One of my strengths over the years was having deep respect for the markets and using the markets to predict the economy, and particularly using internal groups within the market to make predictions.
On his investment style
A lot of my style is you build a thesis, hopefully that no one else has built; you sort of put some positions on; and then when the thesis starts to evolve, and people get on and you see the momentum start to change in your favor, then you really go for it. You pile into the trade. It’s what my former partner George Soros was so good at. We call it– if you follow baseball, it’s a slugging percentage, as opposed to batting average.
I’ll get a thesis. And I don’t really– I like to buy not in the zero inning and maybe not in the first inning, but no later than the second inning. And I don’t really want to pile on in the third or fourth or fifth inning.
Normally, I’ll wait for– I’ll go in with, say, a third of a position and then wait for price confirmation. And when I get that, when I get a technical signal, I go.
On algo models and regime changes
So they all have many, many different schemes they use, and different factors that go in. And if there’s one thing I’ve learned, currencies probably being the most obvious, every 15 or 20 years, there is regime change. So currency is traded on current account until Reagan came in and then they traded on interest differentials. And about five years, 10 years ago, they started trading on risk on, risk-off. And a lot of these algos are built on historical models. And I think a lot of their factors are inappropriate because they’re missing– they’re in an old regime as opposed to a new regime, and the world keeps changing. But they’re very disruptive if price action versus news is a big part of your process, like it is for me.
And this is important, because I don’t think anyone has ever said it before. One of my most important jobs as a money manager was to understand whether I was hot or cold. Life goes in streaks. And like a hitter in baseball, sometimes a money manager is seeing the ball, and sometimes they’re not. And if you’re managing money, you must know whether you’re cold or hot. And in my opinion, when you’re cold, you should be trying for bunts. You shouldn’t be swinging for the fences. You’ve got to get back into a rhythm. So that’s pretty much how I operated. If I was down, I had not earned the right to play big. And the little bets you’re talking about were simply on to tell me, had I re-established the rhythm and was I starting to make hits again.
Everything for me has never been about earnings. It’s never been about politics. It’s always about liquidity.