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Staying Flexible – Quick Thoughts on Macro Trading

(2-minute read)  | 

This week’s menu: a quick dive into a couple of personal strategies—and more importantly, mindsets and methodologies—for observing and analysing the flow of today’s global economic currents.

1. Don’t miss the forest for the trees. 

The primary job of an effective capital allocator is not to play 5-min macro by trading in and out of positions but to allocate to structural views that can become entrenched over time while using the volatility to gain the best possible entry basis. 

We believe that in the age of regorging economic factions and discourse, companies with strong balance sheets will provide capital preservation to beat high real inflation. The biggest beneficiaries of this age will be businesses where stressed balance sheets (not due to incompetent management, but because of the prior economic environment) meet incoming massive Free-Cash-Flow due to the changing of times, and will be the best way to generate alpha.

There are credible arguments on both sides for a more dovish vs hawkish Fed going forward and the odds of a soft-landing recession, whether it’s rightly or wrongly priced in. 

2. Fast asymmetries. 

John Boyd, the father of F-16s, was the most preeminent fighter pilot in the history of the United States air force. His military genius (though widely unknown till recent times) is likened to that of Carl von Clausewitz and even mentioned in the same breath as Sun Tzu. 

Boyd figured that the way to defeat your enemy in a dog fight is to get inside his OODA (Observe-Orient-Decide-Act) Loop, and the only way to do that is the ability to execute actions that are asymmetric at a high tempo to throw him off. A speculator and the market are analogous to a constant dogfight, and maximum alpha is gained when a speculator gets inside the market’s OODA Loop before it becomes a consensus. 

This is the challenge presented to every speculator, and we think that the market in Tier 1 Manhattan Office Retail REIT is operating in a slow-moving OODA Loop that we can take advantage of. 

There is a certain office REIT in Manhattan whose tenants are the likes of Michael Bloomberg, Ken Griffin and Mark Zuckerberg, along with Big Law and Big Tech, and these guys won’t be the ones moving to Nashville to work from home anytime soon. In fact, CITADEL’s bid to build a brand new skyscraper in downtown Manhattan probably bottom-ticks the work-from-home consensus, and we believe that office REIT is the preferred way to top-tick the highs in US rates.

Stay tuned for more nuggets on macro trading and other hot-button market issues in the weeks ahead.

(2-minute read)  | 

This week’s menu: a quick dive into a couple of personal strategies—and more importantly, mindsets and methodologies—for observing and analysing the flow of today’s global economic currents.

1. Don’t miss the forest for the trees. 

The primary job of an effective capital allocator is not to play 5-min macro by trading in and out of positions but to allocate to structural views that can become entrenched over time while using the volatility to gain the best possible entry basis. 

We believe that in the age of regorging economic factions and discourse, companies with strong balance sheets will provide capital preservation to beat high real inflation. The biggest beneficiaries of this age will be businesses where stressed balance sheets (not due to incompetent management, but because of the prior economic environment) meet incoming massive Free-Cash-Flow due to the changing of times, and will be the best way to generate alpha.

There are credible arguments on both sides for a more dovish vs hawkish Fed going forward and the odds of a soft-landing recession, whether it’s rightly or wrongly priced in. 

2. Fast asymmetries. 

John Boyd, the father of F-16s, was the most preeminent fighter pilot in the history of the United States air force. His military genius (though widely unknown till recent times) is likened to that of Carl von Clausewitz and even mentioned in the same breath as Sun Tzu. 

Boyd figured that the way to defeat your enemy in a dog fight is to get inside his OODA (Observe-Orient-Decide-Act) Loop, and the only way to do that is the ability to execute actions that are asymmetric at a high tempo to throw him off. A speculator and the market are analogous to a constant dogfight, and maximum alpha is gained when a speculator gets inside the market’s OODA Loop before it becomes a consensus. 

This is the challenge presented to every speculator, and we think that the market in Tier 1 Manhattan Office Retail REIT is operating in a slow-moving OODA Loop that we can take advantage of. 

There is a certain office REIT in Manhattan whose tenants are the likes of Michael Bloomberg, Ken Griffin and Mark Zuckerberg, along with Big Law and Big Tech, and these guys won’t be the ones moving to Nashville to work from home anytime soon. In fact, CITADEL’s bid to build a brand new skyscraper in downtown Manhattan probably bottom-ticks the work-from-home consensus, and we believe that office REIT is the preferred way to top-tick the highs in US rates.

Stay tuned for more nuggets on macro trading and other hot-button market issues in the weeks ahead.