Macro Traxx portfolio set (here's a primer)
Macro Traxx portfolio set (here's a primer)
My newest sub-portfolio is up and running and on the move
I added a bit to the 3 tactical positions in this new portfolio, which I outlined in some detail recently. This is 10% of my total portfolio that we track in the service, but as I implied when I first mentioned it, I think it has enormous potential for my own investing. And if so, that just makes it more valuable for subscribers to watch what I do, question it and understand it, then personalize it on their own. That’s the program here.
The key new position today was a US Treasury Bill, maturing in about 1 year.
Exciting, eh? Actually, it is to me. This seems like an opportune time to explain step by step how I think through Macro Traxx. I believe it is simple to understand, but takes a well thought out process to avoid wasting effort and dollars trying to do it.
My Macro Traxx strategy: explained using the new, current portfolio setup
I bought the T-bill with about 80% of this account (so for accounting purposes, it is about 8% of the total institutional portfolio since Macro Traxx is 10% of the total).
That T-bill yields around 5%
So using a proverbial $100, I invested $80 in a T-bill that I can trade out of any time without significant price slippage, as it accrues interest for a year until the $80 I invested in it is returned to me after it grows at 5% to $84 this time next year.
So $80 will become $84 in year. If it doesn’t it is because the US Treasury can’t pay its debts and can’t borrow more, so heaven help us if that’s an issue!
That leaves $20 of the original $100 to invest for growth. I know that I could lose 20% of that $20 (down to $16 in value) and still break even over the 12 month period ($80 becomes $84 and $20 becomes $16 so $100 returns $100 at the end. From a goal standpoint, that is my worst case scenario, since I aim to try to take advantage of that T-bill “cushion” to be much more aggressive than I would be in Core, YARP, etc.
That “$20” is nearly invested, but as I’ve noted, this is an impatient strategy by design. “Swing trading” essentially. I’ll own something for months or weeks if I can, but sometimes it might just be a couple of days. I am using the same type of chart analysis I do for other portfolios, but with much shorter time frames. That means higher risk, as patterns that develop over a period of weeks are easier to be patient and confident in than temporary dips that might go back to being overvalued very quickly. To be specific, I use 2-hour and 4-hour charts to a much greater extent here, along with my usual daily, weekly, etc.
That $20 is currently spread across 3 different ETFs. I’ll use leveraged ETFs but so far these 3 are not of the leveraged variety. One is “long” a major index ETF and 2 are “short” via single-inverse ETFs. It is obviously very early, but the fact that so far all 3 are up just goes to show that my base belief of “playing offense and defense at the same time” always has the potential for both offense and defense to win at the same time.
My enthusiasm for Macro Traxx, and part of why I debuted it as soon as I could for myself and our paid subscribers, is that I think the markets could be setting up nicely for this approach.
T-bill yields still “rock” at 5% or so
Some major (“macro”) market segments are flying and seem unstoppable for now, while others look weak or downright ugly
There will be times when all of the ETFs I use alongside that Treasury security are long and other times where they are all short, and anything in between. The goal is to make as much as I can and not lose “big.” But big here is 20% over a year, while Core is more like perhaps 7% as a downside risk limit I focus on, and YARP is about 10%. So I am taking bigger risks with smaller amounts of money. That’s just how I roll, and have for 30 years.
The Macro Traxx portfolio is 92% invested, so there’s about 8% still “burning a hole in my pocket.” I’ll look to invest that next week, likely in 1-2 more ETFs, and monitor the whole “trading” strategy here to keep a short leash on all of it.
I hope this guided tour of my strategy for Macro Traxx helps people understand the what and why and how of it better. I fully expect some subscribers to bypass the T-bill part and just use the swing trades as their “research” to determine what to do for themselves. Others might decide to structure it as I did, but with less in the T-bills and more in the ETFs. And, I have run a version of this strategy that was 95% in the Treasuries, maturing for $100 (thereby locking in a 0% worst-case) and then using options to invest the other 5%. Options, when used carefully and methodically, can potentially provide outsized returns, and all the while you can only lose what you put up. So in this example I “risk” 5% over the course of 12 months, but that 5% is capable of producing a multiple of what I started with.