Overtime

Mailtime

Good morning,

Mailtime is early this month, but that didn’t keep you all from sending in some great questions and chart requests.

One of those was to look at some AI ETFs, and I’ve included four in today’s report. I’m a big believer in knowing what you own, so I’ve added the top 10 holdings for each, so readers can see what is the same (or different) between them.

For the most part, these are QQQ in disguise (of course, with higher expenses), so yesterday’s ABBT trade (Anything But Big Tech) very much applies, and you’ll see the similarities in the charts.

Now, let’s get into it!

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Questions

1) Who are the technicians who you model your work after (if any) and whose work do you follow most closely currently?

Ahh, this is a great question. There are really too many to name, but below are a few of my top “volume-up” technicians, or the ones where you take CNBC off mute and actually listen to what they’re saying.

Chris Verrone and Todd Sohn. The technical team at Strategas Research Partners are pro’s pros and I read every technical note they put out when I was at LPL for more than four years.

Jeff deGraaf. Love his emphasis on test, test, test. I suffer through 25 minutes of policy and economic talk every week on the RenMac podcast just to get a few minutes of his technical insights.

Jonathan Krinsky. Chief Market Technician at BTIG. Don’t get his insights often outside of the occasional CNBC hit, but his work on Josh Brown’s Reformed Broker blog 10-12 years ago was hugely influential to me becoming a technician.

Ryan Detrick. If you see a sentiment take, an Excel table study, or a seasonality chart from me, just know it’s been influenced by my former manager at LPL.

2) What are your thoughts on managed futures funds for trend following. Such a wide dispersion of managers...not going to name names, but I have gone from top performers to woeful underperformers in terms of selecting different managed futures strategies to experiment over the years.

Okay, I’m a believer… But.

All good technical analysis is rooted in trend following. So, we can’t do what we do around here without believing in the momentum factor, and that trend following strategies can be successful and add value.

But.

Manager selection is a business I got out of years ago. It’s hard enough to find a good manager. But the thing that killed this game for me was this paper from Research Affiliates: Hiring Good Managers Is Hard? Ha! Try Keeping Them.

Essentially, what they found is that even if you managed to beat the already slim odds of picking a good manager, the long-term outperformers spent so much time underperforming that investors were rarely able to stick with them in the bad times. It’s the famous fund returns vs. investor returns disparity, and the simple fact is you’ll never know if you have a dud or a winner experiencing a bad streak until years down the road.

The last thing I’ll say is that if you are going to buy a managed futures fund, understand it is there for diversification purposes. It’s not meant to outperform the S&P 500, and the returns (if they come) usually come hard and fast (like a decade’s worth of returns in a few months fast). You own the strategy because you believe in it, and you don’t touch the allocation, for not just years, but through the full market cycle.

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Chart Requests

AIQ: Global X Artificial Intelligence & Technology ETF