Michael Gayed

And for those that don't know the name, I encourage you to look up Bob Farrell's 10 rules. He was kind of this legendary technician when it came to investing, when it came to markets. So my father was on his team. I grew up seeing that. He left, started his own investment advisory firm in 1991, as I recall. Grew that $2 billion in assets, was, large cap growth was the mandate. And then had his own hedge funds. And a lot of my passion for markets really kind of stems from me mimicking, going back to that point, his own passion for markets. And not just passion for markets, but passion for being an entrepreneur. He was always the kind of guy that wanted to build and

Have a better life, never stopped working. He himself was a big believer in cycles. And I think a lot of who I am today starts from kind of the, the framework that he kind of approached life with. But I joined the family business after college. My father passed in 08. I was not of age to take over the business. Had a stage where I was debating whether to get an MBA to reset my career, because that was just as the GFC was taking place. And I was a nobody. Nobody knew my name. I had just gotten the CFA charter in 2008. Horrible timing. It didn't matter to try to get a job, right? And ended up working for a family office for a year. After that year, decided I wanted to have

More than one client. Worked for a small RIA. Started doing writing. Started getting a lot of content out there. Ended up eventually launching a mutual fund, traveling across the country, building a social media following, putting unique research out there. Launching two ETFs. And despite all that, still the entrepreneur, because I haven't quite gotten to where I hoped I would be at this point.

Which is separate from the funds, doing other work related to Tidal Financial Group, which is the advisor RA that I'm under. Music is a big passion of mine. I'm a songwriter. I've got guitar, bass, literally, I can turn my head right and I can see it hanging on the wall. So I'm a big fan of music just from a creativity perspective, but it's like everything else, right? I think when you are passionate about something, there's the element of it that it's also fun, right? That you don't necessarily think of as work. It's cliche, right? It's like, if you enjoy what you do, you'll never work a day in your life. That's not always the case for all aspects of this business, right? But a lot of my days are can only just focus on building. And this is

The thing, which is, I think, underappreciated. A lot of people talk about, well, the market's open from 930 to 4 Eastern and then you can call it a day. It's like, no, if you're an entrepreneur, it doesn't matter what domain you're in, you got to keep pushing. You got to keep building. You got to devote your time. And it's hard, right? Because I don't necessarily believe in the idea of a work-life balance. Well, and neither does Bezos. That narrative is just not true. If you're going to be an entrepreneur and you want to build, time is the most precious resource, the most finite, and is the one you have to use most effectively, right? And it takes a lot of time to build a business and to build a name and to build a presence. So it's like, you can't have it in

The middle. You're either going to be all uncommitted, which means you don't have much time for yourself and really enjoy things outside of your work. Or you take the risk and yeah, you might fail, but at least you have a chance of really being something bigger.

Because I've been seeing you every day, twice a day, three times a day for years. Let's talk about how you're able to do that. Or is it, do you have a team or are you just in there every single day, elbows out and generating all this content, whether it be video, audio, I see all the clips on Seeking Alpha, there's a lot out there. So can you talk a little bit about

Like the wholesaler. Okay. The other model is to say, view yourself as a publisher where you're putting a lot of content out, which is not related to your funds, right? Which is related to you as, as the brand name, right? And build that audience. And then hopefully there's a halo effect because people see your content and then they realize, oh, this guy actually manages funds too. Yep. Let me take a look at the funds, right? So I've always had kind of more of that mindset in terms of my approach to content publisher first and hopefully monetize it really through the funds, right? Yep. So to your, to your question, do I have a team? Of course I do. I'd be insane not to, right? Everything goes through me and I'm the guy that, that develops the ideas. Um, but you

Have to do that. And you also have to recognize that different frameworks work for different platforms and different ways of communicating work better in some ways in some platforms and others. So, when I deal with people, um, on calls or when I do podcasts like this, obviously it's very professional, right? Because that's what I'm obviously going for. And that's kind of at the core of who I am. When I write things for Seeking Alpha or write, uh, pieces on the lead layer for it, much more analytical, much more deeper dive, showing charts, explaining the reasoning. When I tweet, I'm very loud. Right. And like people say, Oh, you're, uh, you're, you're, you're a portfolio manager and you're coming across so emotional and aggressive

And you're cursing. It's like, okay, I have 740,000 Twitter followers. People want to be entertained. And the truth is the algorithm does amplify that. It's not my opinion. So yeah, it's like, I believe in being compliantly Machiavellian, compliantly, the ends justify the means, right. From that standpoint. So from that perspective, it's like, all right, if that's what gets attention, that's what I'm going to be as a persona. But everything is ultimately about trying to build that, that brand name, that presence, and hopefully have the halo effect, right. Um, of people then seeing that I have these funds, a tax for a run, Jojo. Now, the thing is, of course, you can have an audience. They might like you and believe in you, but your approach may not be working because you have to be in a cycle that doesn't favor your

Approach. Right. And this is where I think a lot of people get tripped up. They don't distinguish between me as an analyst and rules-based strategies that would run the exact same way if I die tomorrow that are yes, based on my intellectual capital, intellectual property, I'm the guy behind it. I'm the entrepreneur that's, that's funding it. Uh, but, uh, they can't seemingly understand that like everything else in the business, there are environments that favor what you do, environments that favor, that don't favor what you do. Um, and that's totally independent of

Uh, meticulous and organized when it comes to scheduling because you're getting pulled in a lot of direction. So how do you balance that? Are you blocking off time to say, okay, this is, these are my client calls. This is my content. This is my podcast. This is when I'll do guests. You know,

Financial group. Meaning. Yeah. I've got over a thousand paying subscribers. I will literally one by one do a mail merge and say, listen, if you want to talk markets, here's my calendar link. Because I do believe that, um, especially because it's rules-based, I can do this. I have the time to do this. Life is a series of, of, uh, scratch off tickets, right? Meaning you've got to, you don't know which scratch off ticket is going to, is going to pay off for you. Right. And I view every relationship like a scratch off ticket, right? It's like, you don't know who you're going to help, who you're going to help, uh, and who's going to help you. So I don't believe in burning bridges unless somebody's, really going after me in a really aggressive way.

Um, but it's a lot of organization. It's a lot of, going back to that earlier point about, what do I do for fun? It's why I don't have much time because I'm constantly putting content out there doing podcasts, talking one-on-one to people. So a lot of what people see on Twitter, they think I'm just tweeting all day. It's like, I should be focusing on so many things. I have so much time. It's like, no, it's that old expression. If you want something done, give it to a busy person. Yeah. Right. And really is that. And, and, and the organization part is really, really, really critical. Like I'm very adamant. I, if I have a 30 minute phone call conversation, I don't go a minute above that because I got something else to do.

Crash SPs down 17% in three weeks. I was the only one that was aggressively saying it very aggressively saying that pretty much every single writing, like 17 articles of which in the title said summer crash. So it happened. Then I hustled to try to get a journalist to talk about it. Then I started getting the media and all the while I had created a, basically a separately managed account strategy around this kind of risk on risk off dynamic. In 2011, Gibbs verified performance of that composite was up like eight and a half percent. In 2012, the Gibbs verified performance of that composite was 45%. No. Right. And because I was getting so much media attention, I was kind of on fire at the time doing Bloomberg, CNBC, almost every other day. It's like, all right, well, let me launch a mutual fund

With my, my partner at the RA. So I launched the ATAC rotation, what I then called the ATAC inflation, inflation, ATAC inflation rotation fund was the original name. We've since removed the word inflation. Now I have to launch that strategy the day before quantitative easy three began. Okay. Now that's actually a very important marker for a lot of reasons. So the backtesting on the model was really strong. The actual performance in 2011, 2012 for the SMA composites was very strong. Rotating risk on offense equities with leverage, risk off defense treasuries, long duration, and the risk on side is rotational across large caps, but more importantly, small caps and emerging markets. Because if you think about from an asset allocation perspective, what's the only way you

Beat the S&P? It's one of two ways in the absence of leverage. If you're going to be equity long only, you tilt smaller or you tilt international, right? That's it. It's not stock picking, right? From an asset allocation perspective, that's all you can do really to ultimately beat the S&P in a meaningful way, assuming the cycle's in your favor. So develop the model for the composites, bring it to the mutual fund. Day before QE3, the effect of quantitative easing three was that you effectively killed off left tail risk, which means you have an approach that thrives on risk off on treasuries in high volatility sequences for stocks. And every time you get a signal, the market says, screw you, I'm going to keep going on. And that's because the cycle was so dominated by money printing,

It's squash vol, squash volatility. So I keep getting whips off, playing defense. Oh, yeah. Right. And this has been the dilemma, not just for me, but for a lot of active managers, right? Which tend to thrive from the outside. And out of the gate, the mutual fund did well. It had, people were throwing allocations to it because they saw me in the media and I was on fire with a lot of things. QE3 happens. And then on top of that, it wasn't just a function of a cycle that with the exception of 2020 was purely risk on and late 2018 with the Christmas Eve Nasker. It was also that it purely was dominated by large caps, the cycle, the FANG phenomenon. So here I am, I created a model, which prior to 2012, assumed there would be occasional risk

Off periods. But then on top of that, assume that risk on meant persistence in small caps and persistence in emerging markets to try to benefit off of that drift, that momentum. Small caps peaked relative to large caps in 2014. Emerging markets, as have been like volatile cash. Death by a thousand cuffs. gone nowhere. Wow. The SBA has been the only game to help. So why do I mention all that in the context of mutual fund? My timing for launching that fund was horrible with hindsight because I happened to enter a cycle that favored pure risk on, which meant a lot of whipsaws around risk off and pure large caps, which meant a lot of risk on, whipsaws around risk on, small caps, risk on emerging markets. So that fund only really had two

Good years. 2017, lowest volatility year in history. A lot of whipsaws around risk off, but small caps and emerging markets had a real drift that year. So the mutual fund was up 27% in 2017. And then 2020, you had the COVID crash. It's in treasuries. It ends 2020 up 72%. Yeah. Aside from that, it's just languished, right? And it does go back to this point that every strategy is a function of the cycle that you operate in, right? I need a very particular environment for really old my funds. I need an environment where there's some left tail risk, to have a chance of getting risk off, right? I need an environment where it's not just about large caps. We haven't had that in a while.

Okay. So wire houses don't have an incentive to open the floodgates up to ETFs because they don't have that fee that they can grant. Okay. So there's an incentive misalignment there. The other incentive misalignment is that wholesalers, salespeople really don't want to promote ETFs. And there's a very real reason for that as opposed to mutual funds, which is that it's hard to get paid on what you raise. So in the mutual fund world, you can track flows, meaning you have some wholesaler, some salesman, they have some advisor relationship, that advisor ends up allocating. You can actually see that flow. You can identify who the advisor is on the mutual fund end. And then you can compensate the wholesaler, the salesperson with something because you can actually tie it to that effort. With ETFs, you can't track it. You

Actually, for the most part, don't really know who the buyers and sellers are. So if you're a salesman or saleswoman and a wholesaler, and you have, you're presented with a choice. Do I promote a mutual fund where I can get paid more because it's trackable? Or do I promote an ETF where it's not trackable? What are you going to choose? First, you're going to choose the mutual fund. Right. So to your point about why not, why keep it the way it is? Because first of all, I've already got some presence on wire houses that would not consider an ETF. I've got some legacy there. But I do also think that some advisors just naturally prefer the mutual fund vehicle independent of the tax inefficiency of it compared to an ETF.

It's a liquid. I don't want to buy this ETF because it doesn't have the movement, even though the volume is irrelevant because it's about the underlying, right? It's where the liquidity is driven and you're fine. And you do a limit order and you'll never have any exit issues anyway, for the most part. So with mutual funds, you don't see that. So you don't have volume, right? It's just price once a day and that's it. So my point is volume, I would argue, is actually a big detractor in getting assets, especially for newer ETFs. Whereas that's not even a data point

Probably your best real-time way of seeing the demand for construction activity. Housing makes up 18% of the economy's GDP. And as lumber goes, so too typically does home values, right? So if you believe that housing is a leading indicator, you have to believe lumber is a leading indicator. Just like, by the way, if you believe industrial activity is a leading indicator, well, then copper. Right. Right. It's the same kind of concept. But in this case, I'd argue far more predictive because most people's wealth is in their homes. Now you compare it against gold, which is more of a safe haven flight to safety type of commodity. It turns out that usually when lumber is outperforming gold, stock market volatility is lower. When gold is outperforming lumber, stock market volatility

Is higher. Not based on my opinion, based on pure fact. And it relates to that idea that why would lumber be doing well? Because it means housing is going to do well. Why would gold be doing well against lumber? Because it suggests there's some kind of credit contraction. Now that's sort of the core, which impacts volatility. So in 2020, when the mutual fund ATEX got the COVID crash, right? It was in treasuries mid-January in long duration TLT. It's up like 30, 40% coming off the low and then goes fully into equities. I tell my colleagues at Title, listen, I learned a lot from the mutual fund space. With hindsight, I think I made the mutual fund overly complicated, right? And not necessarily in terms of the strategy, but in terms of the communication. Risk on, risk off,

Utilities, treasuries, the signals, small cap, emerging market. You got to keep it simple, also from a story perspective. So I said, okay, listen, I got this lumber to gold relationship. People find it interesting. I presented on it all across the country. Let's create an ETF. So we went out, started that process, created the index with market vector. And it's a very, very simple, to your point, approach. So if lumber outperforms gold over the last rolling short-term time period, it goes risk on leveraged 1.3x small cap, large growth, right? If gold outperforms lumber, it goes all in long duration treasuries, TLT as your proxy. So it's only playing with kind of three parts of the marketplace, small cap, large growth, risk on levered, static, risk off long

Duration treasuries, which tells you why I went through so much hell last year. So I always go back to this point, and as you mentioned that you run rules-based strategies, I'm sure you can relate to this. Every strategy is a function of three things, right? What's your signal? What's your look back period on the signal? But then most importantly, which people really underappreciate, what is your opportunity set? So the problem is I launched Roro November, 2020, had an okay 2021, nothing to write home about. But then here comes 2022. It's a risk off year, right? In the sense that you have on average higher volatility, you have on average equities going down quite a bit actually at the lows, but you have for the first time in history, long duration treasuries

Losing more money than equities, right? And the signal was actually risk off the bulk of the year, but because the expression of risk off from a rules-based perspective is long duration treasuries, for good reason, by the way, I could do nothing but take the pain. I called it hell. Yeah. And that was the same dynamic with Atax, although Atax and mutual fund can be short duration, same dynamic with JoJo, which doesn't use leverage, that's the bond thing. So they all have this commonality that they all rely on that flight to safety dynamic in treasuries. So it had a horrible, horrible drawdown. Now, the thing is, it's like I launched the funds for a reason. Last year was an anomaly. A lot of people say anybody could have seen this coming. I completely, completely disagree,

Not from the standpoint of the idea that stocks and bonds are both going to lose money. It's about the how, it's about the interaction. I keep going back to this point that 59% of the weeks in 2022, the S&P 500 lost using weekly data was negative. The only other time you had that kind of sequence was 1931. But then on top of that, the number of weeks that long duration treasuries lost money, that yields rose, was 74% of the year, most ever in history in terms of the sequence. So you have an extreme in terms of the past behavior of equities as a standalone, extreme in terms of the number of weeks that you lost money with treasuries. You have a weekly approach to trying to rotate the two, you're damned. You can't possibly work with that.

So I launched it the exact wrong time. Now, and then JoJo 2021, I launched the same idea, treasuries as the safety. Now, the thing is like, there's always this sort of interesting dynamic in this business, which again, I'm sure you can relate to, which is that you launch some approach that's not working out of the gate. Cycle doesn't favor it. You believe in it, you know the research, but you also know that markets live long-term, but we live in the small sample. So people don't care about long-term data. They care about what you've done for me lately. Not what have you done for me, over most of the years. Right. So there's an interesting question you have to ask yourself as an entrepreneur in this business. Are you keeping a fund or strategy alive because you

Believe in it, or are you doing the wrong thing by keeping alive, subsidizing the expense, because you're falling for sunk cost fallacy, right? That you're committed to the approach, but it's just not working. But you, so you keep throwing money, good money after bad, or if you do decide it's sunk cost fallacy, in which case you close that strategy, are you then closing it at the very moment that strategy is about to turn around? Yeah. Are you selling the low in that approach, which is not raising assets, which is not raising assets because the performance sucks because the cycle doesn't favor in that moment of time, that methodology. Right. And I'll tell you, that is nobody on Fintwit, nobody that's outside of this can

Possibly understand how challenging that is because you don't know the answer to that except for hindsight. Right. Right. Like I believe in my approach. I know the research. I know the cycle dynamics. I know that I happen to launch. It's not an excuse in, I can show all the data of how unusual the last decade has been because of really QE3 breaking a lot of intermarket relationships. Does that mean that I should give up after 10 years on mutual one? Or does that mean I should give up on Roro after it just went through a historic collapse in the risk off-flight safety trade? Or if I could do it all over again, would I today launch the funds now? Right. Right. And like the answer is unequivocally. If I could, if I knew the purpose of foresight

I'd enter a year like last year, I wouldn't have launched. I'd launch now though, because now you've got room to make money in treasuries again. You have to accept the entire dynamic. That's why I'm like, there's a part of me that has been wildly frustrated and has the anxiety as every entrepreneur does. Right. And I'm putting myself out there and that's nervous, but at the same time, it's like, I'm also oddly really optimistic. Yeah. But you also have to get past a lot of these dynamics, which still are, I'd argue, very kind of unusual post-COVID.

Relationship. Same idea though. Utilities are performing the market, typically higher volatility, the other form, lower volatility. Low volatility regimes tend to be good for credit narrowing. High volatility regimes tend to be better for credit widening, spread widening. So in that case, it's either all in junk debt, right? As the junk on risk on expression, utilities are formed, or all in long duration treasuries, right? Now, again, it's like the frustrating thing about last year is that the junk was treasuries. Yeah. Right. It was duration. Yeah. So that approach really does need, as a bond rotation strategy, really does need a spread event. It needs to have one of these blowouts where junk debt is yielding like 20, 30% because everyone's just dumping it while treasury yields are dropping. So you make money in treasuries and then hopefully you'll

Go back at the high yield and much higher yields whenever you get the junk on signal back. Again, I haven't launched it at the wrong time, right? It's not an excuse. It's just fact, July 2021. Yeah. Right. So now the thing is like, I really do believe, and yeah, you can argue I'm biased on this. I don't disagree on that, by the way. I really do believe there is a credit event out there, right? And whether or not that fund can get it fully or even partial on it, I have no idea because the signal has to get it right. I believe in the signals, right? But I at least need to have a chance, right? And that chance means I need to have some volatility and some risk off. Now, if I'm right,

They have a credit event, flight to safety research, recession happens, and suddenly there's convexity, right? In the performance, hopefully, of all of my funds. And this becomes then the real big challenge, right? Which is that suddenly people start chasing the performance of the funds when they should be buying it now in advance of that?

Already take place, not understanding how compounded works.

Is the winner, although by magnitude I can really catch up like I did in ATEX in 2020 with the right setup, you better to blend the two, right? But do it weighting wise properly. So much more than five, 10% range kind of satellite of the core satellite approach. JoJo, I actually think of the three funds becomes the most interesting because at least it's got yield and income because it's a bond strategy that can be a larger weighting. As you believe there's a credit event out there, people will be shocked at how, I hope at least, that fund can suddenly be the number one fund in the bond category because all you need is one of these credit events and hopefully get most of it

This guy actually is onto something, even though his funds didn't do so well. Right. And I have to basically buy time for the cycle to come to me. Right. It's like people think that this is me being, uh, going off the rails. No, it's actually a very purposeful strategy because I don't know what else to do to keep the attention on me. And then by extension, my funds, when the funds have gone through such a big drawdown and nobody's going to look at the funds now until after the fact, but by the time they realize that for the fact, the funds already happened. So I've got to just keep out there as much as possible. That's why I'm so stubborn with this stuff.