The Hunt for Red October.
September has been an exceptional month for energy and short-term trading to drive Alpha.
Housing names are well off the highs. I’ve been short for a month and started discussing this a few weeks ago. If you’re still asleep at the wheel and missing this stuff then reading the report each week is a good place to start.
Some members in DeltaOne had extraordinary months, one hitting a personal record for trade P&L at $116K.
Credit conditions are tightening and with energy prices set to trade higher that just gives another reason for pressure on equities.
One of the things I talked about in this new episode of The LongVol Show titled “The Hunt for Red October” was market structure:
Short-term options
Passive ETF inflows/outflows
When we get this risk-off, like I think we do next month, then it can get ugly in a hurry. Few understand this.
This market has been similar to the plot of The Hunt for Red October - investors are trying to navigate Jerome Powell’s policies and while they were up on the year they are now close to flat….if not negative.
We are in a new market regime - this is not ZIRP anymore and these unchartered waters will take tact, focus, and the ability to be active in the management to drive returns.
I wrote this in an end-of-year note last year here:
I do think that we're going to continue to see a lot of volatility going forward for 2023.
And I certainly do not believe that passive management is coming back for a while, in fact, Howard Marks agreed in a recent note he put out.
That's a positive for an active fund manager like me so hopefully I am catching the start of an active investing inflection as my hedge fund gets out of incubation and ventures out into the world.
Passive management is dead - at least for the next few years but that makes me excited because there are a lot of opportunities that are going to present themselves as this all begins to get worse.
Enjoy the new episode.
The Hunt for Red October - Episode 6
P.S. The October Mastermind was updated with a guest speaker and the class schedule/lecture topics are out below
This article is presented for informational purposes only, is an opinion, is not intended to recommend any investment, and is not an offer to sell or the solicitation of an offer to purchase an interest in any current or future investments. Any such solicitation of an offer to purchase interest will be made by a definitive private placement memorandum or other offering documents.