Tactical Short 3rd Quarter 2024 Recap

McAlvany Weekly Commentary

Late-Cycle Bubble Fragilities MWM Q3 2024 Tactical Short Conference Call October 31, 2024 David: Good afternoon, this is David McAlvany. I want to welcome you to our Tactical Short Third Quarter Conference Call. Thank you for participating in this call. As always, we want to give a special thanks to our valued account holders, we greatly value our client relationships. I came across a quote from Carmen Reinhart, who has been a guest on our weekly podcast in the past. She's spent time at a variety of universities and with the IMF and World Bank, working as an economist. Co-wrote a book with Ken Rogoff a number of years ago. If you don't know Ken, he's a chess Grand Master, Harvard professor, author of many books, including one that they co-wrote, This Time it's Different. They look at debt and what is ultimately sustainable or not sustainable. And as we go into the conversation today with Doug, there's a lot of complexity and a lot of detail, and I appreciate how simple and focused this one quote from Carmen is, because it gets to the nub of what we're dealing with. She says, "If there is one common theme to the vast range of the world's financial crises, it is that excessive debt accumulation, whether by the government, banks, corporations, or consumers, often poses greater systemic risks than it seems during a boom." And just holding onto that simple idea, where we begin today is with that simple idea, we'll move through complexity, and I want to come back around to that simple idea of too much debt ends up being a bad idea when you get out of the boom times. So a little context: With first-time listeners on today's call, we'll begin with some general information for those unfamiliar with Tactical Short, and there is more detailed information available at mwealthm.com/TacticalShort. The objective of Tactical Short is to provide a professionally managed product that reduces the overall risk in a client's total investment portfolio. At the same time, we'd like to provide downside protection in a global market backdrop with extraordinary uncertainty at extreme risk. The strategy is designed for separately managed accounts that gives us the ability to— The advantages of that are that it's investor-friendly. There's full transparency, there's lots of flexibility, reasonable fees, there's no lockups, and that's why we've chosen that structure. We have the flexibility to short stocks and ETFs, and our plan has been to, on occasion, buy liquid listed put options as well. Shorting entails a unique set of risks and we're set apart both by our analytical framework, as well as the uncompromising focus on identifying and managing risk. Our Tactical Short Strategy began the third quarter with a short exposure targeted at 80%. The target has held steady throughout the quarter at that level. Focused on the challenging backdrop for managing short exposure, a short in the S&P 500 ETF, SPY, remained the default position, which is the case for high-risk environments. I'll give you an update on performance, and then I will pass the baton to Doug. Tactical Short accounts after fees returned a negative 4.28% during Q3. The S&P 500 returned a positive 5.89. For the quarter, Tactical Short accounts returned a negative 73% of the S&P 500's positive return. And as for one year performance, Tactical Short after fees returned a negative 20.99 versus the 36.33 return for the S&P. So, Tactical Short's loss was that of 57.8% of the S&P 500's positive return. We regularly track Tactical Short performance versus three actively managed short competitor funds. The first is Grizzly Short Fund, which returned negative 5.48 during Q3. And over the past year, Grizzly has returned negative 14.14. Ranger Equity Bear returned a negative 9.27 for the quarter, with a negative 12.47 for their one-year returns. Federated Prudent Bear Fund returned a negative 3.58 during Q3, and negative 18.63 for one year.