Ray Micaletti built his investing around one idea he calls relative sentiment. Mark “Moose” McGrath and I asked him what it is and why it works for him. Ray explains it as a comparison. How are institutions positioned in the market, and how do retail traders feel about it?
Two kinds of sentiment
Ray walks through the indicators he watches, including the AAII sentiment survey and put-call ratios. He talks about GameStop and other moments when retail traders surprised the market. In his view, the gap between institutional and retail sentiment tells you something.
Sentiment and trend
Ray pairs relative sentiment with trend following in a systematic approach. He looks at historical market events where sentiment pointed the way even when other signals disagreed. He also talks about running ETF strategies and staying disciplined when markets swing.
Adapting the model
We bring in Boyd and complexity theory. A model that stops evolving stops working. Ray questions traditional views of market indices and risk. We talk about how networks give retail traders more reach, the Barings Bank collapse, and blockchain.
The thread through it all is self-disruption. Ray keeps testing his own approach before the market tests it for him.
This episode is not investment advice.
What signal do you rely on that you haven’t tested in years?
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