Global Macro Trading Journal
- Thread starter Daal
- Start date
Faber, who has been bearish on gold for over a year now.. says it is starting to look relatively attractive again and between 1500$ and 1600$ would be a great entry point.
Also goldstocks are extremely oversold and should rebound soon. Let's hope.
It has been a massive carnage really with each and everyone of them at least 50% or so from the top.
I bought some thursday for the first time in a year.
Also goldstocks are extremely oversold and should rebound soon. Let's hope.
It has been a massive carnage really with each and everyone of them at least 50% or so from the top.
I bought some thursday for the first time in a year.
Quote from Debaser82:
Also goldstocks are extremely oversold and should rebound soon. Let's hope.
It has been a massive carnage really with each and everyone of them at least 50% or so from the top.
I bought some thursday for the first time in a year.
"Hope?" Fuck that... hope is the ultimate 4 letter word for traders.
It all depends on time frame -- but in the near to intermediate term, gold stocks smell like a value trap.
IMO the thing is there's a huge difference in mkt cap size. Something like PKI @ 2766 P/E can see appreciation by simply beating on the top line @ a mkt cap of 3.14B. AMZN's mkt cap is 92.16B, it doesn't seems reasonable that at their profit margin that P/E can be sustained. And unless you expect AMZN to monopolize the internet commerce industry, top line growth is out of the question. Even AAPL doesn't have the lion's share of the handset/computing markets. To sum up: there are size constraints and AMZN is hitting it. Of course, as you and GOC have raised concerns, timing is everything.
Isn't long-term the main timeframe? I.e. 12 months+? Apart from options, I've never made 5-10+ times my money (i.e. my capital deployed on the trade, not my risk/reward ratio) on a short-term trade.
If you bought AAPL 10 years ago, you made a 60-fold return. Even a mere 3 1/2 years ago (when it was hardly a difficult idea to spot) would have reaped 6-7 times your money. If you bought tech in the early 90s, you made silly money. If you bought real estate after 9/11, you scored huge. If you bought Russia or Asia on size after the 1998 collapse, you could have retired by now, ditto with Brazil/Argentina after their meltdowns in 2001-2002. There are many other examples.
Which pays the greater return on time invested - trying to make 500-1000 good short-term plays per decade, paying short-term capital gains or income taxes on them, having to grind out your edge time and time again; or spending that time finding the 2 or 3 big opportunities of the next 5-10 years, putting 25% of capital into each, then sitting back and letting them compound tax free so long as the thesis remains intact and keeps getting validated by the data?
Really, I'm not sure how relevant it is what the next 5-10%, or even 20% move in gold is. You are not going to get rich off that move.
I'm not dismissing shorter-term timeframes, but it does seem there's a major risk of missing the forest for the trees here.
Well, couple things.
First as you know, it's the CAGR that matters (compound annual growth rate). If a trader can match Stan the Man Druckenmiller's record of 30%+ returns over 30 years, it doesn't really matter how he did it.
Second, there are multiple paths up the mountain, and different ways to make money on a big theme or trend.
Say, for example, that you foresaw the huge outperformance of consumer retail stocks (see XRT) from 2009 onward.
If you deliberately chose to trade heavily in this area, on the bullish side, while selecting the best stocks to purchase in size at the optimal inflection points, you could have still implemented what is basically a swing strategy -- holding winners for months at a time but not years -- while taking very large gains out of the overall thematic move.
Right, but there is also the danger of hindsight bias. A lot of major moves have the illusion of clarity in the rearview mirror. There are reasons for this rooted not just in human psychology but the basic functions of the brain itself.
The gigantic macro moves are the best moves. But to do them huge requires a lot of conviction and possibly a lot of risk. Look what happened to John Paulson in 2011.
Also, re, tech stocks in the late 90's, Asia, Russia / China / commodity producers in the 2000's EM oil boom years etc, all of those plays oriented themselves to macro-aware swing strategies that allowed for taking "big chunks," i.e. moves that lasted weeks or months at a time, without the exposure risk of a Jim Rogers' style "I am going to buy and hold no matter what."
If those are the options I'll take door number one every time.
Why? Because "finding the 2 or 3 big opportunities of the next 5-10 years" and then "putting 25% of capital into each" entails huge embedded risk.
What if your assessment is wrong? If you deliberately embrace an attitude of "I am committed to this position for 5 or 10 years" and you get a driver wrong, you lack the flexibility or strategic capability to make a shift.
With what you call "short term plays," in contrast, I can still participate in major thematic moves and exploit the hell out of them. I can be aware of varying conditions in long term, intermediate term and short term time frames simultaneously and dial up my exposure levels at the appropriate times. And if I am wrong, I can sidestep potential sharp losses.
And going back to gold for a second -- I really have no idea what gold is going to do. My conviction there is zero.
There are good arguments for gold going to $3,000. There are also good arguments for gold going back to triple digits.
What you get is a sort of scenario tree -- and even if you were to decide that "the probability of gold going to $3,000 is 65%," a little under 2 out of 3 is not strong enough for me to put a major chunk of my capital at risk and just accept getting clocked if I am wrong. ESPECIALLY not when I can be aware of the various scenarios, increase exposure in either direction as firmer conviction develops, and book large gains through skillful exposure manipulation and thematic awareness WITHOUT undue risk.
Also, "so long as the thesis remains intact" is the gray area. How quickly do you abort the thesis if you are a "long term" player? How big a hit do you take in waiting for your thesis to be confirmed wrong? As a trader, I have the ability to extend my timeframe and act like an investor when I see fit. It is harder for those with an investment mentality, but lacking the training and experience of traders, to do the reverse.
I don't really disagree with you so much as take a different point of view entirely.
My view of how to get rich in markets is not related to any one move. In a given year there will certainly be a handful of trades, and a handful of themes, that dramatically stand out.
But the path to riches, in my view -- and not saying this is what works for everyone -- is a well developed methodology that minimizes downside risk, maximizes safe extraction of profits from powerful thematic drivers, and offers the ability to generate 20-40% CAGR over the long term with very low risk of losing years and the leverage advantages of OPM.
With the above as the focus, I can go "big game hunting" for the next major macro trade, but I can also generate returns in muddled markets and sleep well every night without worrying about whether I got "the big one" right.
Not to mention that this style allows for huge exposure at carefully timed inflection points anyhow. If gold goes to $3,000, then before it passes $2,000 the overall environment shift and change in macro drivers favoring gold will become well apparent. With an ability to take a portion of accrued profits and make an aggressive bet on gold at the right time, it will then be possible for us to wind up making more on a gold trade (in CAGR contribution terms) than an investor who patiently "bought and held" the whole time but does not understand the nuances of dialing exposure up or down -- having "the courage to be a pig," as Soros advised, but only doing so at exactly the right times.
This sounds like an ideal to strive for, but of course "dialing exposure up or down" is also a probabilistic betting process. A 'drivers-based investor' need only decide whether the original thesis is still in place or not; attempting to time any market, say buying pullbacks in a bull advance, requires making numerous assumptions about the character of that advance. The more you try and take out of the market per unit time invested and the finer you try and tune entries, the more accurate these assumptions must be. I trade technicals myself, but as far as I'm concerned the Holy Grail is find an investment you expect to yield 10-20% per year for a decade, put a big chunk of your cash in it and then wait.
The thesis for gold is of course somewhat different than that.
darkhorse,
This seems to come down to the issue of whether stops can improve or hurt trading performance. I have a love hate relationship with stops, simply because I see some flaws in them.
Take someone who is counting cards in a blackjack game in a casino that is not aware of it, he has an edge when he is playing, it would not make sense for him to stop playing at some point for any reason OTHER THAN
-He no longer thinks he has an edge(Got mentally tired and is having a hard time counting the cards, or something else)
-Is reaching his drawdown tolerance level
If I put a trade in and I still think I have an edge based on my analysis I would highly prefer to cut down the position but still keep it because I believe I still have an edge, the fact that the price went against me is evidence that my thesis MIGHT be wrong(I do believe the market is semi-efficient and large price discrepancies between true value and market price are rare, every time the discrepancy increases, it counts as evidence against the thesis given its rarity), which is why I would cut the position but not totally because the analysis still says there is an edge.
I can't stop playing the blackjack game simply because I got dealt a few losing hands in a row and somehow think the deck is 'cursed', I stay rational and keep betting
Now one might say 'well, what if your analysis is wrong and there is no edge'. I say this
-If the trader is a bad analyst and consistently get things wrong he is going to go broke whether he uses stops or not. With stops he MIGHT take a bit longer(Though it will depend on things like position sizing etc) but he is going to broke no matter what
This is why I don't scorn Rogers 'I will hold no matter what', he does take that a bit too far perhaps but I see him as the guy counting cards with an edge refusing to quit due short-term bad luck
I do see situations where a stop CAN improve performance, its on the situations where the stop itself is an edge. If you know that the price going through a certain point means there is no edge left or turned the other way, this is an edge in itself and makes total sense to put a stop there. There COULD be an edge on stuff like MAE(From Tharp books) but for Macro Trading that is kinda useless since we can be trading corn one day and Thai bat the next, different MAEs would apply
This seems to come down to the issue of whether stops can improve or hurt trading performance. I have a love hate relationship with stops, simply because I see some flaws in them.
Take someone who is counting cards in a blackjack game in a casino that is not aware of it, he has an edge when he is playing, it would not make sense for him to stop playing at some point for any reason OTHER THAN
-He no longer thinks he has an edge(Got mentally tired and is having a hard time counting the cards, or something else)
-Is reaching his drawdown tolerance level
If I put a trade in and I still think I have an edge based on my analysis I would highly prefer to cut down the position but still keep it because I believe I still have an edge, the fact that the price went against me is evidence that my thesis MIGHT be wrong(I do believe the market is semi-efficient and large price discrepancies between true value and market price are rare, every time the discrepancy increases, it counts as evidence against the thesis given its rarity), which is why I would cut the position but not totally because the analysis still says there is an edge.
I can't stop playing the blackjack game simply because I got dealt a few losing hands in a row and somehow think the deck is 'cursed', I stay rational and keep betting
Now one might say 'well, what if your analysis is wrong and there is no edge'. I say this
-If the trader is a bad analyst and consistently get things wrong he is going to go broke whether he uses stops or not. With stops he MIGHT take a bit longer(Though it will depend on things like position sizing etc) but he is going to broke no matter what
This is why I don't scorn Rogers 'I will hold no matter what', he does take that a bit too far perhaps but I see him as the guy counting cards with an edge refusing to quit due short-term bad luck
I do see situations where a stop CAN improve performance, its on the situations where the stop itself is an edge. If you know that the price going through a certain point means there is no edge left or turned the other way, this is an edge in itself and makes total sense to put a stop there. There COULD be an edge on stuff like MAE(From Tharp books) but for Macro Trading that is kinda useless since we can be trading corn one day and Thai bat the next, different MAEs would apply
Plus as far as drawdowns are concerned, not using stops won't necessarily mean bigger drawdowns given that it can all be controlled through position sizing. This is why I don't see much value in stops UNLESS
-They provide an edge in themselves(You know something about a technical point or amount of time, for time stops, that other people don't)
-You believe you will face some kind of psychological difficulty by being underwater in the position after a certain point and thus rather just get out(There is a case to me made that in this situation the trader sized his position incorrectly)
-They provide an edge in themselves(You know something about a technical point or amount of time, for time stops, that other people don't)
-You believe you will face some kind of psychological difficulty by being underwater in the position after a certain point and thus rather just get out(There is a case to me made that in this situation the trader sized his position incorrectly)