Wednesday, November 22, 2023

Quote of the Day: Wall Street "Running With No Protection"

Comments made by Hedgeye CEO Keith McCullough in today's Macro Show resonated with me, and has me calling up the following from my video commentary this morning:  

"Let's see this for what it is; this is not a time, from these levels and from this stage in the cycle, to expect that the next new raging bull market is about to begin... I'm a bit amazed, if not perplexed, by the pros who are suggesting it is... I do understand their narrative, and I can articulate it, and I can adopt it in a debate and become very convincing -- and it's worth considering, and exploring, and testing -- but it should not be considered the highest probability outcome on a go-forward basis... It's one potential outcome, and it's a rosy one, and it would be great, but I just can't tell you from any angle that it's a high probability outcome right here... Therefore prudence is mandatory, as far as we're concerned."

Hedgeye is one of the firms whose research we pay for to supplement our own... Here Keith (speaking to the individual investor) essentially chastises professional investors (who "run" other peoples' money) who are presently in these markets with no hedges (and those would be options hedges) on:

"Wall Street has no protection at this point... If you think you can run with no protection, it's because you're chasing performance with other peoples' money... To be very clear, somebody who's running money -- and a lot of our clients can run, guns ablazing, with no protection -- and be dead wrong for 3 months, we saw a ton of them get fired in October... They don't personally lose money, they just get fired for losing your money... So, understand the incentives and the risk-taking of people who do this institutionally, versus what you really need to think about."

As you clients know, we never "chase performance."  You've hired us to prudently manage your money, painstakingly consistent with what our deep research identifies as the prevailing risk/reward setup... And, therefore, presently, we are indeed hedging against the potential for something meaningful to the downside over the next several months.

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