Episode 80: Thematic Playbook

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As we head what is expected to be a rate cut here in September I can’t help but to point to the idea that this is what we saw last Summer as well into, guess what? A September rate cut. The same thematic playbook strategies then (aside from Gold names) are the SAME play again this time.

People ask about “my system” - I don’t have a system per se, I have frameworks that we use in the fund to generate what are called Event-Driven Trades and then Core Positions meaning turn-arounds, FCF positive companies and other value plays that may be out of favor.

That’s it. This is what I do. I don’t chase things I know nothing about, I don’t bet on companies with negative FCF and no sign to how that changes (but I will trade them) and I am not out here looking for the next Amazon.

I invest and trade into SURE THINGS.

And those sure things are part of what we call a Playbook. As a subscriber to The LongVol Report PDF you can access both frameworks and this week we’re going to focus on some of the thematic/event-driven ideas as we head into the September rate cut.

These are trade able themes and themes exist ALL the time, each year, over and over and over. So, instead of the idea that the world is always ending, or that a recession is always near, we focus on those frameworks to generate idea flow.

And for those of you that actually pay attention, and can get past your Matrix programming of everything has to be doom and gloom or market tops, then maybe this weeks article will help or maybe it won’t and if that’s the case then using the Swing Alerts Portfolio or our asset management firm are better choices.

I already made a video this week with the “Best Ideas” from The LongVol Report and if that gets play this will be the new format going forward. There were 5 ideas from the report this week that personally caught my attention and I walked through why, what triggered me into them and general commentary:

🍜 Fast-casual restaurant are seeing a slowdown. Cava, Chipotle, Sweetgreen, and other peers have reported a decline in foot traffic and weaker sales over the last quarter. As consumers cut back on lunch, investors have similarly trimmed their holdings in the sector. (CNBC)

🤝 Total mortgage application volume jumped 11% from a week ago (CNBC)

📈President Trump is driving this market. The White House is as involved in day to day market swings as economic data, and that influence has spanned tariffs, debt, commodities and crypto. Big Tech stocks too have all been influenced by Trump’s deals and commentary. (Barron’s)

📈 A new generation of “buy the dip” retail investors have propped up the market (WSJ)

The monthly measured move, also known as an AB=CD has a $690 target to complete the leg here and this has me a little cautious. Does that mean recession? I don’t know and to be frank, I don’t really care because I look at this from the lens of a trader. If we do in fact sell off here soon then my trader cap goes on and that means maybe shorting the $SPX ( ▲ 0.83% ) buying some $VIX ( ▼ 6.95% ) and for sure, shorting some of these tech names like $AMD ( ▲ 8.81% ) and $NVDA ( ▲ 0.68% ).

Does that mean I am concerned about other names in our portfolio, yes and no, I would expect some of them to pullback but our cost basis is so low and the rest of them have other drivers that are re-rating their multiple so even with a sell-off their core balance sheet won’t be affected to much.

So, the point here is this may be a signal but like all things it’s how you take this signal/data and process it to actionable idea flow for P&L.

We talked about this back in Episode 74 and 73. I shared my views that September would be the said rate cut but that means NOTHING unless you take that data and develop actionable trades from that. I had the interns this Summer take this theme and begin to work on ideas from it, we looked at certain names, skipped some, decided on others but this is as clear as a thematic/event-driven idea as it gets.

We’re not betting on whether or not a some new IPO will work or whether or not some debt-loaded small-cap will find new money. We take an actionable theme, narrow it down and try to skate to where the puck is GOING TO BE NOT WHERE IT is with that said theme.

Yes, this is speculation but so is investing into your friends restaurant or some Company you heard about on a forum that has no earnings - so pick your poison.

But what does data like this really mean? It’s broad and it’s unfinished and meant for the arm-chair investors to debate on in their Discord rooms and stock forums all while having no skin in the game but secretly just wasting each others time!

So, what positions did I personally take from this?

But then again, you could have made this even more direct and traded small caps into this with $CALF ( ▲ 0.83% ) (which we own and I shared with you last week) or $IWM ( ▲ 1.09% ) which has been on a nice run with the anticipation of this rate cut.

So maybe you’re asking what does any of this have to do with a recession, unusual call flows or stocks with moats and the answer is nothing. And that’s the point, so while others want to worry about the doom and gloom, the national debt (and to be clear it matters, but not for this) and trying to guess what next growth stock is going to make it we can trade the themes.

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Notes:

I decided last week to pause DeltaOne for new members and current members remain but going forward we will be requiring new members to meet a few parameters because it creates “remote analysts” for me which creates value. If you were to go to any large bank/fund you go through an analyst training program and I spent the Summer training the interns on our firms investment frameworks which is pretty dam close to what the FOPT Lecture Series is (Foundations of Professional Trading).

More will be announced here in Q4 but for the current members who have been around for a few years it will just get better and maybe we can end up building our own collective hedge fund using the approach we use.