Talk Your Book: A Tactical Strategy That Actually Works

Today's animal spirits talk your book is brought to you by Potomac funds. Go to potomac.com to check out their whole suite of tactical asset allocation strategies. That's potomac.com for more. Welcome to Animal Spirits, a show about markets, life, and investing. Join Michael Batnick and Ben Carlson as they talk about what they're reading, writing, and watching. All opinions expressed by Michael and Ben are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ritholtz Wealth Management may maintain positions in the securities discussed in this podcast. Welcome to Animal Spirits with Michael and Ben. On today's show, we're joined by my friend Dan Russo. Dan is the co CIO at Potomac. Like, rewind ten years, maybe even more at this point. Gosh. Time is going by, Ben. Like, 2012, tactical strategies were all the rage. Particularly, there was a whole new category called called black swan funds. Anything that did anything to sidestep did I just say anything twice? Mhmm. Any strategy that Allow myself to introduce myself. Any strategy that was around that managed to sidestep part of the GFC and even new funds that launched up investors love to fight the last war was all the rage. How do we avoid the next shoe to drop? The problem is most of the time, the market is biased to go up. Right? 74% of the time, 73%, 75%, whatever it it goes higher one year later. And the problem with a lot of these tactical funds or these bear market strategies, and I know those are not the same thing, is that a lot of them can't survive the upside. And if they can't survive the upside, as we've learned over the last decade plus, then they're no good to investors. And so the conversation today with Dan gets into one of the unique things that they've been able to do is actually keep pace with a rising market. What a concept, but really hard to do. And they've done it. Yes. Protecting the downside volatility is a lot easier if you take take the upside off. Right? And that's what a lot of those funds did. And a lot of people realized that in the February after they rushed into all those strategies and products, then they got out because it's like, hey. This is no fun. We can't if there's no downside volatility, this thing's worthless for us. Right? And, yeah, that's the hard thing is, like, trying to play both sides. And the great thing about Dan and I think a lot of quantitative investors is that he's a straight shooter, and he tells you, like, this is the good stuff. This is the bad stuff. Straight shooter. I do love that. I do love that. Management written all over him. And and so we get into all that, and …