What does CTA mean? ft. Andrew Beer and Eric Crittenden
CTA (Contrarian Tactical Alpha) is redefined as a strategy that succeeds not through trend following, but through contrarian positioning in various markets. The strategy complements strategic consensus beta portfolios by making tactical, counter-intuitive bets when assets are undervalued or unpopular.
Summary
Andrew Beer and Eric Crittenden discuss the true meaning and application of CTA (Contrarian Tactical Alpha). Rather than the traditional interpretation of trend following, they argue that successful CTA strategies are fundamentally contrarian in nature. The speakers use an analogy comparing trend following to arriving late at a party—showing up after momentum has already built and popularity is established. In contrast, effective CTA involves buying assets that have underperformed and are beginning to recover, such as crude oil in January after prolonged declines, or gold at $2,200 after a decade of stagnation. Another example given is shorting treasuries in September 2020 when yields were at 70 basis points and inflation concerns were not yet on investors' radar. The key value proposition of CTA within a portfolio context is that it serves as a counterbalance to strategic consensus beta holdings, which represent conventional portfolio allocations that remain relatively stable over time. By incorporating tactical, contrarian positions, investors can benefit from opportunities that arise when market sentiment is most negative about particular assets or sectors.
About this episode
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Key Insights
- CTA success is driven by contrarian positioning rather than trend following—buying unpopular, underperforming assets like crude oil after declines or gold after a decade of stagnation, rather than chasing momentum late
- Trend following is characterized as arriving late to established trends, analogous to showing up at a party at 1:00 AM when everyone is already there, whereas successful CTA involves buying when sentiment is most negative
- CTA serves a portfolio role as tactical positioning that contrasts with strategic consensus beta holdings, providing value specifically because it operates counter to conventional portfolio allocations that remain stable over time
Topics
Transcript
[0:00] What CTA stands for is contrarian tactical alpha. And the reason I say it is because CTA as a term is familiar to people. They know it. I don't have to introduce a new term. But but when the space makes money, it's it's it's not trend following. It's not getting into something late, right? When people think about trend following, they think about I often say this analogy, it's like you show up at a party at 1:00 and hope it goes till 5:00, >> Mhm. >> right? It's like it's it's like everybody's already there and you're showing up because it's already popular. When I've seen the space make money, you're really contrarian. You know, [0:30] you're…
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