Noticed food prices lately? Or perhaps the price of gas at the pump has caught your attention. You probably didn't know that raw cotton is up 180 percent since a year ago. Guess where that will take clothing prices. Think deflation is our problem, think again. Inflation is here.
US monetary policy and US debt policy hinge on the assumption of deflation. So much for those policies. Be prepared for major increases in treasury rates which means a dramatic and unanticipated increased in annual federal fiscal deficits. Things are going to get a lot worse quickly.
Bernanke and Obama are going to reap the results that their policies have sowed. A return to the Carter days -- stagflation is back. The stock and bond markets will struggle from here.
Friday, February 25, 2011
What makes a great trader? Managing risk
Found these excellent comments (one, two) on trading from Fullcarry and had to favorite and share these tweets.
Amazing how quickly these pearls of wisdom can dissipate in the real-time information ocean of Twitter if you don't happen to spot them at the right time.
Incidentally, this is why I try to favorite (Twitter's bookmark function) tweets and check up on my favorite Twitter lists. You never know what you'll find, or what you might have missed if you didn't happen to catch it in your stream. Wish Twitter would improve its archived search features so users could easily uncover more great information like this, but that's a topic for another day.
Back to Fullcarry's notes: what's amazing about this particular insight on trading is that it goes against the grain of conventional thinking on successful trading and investing.
So many outsiders, and many trading books and programs aimed at a mass audience, operate on the assumption that you need to aim for a high percentage of winning trades ("high probability outcomes") or that you must be right most of the time to make it as a trader.
As Fullcarry tells it, just the opposite may be true. You don't have to be right on all your calls (or even half of them) to be a profitable trader. You do have to know how to manage your trades and your risk.
After I had saved these tweets last week, I happened to notice a great post by Darvas Trader that ties right in with Fullcarry's message on managing trades and risk. It's called, "The Dirty Little Secret of Successful Trading" and it makes a similar point about relying on winning percentage vs. managing risk.
Quoting Darvas Trader:
"Risk management is the single biggest determining factor in the long-term success of a trader."
Great study material for traders and investors who are learning to apply some form of risk management to their trading or investing method of choice.
Of course, you could always go the big-shot fund manager route and tank your investors' returns (by refusing to take losses and managing risk) after a big winning streak, but maybe the disciplined approach is more useful for those of us who aren't in the media spotlight.
If you're enjoying these posts and would like to see more, please subscribe to our free RSS updates and follow Finance Trends in real-time on Twitter and StockTwits.
One of the best traders I ever met was never right.
Ed Bradford
Fullcarry
Ed BradfordFullcarry
It was one of the few woman traders I ever worked with. She just new how to trade and manage positions, but was terrible at calling things.Ed Bradford
Fullcarry
Ed BradfordFullcarry
Amazing how quickly these pearls of wisdom can dissipate in the real-time information ocean of Twitter if you don't happen to spot them at the right time.
Incidentally, this is why I try to favorite (Twitter's bookmark function) tweets and check up on my favorite Twitter lists. You never know what you'll find, or what you might have missed if you didn't happen to catch it in your stream. Wish Twitter would improve its archived search features so users could easily uncover more great information like this, but that's a topic for another day.
Back to Fullcarry's notes: what's amazing about this particular insight on trading is that it goes against the grain of conventional thinking on successful trading and investing.
So many outsiders, and many trading books and programs aimed at a mass audience, operate on the assumption that you need to aim for a high percentage of winning trades ("high probability outcomes") or that you must be right most of the time to make it as a trader.
As Fullcarry tells it, just the opposite may be true. You don't have to be right on all your calls (or even half of them) to be a profitable trader. You do have to know how to manage your trades and your risk.
After I had saved these tweets last week, I happened to notice a great post by Darvas Trader that ties right in with Fullcarry's message on managing trades and risk. It's called, "The Dirty Little Secret of Successful Trading" and it makes a similar point about relying on winning percentage vs. managing risk.
Quoting Darvas Trader:
"Risk management is the single biggest determining factor in the long-term success of a trader."
Great study material for traders and investors who are learning to apply some form of risk management to their trading or investing method of choice.
Of course, you could always go the big-shot fund manager route and tank your investors' returns (by refusing to take losses and managing risk) after a big winning streak, but maybe the disciplined approach is more useful for those of us who aren't in the media spotlight.
If you're enjoying these posts and would like to see more, please subscribe to our free RSS updates and follow Finance Trends in real-time on Twitter and StockTwits.
Thursday, February 24, 2011
Simplify: a Lesson from the Bad News Bears
Watch coach Leak's instructions to pitcher, Carmen Ronzonni. Sometimes we make things harder than they need to be. Simplify.
Wednesday, February 23, 2011
What Happened to Robin Hood?
In Madison, thousands of high income folks are busy demonstrating in the hopes that lower and middle income taxpayers will pay higher taxes to keep these rich folks riding high. The average teacher in Wisconsin makes between two and three times the all-in compensation of the average Wisconsin taxpayer, so, by all means, lets raise taxes and make the gap even higher. To show their concern for their students, the Wisconsin teachers have taken to calling in sick while they are demonstrating in the state capital for even more money.
Meanwhile, the state faces an immediate $ 3.6 billion shortfall and will be forced to begin laying off teachers next week. Why don't the demonstrating teachers care about the pending layoffs? Because the ones demonstrating will not be the ones laid off. The ones laid off will be the most recently hired teachers with the least seniority and these teachers aren't paid as well or have as much seniority as the ones wreaking havoc in Madison. The rich teachers are protected by seniority rules.
Just imagine a couple both of whom have been school teachers in Wisconsin for twenty years and have a combined compensation exceeding $ 250,000 annually. These are the people demonstrating. These are the people that are not showing up in the classroom even though paid (handsomely) to do so.
Where is Robin Hood? He needs to ride in and support the taxpayer against these rich folks who are robbing the public treasury and not showing up for work.
Student demonstrators, as usual, are supporting the relatively affluent against the interests of the average citizen. No change there.
Meanwhile, the state faces an immediate $ 3.6 billion shortfall and will be forced to begin laying off teachers next week. Why don't the demonstrating teachers care about the pending layoffs? Because the ones demonstrating will not be the ones laid off. The ones laid off will be the most recently hired teachers with the least seniority and these teachers aren't paid as well or have as much seniority as the ones wreaking havoc in Madison. The rich teachers are protected by seniority rules.
Just imagine a couple both of whom have been school teachers in Wisconsin for twenty years and have a combined compensation exceeding $ 250,000 annually. These are the people demonstrating. These are the people that are not showing up in the classroom even though paid (handsomely) to do so.
Where is Robin Hood? He needs to ride in and support the taxpayer against these rich folks who are robbing the public treasury and not showing up for work.
Student demonstrators, as usual, are supporting the relatively affluent against the interests of the average citizen. No change there.
Tuesday, February 22, 2011
Russia Forum 2011 w/ Nassim Taleb, Marc Faber
Russia Forum 2011, which recently took place in Moscow, featured a global investing outlook panel discussion which included famed investors and commentators, Nassim Taleb, Marc Faber, and Hugh Hendry.
Also on hand at the forum were economist, Nouriel Roubini, strategist, Russell Napier, and a panoply of international investors and business leaders. You'll find Roubini and Napier adding their thoughts in the outlook panel video above.
There was also a rather interesting panel, featuring Faber and Taleb, entitled, "Is Russia the Best or Worst in BRIC?".
This conversation is worthwhile not only for the contributions from the aforementioned panel stars, but also due to the comments from other panelists and some key questions from the audience.
Pay special attention to Mario Garnero's comments on the effects of Brazil's past inflation on its middle class (this is important for those of us in QE, deficit-land US), as well as the questions on Russia's future from the native conference attendees.
If you'd like to take a look at last year's lively panel discussion and judge the panelists' comments against what took place in 2010, check out our related post links below.
Related articles and posts:
1. The Russia Forum 2011 - Russia Forum.
2. Panel discussion from Russia Forum 2010 - Finance Trends.
Also on hand at the forum were economist, Nouriel Roubini, strategist, Russell Napier, and a panoply of international investors and business leaders. You'll find Roubini and Napier adding their thoughts in the outlook panel video above.
There was also a rather interesting panel, featuring Faber and Taleb, entitled, "Is Russia the Best or Worst in BRIC?".
This conversation is worthwhile not only for the contributions from the aforementioned panel stars, but also due to the comments from other panelists and some key questions from the audience.
Pay special attention to Mario Garnero's comments on the effects of Brazil's past inflation on its middle class (this is important for those of us in QE, deficit-land US), as well as the questions on Russia's future from the native conference attendees.
If you'd like to take a look at last year's lively panel discussion and judge the panelists' comments against what took place in 2010, check out our related post links below.
Related articles and posts:
1. The Russia Forum 2011 - Russia Forum.
2. Panel discussion from Russia Forum 2010 - Finance Trends.
Thursday, February 17, 2011
Steve Cohen on trading, global macro
If you caught our last post on Steve Cohen's ISI chat with Paul Tudor Jones (coverage courtesy of Dealbook), it's highly likely that you clicked through to read the details of Steven's interview.
Here's one item from that discussion that really grabbed my attention, Steve Cohen talking global macro:
"...Mr. Cohen, who said probably 25 percent of his investments were made outside the United States, has been emphasizing to his traders that global macro themes are more important than ever in investing.
For this reason he went to Davos, Switzerland, last month for the World Economic Forum and said that he found “the development of the next phase of the consumer economy in China is very intriguing.” He recognized that there “could be more situations like Egypt” and “you have something going on here that could be a tinderbox.”".
This piece of info really jumped out at me for a few reasons.
Firstly, as far as I know, Cohen has not been identified as a global macro trader in the past. SAC Capital seemed to grow from Cohen's roots in proprietary stock trading, with SAC's traders eventually taking on a larger role in fundamental analysis as time went on.
The fact that such a prominent, fundamental and technical-driven US stock trader is now stressing the importance of global macro themes and their influence on markets is quite noteworthy.
His recent comments to PTJ on the firm's growing exposure to international investments were also touched on in an earlier, 2008 interview with AR:
"...How much does SAC invest outside the U.S.?
[SC] Probably 15 to 20 percent of our activity is outside the U.S. There’s a lot of opportunity for growth in both Europe and Asia. The game is changing. Stock markets are starting to develop all over the world, and that creates opportunity...."
This brings to mind two separate interviews, with Passport Capital's John Burbank and California investor Michael Burry, that we shared last fall in our global macro post series. Both stressed the importance of international investing and the profound influence that global macro themes now have over US markets.
The observations made by Burry and Burbank were soon echoed by well-known hedge fund manager, David Einhorn, who noted the shift that had occurred in his investing style due to the impact of big picture, macro trends.
These interviews are a rare glimpse into the thinking of some of our most astute investors, and are all must hear/must read material. Hoping you will be informed by, and profit from, them.
Related articles and posts:
1. Must hear interview with John Burbank - Finance Trends.
2. Michael Burry: an up & coming macro star? - Finance Trends.
3. Macro themes dominate investing world - Finance Trends.
Here's one item from that discussion that really grabbed my attention, Steve Cohen talking global macro:
"...Mr. Cohen, who said probably 25 percent of his investments were made outside the United States, has been emphasizing to his traders that global macro themes are more important than ever in investing.
For this reason he went to Davos, Switzerland, last month for the World Economic Forum and said that he found “the development of the next phase of the consumer economy in China is very intriguing.” He recognized that there “could be more situations like Egypt” and “you have something going on here that could be a tinderbox.”".
This piece of info really jumped out at me for a few reasons.
Firstly, as far as I know, Cohen has not been identified as a global macro trader in the past. SAC Capital seemed to grow from Cohen's roots in proprietary stock trading, with SAC's traders eventually taking on a larger role in fundamental analysis as time went on.
The fact that such a prominent, fundamental and technical-driven US stock trader is now stressing the importance of global macro themes and their influence on markets is quite noteworthy.
His recent comments to PTJ on the firm's growing exposure to international investments were also touched on in an earlier, 2008 interview with AR:
"...How much does SAC invest outside the U.S.?
[SC] Probably 15 to 20 percent of our activity is outside the U.S. There’s a lot of opportunity for growth in both Europe and Asia. The game is changing. Stock markets are starting to develop all over the world, and that creates opportunity...."
This brings to mind two separate interviews, with Passport Capital's John Burbank and California investor Michael Burry, that we shared last fall in our global macro post series. Both stressed the importance of international investing and the profound influence that global macro themes now have over US markets.
The observations made by Burry and Burbank were soon echoed by well-known hedge fund manager, David Einhorn, who noted the shift that had occurred in his investing style due to the impact of big picture, macro trends.
These interviews are a rare glimpse into the thinking of some of our most astute investors, and are all must hear/must read material. Hoping you will be informed by, and profit from, them.
Related articles and posts:
1. Must hear interview with John Burbank - Finance Trends.
2. Michael Burry: an up & coming macro star? - Finance Trends.
3. Macro themes dominate investing world - Finance Trends.
Wednesday, February 16, 2011
Bernanke is a Political Hack
Ben Bernanke is likely the worst Fed Chairman in US history and that's saying something. We have had some really bad ones, but none like this guy. He has now purchased nearly $ 400 billion of his $ 900 billion QE2 buying spree. If he doesn't buy, who will? That's a question that is getting asked a lot lately.
Now Ben has opined on the Dodd-Frank bill, probably the second worst piece of legislation in American history (Obamacare is the winner of the gold). Ben likes the Dodd-Frank bill, otherwise known as FinReg. FinReg is one of the key contributors to our high unemployment rates. So, I guess it is having an impact. It is certainly not irrelevant. The mountain of new rules, regulations and prohibitions have done their job. They have stifled credit creation and muzzled the financial system.
Ben and Obama have a lot in common. Their policies are both significant contributors to our current stagnation and high unemployment.
Now Ben has opined on the Dodd-Frank bill, probably the second worst piece of legislation in American history (Obamacare is the winner of the gold). Ben likes the Dodd-Frank bill, otherwise known as FinReg. FinReg is one of the key contributors to our high unemployment rates. So, I guess it is having an impact. It is certainly not irrelevant. The mountain of new rules, regulations and prohibitions have done their job. They have stifled credit creation and muzzled the financial system.
Ben and Obama have a lot in common. Their policies are both significant contributors to our current stagnation and high unemployment.
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