5/18/2026 - I recently spoke with an unusually successful hedge fund team. Their returns were particularly interesting because they didn't trade all that much. They developed big picture ideas--many of which were unique--and they occasionally tweaked the expression of these views and the combination of the positions in the portfolio. The lion's share of their time, however, was spent in developing ideas. Rarely did they express their ideas in terms of going long or short a particular market. Rather, they were interested in the relative performance of multiple markets in the face of changes in the world. For example, if their research pointed to higher oil prices, they would express a number of their views in rates markets (expressing an inflation perspective) and equity markets (expressing different growth perspectives for oil producers vs. consumers). The result was a diverse and unique combination of positions that provided multiple ways to win.
Still, that is not what I found most interesting in their approach. They had big picture views and therefore focused on big picture price targets. Perhaps their most unique quality was their ability to hold onto positions while they worked out. Moves that would have shaken out other traders had them contemplating adding to positions. Yes, they were wrong on occasion, but they had a number of amazing winners. Their skill was finding areas of unique opportunity and then committing to those. The capacity for commitment was their key talent.
Similarly, some people are great at dating and meeting people at social events. Others are great at committing to and cultivating long-term relationships. It's not that the team I spoke with was so great at controlling their emotions; their greatness could be found in their capacity for commitment.
Which few traders talk about.
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5/17/2026 - The U.S. stock market has been on a historic run. Many traders I hear about have not captured the lion's share of this rally and are frustrated. They are looking for a way to get in when the market is stretched and the market has not let them make their comfortable entry.Please allow me to point out a few things.
* Energy (oil) prices continue higher in the face of seeming Middle East progress toward peace;
* Inflation expectations are on the rise and we're seeing higher yields at the long end of the curve;
* European stock prices (VGK) remain well below their late February highs;
* Europe and the Far East as a whole (EFA) remain below their late February highs;
* Oil importing countries such as Australia (EWA) and Japan (EWJ) have not made new highs;
* We have recently seen more U.S. stocks make fresh 52-week lows than highs.
* Many U.S. stock sectors have not made new highs, such as raw materials (XLB); financial (XLF); consumer discretionary (XLY); healthcare (XLV); and industrials (XLI).
* The equal-weighted version of the SP500 (RSP) has not made new highs.
Well, you get the idea. If and when this market corrects, everyone will look back at how obvious the top was.
It pays to question our assumptions and look beyond a broad market average to see what markets are actually doing. A rising tide lifts all boats. Many boats are not rising.
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