Editor's Note: Below is a chart and excerpt from today's Early Look written by Hedgeye CEO Keith McCullough.
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Yesterday I had a meeting with one of the hedge fund industry’s best asset gatherers. He’s been a partner at a few high profile hedge funds that launched with a lot of money. Some of those funds aren’t around anymore. His number one complaint about one of the PMs (Portfolio Managers) he partnered with was: “He’s a great stock picker, but had no macro or market timing process. He didn’t understand The Machine and, most importantly, didn’t find ways to change or augment what used to work.” In other words, he was a really smart guy who wasn’t smart enough to change as The Game changed. I’m not telling you this story to pick on the poor (really rich) guy. I’m using the mathematical (card counting with 1 deck) analogy to remind you that there’s a massive opportunity for you to generate alpha right now using The Machine. Think of The Machine as the dealer. While its short-term moves are non-linear, it’s rules based and predictive in terms of its behavior. All the while, you can tilt the odds in your favor when the dealer of 85-90% of daily trading has a hot deck. Captain Stock Picker (my former self as a buy-side analyst) is one of many in an oversupplied industry of analysts who can and will make a lot of mistakes by simply not knowing the rules of The Game or The Machine. |
