00:00You're definitely getting some opportunity in November, given the S&P 500 is down 2% so far this month.
00:05What's your highest conviction short in this fund?
00:08So the names that we have that are involved with ABS, so car credit, are really one of our standout areas.
00:17We have been short CarMax all year.
00:19We've now covered that, and we've kind of spread it to some of the other participants inside of that sector.
00:26But we really do feel like ABS credit now, the default rate is higher than it was in 08, and we think there's a lot of trouble coming there.
00:34So this is a fascinating fund.
00:36I take a look at your portfolio.
00:38You hold between 60 to 70 positions.
00:40Just how active are you?
00:43What does turnover look like?
00:44What is your average holding period?
00:46Our average holding period is definitely less than four quarters.
00:50We know pretty quickly if we're wrong, and we're very good technicians as well, which probably is half the battle.
00:57We don't let our stocks run.
00:59We know exactly what momentum looks like, so we shy away from that in highly shorted names.
01:05But we tend to like names that are somehow pulling forward their business through accounting shenanigans.
01:14It's interesting that you say that because a lot of people think, oh, I'm going to go short the market.
01:18I'm going to short the MAG-7 because they're so stretched.
01:22You are really going much deeper into many things.
01:26Now, since I mentioned Urban Outfitters, they're a Philly headquartered fund.
01:31I drag past the headquarters sometimes.
01:33Anyway, what about them particularly?
01:36So obviously the MAG-7, and why not short the MAG-7?
01:39Why an Urban Outfitters, and why not, say, like an Apple or Google?
01:43Well, because we have a specific type of setup that we have where we're created screens over many years where we're looking for specific type of characteristics that we know makes companies vulnerable.
02:02Pulling forward earnings, in CarMax's situation, they had a very large finance department where they were self-funding a lot of their sales, which they would have not normally have gotten to had.
02:16We've been short a lot of the cable companies this year.
02:20Clearly in a downtrend, very, very difficult for them to get out.
02:24A lot of capex, a lot of new technology coming.
02:27So we really need to see some type of catalyst, and we're not shorting something for it to go down 10%.
02:33We look for something that's going to go down 30% to 50%.
02:37So it has to have that vulnerability.
02:40Eric was showing us the comps earlier and comparing it to the one-time inverse, and those are not buy-and-hold products.
02:45Those are like maybe intraday trading products.
02:48Is yours a long-term hold product?
02:50Yes, it actually is.
02:52We designed it back after the 08 crisis.
02:55We saw the problems that were occurring in the ETF space, and this active exemption that we were able to gravitate to was fantastic because, as you know, an active ETF marks with an NAV at the end of every day.
03:10So we don't have the compounding issue, and we're literally short stock.
03:14So, for instance, right now the market's a little oversold.
03:18We've cut back.
03:19We're about 20% cash right now.
03:21So we can move around, and we are very active, and you asked me what our turnover was.
03:26I believe it's somewhere in the 5% to 800% range.
03:29And, Brad, we have less than a minute left here, but I want to go back to a point that Eric was making that you've been around since 2011.
03:35It has been hard to short this market.
03:38So just walk us through that lived experience over the past, you know, 14 years or so.
03:43So I actually started this type of portfolio when I worked for the Bass Brothers.
03:47We were managing a very large position in the Disney Corporation, and then we always had internal hedges against it.
03:54So I had run this program in the 90s.
03:57We moved from a limited partnership that we were running from 07 to 2010 into this ETF.
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