If you’re watching Real Vision, then you’re
probably here to improve your investment process, right? Well what does that even mean? Because there are so many different experts
that come on Real Vision with different strategies. They invest in different asset classes. So eventually you start wondering, who sure
I copy? I mean, who do I follow? Well maybe the answer is no one. Maybe we all need to develop our own process
and do our own homework. But then the next question is, where do we
start? Well that’s what we’re going to be talking
about in this episode of Real Vision’s The One Thing. What’s going on investors? AK Here. Recently Keith McCullough of Hedgeye sat down
with Raoul Pal to talk about how he arrived at his process. 2009 was where I just ignored my own process. Because I just thought, the smaller probability
outcome is going to be the one that happens, which is a dumb thing to do, right. You’re betting on the really small probability. But that’s what I did, and I screwed it up. How has your business evolved? And how’s your process, more importantly,
evolved? Yeah, the two big components of my process
have never been more robust. So I have the fundamental research process,
which we call our GIP model or Growth Inflation Policy Model. Effectively get the rates of change in growth
and inflation rate, and you’re going to get the forward behavior of the policymaker right. My outlook is, in Q4, we said quad four in
Q4. It’s our four quarter model. Quad four is when you have growth and inflation
slowing at the same time. I said if that turns out to be accurate, and
the data continues to rinse and repeat, the negative rate of change growth and inflation,
the Fed will not only not be raising interest rates, the last rate hike will be into a slowdown,
and then we’ll be talking about falling interest rates. So this clip was great because it shows that
even when you have a robust process like Raul does, sometimes even the best stray away from
it and end up betting on, as he said, low probability events. Keith then goes into the framework he uses
where he breaks down the economy into different quadrants. And then from there he drills down into specific
positions. He also has an interesting approach to his
macro outlook, which is what he’s famous for. The way he actually drives that outlook is
by analyzing the business results of global companies. So in that sense, he’s going from bottom up. Started to build a global macro overlay to
actually analyzing companies from a bottom up perspective, which was easier with global
companies like Nike, for example, or some of the big ones that I started to understand
better, earlier. But it all started with just being an analyst. I started as an analyst. And now today, like, I guess I moonlight as
a macro strategist. But most of my– all my macro calls are born
out of that same analytical process. That’s 20 years– we’re almost 20 years later,
but I’ve really just applied most of my fundamental learnings as a bottom up analyst to my top
down view. And it’s certainly not a qualitative one. It’s how I quantify it, like this whole rate
of change process that we’ve built and what not. For another example of how to build an investment
thesis, Kyle Bass, the legendary hedge fund manager sat down with Real Vision to give
his thoughts. It’s easy to maintain a conviction. It’s harder to maintain investors. Right. Right. And, you know, those that are committed to
the excellence of research in this business and ideas in this business, we check and recheck
our thesis all the time. It’s a constant endeavor, 24/7, seven days
a week. In being more public with your views also
invites a new level of scrutiny and discourse. And that discourse only makes you better at
what you do. Another process that’s not as common, but
should be universally respected, because of how much work is involved in it, is short-selling. We’ve had some of the best short-sellers in
the world on Real Vision. And what you’ll realize with all of them is
that they’re truly the best detectives. Check out this clip of this amazing interview
with Marc Cohodes and Grant Williams. I have done the work here of the SEC, the
DOJ, the FDA. I’ve helped Blue Cross Blue Shield of Texas
not cover the shit, private insurance companies, the VA, so vets don’t get injected with this
poison, and on and on and on. And the government and the regulators sit
there with their heads literally up their ass. If there’s one common idea that we keep coming
back to it’s, how important it is to actually have a defined process. Because if you have a defined process, then
you’re not going to fall into that trap of just trying to chase results. If you’re just trying to chase results, that’s
how you end up buying at the top and selling at the bottom. You lose money. You’re always going to want to join the latest
fads without the least bit of understanding of why that fad exists and how it’s even making
money. So the point is, at Real Vision, no matter
how much we’re focused on forecasts and opinions, we’re probably be even more interested in
the process. And if you want more help fine-tuning your
process, then make sure you subscribe to Real Vision. I’ll talk to you in the next video.