Takeaway: "I think most people knew what they didn’t trust. They just couldn’t see what the alternative was."

Editor's Note: Below is a new interview (and transcript) between Hedgeye Founder & CEO Keith McCullough and Mark Bunting, Publisher & Host of Uncommon Sense Investor. It was originally published on Uncommon Sense Investor.

From uncommon SENSE Investor:

Keith McCullough doesn’t care what you think of him.

He gets that attitude in large part from his father, a firefighter, and one of his grandfathers, who was one of 19 children from Quebec, and became a successful, serial entrepreneur despite a limited education and often being told he wouldn’t succeed.

McCullough loves to hear he’s not good enough. He heard it growing up in Thunder Bay playing hockey, which culminated in him captaining the Yale hockey team to a championship.

And McCullough still hears it as the founder and CEO of Hedgeye Risk Management, a firm he launched in 2008 as a disruptive competitor to the “Old Wall” Street ways of doing business.

It’s why the guy they call the “Mucker” is driven to wake up early every day to play the hedge fund research game out loud, and grind out he and his team’s proprietary Hedgeye macro research for thousands of subscribers large and small.

They also produce a steady supply of free media content, much of it educational, that’s of value to investors.

Watch this wide-ranging conversation with McCullough in which he has ample latitude to express himself in ways he hasn’t before.


Mark Bunting (MB): Keith, you started Hedgeye in 2008, with the idea that you wanted to democratize hedge fund research, with the idea as well, that you wanted it to be transparent and accountable, and to do it with trust. But prior to that, you were working for Wall Street firms for about 10 years. What was it about the way Wall Street was operating that you felt was inherently wrong and you wanted to change?

Keith McCullough (KM): Well, I mean, Wall Street by definition is opaque, right?

I mean, it’s the opposite of how we define both the vision and the mission where you can’t look inside of a hedge fund, never mind inside of an investment bank, and all of its tentacles and all of its conflicts of interest.

So I think that most people knew what they didn’t trust. They just couldn’t see what the alternative was. And I didn’t either just to put it on the table. Hedgeye has been a great adventure.

Many days where it’s just this constant evolution and creation of, if I could show you what a world-class hedge fund does every day, then the words “hedge fund” don’t become bad words or dark words or evil words.

They become trustworthy, you know? Hedgeye, that’s why I thought of it that way, I put an eye or transparency on top of that word that not everybody could understand or had the opportunity to see.

MB: Now, fast forward to today, you’ve got 40 plus analysts, more than 25 research products. You’ve got subscribers in close to 100 countries. So, clearly people are paying attention and it’s working. What do subscribers say to you in terms of Hedgeye’s research being useful to them, or different or unique?

KM: Mark, that’s interesting because you get the whole continuum because we have, what we’re really providing people is an education on how to play the game, the hedge fund game at the highest level, or now, an entire full investing cycle, global asset allocation fully loaded.

So this is not for somebody who just walks into the game with no skates on, to use a hockey analogy. So we have beginners that we do have to tell them one skate on, here are the laces, and here’s how you do it.

So the feedback we get there is that it’s an education that takes time, and the intermediate to higher level players will often say, I can’t believe what I did before I met Hedgeye.

And that’s precisely what I love to hear the most is that I want you to get rid of all that baggage, that “Old Wall”, all those bad practices, everything down to using 50-day moving monkeys to play and get to the highest level, or at least trying.

We also have power users that are, I tell them, I hope they’re better than me at this. And I mean that quite literally in terms of performance.

MB: One of your big victories was anticipating the 2020 crash. And you said after the fact that “Old Wall”, as you call it, Old Wall Street has not evolved at all. And it pisses you off because they are leading investors astray, and investors are losing a lot of money. So why has Wall Street not evolved, and why are more firms not using your macro process or something like it?

KM: I think, quite simply, it’s because they don’t have it. They don’t have our process. They don’t have our players that play within the process. It’s not unlike any other profession where you find a certain team plays the game differently.

The setup for that is that they’re constrained at the core to not be able to do that, anyway. But what pissed me off about it was that I want to compete with somebody.

Like I want to play against somebody out there that actually plays the game the way we do and what you you know, Mark, and most people know, is that all those people are still on the buyside.

They’re all still inside of a place that you can’t see. So I was, I still, on an ongoing basis, am quite surprised that I’m still playing against the same old product, the same stale content, the same conflicts of interest.

It’s never been worse. And if anything, with social media now, more of those types of, I guess, are having an opinion and an opinion that people still pay attention to, which is very dangerous, and I try to help people risk manage, or mitigate their exposure to that.

Click HERE to read the full transcript and watch interview on The Uncommon Sense Investor.

Click HERE to follow Mark Bunting on Twitter.