Below is excerpt from opening lines of today’s edition of “Sight Beyond Sight”, the macro-strategy commentary courtesy of Stamford, CT-based think tank Rareview Macro LLC. Our thanks to firm principal Neil Azous for the following observations.
Model Portfolio Update: Significantly Reduced Equity Net Long Exposure
Our inspiration level today is almost as low as the price of gold – that is, close to touching a low for the year.
We are struggling to find a meaningful macro catalyst or new top-down theme. None of the specific ideas we have analyzed recently are an “A Trade” and we will not deploy them ourselves, or ask you to either. The risk-reward in the short-term in many consensus themes are up 1 and down 2, not the profile of up 3 and down 1 that in the past we have always looked for.
In fact, we are finding that the psychology that has driven us all year is dissipating and for the first time we are more concerned about giving back performance in the model portfolio than generating further profits.
In the absence of a new opportunity, and following a period of healthy outperformance, a dilemma has arisen for us – markets/positions by nature mean revert. Now everyone has their own metric they watch for, and their own threshold for the mean reversion in their portfolio to start with. But let us just say that ours has been breached and it has served us well in the past to pay attention to that.
Now that may not be the case for many of you, and if we were in your position there is little question we would be pursuing the same ideas/themes in order to catch up with our benchmark. For today, we have little to offer you. However, like the Homebuilder seasonality and beta observation made yesterday (reminder BZH reported this morning and is in small cap basket we presented), we will continue to highlight ideas as and when they arise.
So in that spirit, we significantly reduced our net long equity exposure. Continue reading