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Seven years after my exit from the industry I still get asked the same question!

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It always seems like a no-brainer to people on the outside...

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If you can generate alpha... or a lot of levered beta... or aggregate a lot of AUM then the answer is yes.

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Well most people that generate levered beta are sure they are generating alpha…. I am sure Bill Huang thought he was an alpha king!

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Yes it does seem that the Hedge in Hedge Fund was silent at times or at least optional.

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Thought provoking as usual, thanks for sharing Russell.

I think what you've written just highlights the perpetually cyclical nature of capital markets. "This time it's different" is always the most dangerous phrase.

Essentially a "winning strategy" works until a reversal in a major market index (Nikkei, NASDAQ, S&P500 etc...)

So the question is that - what survived the rout of 2021-2? What "held up" between Oct 2021 - Dec 2022 has a high likelihood of being the next "winning trade".

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so far short bonds looks the trade to me... keeps on giving

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I like to think in terms of a "base trade" and then the "cream and froth" and finally "comeuppance"

For example:

1990s - Strong dollar policy (aka Rubin Dollar) - Long SPX - Tech boom - AOL-time Warner peak

2000s - China enters WTO (aka Era of BRICs Jim O'Neil) - Long EM - Commodities boom - Lehman crash, EU debt crisis

2010s - Software eats the world (aka era of FAAMGs) - Long Tech - QQQ - Covid, crypto rout

2020s - The return of history (??? era) - Long commodities, value - turning point TBD

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By the way, for what it's worth my belief is that Japanese equities in the 2020s are the QQQ of the 2010s and 1990s. Timestamp this please 😉

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Seems a decent bet to me!

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Yes

Short bonds has worked very well

Long gold hasn't though

I'm a bit wary about betting on higher commodity prices at this stage

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My observation is that when short bonds is not working - gold works. Ulitmately I think inflation gets outs of hand and both sides works for awhile

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