The Money Is Made On “Page Sixteen”

When a story shows up on a magazine cover, the biggest profits have generally been made. That’s why in our investment process at MO, we’re always looking for “page sixteen” stories.

The basic idea is this:

  • You don’t make money from stories on the front page.
  • You make money from the stuff on page sixteen…
  • As it steadily moves forward toward page one.
  • By the time it hits page one, the big gains have been made.

Does that mean a move is “over” once a magazine cover shows up? Not necessarily.

Sometimes, when a story hits page one, the final stage of the move is yet to play out — and that can be the most spectacular.

Think “blow-out” in terms of euphoria or pessimism extremes.

But still, you want to be well positioned before that happens.

The final stage of a move can be so wild and crazy, the only way to REALLY exploit it is to have a solid cushion of profits in winning positions you started building a while ago.

And sometimes, a trade is so powerful and so long-lasting, it just goes and goes like the energizer bunny, further than anyone could have thought possible.

This, in turn, circles back around to that “page sixteen” focus. Getting your size on relatively early (yet wisely and safely) is key.

You don’t need a crystal ball to trade markets successfully. But you need the ability to anticipate.

We don’t know what the future holds.

And that is where the art and science of trading comes into play.

You have to balance the requirement to act before certainty is present — by the time certainty arises, it’s too late — with a means of preserving capital and avoiding the temptation to act prematurely.

Colin Powell once put it in a way that has always stuck with us. If no information is “zero”, and total information (i.e. certainty) is “one”, then you want to act somewhere around 0.6.

  • No information: 0
  • Point of action: 0.6
  • Point of certainty: 1

It’s a compromise between acting too early and acting too late.

Moving when there is enough information to move… but not jumping the gun or committing prematurely.

This is where price action comes in… and it’s also the reason acting without respect for price action is foolish.

Your view on markets might be completely wrong. Who or what is going to let you know that — other than price?

We know many investors who ignore price action completely in making their decisions.

Some of these guys are good friends of ours. Some of them are very, very good at what they do.

But god bless ‘em, in our view all those guys are Wall Street versions of Miss Cleo to some degree.

They are so confident in their fundamental analysis, they believe they “KNOW” what is going to happen… to the extent they are willing to catch falling knives, or even falling anvils.

We are more humble than that.

  • We sometimes have a strong sense of what could happen.
  • We sometimes feel strongly in respect to favorable odds.
  • We can have high conviction that “XYZ is how it will go.”
  • But knowing? Being certain? No.

This is why price action is so great!

Price action is like a wise companion who gives you thumbs up or down on whether your views are working out or not.

Who else or what else provides that function? Nothing we know of.

As a counselor and confidant, price action is invaluable! Why the hell would anyone ignore it?

Prior to the 2008 meltdown, someone asked Bill Miller when he was willing to stop buying in a position that was going against him.

Miller’s response: “When there is no longer a price quote.”

When we first read that — well before 2008 — we said to ourselves, “this arrogant joker is going to blow up.”

And he did.

It’s not just that WE can’t “know.” NO ONE can know the future for certain.

It’s crazy for ANYONE to think they know what is going to happen with great certainty. The market is just too complex.

There are too many variables for any human to process.

Hell, there are too many variables for any super computer to process!

From time to time we hear about giant internal hedge funds at places like Goldman Sachs taking losses.

If there was a way for computers to predict the future, do you think this would happen?

Those guys would spend eighty million dollars a month on nitrogen-cooled quantum CPU upgrades if they thought it would benefit them.

They would hire the best programmers in the world and pay them five million dollars a year, if they thought it would pay off.

But it wouldn’t — in terms of predicting the future anyway — because there are just too many variables.

And it will ALWAYS be this way. Consider:

In terms of complex feedback loops and compound reactions, there is enough turbulence in a glass of water to jam up the world’s most powerful supercomputer.

There are more potential variations of legal chess games than particles in the known universe.

The embedded complexity of global financial markets is effectively infinite.

Not only would you have to know everything, you would have to know how everything interacts with everything, and on top of that know about random future interactions and unknown variables not yet known to the participants themselves.

On a real-time scale of billions to trillions of variable interactions per minute, any of them capable of spinning out, power law style, into something bigger than anyone expected.

Computers will not be cracking that nut.

And yet, great traders can make a lot money — and protect what they have — WITHOUT “knowing” the future.

The reason this game is so great… and the reason we love it… is because you don’t need prediction to win.

You just need a high quality methodology that allows you to do the following things:

  • anticipate profitable scenarios
  • make attractive wagers in reward / risk terms
  • limit your downside risk
  • intelligently add to winning positions
  • never jeopardize your survival

This is why we put so much elbow grease into figuring out possible market scenarios.

We aren’t trying to “know” the future… we are just trying to anticipate the good bets.

If you make enough good bets, and ensure your survival by cutting losses and avoiding bad bets, you can do well over time.

And if you have the courage to really press your best bets — to build up a cushion of profits and then bet huge, while still betting SAFELY, when the time is right — then you can do better than well. You can crush it.

All without “knowing” the future at all…

But merely “knowing” how to play a probability driven game with incomplete information and asymmetric opportunity sets.

Page sixteen is the beginning. Price action is the middle. Position sizing is the end.

How is it that some traders make hundreds of millions of dollars?

No really, how is it that some guys go into markets — these vast oceans of incomplete information — and make more in a month or a year than fifty average individuals make in an entire lifetime of work?

At the heart of it they do the same thing we are talking about:

  • Seek out “page sixteen” scenarios — not yet discounted by the market.
  • Use price action to determine a logical course of action.
  • Use position sizing to absolutely crush it when all the stars align.
  • Further use position sizing to limit or cut risk to ensure survival.

The above principles do not require prediction. They don’t require “knowing” the future.

They simply require a combination of scenario awareness, guts, and a deep sense of humility (to avoid risk of ruin).

What’s great is that this process is scale invariant.

To some degree a great macro trade is a great macro trade… whether you do it with ten thousand dollars or ten billion.

It’s a mental puzzle with a pay-off at the end.

We love the game for its pragmatic nature.

Usually, in most cases, there is a disconnect between career fulfillment and profit potential.

This is why you often hear about corporate lawyers going off to start artisan goat cheese farms or other such things.

They did something they hated for money. Then they saved up a nice big chunk, and switched to something they love for no real money at all.

We consider ourselves tremendously fortunate in not having to choose. We get to play a game we love, with embedded profit potential too ridiculous to fathom.

Markets are endlessly fascinating… the puzzle pieces are always moving and shifting.

And for us at Macro Ops, we get the added benefit of being able to play this incredible game with you

We’ve built an elite community of traders and investors in the Macro Ops Collective that all share this same passion for markets. 

It’s a joy to wake up everyday and jump into the Comm Center (our private slack) where all our Collective members are working hard to solve these “page sixteen” puzzles together.

The truth is that markets can be a lonely game. We started Macro Ops to fix that. 

And now we have a community that makes this endeavor more enjoyable and fulfilling than we ever thought possible. 

If you’d like to join the Macro Ops Collective and get full access to this unique community and all the research and tools that come with it, click here. 

Enrollment to the Collective is open until midnight on Sunday (9/25). 

After that we’ll be closing our doors for the season. 

We’d love to have you join our team. 

Click Here To Join The Macro Ops Collective!

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Brandon Beylo

Value Investor

Brandon has been a professional investor focusing on value for over 13 years, spending his time in small to micro-cap companies, spin-offs, SPACs, and deep value liquidation situations. Over time, he’s developed a deeper understanding for what deep-value investing actually means, and refined his philosophy to include any business trading at a wild discount to what he thinks its worth in 3-5 years.

Brandon has a tenacious passion for investing, broad-based learning, and business. He previously worked for several leading investment firms before joining the team at Macro Ops. He lives by the famous Munger mantra of trying to get a little smarter each day.


Investing & Personal Finance

AK is the founder of Macro Ops and the host of Fallible.

He started out in corporate economics for a Fortune 50 company before moving to a long/short equity investment firm.

With Macro Ops focused primarily on institutional clients, AK moved to servicing new investors just starting their journey. He takes the professional research and education produced at Macro Ops and breaks it down for beginners. The goal is to help clients find the best solution for their investing needs through effective education.

Tyler Kling

Volatility & Options Trader

Former trade desk manager at $100+ million family office where he oversaw multiple traders and helped develop cutting edge quantitative strategies in the derivatives market.

He worked as a consultant to the family office’s in-house fund of funds in the areas of portfolio manager evaluation and capital allocation.

Certified in Quantitative Finance from the Fitch Learning Center in London, England where he studied under famous quants such as Paul Wilmott.

Alex Barrow

Macro Trader

Founder and head macro trader at Macro Ops. Alex joined the US Marine Corps on his 18th birthday just one month after the 9/11 terrorist attacks. He subsequently spent a decade in the military. Serving in various capacities from scout sniper to interrogator and counterintelligence specialist. Following his military service, he worked as a contract intelligence professional for a number of US agencies (from the DIA to FBI) with a focus on counterintelligence and terrorist financing. He also spent time consulting for a tech company that specialized in building analytic software for finance and intelligence analysis.

After leaving the field of intelligence he went to work at a global macro hedge fund. He’s been professionally involved in markets since 2005, has consulted with a number of the leading names in the hedge fund space, and now manages his own family office while running Macro Ops. He’s published over 300 white papers on complex financial and macroeconomic topics, writes regularly about investment/market trends, and frequently speaks at conferences on trading and investing.

Macro Ops is a market research firm geared toward professional and experienced retail traders and investors. Macro Ops’ research has been featured in Forbes, Marketwatch, Business Insider, and Real Vision as well as a number of other leading publications.

You can find out more about Alex on his LinkedIn account here and also find him on Twitter where he frequently shares his market research.