The WOTE Public: "I Succeed Because I Fail"
Discussion
I put together a long Twitter thread this weekend reflecting back on how I’ve navigated macro and markets since December 2021, broken down into the following sections:
As with everything I produce on Twitter and Substack, 99% of this thread was for my own benefit, so I don’t expect anyone to take the time to comb through my detailed musings about my own process. But I will reiterate here what I ended the thread with:
I personally seek to follow and learn from those who are constantly iterating and evolving and admit when they’ve been wrong or gotten lucky. Am I dogmatic in my beliefs when I believe the evidence is stacked in my favor? Do I have a hard time admitting I’m wrong until I see enough countervailing evidence? YES and YES. But do I iterate and evolve over time and come out the other side 10x better? Without question. I’ve done it my entire life, a skill honed principally through sports as a result of closely following Michael Jordan’s “I succeed because I fail” framework:
We are at such a critical juncture in macro and markets right here and now, and I believe it is mission critical for both bulls and bears alike to reflect on what they’ve learned since December 2021 to ensure maximal chance at success over the next 6-12 months. The Twitter thread and this post is my own mental preparation for what’s to come.
Two Conditions
In the S&P 500 section of the Twitter thread above I discussed the two key conditions I am looking for to declare the bear market over: 90% of stocks move above their 50dma and the yield curve moves out of inversion. The 90% “breadth thrust” signal has marked the end of every single bear market since 1968, and the signal has never fired without the curve concurrently exiting inversion. The 90% signal got up to 89% at the peak last August, but the curve was still firmly inverted. Right now it’s at 81% with the curve still firmly inverted (image below of NYSE stocks is at 83%, but the data I look at but cannot show is at 81% - NYSE is just a rough gauge).
These are slower moving signals not helpful for tactical week-to-week, month-to-month trading, but they provide a lens through which to interpret everything else. The bottom line: Until these two critical conditions fall into place, I will continue to look down not up.