Attack the Week (ATW)

September 8, 2024

Sunday Thoughts

I love doing a bit of DIY at home. It’s mostly relaxing, but boy, things will get infuriating. I have done electrics and plumbing, yet I almost always regret not having called a proper expert for help. Maybe it’s the well-known Dunning Kruger effect, which makes me overestimate my own ability in one field and think I can suddenly master any other occupation. I don’t know. After all, what do we people in Finance really know? If there was no money and we would have to exchange services of a kind, how could I possibly repay an electrician? He might like my latest macro outlook or risk-adjusted return analysis. Maybe we’d exchange skills: I’d explain yield curves in exchange for proper skills. But something tells me my services wouldn’t stack up too well against the practicality of having hot water or working lights.

As investors and traders, we are dealing with a high degree of uncertainty, which is the very nature of our business. In pretty much any other profession, that uncertainty is unwanted and eliminated where possible as we are dealing with facts and hands-on solutions. Do you think many fakers and wannabe electricians or boiler experts would survive for long? I don’t think so. It’s in the land of complexity and uncertainty where the fintwit gurus and wannabe traders reside. That’s where they use jargon and complexity to lure people into believing they have skills.

I started this blog to offer an educational and no-nonsense alternative. I’m in this space precisely because there are so many fakers, and I can’t change this fact, but I can provide competition. I read so much bullshit. I saw a post of someone the other day showcasing a several hundred-page alpha handbook. Now, good on whoever has taken the time to write it, but investing is not about bicycle maintenance manuals. It’s sticking to failing over and over again and learning and building your own process through time. Humility, sweat, and tons of experience builds alpha, and you will never ever be able to learn this from any book or paper. First and foremost, you need to educate yourself and learn certain principles. That’s why this place exists. Why don’t you try it for 7 days for free?

One thing of curiosity and often repeated in the previous years was the chart overlaying central bank balance sheets with the SPX, as shown below. The rationale for many story peddlers was pretty straightforward in that reserve asset expansion would inject more liquidity, which then lifts multiples. Looks compelling, right?

It’s been quiet on that front recently. The narrative doesn’t hold, as you can see from the updated chart below.

That, my friends, is the difference between yapping about spurious relationships and narratives and a time-tested process. That’s because those who peddle stories don’t provide you with any history of their calls and certainly don’t give details of any process. Why? Because there isn’t any. It’s all hot air.

Here, we offer transparency, provide models, education and an asset allocation model which has its foundations in deep research. And that’s just the start.

Let’s now read Macro D’s latest thinking before we briefly scan the week’s upcoming calendar. We then check out the 10 most important charts for the upcoming week before scanning the latest output of our asset allocation model.

Let’s go!