“Larry is dedicated to helping investors navigate the political and economic risks facing the markets. He is without question one of the top 6 financial bloggers on Wall Street.”
The Wall Street Journal, Market Watch
Why Have So Many Individual Investors And Financial Advisors Subscribed To McDonald Advisory’s Letter?
Q. Now, Larry, you have recently entered this very competitive world of financial newsletters. Let me start off asking, why would anyone subscribe to your newsletter, instead of say, reading the Financial Times or The Wall Street Journal?
A. That’s for news. This is high-level, practical risk analysis. It’s a condensed, fully charged letter packed with trades and warning signs. I read and distill the news, of course, but the difference between me and a journalist is massive. I’m on the trading floor, and I’ve taken professional risk at the highest level. But also, I bring risk analysis together with political policy analysis coming out of Washington and Europe. I feel there are very few people in the world that bring both of these valuable skill sets together. Since Lehman’s failure, every selloff in the market greater than 7% has been 100% politically driven.
Q. How many years have you taken risk at the institutional level?
A. Twenty-two years on Wall Street, and ten at the institutional level. At Lehman I had $500 million of proprietary balance sheet risk that I manage every day. In the newsletter market, a lot of guys are just trying to make a name for themselves. Quasi-gurus who’ve never taken risk, or been asset managers. You have academics with their theories, but in reality, you need a veteran risk taker in your corner. It’s a totally different level of understanding.
Q. Does credit lead equities? And are you a valuable asset in credit analysis?
A. Most equity investors don’t understand the credit side of the bond market. Sovereign bonds, high-yield corporate bonds, and investment grade corporate bonds have provided massively predictive warning signs to every substantial equity selloff since Lehman. The great skill set I have is that I traded equities when I was younger, but I then moved into the bond market as a trader. I made a lot of mistakes in my younger years not understanding how much the credit market effects the equity market. And I am dedicated to helping people understand this, and how to avoid the classic mistakes.
Q. What are the 17 Lehman Systemic Risk Indicators, why should they mean anything to me, and how can they make me money?
A. I’ve delivered 55 keynote speeches in 16 countries about the 17-Lehman Risk Indicators. These were very well-paid, closed door events, but it’s so important for asset managers all over the world to have access to these indicators. Before Lehman’s failure, and the 50% drop in stocks during the months after, before the 16% elevator shaft drop in May of 2010, before the 20% dive in August of 2011, and the 11% chop -to-the-knees the market took in the second quarter of 2012, every time both the sentiment risk indicators and the systemic risk indicators were at elevated levels. Our team has done a wonderful job of protecting investors, and making money on the short-side from these declines. We don’t take people to every wedding, but we never go to funerals.
Q. Tell me about the political angle in your letters.
A. Well, I’ve always had an interest in politics, but after the markets went into a death spiral, I quickly realized Washington D.C. and European policy makers had grabbed the reigns. Today, if investors ignore the policy decisions coming out of Capital Hill and the Eurozone they are going to get hurt. In 2006, the balance sheets of the Federal Reserve, the European Central Bank, the Bank of England, and the Bank of Japan were about 75% smaller than they are today. Because of this, politics is having an outsized influenced over the stock and bond markets and economic activity. In the ’90’s all you had to do was analyze company specific risk… stocks. Today, new clients keep telling me the reason they subscribed is because they are constantly getting hit by political curveballs coming out of Europe and Washington, and they want to get a step ahead.
Q. Who are ACG Analytics?
A. ACG are a team of razor-sharp political analysts that have an inside track in D.C. and Europe. I’m running a joint venture with them. Much of the deep, political knowledge I bring to readers is from ACG. What I do is turn that knowledge into the trade. It’s all very well having access to politicians, but what exactly will a new policy mean for the markets? This is exactly where my letter comes alive.
Q. And how is this presented to asset managers?
A. We’re in constant touch. We do audio and video recordings, letters, anything we see that’s important will be sent to clients. And I offer phone time for a more advanced subscription. I want to make sure clients are alerted of any new developments, updates on Europe, macro market views…
Q. Macro views. I’m glad you mentioned that, because I found the letter to be very macro.
A. It is macro, and deliberately so. No-one can invest today without knowing the systemic risks. These are globalized markets. If there is a tidal wave 2,000 miles off shore, and you have a trip planned to Long Island for the weekend, are you saying you don’t want that information? Anyone who ignores the risks still prevalent in Europe, for example, is setting themselves up for a disaster. But we also come up with excellent company specific and industry specific ideas. We’ve studied all the letters out there, and this is without question the best of them.
Q. How can you get investors ahead of the curve?
A. We are based in Manhattan. Years ago when I started off in the retail side of the business, there were many times I felt isolated from the action. Many asset managers, and family offices live a wonderful quality of life away from the New York grind. I want to bring that information edge to their portfolios. In the last four months I’ve had one-on-one meetings with some of the largest hedge fund managers in the world, the speaker of the house, Senate and Congressional leaders. I want to bring that advantage to our readers.
Q. Well, Larry, I wish you the best of luck with this. I’m sure it will be a huge success.
A. Thanks a lot, bud.
“Larry McDonald has been advising me for over 20 years. The 17 Lehman Risk Indicators have been very accurate at calling market declines over the last couple of years. I highly recommend his research to any institutional investor.”
Jim Rappaport, CEO, New Boston Fund
“From the trenches of Wall Street, Larry’s natural contrarian views have saved me hundreds of thousands of dollars. I cannot thank you enough for all the work you do for us. I hope you have all the success in the world. You deserve it.”
-J Corbett, Wealth Advisor, Morgan Stanley
“The Fiscal Cliff Notes” is the most concise, advanced finance letter I have ever read. It puts global market risks into perspective – every week. My confidence investing my clients’ money is tenfold with Larry in my corner.”
-C Lakian, Broker, Merrill Lynch
“In 2007 Larry McDonald saved my family’s fortune from going down with the subprime crash. I’m not sure if I need to say anything else. I owe you an enormous debt of gratitude.”
-M Starrett, Real Estate Developer
“I don’t touch the markets without a long phone call with Larry. He might very well be a market genius.”
-J Madejski, Founder, Auto-Trader
We look forward to working with you in the future, and providing you with world-class advice from the front-line of Wall Street.
To contact the offices of McDonald Advisory, LLC
Call US +1 (646) 504-9849.