AG Capital: Fade to Famous
Disclaimer: While an investment in managed futures can help enhance returns and reduce risk, it can also do just the opposite and in fact result in further losses in a portfolio. In addition, studies conducted of managed futures as a whole may not be indicative of the performance of any individual CTA. The results of studies conducted in the past may not be indicative of current time periods.
There’s something about being quoted in the Wall Street Journal or making it onto Bloomberg TV that often leads to terribly inaccurate judgement calls (at least in the short-term). A classic example of this is Ray Dalio’s famous interview from Davos in early 2018, where he declared that “If you’re holding cash, you’re going to feel pretty stupid” just before the market cratered -12% and potentially may have begun a topping process for the entire bull market run from 2009.
More recently, during an interview with Bloomberg this August, famed fund manager Mark Mobius said to “buy gold at any price”. We note the following:
• When the famous guys, whose every word novice traders salivate over, appear on TV with foundation and mascara on, you will make money more often than not by fading their technical targets and projections.
• After catching a couple of chunks of the gold bull market from October 2018 – August 2019, we made the difficult decision to go net short the market. We did this for two reasons: 1) it’s the right thing to do, based on our technical analysis and the overblown nature of the rally; and 2) it’s important for us to remain levelheaded and openminded as traders, and to not get so sucked into a fundamental view that we refuse to execute on the other side of the trade when necessary. Our inability to do so directly led to our down year in 2018, as we stubbornly bought back in on the long side instead of being as open minded as we should have been.
• Although gold’s six-year consolidation from 2013-2018 points to roughly $1,700 as an upside target, it has an equally strong resistance level at $1,550 and given our “fade the famous” comment above, along with our own analysis, we are short, targeting the low-mid $1,400s for the corrective price action.
The firm follows a fundamentally-oriented, discretionary long/short macro investing. We look for opportunities where imbalance between supply, demand, and inventories (where applicable) may lead to a large price move. Position hold times vary from 1 month to years; no day-trading, no algorithmic trading. Fundamental analysis is used to determine directional exposure, both long and short. Technical analysis is used to determine trade timing: enter and exit positions where extreme asymmetry exists from a risk/reward standpoint.