Disclaimer
In no way, shape, or form should my views and positioning be construed as investment advice. They are strictly for informational purposes only. I publicly document my personal investment process to apply as much pressure on myself as possible, not to convey advice to others, as everyone’s individual financial circumstances, portfolio positioning, investment process, strategy, etc are extremely unique. Every single piece of information communicated publicly and privately via The WOTE should be viewed as exactly that: a piece of information.
Current Equity View: November 20, 2023
Structural Outlook (1-2 Years): Bearish
Cyclical Outlook (1-12 Months): Neutral
Tactical Outlook (1-4 Weeks): Bullish
Current Equity Allocation: November 20, 2023
WOTE US 60/40: 55% versus a 50% strategic weight
WOTE US Long/Short Equity: 50% versus a 0% strategic weight
Current Positioning: November 20, 2023
WOTE US 60/40
Positioning: 55% SPY, 45% BIL
Discussion: The WOTE US 60/40 strategy is designed to isolate my performance over- and under-weighting equities versus fixed income in the context of a US 60/40 portfolio. The benchmark for this portfolio is 60% SPY/40% BIL.
WOTE US 60
Positioning: 100% SPY
Discussion: The WOTE US 60 strategy is designed to isolate my performance in equity sector selection in a fully invested US equity portfolio with an SPY benchmark. This portfolio would typically comprise the equity portion of the WOTE US 60/40 portfolio, but for performance purposes I want to break the investment process into its component parts.
For now I am 100% allocated to SPY as I am in the process of stalking a large allocation to RSP, likely implemented toward EOY and into January. More to come on this in a soon-to-be-published SPX outlook piece and the November WOTE Report.
WOTE US 40
Positioning: 100% BIL
Discussion: My philosophy on a US-oriented 60/40 portfolio is that the strategy should be equity-dominant. In other words, I 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 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 I 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
Positioning: 50% SPY
WOTE Special Ops
Positioning: 100% cash
Discussion: Special Ops is the strategy I run via the private Xwitter account, and outside of general positioning info and performance analysis, the bulk of the communication around this strategy will continue to be conducted via the private Xwitter account.