Fear sells paper, unless you threaten to default… – May 12th 2023

Political induced fear has been the rhetoric all week as the June 1st debt ceiling deadline approaches. Will this be the year the US decides to default on its obligations and chooses to become a third world economy? Unlikely. Interestingly though, is the recent re-pricing in 4wk Bills cheapening as this tug-o-war continues. Although, the US remains volatile and difficult to navigate in the near term and as erratic as many areas of the market may seem, data continues to suggest that the Feds actions on reducing inflation are working. We expect to see a clearer picture for markets in the weeks to follow which should finally allow price action to breakout of the tighter ranges we’ve been in.

** Thoughts on RCG Portfolio Positioning
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** Dynamic Macro Strategy
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This strategy relies on historical data and quantitative techniques to detect statistical disparities and make predictions in global markets using liquid ETF’s.

“The path of least resistance continues to point to global exposures and diversification out of US assets. We have continued to look ahead however and continue our shuffle out of EU economies that once again are showing signs of distress. We are favoring US sectors that remain under-supplied and under-invested as lower valuations and pricing pressures present better buying opportunities. We expect the latter half of the year to be led by US outperformance versus its peers.” – Nick Diaz

** Inflection Strategy
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The strategy takes positions in highly out of favor US equities which we believe are inflecting due to changing fundamentals/events.

“We are now passed the first quarter’s earnings season and most of strategy’s holdings reported in line quarter results with a positive forward outlook. We continue to see these companies improving balance sheets and many now even buying back shares and/or paying dividends. For instance, Petrobras will be paying two installments of 57c on 5/26 and 6/23, and announced a third divie of 75c/2 for 8/18 and 9/20. Both Valaris and Taboola announced a new share buyback program. Ally Financial and Occidental Petroleum continue focused on debt reduction, share re-purchases and dividends. Constellium and Geo Group are now close to reaching their debt targets. All holdings continue to trade at depressed levels for various reasons.” – Stefan Lingmerth

** Safe Haven Strategy
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This strategy protects capital during inflationary environments and seeks to maximize yield using fixed income instruments and defensive assets. PM – Nick Diaz

“We continue to roll short tern expiring debt T-Bills and have added exposure into recent markets dips. We are looking to tactically extend duration out to 2yrs on the curve as opportunities arise. We saw a fall out in most precious metals yesterday and are monitoring closely to consider adding back exposure at more favorable levels and re-insert this kicker into the portfolio in full size.“- Nick Diaz