rate Cuts because what ends

play20:37

up happening the reason why these

play20:39

utilities get bid in a rate cutting

play20:40

environment is the utilities are seen

play20:43

are are pretty much only attractive for

play20:45

their dividends right you buy utility

play20:47

for that dividend growth you don't buy

play20:49

utility for you're not buying the

play20:51

utility company for the same reason

play20:53

you're buying AMD or Nvidia or any of

play20:55

these other Tech names right because

play20:56

you're looking for that stability those

play20:58

pay payments and whatnot and those

play21:00

payments the your yields on utilities

play21:02

are going to be correlated to what the

play21:04

you can get a risk-free rate of or of

play21:06

return on at at the FED right so if the

play21:09

fed's going to drop that rate below

play21:11

especially below the rate of utilities

play21:13

or what utilities are yielding then

play21:15

money is going to flow from there or

play21:17

portion of it is going to flow there

play21:18

into utilities because it's it's more

play21:20

attractive yield especially if the FED

play21:23

drops rate significantly then even on a

play21:24

risk risk adjusted basis the yield

play21:26

attractive so even more money gets gets

play21:28

push there right so I think that even

play21:31

though we're in an environment where um

play21:34

like you said look utilities are are

play21:36

more of a safety demand they catch a

play21:38

safety bid they're not really like a

play21:40

growth bid but I think that when you're

play21:43

facing a situation where like the FED

play21:45

could cut rates with the market at

play21:47

all-time highs and without us being in

play21:48

an actual recession it's like a win-win

play21:51

situation where like look we spent the

play21:54

last two years or most most of the last

play21:56

two years because it's kind of broken

play21:58

off the last year right but the most of

play22:00

the last two years in a positive stock

play22:03

Bond correlation to the downside because

play22:05

the FED hiked so aggressively but what

play22:07

happens if you have a situation where

play22:09

the FED can reduce rates materially

play22:11

without a recession I'm not saying that

play22:12

they're going to but if they do if they

play22:15

happen to do so right you're going to

play22:18

again get a positive stock

play22:20

correlation stock stock Bond correlation

play22:23

to the upside now so everything gets

play22:26

kind of that bid utilities bonds and

play22:28

equities right so I think that to some

play22:31

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

play22:34

of people or state of capital that looks

play22:36

at utilities is almost like a risk-free

play22:38

trade here right because look if you get

play22:39

a recession rates are coming down right

play22:42

so it's going to boost the demand for

play22:44

for utilities or their

play22:46

attractiveness if you don't get a

play22:47

recession and the FED Cuts interest

play22:50

rates marginally it's still good for

play22:51

utilities right the only situation is

play22:54

where the FED has to hike aggressively

play22:55

and obviously the Market's not even

play22:57

considering that right now and it's just

play22:58

doesn't make sense for the FED to do

play22:59

that right now so I think that like

play23:02

utilities are in that win-win situation

play23:04

where real estate has it's a little bit

play23:06

different right you're talking about

play23:07

it's just a different ball game debt

play23:10

loads and whatnot are not the same right

play23:12

um You have this situation where

play23:16

commercial real estates obviously under

play23:18

different pre performing vastly

play23:20

different compared to like a utility

play23:22

company and we can we don't even need to

play23:25

go into like the balance sheet

play23:27

breakdowns and the leverage ratio

play23:28

between the two the two um the sectors

play23:31

you could just look at it based on how

play23:33

the comp how the sector have been

play23:34

performing right like overall the basket

play23:36

companies the reason utilities are

play23:37

getting demand is again they're the more

play23:40

robust um s they're the the the more

play23:43

robust sector in this higher uh than

play23:45

normal rate environment especially in a

play23:48

scenario where the FED can cut rates

play23:49

either with or without a recession so I

play23:52

don't think this should scare you is

play23:54

what I mean to say right looking at

play23:55

utilities as the top performance not

play23:58

really a sign that the Market's looking

play24:01

for deflation coming up soon it's more

play24:03

of just the environment we're in is just

play24:06

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

play24:08

for utilities whether or not we do get

play24:10

deflation or whether or not we just get

play24:12

rate Cuts but somehow are able to just

play24:15

get that soft Landing scenario of course

play24:18

like I'll tell you this much if the

play24:19

market was really getting amped up on

play24:21

deflation the third best performing

play24:23

sector would not be

play24:26

energy right like this this would not be

play24:29

up here so that's already one warning

play24:31

sign of look and again energy is also a

play24:34

very heavy um sector eliminated with

play24:37

interest rates right with uh with

play24:38

dividend yields right um

play24:42

so I think that because it's a very

play24:45

utilities and energy are very dividend

play24:48

focused again in a situation where like

play24:50

you get softer softer growth maybe

play24:53

softer inflation softer labor market

play24:55

right or maybe somewhat High to Sticky

play24:57

inflation softer growth um software

play24:59

labor market so on and so forth and they

play25:02

can bring rates down you again just

play25:03

increase the attractiveness of the

play25:05

dividend yields on the energy stocks and

play25:07

therefore again even though you don't

play25:09

have a real recession you kind of make

play25:10

the divid you kind of make energy more

play25:12

um lucrative and I think all in all this

play25:16

is not I like if we take a look at the

play25:18

major Trends right on this report this

play25:20

is not bearish literally every sector

play25:23

but real estate is bullish and real

play25:24

estate is neutral so that it's very hard

play25:27

to be bearish

play25:29

bonds are bearish vix is bearish gold is

play25:31

bullish come literally everything here

play25:33

about real estate is everything that

play25:35

needs to be bullish in a in a real bull

play25:36

market is bullish here outside of real

play25:38

estate and I think that we'll start to

play25:40

see stuff here change even before may

play25:43

maybe the system picks it up first right

play25:45

because the system and the trends aren't

play25:47

really correlated at all so the trends

play25:50

can flip without the system flipping the

play25:52

system can flip without the trends

play25:53

flipping uh and that's what makes our

play25:55

our whole approach very unique right we

play25:57

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

play25:59

crosscorrelations of things vastly so

play26:01

we're not just looking at different

play26:03

versions of the same data so like if the

play26:05

system starts to weaken a bit I would

play26:08

assume we would start to see some

play26:09

breakdowns in some in some Trends maybe

play26:11

like Industrials right growth growth

play26:12

stuff Industrials

play26:15

um uh discretionarily

play26:28

but it's not nowhere it's not anywhere

play26:30

near where we have to start getting

play26:32

super scared and the model is just

play26:34

saying look there's a situation where

play26:37

maybe Q The Q's can dip maybe maybe they

play26:39

go down to lower Vamp or maybe they just

play26:41

go down to Mid Vamp or maybe they don't

play26:42

go down at all the system is trained to

play26:45

remove risk when the growth expectations

play26:48

get somewhat choppy like they are right

play26:50

now they're not they're not negative but

play26:52

look they're not as high as they once

play26:54

were and if that's the case we take some

play26:57

risk off the table if we to buy in

play26:58

higher because growth rebounds and we

play27:00

just there was a system mishap which the

play27:03

system isn't Flawless there is no system

play27:05

that is that's perfectly fine we don't

play27:07

care doesn't matter where we buy or

play27:09

where we sell we we don't really care

play27:10

like oh did we buy time the top did we

play27:12

time the bottom irrelevant what matters

play27:14

to us is this we are trying to take as

play27:17

much or capture as much of this of these

play27:19

stats as possible this is the systems

play27:21

performance going back to

play27:24

2016 um or I should say rqf right the

play27:26

the Quant fund model that runs all three

play27:29

strategies simultaneously together in

play27:31

one portfolio these returns are what

play27:33

we're trying to

play27:34

capture and to do that we have to

play27:36

execute as the signals come we cannot

play27:38

sit here and capitulate and say you know

play27:40

what um stocks are down too much I want

play27:42

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

play27:44

that if you're in a position where uh

play27:46

the last draw down which I think was

play27:47

what what was it 15 16% on rqf yeah yeah

play27:51

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

play27:53

people like oh my God 16% you've been

play27:56

following um if if you think 16% draw

play27:59

down in your account is horrible you've

play28:01

been macro pilled we can debate that all

play28:04

we want and now your age matters and

play28:06

this isn't financial advice either right

play28:07

but your age does make a difference if

play28:09

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

play28:14

the problem most of you guys are going

play28:15

to run into in this macros space again

play28:18

please do your own research on this

play28:20

understand what you're doing don't just

play28:21

blindly follow anything these are

play28:22

hypothetical models we follow them with

play28:24

real money in the um in the Discord chat

play28:27

WE Post daily screenshot of a real

play28:29

trading account that executes live and

play28:31

we post monthly Recaps on our X page of

play28:33

the performance each month based on the

play28:36

real-time positions that we execute in

play28:38

that account but that doesn't mean you

play28:40

should be following it step for step

play28:41

long story short if people in the space

play28:45

are going to experience something that

play28:47

they are going to go to people they're

play28:49

going to come into the space maybe they

play28:50

want to grow money aggressively right

play28:53

and they're going to come across people

play28:55

that are institutional service providers

play28:57

meaning they're selling research reports

play28:59

for institutions you cannot approach an

play29:01

institution a real institution not a

play29:03

hedge fund like some money manager and

play29:05

tell them you have a model that has um

play29:07

an average draw down of 9% when the

play29:09

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

play29:11

to tell you that's garbage right he's

play29:13

not going to even look at the returns

play29:14

he's going to tell you that's garbage

play29:16

because at the end of the day they have

play29:18

they're the ones that are advising and

play29:19

have to take telephone calls or whatever

play29:21

client conferences when the Market's

play29:23

down and their clients emotions are in

play29:24

shambles they don't want to deal with

play29:26

the volatility what ends what ends up

play29:28

happening in this macros space is you

play29:30

have these veteran people that have run

play29:32

through the mill they they have all this

play29:35

experience in in low variance or call it

play29:37

Vol volatility controlled portfolios

play29:39

maybe 60 40 but then split out um that

play29:42

60 isn't just aggressive equities it's

play29:44

it's like it's split nine ways Seven

play29:47

Ways to Sunday right whatever whatever

play29:48

it is and they have this this super low

play29:52

ker model but has a super low draw down

play29:55

and I'm not talking about really low but

play29:56

maybe 7% Ker right yeah but it's like

play29:59

what's the goal here the goal here is to

play30:01

make money and if you want to have a 40%

play30:05

ker you're gonna have to take some risk

play30:08

that's that's just the way it goes

play30:09

correct and I think people in the people

play30:11

in the industry what they do is they

play30:14

they are they're trained in a way that

play30:18

when they resell their products out to

play30:20

retail on on Twitter maybe they they are

play30:24

so used to this investment um investment

play30:26

fund or investment advisory approach

play30:29

where in reality our goal is look if we

play30:31

can make if if this is the ker 46% a

play30:34

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

play30:36

a year and this is the draw down metri

play30:38

and these are the draw down metrics this

play30:39

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

play30:41

need volatility to generate if there

play30:45

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

play30:48

impossible to generate

play30:50

outsized Equity substantial outsized

play30:53

Equity returns without inducing

play30:55

substantial volatility in the process on

play30:58

unless you're making markets that's a

play31:01

different story but we're not market

play31:03

makers and most likely anybody listening

play31:06

to this podcast is not a market maker so

play31:08

that's our approach to this

play31:11

look size

play31:13

accordingly take the risks that you're

play31:15

willing to handle adjust accordingly

play31:17

manage your own risks for us 9% average

play31:20

draw down 16% draw Downs is

play31:22

nothing on on $10 million it's $1.6

play31:25

million at 16% right sounds like like a

play31:28

lot because it's big numbers right but

play31:32

to over time to

play31:34

generate 4.6 million a year or $4.6

play31:38

million that year and risking 1.6

play31:41

million makes a lot more sense than just

play31:42

risking 1.6 million to maybe make 1

play31:45

million right so that's the key here you

play31:47

want without the kager and without the

play31:49

outsize performance these draw Downs

play31:52

become dangerous like if your if your

play31:54

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

play31:57

draw down that's least

play31:59

we look to we accept these returns or

play32:02

this risk because the returns have been

play32:05

excessive and we we will continue to

play32:07

accept accept this volatility if the

play32:10

returns continue to prove to be

play32:11

excessive if that changes obviously the

play32:13

landscape changes and that's where I

play32:14

think we can wrap this podcast up this

play32:17

weekend uh this week excuse me if you

play32:19

guys have any questions feel free to

play32:20

reach out to us on X at the market radar

play32:24

or go to our website at market-

play32:26

radar.com

play32:28

thank you so much and we'll see you guys

play32:30

next week

play32:34

[Music]

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