How a Veteran Trader Accidentally Created the Ideal Investment Strategy
Tags: Money, Economics, Business, Finance, Investing

Successful software entrepreneur turned hedge fund manager Erik Townsend is on a mission to improve retail investor’s access to quality education. By inviting the best of the best in finance and economics onto his show, MacroVoices, he’s become the Joe Rogan of financial podcasters, creating a binge-worthy Netflix of finance for amateur and professional economists alike.

The podcast’s format is simple: Invite anyone on with an idea that’s gained significant recognition, no matter how crazy, improbable, or complex, but only if it’s unique. In a recent interview with real estate investor and YouTuber, George Gammon, Townsend outlines his approach:

“Learn as much as you can. There’s a lot of smart people out there with a lot of contrasting ideas. Assimilate all the different viewpoints, then, interpret the news as it happens.”

By interviewing a wide range of experts each with an opposing view on the same topic, Townsend has created the perfect investment strategy. As guests explain their ideas meticulously, viewers learn what could happen in each scenario, preparing them for the future and allowing them to profit from the outcome, removing simplicity, but adding confidence, conviction, and certainty — to some degree.

MacroVoices hosts discussions, free of charge, free from $5,000 Wall Street paywalls, on a range of topics from understanding the Eurodollar system to predicting oil prices to demystifying the economic effects of COVID-19. Whatever takes your fancy.

Right now, the hottest topic is whether the U.S dollar will strengthen or weaken in the near future.

Townsend’s first guest, Brett Johnson of Santiago Capital, came on the podcast to promote his dollar-bullish “Milkshake” theory: Johnson says the Greenback will rally despite the Fed’s loose stance on monetary policy as entities outside the U.S have $12-$13 trillion in dollar-denominated debt. Plus, to service these debts, they need to pay over $300-$400 billion dollars each year to avoid defaults.

But defaults have risen due to slowing global growth, bolstering the Greenback. The resulting dollar destruction reduces the dollar supply while also increasing dollar demand as the Fed tries to plug holes in the endless chains of financial liabilities and derivatives — outweighing their recent $6 trillion printing binge.

Meanwhile, Townsend’s other guest on the subject, the Forest For the Trees founder, Luke Gromen, believes the Greenback will weaken significantly in the near future. Where Gromen and Johnson views’ differ is what happens when entities sell their U.S dollars. Gromen says the world is short dollars so there’s no way out: the world has to service its existing debts.

The Fed will act fast when the world deleverages, printing vast amounts of money, buying all the outstanding debt totaling $47 trillion to prevent the collapse of the global financial system. This, Gromen says, will cripple the U.S dollar permanently.

Right now, however, the dollar bulls are winning the battle. The U.S dollar remains strong despite the Fed announcing they will print unlimited amounts of money to “support the economy” (code-speak for supporting speculative asset prices).

But if the U.S dollar starts to weaken, we’ll know why thanks to Luke Gromen. We’ll have to overcome our initial bias and challenge Johnson’s original dollar-bullish thesis. This time, though, we’re prepared and can adjust accordingly, cutting our losses early to avoid further pain. That’s the accidental genius of Townsend’s podcast. We can invest in solid, well-researched ideas, with vigor and conviction, but if the market goes against us we’ll have no difficulty accepting defeat. No more bad investing habits, no more binary thinking, no more feels, no more “I think the price will go up,” or “I think the price will go down,” no laziness, no FOMO, no greed. Some say it’s lazy to watch others explain a theory in detail, but it’s a better strategy than investing using only instinct or trading on a whim.

The fun doesn’t stop with U.S dollars, however. It's just one of many asset classes MacroVoices covers. It’s time to repeat the process for stocks, bonds, commodities, etc. But if you can’t find what you’re looking for, use Townsend’s strategy elsewhere and you’ll witness its effectiveness.

Because Eric had most asset classes covered, he made a fortune in the latest virus-induced crash, reacting quickly to the threats COVID-19 posed to the global economy. He grasped all the possible scenarios and outcomes, knowing why each asset class may rise or fall. So when the time came, he capitalized on volatile price moves, predicting the oil price crash, the stock market sell-off, and the unexpected crash in precious metals, netting a tidy profit.

Hopefully, the latest market meltdown will spur retail investors into action as they realize the advice from the financial industry sometimes isn’t built for their benefit, that outsourcing their financial education is a recipe for disaster. Free, impartial resources like MacroVoices help fill this void, providing anyone willing to break free from Wall Street’s bubble with the building blocks to manage their money solo. Though, whether investors wake up to what transparent finance figures like Townsend have to offer is the real question going forward. I hope so.