Ducks in a Row: Aligning Positions to Sentiment
Vision | Courage | Patience for better investing
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Sentiment vs. Positioning
US Equity Markets fell nearly 5% this week.
The 10-year US Treasury yield soared to 3.16%. (As yields rise, bond prices fall)
Inflation is at historic wartime levels, coming in at 8.6% year-over-year.
Surprisingly, Gold was up 1.17%.
If you’ve been following along, you would be prepared for all this activity in our newsletter last week.
You can read in detail why we are shorting the market and our rationale in last week’s newsletter “The Short Answer for Our Short”.
Current Portfolio Holdings as of 6/10/2022:
This week we sold our cash position to initiate a broad market short through $SH, the ProShares Short S&P 500 ETF.
This change had the greatest positive contribution to portfolio performance this week and is now our largest position.
Across all of our holdings, we are nearly 50% invested in strategies that are actively positioned away from US Equities
At a glance, $SH, combined with $MSVX, and diversifying managed futures funds $GPAIX and $EBSIX our portfolio is distinctly different at sizable positions. We are roughly in line with our target beta of 0.25.
While our positions may seem extreme or different from most active investment managers we are following the trends of the market and staying away from false hope.
In times like now, it’s ok to be different.
Big opportunities in life have to be seized... when we get the chance to do something that's right and big, we've gotta do it. To do it in a small scale is almost as big a mistake as not doing it at all.
Short selling is riskier than going long because, theoretically, there is no limit to the amount you could lose.
There are many ways to implement a short bias. We are intentionally keeping things simple and practical.
When we decided to buy a simple short we purposefully stayed away from options, futures, or other inverse products.
We do not want to overcomplicate a complicated market.
As an investor, it’s important to understand this new holding is a daily reset vehicle.
The ProShares Short S&P 500 seeks daily investment results, before fees and expenses, that correspond to the inverse (-1x) of the daily performance of the S&P 500®.
We may need to trade this holding more often than others because of the daily reset feature.
In plain English, we see this as a sprint rather than a marathon.
We will continue to use this investment and other opportunities to seek profits during market declines.
A reality check
We have the worst consumer sentiment ever recorded.
Now, throw in 8+ rate hikes, 8.6% inflation, and a topping housing market.
The disconnect in this chart continues to confuse me:
Short term, we will be watching and waiting to see if other investors catch up and start to sell off to be more in line with negative consumer sentiment.
As an investor with Tuttle Ventures, know that we stay up to date with what is happening and are able to adapt and change as required by the markets.
Value investing requires a great deal of hard work, unusually strict discipline, and a long-term investment horizon.
Few are willing and able to devote sufficient time and effort to become value investors; only a fraction of those have the proper mind-set to succeed.
Thank you for reading and I am grateful and humbled to be able to learn, grow and invest alongside you at Tuttle Ventures.
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Check out the website or some other work here.
Darin Tuttle, CFA
NOTE - This is not investment advice. Do your own due diligence. I make no representation, warranty or undertaking, express or implied, as to the accuracy, reliability, completeness, or reasonableness of the information contained in this report. Any assumptions, opinions and estimates expressed in this report constitute my judgment as of the date thereof and is subject to change without notice. Any projections contained in the report are based on a number of assumptions as to market conditions. There is no guarantee that projected outcomes will be achieved. Unless there is a signed Investment Management or Financial Planning Agreement by both parties, Tuttle Ventures is not acting as your financial advisor or in any fiduciary capacity.