Attack the Week (ATW)

January 26, 2025

Sunday Thoughts

I have started watching the BBC series “SAS Rogue Heroes”, and it’s been quite captivating and entertaining. The series dramatizes the birth of the Special Air Service (SAS) during World War II, capturing the audacity, ingenuity, and reckless determination that defined its early members. Set against the harsh backdrop of the North African desert campaign, the series highlights the SAS's inception as a small, unconventional unit tasked with sabotage missions deep behind enemy lines. Its founding was an act of innovation born out of necessity — eschewing traditional military tactics, the SAS embraced guerrilla warfare, thriving on resourcefulness, adaptability, and a willingness to take calculated risks. The show celebrates the chaos and camaraderie of these early days, highlighting the balance of strategy and improvisation that was critical to their success.

Source: Dall-E

Central to the series and the real-life story is Paddy Mayne, one of the SAS's most legendary figures. Mayne, a larger-than-life character, combined extraordinary courage with a fierce disregard for authority. Before joining the SAS, he was a rugby star and lawyer, but his restless energy and appetite for adventure found their true outlet in war. The funniest story about him is probably that while touring South Africa with the British & Irish Lions in 1938, Mayne smashed up teammates' hotel rooms, temporarily freeing a convict he had befriended and who was working on the construction of a stadium and also sneaking off from a formal dinner to go antelope hunting. What a character.

Known for his wild temper, intellect, and audacity, Mayne led some of the most daring missions, destroying enemy aircraft and supply lines while inspiring loyalty among his men. Yet he was also a deeply complex individual, haunted by the toll of war and his own demons. His life exemplifies the tension between discipline and individuality, an essential trait for thriving in extreme conditions. He died after the war, driving drunk and crashing his car at the young age of 40.

The SAS’s principles — ingenuity, calculated risk-taking, and the ability to thrive under pressure — offer valuable lessons for life and investing. In trading, much like in warfare, success often comes from recognizing opportunities others overlook and embracing unconventional strategies. The real risk/reward lies in the things people are not talking about. It’s in the shadow of fear and consensus where often the win lies. Yes, true risk-taking is not losing yourself in the weeds of complexity and detail. Sometimes, I ask myself what the craziest trade would be. Something that pretty much everyone would tell me would be a foolish bet to take. Usually, they are futile, but if they work, they work insanely well.

What is a foolish trade to take now? Shorting US equities? Certainly. Betting against US growth, very much so. Betting on a European & Chinese revival? Now we are talking. The end of the US Dollar as the reserve currency? Paddy Mayne would be so proud. Remember, making money in macro is betting on great risk/reward opportunities while also capturing the most likely outcomes. Things don’t always pan out the way markets expect them to. It’s in the very nature of complex systems how things operate. What is obscured in low volatility and stable correlations can change at any time. Long-term investing success lies in one’s process of capturing opportunities and managing them well. It’s about being nimble and then sizing up appropriately when the odds stack in your favour. It's easier said than done, but experience will help.

At Paper Alfa, we provide insights, education and tools for you to navigate the financial landscape at all times. We have provided valuable models that provide the technical setup and picture for risk-taking. This is going to be complemented with an intra-day model, which is soon to be released for existing subscribers of the scripts. If you are interested, ping me an email with your TV username. Note that only paying subscribers will be granted access. No exceptions.

In addition, we have launched the weekly asset allocation model, which is educational and has shown great results so far. We have been backtesting and running it since the 70s, and we are not far from printing new all-time highs. In 48 years, it has only produced 3 down years. Risk management wins the compounding race.

Source: Paper Alfa Engine Room

Interested? Why not try the 7-day free trial and join the growing pack of like-minded people? That’s a good risk/reward trade.

Let’s now read Macro D’s latest thinking before we briefly scan the week’s upcoming calendar. We then check out some of the best set-ups for the coming week. I have formerly posted 10 best charts. I have now enhanced it to choose the best setups as we enrol for a new trading week. We then also look at the output of our asset allocation model.

Let’s go!