The Battle for Top Inside Shorter

Good Afternoon,

Inflation is 10%, you can’t get medical care, wages haven’t gone up in a decade, Jim Cramer is bullish on your fantasy team, and the housing market is back to 2008 levels of bad. Oh, and the pound may as well be accepted the next time you try and pay for coffee. And that's what you missed in the Eight Ball.

Bottom Line Up Front

Contribute something new to the news you’ll coffee chat over

• Elon wants to know if you think "Twitter is dying?" Maybe that's because he met his now-ex girlfriend and mother of his child, Grimes, on Twitter.

• META is having a hiring freeze. Not to be outdone for poor peer treatment, Facebook co-founder Eduardo Saverin was an even better babysitter and chef to the chicken he was required to carry for a final's club hazing. So much so, the ritual continued for over a decade. (Last reported occurrence is in a 2017 Harvard Crimson article).

• CPI accelerates to 10% from 7.9% in August. Maybe it's because Jerome Powell is still concussed from his 2016 biking accident, when he cycled to work most days.

But first, a quick note from The BAD Investment Company.

Tired of ESG Bullsh*t? Fortunately, there's a money manager that decided that B-A-D might be the better acronym for investors.The BAD ETF (NYSE: BAD) launched last December and is taking a different stance in this green washed world focusing on 3 industries for which the ticker represents – B-A-D.

• Betting – Casinos, gaming, and online gaming operations – 33%

• Alcohol – Alcoholic beverage manufacturing and distribution – 23%

• Drugs – Pharmaceutical and biotechnology product development and manufacturing – 33%Cannabis cultivators & distributors - 10% 

The case for these BAD industries remains strong for a simple yet important reason – they have historically offered attractive risk-adjusted returns. In addition to these industries overcoming government scrutiny, these industries have shown resilience during economic downturns because people tend to indulge in their vices, or what some call hobbies.

As a result, we believe these asset classes are typically underappreciated and therefore under-valued but the reality is that people will continue to consume alcohol, gamble, and need medicine in good times, and in BAD.

In regards to the betting and cannabis aspects, as these industries become more widely accepted socially and legally, they may offer investors additional growth as more states look to legalize those industries for additional tax revenues.

Learn more about the BAD ETF fund details and sign up for our mailing list to get the latest fund insights and information.

Deep Dive: The Battle for Top Inside Shorter

Truss said she’d hit the ground running. She didn’t mention the Pound would fall right next to her…

And Nancy, in their battle for top inside shorter.

The Pound's slump this week hasn't just kicked off a Tea Party 2.0 over whose currency is built different. The tea has spilled over into politics, as recent reports on UK Prime Minister Liz Truss suggest unsavory insider notifications that would have Nancy Pelosi adding some new strategies to her list.

But neither of them would even be allowed in the same arena, let along ring, as the currency trader who single-handedly broke the Bank of England. That heavyweight title remains with George Soros. Before we deep dive into the last time the Pound took such a significant beating thanks to the actions of one individual, let's examine this week's breaking news across the pond.

What Happened

Tory Twitter is ablaze with news that Liz Truss, the UK Prime Minister, and Kwasi Kwarteng, the UK's Chancellor of the Exchequer, hosted a dinner with hedge fund donors shortly before announcing the UK’s budget.

In a Pelosi-sized coincidence, all of said hedge fund managers then began shorting the Pound. Each made a small fortune.

The potential government involvement is clear, but not the first nor biggest potential takedown of the British currency. That came from one man alone, who was able to do the job even these current hedge-funders couldn’t:

Blowing up the Bank of England.

Enter: George Soros

George Soros broke the Bank of England and made $1 billion in a single day.

Soros was a currency trader who built a huge short position against the British the pound months leading up to the Bank of England’s collapse.

Soros deals largely with macroeconomic trends. The idea underlying his trade was that the Bank of England would be unable to maintain a component of regulations allowing them to stay in Europe’s monetary body.

Soros believed the pound would not be a part of the euro and he bet heavily on that, going short as the price went up in the summer of 1992.

He realized that the only thing stopping the pound’s value from crashing was the Bank of England’s promise to keep it up.

George Soros didn’t buy this promise... By the infamous Black Wednesday, Soros had shorted more than $10 billion in pounds betting that the pound would fail.

By the time London markets opened, the pound was trading so low, that England even had to exit the European Economic Community.

This made the pound drop even more, and Soros’s profit was estimated at over $1 billion.

Back to Today

The Pound resumed yesterday’s break from falling and continues to dip as the Bank of England’s bond-buying program failed to quell tax-cut concerns.

The currency is tanking now, so how can you execute a similar trade in the future?

Soros’ right hand man outlined his strategy: Think outside the conventional wisdom.

• The present is already in the price. Anticipate changes in the economic trends that are not expected by others, and, therefore not yet reflected in security prices.

• Visualize 18-24 months from now and what level securities might trade at. Look at what people think a company is going to earn. If you can see something in 2 years that’s going to be entirely different than the conventional wisdom, that’s how you make money.

• Find mispricings. Soros isn't as much interested in what a company is going to earn next quarter, or what 1975 aluminum shipments are going to be, as he is in how broad social, economic, and political factors will alter the destiny of an industry or stock group for some time to come. If there is a wide difference between what you see and the market price of a stock, all the better, because then you may make money.

• Avoid herd mentality and groupthink. Instead of looking at the recent past and extrapolating into the future, Soros focuses on variables that might be misunderstood or overlooked. If one of these variables upsets the present consensus, he knows a large move will likely occur and reward those who anticipated the potential disruption.

Oh, and secure an invite to Truss’ next dinner.

Lit's Pick

You've tolerated your MD's puns about the Pound taking a pounding all week. That's why we're taking "No" on any chance the EUR/USD open price will be above 1.0 by the end of the year. That's all for today, have a great weekend!

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