Episode #212 of the On The Tape Podcast featured Lee Robison of Altana Wealth. Altana is a specialist fund manager whose edge is in asymmetric ideas and niche strategies.
From Information Gathering to Information Filtering
When I started in the Hedge Fund industry in the late 90s, it was about gathering information. We could gather information in a way that even some of the big banks couldn’t do, by just digging in deep, translating, going to meetings, meeting companies. And then the internet just took off. This business has shifted from information gathering to information filtering. You need big budgets to buy computer power and people and quants and tech to analyze. But there are lots of other areas where it’s still quite manual. Emerging market stuff, some of the distressed assets, some of the new technologies, carbon, crypto, where you haven’t got that information.
Pathways to Make Money
When pitching ideas to clients, it’s not just about the start and the finish. It’s also about the pathway. Have you got pathways to make money? The Big Short, Bitcoin, some of the AI stocks, some equities, they have pathways where you can take profits. One of the things we did really well, with crypto for example, was we had a sales ladder. I wrote in the sales letter, if this goes up 4x, I’m taking 25 off the table, if goes up 10x, I’m taking another 25% off the table. I wrote this down before we invested, because I knew there would be scary days, volatile days, greedy days. If we’re feeling greedy, I’d go back and adjust the position. People don’t think about exits and pathways enough in investments.
Have a Strategy for Getting Out
Getting in is easy, getting out, especially when you get it wrong is difficult. Always start from what are my potential exits if I’m wrong. Know how you’ll get out of this position. Where would I want to take profits? And then you draw pathways of the things can happen along the way. Then you have different probabilities and then you should be able to say on balance this is a great entry point, or not. I don’t think people do this enough.
What to Watch in 2024
- Consumer slowing down (Jamie Dimon hinted at this too)
- Effect of higher rates starting to be felt
- Cost of living increases
- Savings decreasing
- Bitcoin halving (optimistic crypto predictions)
Portfolio Asset Allocation Strategy
In a portfolio, you can barbell it. You can have 70-80% of low risk treasuries, and then you have a portion that is high risk. I’d love to have 20 brilliant ideas in that 20-30% bucket. I size them to about 1-2%. When I say brilliant ideas, I mean they can 4x or more reward. Not 1.5x, I’m talking about really good stuff. So why? If I put 1%, and it goes down half, I live to fight another day, particularly in a 5% environment. If I put 0.25% in, and it goes up 10x, I’m kicking myself because I haven’t made enough money out of it. You need those little outliers, in particular when rates 0, event at 5, you need those little outliers that make 5-10x alone to lift your year. The larger the portfolio that you have the more of those bets that can go wrong and you can recover from.
My personal view is inflation itself, will be volatile for the next 3-4 years. We’re reshoring, we’re rebuilding the whole energy sector, both renewables and replacing Russian oil. That costs money. We got the tailwinds that came from China, from the Euro, from the Internet. They are all dissipating, so we’re going to have a volatile set of interest rates and inflation anyway. The market is rooting for inflation to get down to that 2-3% level, and for them to cut rates. I think that sounds too easy, I don’t think the world is like that. Oil is pushing 100, China is a mess, the US treasury is out of control how much money they are spending, that isn’t going to end well for America.
Professional vs Amateur
The difference between a professional and an amateur, is not the ability to buy, amateurs can buy in a crash, they can take risk, they can be as good as anybody, what professionals are really good at is selling. Knowing when to sell. When to take profits along the way. When to change your allocation. When your advisor pitches you on an idea, make sure they tell you when they are going to sell as well, that’s crucial.