Join Jeff Malec as he sits down with Brad Giaimo and Bruce Greig from Q3 Asset Management, two investment pros who turned trading floor grit into a modern, rules-based quant shop helping RIAs build out tactical trading models for clients. From Brad’s formative days alongside Paul Tudor Jones to Bruce’s mathematical approach to market analysis, you’ll hear how Q3 builds transparent, systematic models that aim to outperform while protecting downside risk. If you’re an RIA, allocator, or markets geek, this episode is packed with tactical insights and practical knowledge delivered by practitioners who’ve moved from the trading pits to the trading platforms. SEND IT!
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From the episode:
RCM Blog: The Definitive List of the Best Investing Movies
Check out the complete Transcript from this week’s podcast below:
Beyond Buy and Hold: Q3 Asset Mgmt’s Quantitative Approach to Tactical Investing with Bruce Greig & Brad Giaimo
Brad Giaimo 00:00
You don’t hear from anybody when things are going great and the market’s going up and all the strategies are doing well, but when it’s not doing well, that’s when they’re calling, and it’s really important for us to pick up the phone and make sure that we answer their questions. And that was one thing that early on, I think, definitely got us some traction.
Jeff Malec 00:26
Welcome to the derivative by our Sam alternatives.
00:28
Send it.
Jeff Malec 00:42
You. All right, we’re here with Brad and Bruce. Hey guys, how are you? Hey, good, good. How you doing? Could you guys, for those watching on YouTube, who’s who’s Brad, who’s Bruce,
Bruce Greig 00:53
I’m Brad and I’m Bruce.
Jeff Malec 00:56
Love it. And we were talking a bit offline. You guys are in Detroit, Motor City area where Auburn Hills. Where is it? Exactly? Birmingham, Birmingham. God, long time Midwesterners, Detroiters. How’d that happen?
Brad Giaimo 01:15
Well, I’m an East Coast guy. Bruce is a Michigander.
Bruce Greig 01:18
Yeah, I was born and raised within 10 minutes a year, and went to school in Ann Arbor, so pretty much spent my whole life and career within 20 miles of Detroit.
Jeff Malec 01:30
Alright, what do we think of this new quarterback? Underwood?
Bruce Greig 01:35
Well, so far so good, but I don’t know. We’ve got some tough games coming up. So we’ll see.
Brad Giaimo 01:43
The office is kind of mixed between Michigan and Michigan State. So, you know, obviously, with Bruce going Ann Arbor, he’s just, he’s a Michigan guy, but we’ve got some state guys here as well, so it’s always fun when they play each other, for sure,
Bruce Greig 01:58
the game lately, no, hopefully, that’s what I was concerned. Brad’s. Brad’s an east coaster, as as he mentioned,
Jeff Malec 02:06
when did you came here? And I came
Brad Giaimo 02:09
here, you know, three? Three? Yeah, and actually, that kind of feeds into what I usually talk about, if I talk about how q3 actually started. So I don’t
Jeff Malec 02:19
know if, yeah, let’s have it or not, but jump away.
Brad Giaimo 02:24
Yeah. So I’m an East Coast guy born and raised in New Jersey, and I started on the trading floor and the commodities exchange actually coffee, sugar, cocoa exchange back in 1982 and it wasn’t something that I had planned on doing, but I had a good buddy of mine who was a broker for Merrill Lynch. And back in those days, actually, a lot of the big wire houses all had presence on the trading floor, which very few, if any, do Now, pierce Fenner Smith. Pierce Fenner Smith and Ziggy and so, yeah. So Matt was it was a broker for Merrill and coffee, sugar, cocoa, and I was just always kind of interested in that stuff, but never thought it would be anything I would have my the majority of my life doing. But one day, you know, he asked me if I want to go down on the trading floor and check it out and see what it was like. And I thought that’d be kind of a cool thing to do. And this was four world trade, which was one of the smaller buildings, next, right next to the two towers. So I went down there with them, and it was, it was a really great experience. And the thing that I think hit me the most first was either you really think it’s cool, and you want to do you want to be there, you think it’s absolutely nuts, and you just got to get out of there. It’s just too crazy. And I liked it. So Matt got me a job be a runner. I was a runner for about a year on that with Merrill and and then I got some opportunities to move on to working phones in a booth. And the interesting thing about being down on the trading floor is the more jobs that you have with different companies, the better off you’re doing, because they were always trying to poach people and take, you know, talented people. Maybe that’s too conceited. I didn’t mean I didn’t come off that way, but if they thought that somebody had, you know, was somebody they were looking for, they would just go after you. So the more jobs you had, the better off you were doing, which seemed to work out for me, because after working with them for about a year, I moved over to the gold pit, and I worked for a company called DLj, which is also a defunct firm. But back then it was quite large, and it was there, really where things started to take off for me, because that was the beginning 1983 end of 83 and then it was there that I obviously got the opportunity to work for Tudor Jones when he started tutor investment Corp back in 1984 so that’s really the big things. Really took off for me, and I got to work for Paul for three years. I. I even got to trade money for him for about a year back then too, and I’m going to drop him names of a bunch of old guys that many people probably never heard of back then, but Richard Dennis and and Tom demark and guys like that. Richard Dennis was doing the turtles back then, and Paul felt like he wanted to do something along those same line. So he grabbed a bunch of guys who he thought were trainable, and there were 10 of us that he got together, and I had already been working for him for about six months before he decided to do this. But he we worked with him every day, and met with him in the morning, met with him in the afternoon, and
Jeff Malec 05:41
you guys have a clever nickname for yourselves, like the turtles.
Brad Giaimo 05:45
Oh, God, he had some names, but wasn’t anything like the turtles. No, Paul was. Paul’s a great guy, and I haven’t spoken to him in quite some time, but those three years were just probably the greatest learning experience I could, I could have certainly not being going to school for business or trading or anything like that. My school was being on the trading floor. I like to say that Paul was my mentor and the trading floor was my teacher. But was during those three years that I was really impacted by what he talked to us about and and the things that he he made us do and look at and learn and read, and then obviously, getting the opportunity to actually trade money for him was was a great experience. So I left the floor. I got an opportunity to go out on my own in 87 so while I was down on the trading floor during the crash in 87 which was really when Paul made his name on the trading as far as a hedge fund manager is concerned, I was, I had my own seat on the Cotton Exchange at that time, and I did that from 87 to 98 going Back and forth. So I was a local most of that time, just trading back, right? That’s why you got a little gravel in your voice, gravelly in my voice, yeah, I don’t have a New Jersey accent anymore, though. So I have to tell you, because been out here since 2003 and and and. So people tell me I don’t have that jersey accent, okay, but you do. When you go back, though I probably do, and it’s easy to fall into one quick, real quick story about the floor. I think you’ll enjoy is that I started in the fall of 1982 and in the summer of 82 is when they actually filmed trading places. So I’m sure everybody is familiar with that movie. And they traded they they filmed the Trading Places scenes in the exchange at the end of the movie, there in the commodity pit, especially in the cotton pit, to be exact, which frozen orange juice was a smaller pit in that section there. And the funny thing is, is that while I wasn’t there, when they did that, I came in on in the fall. A lot of the guys I became really good friendly with and good friends with over the years were actually in the movie. Because what they did on that weekend, when they shut down the exchange, they asked any of the guys if they wanted to come in and be a part of it so they had extra
Jeff Malec 08:21
give them any money or no, did, I’m sorry, did they give them 20 bucks or something to come
Brad Giaimo 08:26
doing? Oh, I don’t think they gave them anything. I think they just wanted to be there. And a lot of them did show up, obviously, as you could see from the Yeah, but what’s cool now is I could watch the movie, and I’ll see John, and I’ll see I know this guy and I know that guy, and I, I used to trade with this guy, and I did trade in that pit for a while after that. But had I not, had I been there when they were doing the movie? Who knows, maybe I’d be in your whole life would be there. It would totally, could be totally different. But so people do remember that movie, obviously, actually more than some of the names that I drop when I talk about the people that I had the opportunity then to work with. But yeah, so that was that was kind of cool. And then unfortunately, all the other things that went on after that, you know, the crash in 87 I was there for I was there for the bombing in 98 and I had left the floor in 2000 and I was trading commodities off the floor, but a lot of my good friends were still there in 2001 thankfully, all of those guys did were okay, but there were some acquaintances that I knew that unfortunately didn’t, didn’t make it during that, that awful time you
Jeff Malec 09:45
we’ve had a lot of former floor traders on the pod, so I’ll ask you what I’ve asked a lot of these guys, right? You cut your teeth. You learn what you do new down there on the floor. You learn the environment. Where’s that next wave going to come from? Now? That everything’s electronic, right? I have a big worry in Chicago especially, that was a whole community, right? Oh, absolutely, it was. And now that’s gone, and like, these next level of people, I don’t know where they’re going to come from, they’re just going to be servers. They’re going to be right? It’s a little worse than, to me, of like, how people are just going to learn it in textbooks and learn it coding, but they’re not going to have that real life experience of and maybe it doesn’t matter, yeah,
Brad Giaimo 10:25
I don’t know how you’re going to get that hands on experience anymore. I mean, yeah, you could be, you know, whiz with with a computer, and understand all that from that end. But there’s really no substitute, I think, for for being down there and because it was all about the energy. You know, you weren’t trading constantly as a as what I was called a local on the trading floor, just trying to scalp points. But you know, so if you walked off the floor when things got quiet, you walked off the floor because you knew there wasn’t anything going on, but you’d be standing over in the golf well, you went to play golf. Unfortunately, when I would leave to play golf is when all the shit would hit the fan, and I’m out there on, you know, like the eighth hole with my buddy, because we, you know, did pretty good in the morning, and we made our our quota, and then we left to go play golf. And then we’re looking and we’re, you know, well, back then, you didn’t have cell phones to look at, but yeah, and a lot of the the big moves would happen when we were not on the trading floor, but just the energy is what I was talking about. Because you could be off the trading floor having lunch or something, and then you hear the volume, pick up the volume, the sound, and you knew something was going on in your pit or in another pit, and you’d run out there, you know, you’d grab your pad, and you’d run out there, and you’d participate, and as long as that would last for, and then you would hopefully come out of it making some money, or you could come out of it losing money, which is what I experienced for about 15 years on my own, which made me really appreciate, you know, understanding risk and how risk works, and how important it is to keep yourself in the game, which is something that Paul always talked about, You know, he defense was the best offense. He’d have that quote up. I think Lombardi said, If I’m proud and you know, so that was, that was real big to him, is to is to keep yourself in the game at all times, another guy who I had the opportunity to work under, Mark Fisher, who was another big player down there on the trading floor.
Jeff Malec 12:21
But I feel like young people, young investors these days, don’t like I would put Paul Tudor Jones on my Mount Rushmore probably of trade Absolutely. I’m sure you would right. But how many under 30, under 40 investors know that name anymore? They, unfortunately,
Brad Giaimo 12:37
they don’t. Although I do think that Paul out of that group of guys that were doing what he was doing at that time, might actually be someone who they do know, because he tends to stay a little bit more involved getting interviewed on, you know, the
Jeff Malec 12:52
news channels. And lately he’s been talking Gold Plus crypto. So he has maybe people are paying more
Brad Giaimo 12:59
attention. He was not a crypto guy for the longest time, and then he finally started to come around, and has felt obviously comfortable in talking about that and how part that’s part of his portfolios, but he’s just, you know, an amazing guy, and he’s evolved so much from the time I had to the fortune to be with him. I have a picture behind my desk, and there was literally 10 of us in tuner Investment Corporation back in 1984 when it started. And what he has now is just, doesn’t surprise me, because you just knew that the guy was a superstar, you know, like you could just tell he was just going to be successful. And don’t get me wrong, it’s not that he didn’t have a decent place to start from. His uncle was a big cotton trader in Tennessee who he had the opportunity to work for. But still, there was just something really special about the guy, and it wasn’t just from being able to, you know, be successful trading markets. He’s a very generous guy. Philanthropy is just as big and as important to him as the as the ability to do well, trading and making money for his clients. So yeah, that’s something I’ll never forget. But I’d like to now think about what I’ve done in the past as just the foundation to what q3’s has done, and then really, I’d say grade myself on what q3 has been doing, as opposed to, you know, my history as far as being on the trading floor is concerned. But it’s a great story.
Jeff Malec 14:28
And people, yeah, right. There’s a few people who were one of 10 with Paul Tudor Jones, so congrats.
Brad Giaimo 14:34
That is true.
Jeff Malec 14:38
A tough act to follow. Bruce. I don’t
Bruce Greig 14:42
I don’t have that kind of background. I have a little more
Jeff Malec 14:46
just making up names be fine, yeah, little more
Bruce Greig 14:49
academic kind of vanilla background, in a way. I I started off my career actually in bankruptcy, software, of all places. And. Early 90s.
Jeff Malec 15:01
It made people go bankrupt paying for the software. Well, no, yeah,
Bruce Greig 15:05
we automated the software. And, you know, this was like early, mid 90s, you know, back when, when Windows was really still, you know, you had windows 3.0 I think at that point, and our original program was DOS based, I mean, it was ugly, but we were the number one bankruptcy automated software program in the United States. And did it did pretty well. I was a small company. I didn’t really see much of a future there, quite frankly. So I went back to business school at Michigan, got my MBA, and at that time, I kind of got involved in automated trading. I had an older brother that kind of showed me a program called trade station in Metastock, which I think had pretty much just launched in the early 90s. It was, you know, they were pretty new back then, but I was just enamored of, you know, all the different cool charts you can make, and all the colors and the indicators and and I was really drawn to it because I was, I was a math and statistics major as an undergrad at Michigan, so I always loved numbers, you know, I love the idea of kind of problem solving, you know, trying to figure something out and make something that works. And it sort of tied into my software background, because I was able to help my brother program some ideas he had in terms of trading commodities and stocks at that point. And, you know, probably the best thing about that was I didn’t have a whole lot of money back then, but I lost most of it, which that’s a good time to lose money is when you don’t have much of it, and when you’re young like that, you know you learn and you know you bounce back and and I realized I didn’t quite know what I was doing, but I knew what I wanted to do. So again, I got my MBA from Michigan, and then shortly after graduation, I joined an RIA here in metropolitan Detroit. Stayed there for about a dozen years, joined a couple other RIAs doing
Jeff Malec 17:17
before RIAs were even a thing. But so congrats, yeah,
Bruce Greig 17:21
oh yeah, yeah. No, there’s actually a couple of good sized ones here in the Detroit area that they’re kind of do some of the same things we do in terms of very quantitative model development and that, again, that was always my background. So I was drawn to the companies that really believed in quantitative strategies. And q3 was among the leaders. And this was 10 years ago, and, and at that time, we probably had two 50 million under management, you know. And now we’re close to 800 million. So, you know, I picked a great place to land and and they believe in a lot of the same things I believe in, in terms of managing money using a non emotional, systematic, quantitative approach, you know, that can be back tested. It can be, you know, defined by a certain set of algorithms and rules, which, again, always appealed to my background as a math and stats guy, so it’s, it’s been a great fit. And like said, I’ve been here 10 years now
Jeff Malec 18:29
they still have that major there, or is it called, like, data analytics or something.
Bruce Greig 18:35
Now they, yeah, my actually, my son just graduated from Michigan just this last year, and he was an econ major, but he was looking into a different major. They have a major called it’s like quantitative risk analysis. It’s a little more it’s quite a bit different than when I went there 30 some years ago. It’s a lot more kind of robust in terms of, you know, the risk, and kind of different ways of measuring risk, whether or not you apply it to the financial markets. You know, there’s a lot of lot of these companies that like to hire people with a background in coding, statistics, mathematics, that kind of thing. It seems to be a real big, big area right now, at least, at least at U of M, so
Jeff Malec 19:28
at least there used to be before AI, but that’s for another package. Yeah, right. There used to be an app
Bruce Greig 19:34
years that’s changed, right? I
Jeff Malec 19:43
so let’s get into the founding of q3 right? So a lot of people, a lot of traders on the podcast, are making a model, making a program, and then trying to go get investors. Sounded more like you guys had the investors, at least had the RA and have been building the models this whole time. Or do I have that? Backwards. What did that
Brad Giaimo 20:00
look like? No, it’s not necessarily backwards. But when I moved out here in oh three, having come from a commodities background, I started a commodities firm. Is what I was looking to do. So I had an online presence, and that’s where my partner, Adam, actually saw me. He liked what he read about me. He was a student of the markets. He actually traded in Chicago for a couple of years on the CBOE. So seeing my background, he thought I’d be somebody that he would like to get in touch with. So he just called me up out of the blue and we had a short conversation on the phone. We decided to meet at a coffee place, Caribou Coffee. I don’t think they had Starbucks back then. And that
Bruce Greig 20:45
long ago, 2003 they had Starbucks in Michigan.
Brad Giaimo 20:49
I don’t know. Anyway, it wasn’t a Starbucks, because I don’t like Starbucks. But anyway, so we met, and we just really hit it off. And you know, our love for the markets and our backgrounds from the trading floor, and we felt, you know, and again, not, not that it was something totally new at that time, but, you know, the idea of kind of giving hedge fund type of opportunities to the retail investor was, you know, was something we thought we we could do really well with. So we started our own first strategy. We called it absolute return strategy. Can’t remember the exact name of it, but we started that, and we raised money from family and friends. So we didn’t have anything in place other than a strategy that we thought had some potential and some very willing family and friends to give us some money to actually trade it, which we did, and Adam had another gig at that at that time, so it’s kind of all going through. I was kind of handling all that stuff, and it did well. It did well enough that we felt comfortable that we could take it to the next level, which was then obviously introducing it to raising money from people outside of our inner circle. But at the same time, it was still more direct business. We We didn’t really go to the to the wholesaler advisor model until 2009 so between 2006 when q3 was started, and 2009 it was really that just organic type of growth. Through through having the fund, it doing very well. And then in 2009 is when we decided to broaden the universe and start working directly with advisors and not take direct money anymore. And that’s when we brought on people. You’ve been here a while now, haven’t you? 10 years? 10 years. Geez. Okay, so, yeah, so we or and the whole thing’s Jeff has been organic, you know, as we needed things and people to come in and work with us, we brought them on. It wasn’t okay. We’re going to go out and raise some money and hire 10 wholesalers, because and only have one strategy. The strategies grew as the advisors were interested in what it is that we were doing. So we were tactical Right, right out of the gate and and it was more of a niche type of a situation. So we weren’t looking to get entire portfolios at that time. We were just looking to get a percentage that would be interested in non correlated, absolute, quantitative type strategies. So and then as we started to grow with that, in speaking with the advisors, they’d say, Well, you know, sometimes we like what you guys are doing, can you apply it a little bit more to something that has more correlation to it? Because we think that’s something we could sell, along with the totally non correlated types of stuff. So that’s how things just really started growing. We brought Bruce on a couple other guys here. You know, the one thing that I learned from Paul is, if you say you surround yourself with really, really good people, it’s only going to make you that much better. So that’s what we did. And right now, we went from just Adam and myself to 1414, employees now, which five wholesalers, a couple internals, Greg, excuse me, Bruce is all over the research, the r, d stuff. Another gentleman named Greg is real big on the 401, K retirement side of things, which we’ve we’ve been doing for the last couple of years now. And yeah, we’re really happy with the way things have been going over the years. And Bruce,
Jeff Malec 24:25
talk about the models a little bit. You can go one by one or overall concept philosophy, what you’re trying
Bruce Greig 24:31
to do, yeah? So whoever you want. Yeah, I won’t go one by one only because we offer, we offer quite a few models here, but the one thing that they all have in common, as I mentioned, is, is they’re all systematic. They’re all rules based. They’re all very carefully back tested and researched before we bring them to market. And we’ve got a number of different software programs that help us with that. Uh, to kind of, you know, steer us away from cherry picking and curve fitting parameters and that kind of thing, where we’re really careful not to do that. What I always like to tell people is we put a lot of research in upfront so that we don’t have to tweak the models once they get launched to market, once we launch a model, it’s, it’s very rare that we change it, you know, going forward, unless there’s some type of systemic, you know, change in the markets, or, you know, there’s, there’s certain mutual funds that no longer want to work with us, and we might not be able to use those. But it’s really all dependent on doing a lot of the legwork up front, so that we feel that we’ve got a robust strategy that will do well in any type of market. And most of our strategies are, as Brad said, tactical. Now, tactical is a tough term in the industry. Everyone kind of uses it in a different way. What do you mean by Yeah, some people might say dynamic, strategic. What it all has in common is, to me, a couple things. One is is the systematic, quantitative approach, as I mentioned, and the other is that they’re all actively trading. You know, we are not buy and hold investors, nor are we day traders. We trade mutual funds, ETFs, individual stocks, most of our models trade on
Jeff Malec 26:31
talking your SMA side of the business, right? Yeah, yes,
Bruce Greig 26:35
yes, yes, amazing. Most of them trade on a weekly basis. We’ve got some to trade on a daily basis. Kind of the true tactical models that go all in or all out of you know the equity markets, the s, p5, 100, NASDAQ 100 usually are our investment vehicles. We’ve got other models that are a little more longer term to trade on a 30 day or 45 day basis. But you know, again, what ties them all together is the belief that we can create, you know, efficient and meaningful trading systems to deliver, you know, outsized risk adjusted returns by, you know, a combination of believing in how they’ve done in the past with the fact that active trading enables us to always kind of jettison the losers in the portfolio and always buy what’s doing well. It another thing I like to tell people is we often sell on strength, but we buy what’s stronger. So you know, we’re momentum investors, we’re trend followers, but we’ve also got mean reversion models that, in fact, one of our largest models right now, and it’s the basis of our QA Sox mutual fund is based on a very unique mean reversion model. But again, it’s quantitative, it’s systematic, so that that’s really kind of the driving force of, what would you say to
Jeff Malec 28:09
like a Josh brown or BARRY RITHOLTZ or something, who’s like, what are you doing? Just buy and hold right? This isn’t that hard. Everyone’s trying to own equities. Only go up. Yada yada. You know that kind of traditional raa argument is like, hey, just buy and hold and we’ll help pick some winners over time. But basically, you just want to be in the s, p, and hold it for as long as possible.
Bruce Greig 28:33
I mean, we’ve heard that argument since the beginning of time. I mean, like I said, I’ve worked in similar RIAs for 30 years and and that that’s always something that we come up against, especially in a bull market with not pullbacks. It’s so easy just to say, Well, look, the S, P has been up an average of 15% over the last five years. Why do I need you guys? Well, I mean, there’s a lot of opportunity in between. Well, that’s, you know, that’s a good point. Yeah, that’s, actually, I really like that answer. Most people just say, Well, you know, there are going to be those times like, you know, 2000 2001 2008 even 2022, and the S, P is going to drop double digits. And wouldn’t you like somebody that’s actively reviewing your account to get you out and potentially, you know, preserve your capital so, but you’re not always going to be right. You’re not always going to sell to top and buy to bottom, but, you know, that is a big part of the sales pitch. But I like Brad’s answer. What he’s referring to is, and I think we saw it a lot in 2023 and even 2024 where you know, you look at the market and you say, well, the s, p was up, whatever, 20% but throughout the year, you’ve got other dynamics happening. You’ve got small caps that might go on a five or six or seven week rally, and then you might have. Mid cap value you might have international, you know, particular sectors. It’s not just about buying, you know, the broad market indexes and timing those. Most of our models, you know, drill down to the sectors and even the sub sectors. So we’re not just necessarily trying to get in and out of the s, p and and the Dow. We’re going to step further. We’re trying to find, well, which sectors are moving the most, you know, do we want to be in utilities and energy right now, or do we want to, you know, really go forward and double up and technology and and, you know, consumer discretionary,
Jeff Malec 30:42
so equities based, or where you hold bonds or gold or things of that nature too?
Bruce Greig 30:49
No, no. It depends on the model. Most of our models, I would say, are equity based, but we’ve got we’ve got bond models, we’ve got international equity models, we’ve got models that use bonds and stocks, it really covers the gamut of whatever an investor would need in their portfolio. Kind of the main thing is, we like to be able to provide a menu of options, and then the advisor often will pick and choose what makes sense for their particular client.
Jeff Malec 31:24
And when you say advisor, you mean in house or other RAS mostly, yeah,
Bruce Greig 31:31
yes, yeah, no other, yeah, other RIAs or other advisors that work for smaller, independent BDS
Jeff Malec 31:38
got it, and they’re using you like as a OCI, exactly.
Bruce Greig 31:42
They’re using us for our models. You know, we tell them you focus on gathering assets. You know that that’s what you do best. You know, in some case, obviously there’s advisors that like, yeah
Brad Giaimo 31:53
at all, someone to get a little bit more. But there
Bruce Greig 31:57
are decent number of them that appreciate the fact that that’s what we do, and that’s our expertise which frees them up, you know, to apply their value added.
Jeff Malec 32:08
Go golf, go get new clients.
Bruce Greig 32:10
Yes, exactly, and hopefully bring them to q3 and
Brad Giaimo 32:14
interestingly enough, if I could kind of jump in, you know, the strategies themselves are not overly complex. They’re really more I think the beauty in them is the simplicity of that of the strategies themselves and early on, and we still do it till this day. One of the things that we hoped would kind of get us some traction would be explaining to the advisor exactly how us how a strategy worked. Because a lot of the times, especially if you’re coming from the hedge fund world, it’s all black box stuff. And well, we could tell you so much, but then we can’t tell you how we do this or that. And we would tell the guys if, if they wanted to know exactly how the strategy works, some guys do and some don’t, and that’s, you know, that’s really up to them. But if somebody really wanted to take a deep dive into the strategies themselves. We’re more than happy to do that with them. We’re not
Bruce Greig 33:05
really running away well. And I think Holy Grail, I think it gives them the confidence. It does. It gives them a confidence in us too. And I think it gives them a level of trust, yeah, quite honestly, that, you know, we want you to understand how it works, because there will be times that it’s not going to work, right? You know, like everything else, we might go through a couple weeks where the market’s choppy and it’s just not the type of market that works well for trend following. We want them to know why, you know, because if they don’t, they’re just going to, it’ll be easier for them. They’re just, they’re going to, they’re going to leave, and we may never know why they leave, but if we arm them with the information and the knowledge of what to expect, and, you know, kind of what are the potential pitfalls and downfalls of a particular model, then when they live through it, right? I think it’s better because they they understand it, they’ve been briefed on it, and it doesn’t come Yeah, and
Brad Giaimo 34:03
we always pick up the phone because you’re going to get the guys that call. You don’t hear from anybody when things are going great and the market’s going up and all the strategies are doing well, but when it’s not doing well, that’s when they’re calling, and it’s really important for us to pick up the phone and make sure that we answer their questions. And that was one thing that early on, I think, definitely got us some traction, especially the fact that they could speak to the two guys, Adam and myself, who who own the company. A lot of the times you call any of these other firms, you’re not going to speak to the to the head people, by any means. So, you know. So that’s something that we said we were going to do right from the beginning, and we’ve done it ever since, and we’ll continue to do it.
Jeff Malec 34:40
I’ve got a lot of Ra buddies here in Chicago, and they’re half psychiatrist a lot of the times, especially in a down market, right? The clients are just calling. They just want someone to talk to you sure everything’s going to be all right? Yep. So I’m sure they call, then they’re calling you. Hey, you sure everything’s going to be right? Okay, hang up, call the client. Yep, we got it. Here’s how the model’s working.
Jeff Malec 35:07
How do you protect against the models just going, we’re going to be all long Nvidia all the time, right? So do you have sector level constraints and risk constraints, etc, etc,
Bruce Greig 35:18
you know, not really. And it kind of goes back to what I was saying about, you know, when we bring new models to market, it really is all about, you know, all the work we do before we even introduce them and and we, you know, we stress test them, we back test them over, you know, decades and decades of markets
Brad Giaimo 35:42
as much as we could get our hands on, you know, yeah, these days is a whole lot more than in the old days. Yeah. I mean, you really couldn’t get the back data that you needed to kind of do
Bruce Greig 35:50
some serious Yeah. No, it is definitely, is there now and and, you know, we, we do have some models that are riskier than others, but most of our models are fairly diversified in the sense that number one, they either hold a decent number of positions. So one of our flagship, what we call active asset allocation models, holds about 12 to 14 ETFs. You know, in each of the ETFs, of course, by being ETFs have a certain level of diversification. So we’re kind of removing ourselves from that systemic risk of a of a blow up with any one company or even one ETF Not, not the ETFs often blow up. And our tactical models that are a little more concentrated in the sense that they might only use the s, p5, 100 or their NASDAQ 100 again, those are, you know, huge indexes. They’re, you know, they’re diversified to a point. I mean, obviously the NASDAQ 100 is, is so tied to technology. But we
Jeff Malec 36:55
did last week’s podcast, which was with the guys from NASDAQ. Sorry, quick plug.
Bruce Greig 37:00
Yeah, so, so part of that, you know, is intentional. On our behalf, we’re not apt to have a model that’s 100% Nvidia. And for a couple reasons, I don’t know that there’s a lot of demand for that from the advisors that we tend to interface with. That’s not really what they’re looking for, you know. And again, we do have some strategies to employee leverage using leveraged ETFs and leverage mutual funds. But, you know, again, we feel that we’re able to control the risk with those types of investments because they are broad based index funds, as opposed to individual stock risk.
Jeff Malec 37:44
So that’s the SMA portion. So there’s hundreds of models, dozens of models, across all these different
Brad Giaimo 37:51
clients, well, but also to those, each one has a risk profile. So one strategy actually could be looked at as three, but it’s really only one, so I don’t know,
Bruce Greig 38:03
yeah. I mean, we’ve, we’ve got, yeah, well,
Jeff Malec 38:06
seems like too much work for you guys, but maybe that’s why now we have depends
Brad Giaimo 38:10
on the platform we’re trading and how much work
Bruce Greig 38:12
it is. We, we’ve been very we’ve spent a lot of time coming up with very efficient ways of trading, you know, to, you know, obviously, to reduce any kind of trading errors and to make it, you know, efficient to trade all these different models and and we, I think, as Brad alluded to, we operate on a number of different tamp platforms, you know, five or Six, at least, with our models on them, and but, you know, we’ve really got it down to a kind of a well oiled machine. And, you know, we get the trades out every day.
Jeff Malec 38:52
And then I’m guessing somewhere around the way, someone said, Well, I don’t know which of these models I want or need. Just what do you think’s the best? What would you do? And that was somewhat the genesis of the the mutual funds and ETFs and whatnot.
Bruce Greig 39:08
Well, not necessarily the genesis of the funds.
Brad Giaimo 39:13
It’s we’re actually it’s interesting. The dynamic is because we don’t take direct business anymore. We work through advisors. So the advisor is kind of like the client is our client, as far as the regulatory agencies are concerned, but the advisor is our client to us, because they’re the ones that are bringing their their clients to us. So those questions we don’t get from the clients directly, we get them from the advisors, and of course, we’re here to help them, you know, with with our ideas and thoughts, as far as what a good portfolio might be constructed as, but they’re the ones that make the ultimate decision as far as that’s what they want their clients to be in when we get a new SMA account, we do have an offer. Now where we’ll do that, we’ll do everything. We’ll from a risk profile that we get. We’ll actually pick, pick the models themselves for the clients, and just manage it 100% and the advisors kind of little bit more out of the loop in that particular way that we can manage for them. But we wanted to be able to offer two different things, because a lot of the advisors still want to be kind of more involved.
Bruce Greig 40:25
It does, it does vary. We have some advisors that really want to learn about the models and how they work, and, and some of the advisors are, you know, are more sophisticated than others, and, and they have their own spreadsheets, or whatever they use to kind of combine our models and find the most efficient mix based on beta or whatever else and and that’s great, if that works for them. You know that that’s what they’re looking for. That’s what we offer. But as Brad said, we also have a number that that aren’t necessarily interested in learning all the ins and outs of you know, 25 different investment models, and they feel comfortable having us make those selections. Got it.
Jeff Malec 41:11
But let’s talk about the mutual fund. So how many two mutual funds, plus an ETF, yes, plus an ETF in the pipeline and one more of each coming
Bruce Greig 41:21
exactly, exactly. So yeah, in both cases, well, in all three cases of our current funds, two funds, one ETF, they were all launched with the idea that we were going to essentially transition the SMA assets, Aum into the funds. Because, as Brad mentioned during the onset, the the funds are part of they still remain part of our SMA. So just to use an example, we have an SMA called bull cipher, which is the mean reversion approach I talked about. We’ve been running it since 2016 as an SMA. Great track record. In April of 2023 we transition, transitioned it into a 40 act mutual fund. And what’s nice about that is we were able to seed that fund with what, 30 or 40 million right out of the gate, pretty much right out of the gate. And, you know, if you know anything about launching a fund or ETF, it’s a lot of money, and it’s a lot of work, it’s a lot of time. It’s a very steep learning curve. But one of the best things you can do to kind of get off on the right foot is to be able to seed it, you know, with at least 10 or $20 million that’s a history too well, yeah, sure, sure. Because then we’re able to kind of market the you can’t directly port the performance in
Jeff Malec 42:55
which you could, back in my old days, like a few of those first ones that started, ported and raised
Bruce Greig 43:00
a gazillion dollars, you still kind of can, and very limited morning stars got the dotted line. Now, yeah, it’s very tricky, and, and so there is that that is sort of one of the, one of the drawbacks I so
Jeff Malec 43:13
those were private funds that converted, or they were a few SMA accounts that come
Bruce Greig 43:17
No, in our case, they were SMA accounts. And mostly
Jeff Malec 43:21
we see the private fund converts, but this is right, yeah, we’ve seen that getting way inside baseball now, but interesting to me, yeah.
Bruce Greig 43:29
So it was a little easier the way we did it, because we didn’t have to kind of jump through those hoops. For us. It was just a matter of communicating with our advisors and telling them, hey, you know we’ve we’ve got this better wrapper now. We’ve got this publicly traded 40 act fund that is going to be part of the SMA, but the SMA now is just going to have one holding. It’s just going to hold the fund. So it does a couple things, and it makes our lives a little bit easier, quite frankly, because no longer do I have to trade that particular SMA of five or six different platforms. You know, all by three o’clock Eastern time. I know that all the trading is done within the mutual fund, QA, so x, which we obviously have to trade that fund, but it’s just a once a day. You know, the fund doesn’t necessarily trade every day, but it is an actively traded mutual fund. But it made that a lot easier, because we could offer the SMA at some of these temp platforms that have been sprouting up across the marketplace
Jeff Malec 44:40
and then. But there still are SMAs that run individual models, right? Oh, yeah. The one that converted only holds the the mutual, yeah.
Bruce Greig 44:49
And we’ve, we’ve converted three such SMAs, one corresponding to each of our three funds. But yeah, the rsma business is still. A several 100 million dollars. And, you know, it’s, it’s probably not going to go away anytime soon,
Brad Giaimo 45:05
well and but unfortunately, like I said when we talked earlier, Jeff about the trading floor going the way of the dinosaur, as far as the technology, yeah, you know, the SMA business is also, I think, seeing a lot of different things. Fee compression being obviously a big component of that, that it’s just not like it used to be. And so it made sense for us to take to take a shot, jump off the cliff and and get into the mutual fund and the ETF side of things, because, quite honestly, it’s not as sticky money, because the advisors are in and out when you’re buying a fund or you’re buying an ETF, when they feel like doing it, you don’t have that same connection with an advisor that you do when you’re running an SMA
Jeff Malec 45:50
forum. Are you getting money that you never even talked
Brad Giaimo 45:53
to the people? But that’s the other side too. Though you’re getting you’re getting money that you can work both ways. Yeah, it definitely works both ways. But I just see the SMA side of things becoming less and less in the future, being the ETFs, ETFs, not even the mutual funds anymore. It’s really the ETFs, yeah, that are starting to take over. So it just made sense for us to be involved with that. And again, just like everything else, it’s been a learning curve for us, organically, doing all the legwork, all the hard work. We’ve hooked up with some good partners, which has been great. But, yeah, we’ve been doing it all in house, and yeah, and we’re, we got pretty good at
Jeff Malec 46:30
- It’s a little dirty, right? The pay to play and you want to be on this platform and that plan,
Brad Giaimo 46:34
oh, yeah, yeah, you find out other things along those lines as well.
Bruce Greig 46:38
And just the amount of compliance and regulatory I mean, it’s like several every month I have to, you know, verify and attest to five or six different documents for the SEC and and then every quarter, there’s a different slew. And then every six months, every year, it’s, yeah, it’s a lot. It’s a lot when, when you know you’ve made that leap to wanting to get into the 40 act fun, you know, environment, but it’s
Jeff Malec 47:11
like having rental places or something, right? You never, you don’t want to own just one like that. Why? You have a couple own five or six, and you can your main names. You can
Bruce Greig 47:21
do other Yeah, there are absolutely economies of scale. I mean, having having two funds is not twice the work is having one, right? But it’s probably one and a half times the work.
Brad Giaimo 47:31
It’s true. But you also want to have the opportunity for more diversification and choices. So people should use all five of our we have.
Bruce Greig 47:40
I’m just looking at it from a work standpoint that falls on me.
Jeff Malec 47:52
Give me the rundown on the what each funds doing so the QA so x is mainly mean reversion, or it’s much stuff to talk about
Bruce Greig 48:00
our flagship fund. We’ve got about 230 million in it, just in about little over two years. Yeah, it’s, it’s, we really like that one. It’s really unique, without getting too much into the weeds, in terms of the algorithm, it’s a short term mean reversion fund that looks at the s, p5, 100 and the Nasdaq 100 over short time periods, one day, three, day, 10, day, and it basically buys the dip, you know? So if the markets trade in the lower range of their respective range, we buy and we wait for that, you know that that that bounce that normally comes, it doesn’t always come, but and then we get out on a bounce. So, you know, the average trade might only last 134, days, but you know, it’s just all about getting in, getting out when, when the opportunity presents itself.
Jeff Malec 48:58
It seems that’s been the flavor of the month for the past couple years, at least, right? A lot of buying the dip, lot of selling any volatility spikes, right from my other world, and options and volatility like people are loading up on that trade as well when there’s a day, I
Bruce Greig 49:14
think you certainly hear that. But again, I don’t know of any mutual fund or ETF that explicitly trades that way. Now, I’m sure there are some of these, you know, global macro funds or longshore funds that don’t necessarily disclose exactly how they do everything that might look at some mean reversion setups. I I can’t say we’re literally the only one, but we you know that that’s all the fund is. It’s 100% mean reversion. One of the other unique aspects of the fund that we just started in November of last year is we got away from trading ETFs, and it trades futures, so we’re able to kind of offer that preferential tax treatment. It. You know, the 6040 capital gain split, it frees up 85% of our AUM to put in short term bonds, portable Alpha there. That helps, right, right?
Jeff Malec 50:12
And that’s why you’re on a podcast called the derivative and we There you go. You’re preaching to the choir, preaching.
Bruce Greig 50:19
And you know, obviously, as you know, and your listeners know, the s, p5, 100 and NASDAQ 100 you know, are among the most liquid derivative markets. So, you know, with our 250 odd million in AUM, you know, we’re not running into any capacity on the radar. Yeah. And then we could, we could get up, we could scale this fund into billions of dollars.
Jeff Malec 50:46
And the bigger problem with using futures, the roll cost and the right, remember, total return, the dividends, everything. But if you’re just one to three days, that’s out the window too.
Bruce Greig 50:57
So yeah, but there is some of that. And, you know, as we get bigger and we hope to have this problem, you know, maybe we would even start looking at swaps and and some other ways to effectuate the trades.
Jeff Malec 51:10
Yeah, love it all. Right, next. So that’s the flagship. What are the other guys doing?
Bruce Greig 51:16
The other our other mutual fund is QA, I TX, it’s a, all season, tactical, unconstrained growth. It’s, it’s more of a, I guess I would call a traditional trend following system. It primarily looks at the NASDAQ 100 so it’s, it’s, whereas Q, A, so x is kind of half between NASDAQ and s, p, depending on where the setups occur. QA, ITX is a little more focused on the NASDAQ. 100 that fund, again, started off as an SMA that we’ve been running for, I think little over 10 years. I think it was 2015 great track record. You know, frankly, we had a little bit of a hiccup in 2022 that was that was a tough year for a lot of people, doing a lot of different things, but it rebounded back nicely. Had had a nice 2324 it’s up nicely this year. That one hasn’t caught as much attention. You know, part of it is, if you have a tough year, you know, some people kind of focus, we think a little too much on one bad year, you know, you could also argue that that fund doesn’t have kind of as unique a story as the mean reversion,
Jeff Malec 52:37
but got a hell of a benchmark, the NASDAQ’s going straight up.
Bruce Greig 52:42
Well, well, there’s that too. Yeah. I mean, now, being that, it’s a it’s a tactical fund, so we’re not, we’re not always exposed to the NASDAQ, you know, we could be, we could be out of the market for weeks at a time, depending on on the environment. And when this fund gets, gets a signal to tell us to get out of NASDAQ. It then looks to long term government bonds, which it can go short.
Jeff Malec 53:06
That was your problem in 22 There you go.
Bruce Greig 53:09
Yeah, you must have read our
Jeff Malec 53:11
website. It’s not my first rodeo. I’ve been I was in those as well. Yeah.
Bruce Greig 53:17
And in 2022 and, and it wasn’t just long the mark. I mean, it was mostly long. That’s why it lost some money, but, but if you remember, and I think it was kind of early to mid 2022 you had some fairly decent volatility in that market, and we got whipsawed a bit. We were we were short when we shouldn’t have been, and when we were long when we shouldn’t have been, and and and that contributed to probably half of our losses. Because if you look at just our timing of the NASDAQ, 100 we would have, I mean, we would have still lost money in 2022, but the NASDAQ was down in the mid 20s, or whatever it was, you know, we might have been down 15,
Jeff Malec 54:01
and that sucks, because the bonds are there to be the safe part, right. Quick sidebar, q3 where would the name come from? Came up with it in October.
Brad Giaimo 54:14
Well, it’s always my favorite time of the year because of that. But that wasn’t the reason. The joke around the office, my partner’s name, last name is choiring, which starts with a Q, and he has three daughters. But that’s not how q3 came about. It was really about Q standing for quantitative. And then the three tenants, which we’ve kind of always kind of evolved, evolved a little bit, you know, price Act, the things we look at as far as when we develop our algorithms as they pertain to
Jeff Malec 54:44
individual strength. And is the is the Paul Tudor Jones never owned something below the 200 day moving average. Is that some of the DNA?
Brad Giaimo 54:53
I don’t know about that, not in the mean reversion, yeah, not in the mean reversion. No, yeah. So that’s really kind of where. Q3 came from, but quantitative, right?
Bruce Greig 55:02
It’s all about, yeah, it really does. A lot of this does boil down to the fact that we, we lean into, and we’re all into the idea of being quantitative, you
Brad Giaimo 55:13
know, taking the emotion out of the process, and that’s a hard thing to do when you’re, we’re humans, and, you know, you get that, that signal that says the buy, and all you’ve been seeing, just from an empirical standpoint of watching the markets, is that I don’t want to be long here, yeah, but you get scared my signal, and you got to do it, because the minute you don’t do that anymore, then there’s no sense.
Bruce Greig 55:35
Yeah, all the all the back testing, all, you know, all those hours that we spend creating robust models. You just throw that out the window.
Brad Giaimo 55:45
It’s tough, for sure,
Jeff Malec 55:48
the ETF, qvo, why?
Bruce Greig 55:51
Yeah, so, yeah, that one is kind of our most vanilla offering. You might say it’s what we call active asset allocation. It happens we it happens, I guess I’d call it a growth profile, because it’s 5% bonds and 90 95% alternatives and equity. But what we like about it is it’s, it’s sort of a, you know, a good complement to kind of more traditional portfolios and approaches to asset allocation where, you know, an advisor might just say, Well, I’m just going to put you in 8020 and maybe I’ll look at it once a year, and, you know, we might Adjust the drift or rebalance we’re much more active, and I would say proactive than that. The QBO y ETF kind of has, has a framework of four different investments leads. It’s almost like four models in one. We’ve got a core equity component which looks at just kind of your typical morning star, nine boxes of equities, large value, you know, small growth, so on and so forth. It’s got a bond allocation, what we call an active equity allocation. And the ETFs in that sleeve tend to be things like smart beta ETFs, these factor based ETFs sub sectors and international and then one of the very unique parts of the fund is a 15% allocation to liquid alts. So we’ve got commodities in their currencies, in their managed futures hedge fund replication ETFs.
Jeff Malec 57:42
I’m sorry for your managed futures experience the last 18 months.
Bruce Greig 57:46
Well, what hurts and helps? Well, what’s nice about the model? It’s one of our momentum based models, so it doesn’t buy everything. You know, it’s benched managed futures. Yeah. So in the alternative sleeve, we’ve got about 20 ETFs that we evaluate on a weekly basis, and and we hold, we hold three of them. And lately that that sleeve is really driven performance. We’ve been in uranium, Blockchain, gold miners, nuclear, NLR, ETF. So even though it’s only 15% that sleeve gives us kind of that potential alpha, but perhaps more importantly, it gives us the diversification. A lot of those ETFs, as you might imagine, have a low correlation to bonds and equities, so they help dampen the portfolio. So Q boy is sort of our, you know, it’s sort of, it can be a core holding, in some ways, portfolio, you know,
Jeff Malec 58:48
beef or vanilla. What’s is the beef or vanilla?
Bruce Greig 58:52
Remember that? I mean, it’s not, it’s not quite, it’s vanilla for q3 in the industry, it’s really not vanilla. It’s true.
Jeff Malec 59:01
I was gonna argue that with you, like, doesn’t sound too vanilla, but yeah,
Bruce Greig 59:05
no, you can make your argument along with me. But yeah, so it’s, it’s a, you know, that that, that one, that one has done well this year, up about, I think, about 1415, past performance.
Jeff Malec 59:21
And then, because you guys don’t have enough going on, you’re launching two new ones coming up. Yeah, tell us why you’re, why you need new ones, and what they’re, what they’re doing, yeah.
Bruce Greig 59:33
So the one is technically in the SEC quiet period, so I can’t get too much into the details, but I can tell you, it’s it’s a tactical ETF that that’s fairly actively traded. It’s going to trade the NASDAQ 101 of the things that’s unique about this one is it’ll use leverage up to 1.5 on the long side and the inverse side, which is. A little bit new for q3 when we’ve had SMAs in the past that use leverage, but frankly, we’ve always tried to temper that a bit, because we know the minute you start using leverage, you know things can get away from you, quite frankly, on the downside and upside. But this ETF, we have launched it with partners that we’ve known for over a decade, and again, we’ve got some real time performance on the methodology that goes back up to 20 years. So we feel very confident. We’ve already got a large network of advisors that have indicated to us that they would be willing to to put money into it almost from day one. We’ve got an SMA with close to $30 million that we’ll be able to seed it almost from day one. So so that one we’re really excited about and and it’ll be a good compliment to QA so X, our other flag, or other tactical model, because even though they’re both tactical, they’re both actively traded. They both trade the NASDAQ 100 for a variety of the trades. They use a different methodology. You’ve got one that’s mean reversion and one that’s it’s a number of different models, but it’s a little more trend following relative strength. So when you combine the two, and we’re all about trying to combine models, we don’t want our advisors to put all their money in one basket. We’ve seen how that can turn out quite honestly. And so what’s nice about this is it’ll play really well with our existing offerings and really help create some, some additional diversification, right? And then next
Brad Giaimo 1:01:51
year, tactical high yield we’re looking at for next year, which
Bruce Greig 1:01:56
we already are running as, yeah, and again, we’ve had in SMA for about five years.
Jeff Malec 1:02:01
That’s what do they call themselves, unconstrained bond funds, basically, yeah, I think that’s more go anywhere and buy different bonds. So this will be more high end.
Bruce Greig 1:02:11
So, you know, one of the things we’ve learned with working with the SEC is they have this new naming convention that I think came out a couple years ago that says, you know, if you have something in the name of your fund, like large cap, you better have large buildings better be in large cap. And they’ve really kind of come down on that and and, you know, we had wanted to call this fund, you know, q3 all season, high yield, or tactical high yield,
Jeff Malec 1:02:40
not all weather, Brent,
Bruce Greig 1:02:43
not all weather, all season. Mr. All season. Mr. Diallo, saw that, but we got to thinking, Well, wait a second. You know, it’s like so much of what we do, it’s a tactical approach. There are times that we don’t even want to be in high yields. So we thought, oh, geez, that, you know, we’re going to run into our problem with that, because we can’t call it high yield unless we are, again, high yields. And I think it’s 80% of the time they require. Yeah. So that one, we’ll see what we end up calling it. We may just call it q3 also using unconstrained bond or strategic income, kind of one of those, those names that kind of,
Jeff Malec 1:03:20
hey, sec, if you’re listening like, let these guys have some fun. Let them name something not so boring, right? Unconstrained, systematic income. People fall asleep.
Jeff Malec 1:03:39
We’ve mentioned trading places. So give me your Give me your top three Detroit movies.
1:03:47
Oh, Terminator, no. Robocop.
Jeff Malec 1:03:50
Why? Yeah, it was to me. There’s only two answers. Beverly cop, an eight mile, eight mile, three and eight mile.
Brad Giaimo 1:03:57
I forgot about eight mile. Sorry. I forgot about him, but yeah, and Beverly Hills Cop, you’re absolutely right about that a whole lot. But Robocop was, yeah, Robo Cop was, was shot here in Detroit.
Jeff Malec 1:04:14
And then what you guys Detroit sports fans now, lions,
Bruce Greig 1:04:18
I think, yeah, convert pretty much to Detroit, I think
Jeff Malec 1:04:22
so, yeah, like me cheering for the packers to lose last night.
Brad Giaimo 1:04:26
Yes, that was a bummer when they made that field goal, but the tie actually will hurt them as well. Yeah, things stay as they are, so I was okay with that. But one thing that’s interesting, and you see it in sports all the time, and I was going to bring it up that you know, being a contrarian, which is, you know, obviously an indicator that some people follow on the trading floors. And last week, every single ESPN analyst said the lions were going to lose in Baltimore. Yeah, exactly. And they won, yeah. And I can’t tell you how many times that. Has come to be true
Jeff Malec 1:05:01
in markets for sure. Yeah, and bonds, 100% like all these rate cuts are happening, and it never happens like they
Brad Giaimo 1:05:08
think, right? Exactly,
Jeff Malec 1:05:09
speaking of markets. So your background, gold and cocoa? Were you trading cocoa? Ever? No, no,
Brad Giaimo 1:05:18
I was just running orders there, and I actually didn’t even trade gold. I my when I was a local, just scalping points. It was in the Cotton Exchange.
Jeff Malec 1:05:27
But do you have thought those are two of the like, biggest, most in the commodity world? Those have been the High Flyers the past couple years. So you still dabble? Do you still watch and and see what’s going on in those? No, not
Brad Giaimo 1:05:40
really the whole commodities thing. I kind of gave up after we started three and you know, the excitement of being a local on the floor, when you’re scalping points, you’re just trading off of emotion. That’s all you’re looking to do, the emotion of what’s coming in the pit in the form of orders and and I’m just looking to get in and out, in and out. But we’ve morphed into being quantitative now, where we’ve actually moving out of it. So, you know, it’s a little strange making that transformation, but when you’re talking long term and you’re talking about the trading, the way that we do and in things like IRAs for people, and it’s totally different, and the emotional trading just doesn’t work.
Bruce Greig 1:06:20
That’s, that’s a young man’s game. It is. It’s a very
Jeff Malec 1:06:23
young man’s game. Yeah, I felt I was on the bond pit Board of Trade. Oh, wow, as a clerk between the option Pit and the futures pit. So I was getting all the signals and relaying to my broker, sure, but I was the same guy. I’m like, Wait, why are we rallying? What are we doing? He’s like, because Billy’s buying, just buying. Like, there was no there was no logic to any of it. And I’m like, This is how the global financial system works. This is scary as hell. And then so I’m like, Well, why is Billy? Were like, because Goldman putting in orders. Why are they doing that? Like, I don’t know, someone upstairs putting them. So I was like, Okay, I need to go upstairs. What are they doing up there?
Brad Giaimo 1:07:00
Different game upstairs, different game. But
Jeff Malec 1:07:03
hey, those guys were, were great, right? If you were a good local and had that sense, you were, you were doing well,
Brad Giaimo 1:07:09
and that’s what you paid for the seat for. Either you rented a seat or you were fortunate enough to be able to buy one, but you paid because you wanted to be down there on the trading floor. I mean, that’s where that was, Ground Zero, Peter Stottlemyre, I’m sure you know the name Chicago guy, big trade. He talked about the concentric circles of knowledge, of information. And now again, back, this is back in the 80s, so you got to take it for that. But being on the trading floor, being in a pit, was number one. That’s where you the most information was coming in, and then as you got away from that and the circle, it was a different kind of information that was coming in, that you had a process a totally different way. And then when you’re off the trading floor, it’s even totally different from that. So, you know, you
Jeff Malec 1:07:56
wonder if he designed their data access right? Because it’s literally your the servers are in concentric circles, like the old pits, and you pay the most money to be in the near the core, and then the next level is like each circle out. So that’s milliseconds we’re talking or even nanoseconds, yes, but you have more information the closer those
Brad Giaimo 1:08:19
high frequency traders, and that information can be millions of dollars,
1:08:22
right? Yeah, so the difference
Jeff Malec 1:08:24
crazy. All right, guys, we’ll leave it there. Thanks so much. Oh, you’re welcome. Check out. Really. We’ll put the website and all that in the notes. So you guys said you type up some research and some papers now and then, we’ll put link to all that good stuff in the show notes and let people find you. All right, awesome. We’ll talk to you soon. Guys, thanks so much.
Brad Giaimo 1:08:45
Thank you very much. Jeff, you have a great day.
This transcript was compiled automatically via Otter.AI and as such may include typos and errors the artificial intelligence did not pick up correctly.
