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Name: Popular Delusions by Calderwood Capital
Frequency: Semi-monthly
Audience: Professional investors & HNW individuals
Model: Paid
Author(s): Dylan Grice & Tim Bergin
Topics: Macro and deep dives into specialist managers, sectors, themes and individual securities in equities and fixed income

Overview: As Investment Advisors to the Altana-Calderwood Specialist Alpha Fund (ACSAF), Calderwood Capital sits at a unique informational vantage point, being active in some of the hardest-to-reach corners of international capital markets.

In their research to ACSAF investors they triangulate that information, working hard to understand both traditional financial markets (equities, credit, government bonds and commodities) and less traditional ones (cryptocurrencies, catastrophe risk, synthetic credit and private credit).

Each report has three sections: 
  • Words: Macro commentary often gained from their insights talking to more obscure managers
  • Actions: Actionable ideas on particular asset classes, sectors or securities. A typical equity idea incorporates a deep dive into the sector. They look for value and large upside optionality. Recent ideas include, Japanese Regional Banks, US Cannabis, Canadian REITS and US Biotech
  • Reflections: Book reviews, interviews and ideas that inspire them
Calderwood Capital shared four pieces to highlight below.
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Highlight #1: The Death of Duration (November 2019)

This piece states the past four decades have been the Golden Age for duration assets, with the bull market in government bonds helping spur returns in corporate bonds, public equities, private equity, venture capital and real estate. It assesses why it happened and why they believe another decade of the duration trade is unlikely.

"today’s conventional investment wisdom will be tomorrow’s folly: liquid will be the new illiquid; rapid turnover the new patience; niche strategies the new index trackers."
Highlight #2: The Height of The Pandemic (March 2020)
 
This was written in the middle of the COVID uncertainty and is a timely look back and what they wrote at the time. They shared their expectations around the policy response and spread of the virus, assessed if it was time to buy (yes), and discussed what asset was best to buy at the time (see below).  
 

"Which areas are the most attractive? We don’t think it really matters at the moment. More than any time in the past, most investment ideas today ultimately boil down to the same investment decision: “risk on” vs “risk-off”."
Highlight #3: The Cockroach Portfolio (October 2020)
 
This piece looks at how you can construct a portfolio seeking to survive any environment. It led them to the cockroach, which has survived over 350 million years by being robust. The resulting Cockroach Portfolio, allocates to four asset classes - equities, government bonds, gold and cash. 
 
"What fascinated me wasn’t the challenge of trying to know more about the future than the rest of the market, but of figuring out how to build a portfolio given that you didn’t. The challenge I grew (and remain) fascinated by was that of building a portfolio which is robust to ignorance."
Highlight #4: Crash Risk and Japanese Regional Banks (January 2022)
 
This piece looked at two areas:

1. Elevated Crash Risk: This part covers inflation, which at the time was 7.5%, and why they believed the markets were underwriting the risk of a policy error too cheaply.

"The speed of the acceleration, the co-movement of its constituents and the absence of the dispersion we’d expect to see were the situation characterized by isolated supply side, issues all point towards a more fundamental problem we think the Fed are on the wrong side of."
 
2. Japanese Regional Banks: They lay out the bull case for Japanese regional bank stocks, which could be bought (at the time of the writing in January) at a PE of ~13x, EV/EBITDA multiple of ~10x, and at a discount to their equity holdings. They look at why they believed stocks were cheap, what the potential catalysts may be, and the risks associated with them. 
To learn more about
Popular Delusions, click here
Good investing,
Meb Faber & The Idea Farm Team
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The information contained in this communication is of a general nature for informational purposes only, and does not constitute financial, investment, tax or legal advice. The information contained within this communication reflects the opinions of those referenced herein, and do not reflect the opinions of The Idea Farm, L.P. and its affiliates.  Such opinions expressed herein are as of the date of production and are subject to change at any time without notice due to various factors, including changing market conditions or tax laws. Where data is presented that is prepared by third parties, such information will be cited, and these sources have been deemed to be reliable. Any links to third party websites are offered only for use at your own discretion. The Idea Farm L.P., and its affiliates, are separate and unaffiliated from any third parties listed herein and is not responsible for their products, services, policies or the content of their website. All investments are subject to varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy or product referenced directly or indirectly in this communication will be profitable, perform equally to any corresponding indicated historical performance level(s), or be suitable for your portfolio. Past performance is not an indicator of future results.






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