WOTE Asset Management Home Page
WOTE Asset Management Home Page
February 26, 2024 update.
Current Views
Last Update
Structural Outlook:
Cyclical Outlook:
Tactical Outlook:
SPX Sectors:
Current Positioning
WOTE US 60/40: 40% SPLG, 60% BIL
Last Update: February 2
WOTE US Long/Short Equity: -100% equity exposure via PSQ ETF
Last Update: February 2
WOTE US 40: 100% BIL
WOTE Special Ops: 100% cash
Last Update: February 23
WOTE US 60: See image below.
Last Update: February 26
Strategies
These are my five US-centric personal investment strategies.
WOTE US 60/40
Benchmark: 60% SPY, 40% BIL
Discussion: The WOTE US 60/40 strategy is designed to isolate our performance over- and under-weighting equities versus fixed income in the context of a US 60/40 portfolio.
WOTE US 60 (long-only equity strategy)
Benchmark: SPY
Discussion: The WOTE US 60 strategy is designed to isolate our performance in equity sector selection in a fully invested US equity portfolio with a SPY benchmark. This portfolio would typically comprise the equity portion of the WOTE US 60/40 portfolio, but for performance reporting purposes we want to break the investment process into its component parts.
WOTE US 40 (long-only fixed income strategy)
Benchmark: BIL
Discussion: Our philosophy on a US-oriented 60/40 portfolio is that the strategy should be equity-dominant. In other words, we want maximum exposure to equities over time, as that is how wealth is generated over decades; while the fixed income portion of the portfolio is there purely as a liquidity buffer, not an alpha generator. The goal of the “40” portion of the US 60/40 portfolio is to maximize yield and minimize duration risk. Any fixed income exposure taken beyond the 1-3 month portion of the US Treasury curve is to maximize yield only to the extent duration risk is minimal. Looked at through the lens of liquidity, it currently makes little sense to extend beyond the 1-3 month end of the US Treasury curve given the inverted state of the curve and the very high risk of even higher fiscal deficits in response to a likely US recession in 2024. Over time, the 10-year US Treasury note yield averages around 200 bps over YoY CPI. If we conservatively assume that CPI averages 3% over the next decade, a margin of safety in extending out to UST 10s does not arrive until 10s are at least 500, if not upwards of 550-600. In that range, it would make sense for a liquidity portfolio to lock in some of the portfolio at 550-600 versus a 525-550 Fed Funds. But for now, sitting risk-free in 525-550 makes all the sense in the world.
WOTE US Long/Short Equity
Benchmark: SPY
Discussion: We do not short individual equities, so the vast majority of the short exposure in this strategy is to indices and sectors, but primarily the key indices SPX and NDX. When 200-300% long exposure is warranted (see below), the strategy will be aggressively long select sector ETFs and individual securities.
Because the benchmark is SPY (and not cash), the strategy is allowed to go 300% long in order to be consistent with the ability to be -100% short. In other words, if we’re -100% short and SPX rises by 10%, then we’re trailing SPY by -20%. Likewise, if we’re 300% long and SPX drops -10%, then we’re trailing SPY by -20%.
WOTE Special Ops (go-anywhere strategy)
Benchmark: SPY
Discussion: Highly tactical, aggressive strategy largely run through the private Xwitter account. A tiny part of our overall portfolio, but is a useful reflection of our cyclical and tactical views of the equity market.
Positioning Framework
Disclaimer
NOT FINANCIAL ADVICE
The Weight of the Evidence (The WOTE) newsletter (inclusive of anything and everything publicly and privately associated with it, no matter how tangential) contains the author’s own thoughts and opinions on financial markets. The WOTE is for educational and entertainment purposes only and none of the content or ideas should be taken as financial advice. The author is not responsible for any financial gain or loss that you may incur by acting on the information provided. You are solely responsible for making your own investment decisions and should do your own due diligence in regard to opinions and ideas on the markets to form your own personal view and form your own trades. For investment or financial advice, consult with a registered investment advisor and/or financial advisor. By reading The WOTE you are agreeing to these terms, and acknowledge it is for sharing the author’s thoughts and opinions on financial markets. Your trading and investing style, preferences, and risk management may significantly differ from the author’s.