BOLSA NA MÁXIMA HISTÓRICA: O QUE ESTÁ ACONTECENDO E COMO SE POSICIONAR | Second Level #32

Episode Overview

• This episode explores the critical relationship between global macroeconomic trends and local investment performance in emerging markets like Brazil, arguing that global liquidity often overrides local fundamentals.
• The discussion provides a deep dive into sophisticated hedge fund strategies, specifically focusing on "Long/Short" equity management, the mechanics of short selling, and generating "alpha" in volatile environments.
• It offers a practical framework for analyzing market cycles, explaining how professional managers pivot between defensive and aggressive positions based on interest rates and capital flows.
• The conversation highlights the concept of "Analog Data Science"—using qualitative human intelligence to gain an investment edge—and examines specific thematic opportunities in commodities and "junior mining."

Key Concepts

• Macro Dominance Over Micro Fundamentals: While individual company analysis ("micro") is important, global macroeconomic factors ("macro")—specifically US monetary policy and global liquidity—are the primary drivers of asset prices in emerging markets. Even strong companies can suffer 80-90% drawdowns if the macro tide (like rising interest rates) turns against them.
• The "Flux" and ETF Impact: Asset prices are often determined by the sheer momentum of money entering a market ("flux"). Passive investment vehicles (ETFs) drive capital into large, liquid "Blue Chip" stocks first, causing them to outperform smaller companies regardless of operational performance during the early stages of a rally.
• Beta Management Strategy: Fund managers actively adjust portfolio "Beta" (volatility relative to the market) based on the cycle. In anticipation of a bull market, they rotate from defensive stocks (low Beta) to aggressive, cyclical stocks (high Beta) to capture maximum upside.
• "Analog Data Science": In an era of quantitative trading, a competitive edge is gained through qualitative research. This involves synthesizing subjective inputs—body language, tone, and off-the-record sentiment from a network of CEOs, competitors, and regulators—to sense sector "temperature" before it appears in spreadsheets.
• Funding Shorts vs. Bankruptcy Shorts: Professional short selling rarely targets bankruptcy or fraud. Instead, managers look for "funding shorts"—stagnant companies with poor dynamics (like retailers facing deflation or behavioral shifts) to finance long positions in high-growth companies.
• Asymmetry of Short Selling: Shorting stocks carries significantly higher risk than buying. When a "Long" position loses money, it becomes a smaller part of the portfolio. When a "Short" position goes against you (stock rises), it becomes a larger part of the portfolio, compounding the damage and creating "squeeze" risk.
• Decorrelated Alpha: True investment skill isn't just betting on the market going up; it involves "pair trades" (e.g., Long Bank A vs. Short Bank B). This strategy aims to profit from the relative performance difference between two assets, regardless of general market direction.
• The Geopolitical Scarcity Thesis: There is a structural investment opportunity in "Strategic Independence." Western economies are paying a premium to decouple supply chains from China, benefiting "Junior Miners" in friendly jurisdictions (like Brazil) that extract critical minerals and rare earths.

Quotes

• At 0:08:28 - "The most important thing is always the macro rather than the micro. And more important than the local macro is the global macro. Because the amount of money involved is very large." - Explaining why international trends often dictate local market performance.
• At 0:11:18 - "Assets are a reflection of flux." - A concise summary of how buying pressure drives asset prices, regardless of the underlying news cycle.
• At 0:17:35 - "We have to respect the flux." - A core trading philosophy: regardless of your fundamental analysis, you cannot ignore the momentum of money entering or leaving a market.
• At 0:21:50 - "Beta 1 is a stock that walks together with the index... [We increased Beta] because we bought, for example, Localiza, which has a higher Beta... instead of Itaú which has a Beta close to 1." - Explaining the tactical shift active managers make to capture more upside during market rallies.
• At 0:27:00 - "For the gringo [foreign investor], the carry trade was violent... the CDI last year was 14.5%... the guy lost more than 20% in this game." - Explaining the massive opportunity cost for foreign investors who bet against high-yield currencies.
• At 0:29:10 - "We started shorting these guys, not thinking they would collapse, but thinking... 'this guy isn't going anywhere.' So, it is good funding." - Defining a sophisticated short strategy where the goal is to use capital tied up in stagnant companies to fund better bets.
• At 0:32:55 - "The biggest mistake of a manager... is taking himself too seriously. If you take yourself too seriously, your opinion becomes the most important, you don't look at others', and you don't look at the macro factor." - A crucial lesson on intellectual humility and avoiding dogmatic thinking in finance.
• At 0:34:00 - "Not looking at the macro is an option you have. But I don't think it's the smartest option." - Arguing against pure "bottom-up" stock picking in volatile markets, noting that even great companies can suffer huge drops if the macro tide turns.
• At 0:36:20 - "Basically what we do is... 'Analog Data Science'. You are talking to companies, economists, sell-side, buy-side... trying to collect data to say: 'the trend is more favorable for this guy than that guy'." - Summarizing their research methodology, which relies on synthesizing human intelligence rather than just algorithmic data.
• At 0:53:38 - "Dá para ganhar [só focando no micro], dá. Mas eu acho que aí você vai tropeçar quando o macro muda." - Explaining that while stock picking works, ignoring macroeconomic shifts creates blind spots that can wipe out gains.
• At 0:54:53 - "Quem não olhou o macro... não perceberam coisas mudando e estavam com posição muito concentrada em economia doméstica, varejo, empresas alavancadas." - Analyzing why many funds underperformed post-2021 by failing to adjust for rising interest rates.
• At 1:06:57 - "O problema é que quando você perde no short, o seu problema aumenta. O contrário da compra... no short se você perdeu a posição ficou maior." - Detailing the dangerous mechanics of short selling where losing positions grow in size relative to the portfolio.
• At 1:10:04 - "Acho que um erro de Long & Short é querer fazer carteira contra índice. E aí é só ver o mês de janeiro... se o índice subiu pra caramba e você tá numa carteirinha contra índice, putz, aí você se ferrou." - Explaining that shorting the broader index isn't a true hedge during strong capital inflows.
• At 1:14:13 - "Ser humano é à base de incentivo, então você tem que dar o incentivo correto para as pessoas... você tem que ser também gestor de gente, não só gestor de portfólio." - Discussing the business side of asset management and how to retain talent.

Takeaways

• Monitor Global Liquidity First: Before analyzing individual stocks, check the direction of the US Dollar and US interest rates; if global liquidity is tightening, local "micro" successes may not matter.
• Respect the "Flux": Do not fight the trend of capital flows. If foreign money is flooding into large-cap ETFs, acknowledge that these "Blue Chips" will likely outperform smaller stocks initially, regardless of valuation.
• Adopt "Analog Data Science": Don't rely solely on quantitative data; actively seek out qualitative signals—conversations, sentiment, and "body language" of industry players—to identify trends before they hit the financial statements.
• Use Shorting for Relative Value: Change your perspective on short selling from "betting on bankruptcy" to "betting on stagnation." Use shorts on low-growth sectors to fund long positions in high-growth areas.
• Hedge with Commodities: Consider allocating to hard commodities (Gold, Copper) as a hedge against fiscal instability and to capitalize on the structural demand created by the green energy transition and AI technology.
• Diversify for Resilience: For a 5-year investment horizon, consider a balanced allocation (e.g., 25% Equities, 25% Inflation-linked bonds, 35% Multimarket funds, 20% International) to smooth out volatility while capturing growth.
• Avoid "Short Index" Hedging: When building a Long/Short portfolio, avoid simply buying stocks and shorting the main index (like the S&P 500 or Ibovespa), as a general market rally can wipe out your "hedge." Instead, use specific sector pairs.
• Focus on Strategic Independence: Look for investment opportunities in "Junior Mining" and supply chain companies located in geopolitically friendly nations, as Western governments are actively subsidizing these sectors to reduce reliance on China.