The Rolling Past 12 Months
Clear what has happened: Russell 2000 (small caps) outperformed by a wide margin (a full year’s worth in 3 months) through March and then nada for 7 months in a row.
If you observed this, and understand the idea of mean reversion, what to do next was very clear.

A Mess Ensued: No Surprise to GH2 Unfiltered
Those who have watched GH2 Unfiltered videos (Paid subscribers, duh) about financial markets observed this as it occurred (#MondayMorningQuarterbackingNotAllowed). IT WASN’T THE DIRECTION I OBSERVED (I am agnostic observer), it was the GLUE (correlations among the different asset classes and sectors got screwed up, this was CLEAR: Gamestop/meme stocks, interest rates, crypto, inflation fears).
The Pink vs Blue line reversal here is large but the net difference over time limited.

Last 3 Months, Small Caps Underperformed

Again, simple: the glue straightened itself out, rates stopped lurching 5-7 basis points a day. Allowing allocations to adjust and not have to change direction every hour.


Diversified portfolios that included international equities have diluted returns…again. There is no theoretical problem with diversification (that is how robo works, that is the global portfolio), but…tell me the scenario where international financial markets, including bonds, outperforms?
The combination of events required for either emerging markets or non-US equities to outperform isn’t probable (in the context of anything is possible). Both direction AND foreign exchange must favor this. One of them, maybe. Both? Unlikely.

But…US Long Bond Crushed

Again, dilutive to absolute performance for diversified portfolios. Substantial allocations here make 100% sense from a portfolio construction point of view. But, this is problematic for reasons not in the headlines.
a. The largest investors in the world are watching this, FIRST. They do not care about the price of TSLA.
b. If they re-allocate TOWARDS bonds (as would be their natural inclination because they are matching liabilities which last for decades, not the next quarter’s earnings): that would need to come from…stocks.
c. We aren’t going to get a newsflash to say “Swiss National Bank plans to re-allocate 500 billion out of Apple into the long bond.”

Think You Have An Edge? Think Again

This is a screenshot from a professional futures trader. This person is not alone, there are TONS of people that know this. VPOC VWAP etc. Known.
The idea they are making it up? Nah. The idea that you have an edge over them, even with short time frames? It’s YOU that is guessing.
The best part of these people? They know there are limits to their control of the outcome, even if they know every data point (and they do, for all intents and purposes).

But do you see what they are attempting to graph? YO, this is the construct I have used to explain…uh, everything else.

AND…Now You Understand Why I Don’t Watch or Read Research Reports About FB stock.