Global Macro Trading Journal

[Ghost of Cutten]

Quote from ralph00:

It really depends how you trade. I have found such focus on day-to-day performance to be profoundly negative for my results over the years.

On my twitter stream today, I couldn't believe all the chatter about the "move in the euro", "the short squeeze in the euro", ... what have you. The fucking thing was up a handful of pips and just took back some silly zero volume action from the last couple days of the year. Nothing more than a random wiggle from where I sit, and folks couldn't stop talking about it.

"You never count your money while you're sittin at the table, there'll be time enough for countin', when the dealing's done."

You're talking about following intraday market chatter, whereas he is talking about end of day checks of your P&L - two totally different things.

You have to check your statements daily anyway, to identify position errors, looming expiries, large moves in your open positions, and so on, so you are going to notice your P&L regardless. Might as well build sound records and performance monitoring while you are at it.

Like he said - you can't know what you are doing right and wrong, if you aren't looking at what is helping or hindering your performance. How can you improve if you aren't sure whether it was Euros, soybeans, or some Canadian junior miner that most impacted your performance recently? I can understand not looking daily at long-only, cash-only investment positions (things you would hold for 1 year+), but surely with futures and shorter-term plays it requires frequent attention?

 

[Ghost of Cutten]

Quote from Martinghoul:

Here's an interesting tidbit mentioned in this Bridgewater article (as an antidote to all the "Japan going down" stuff):
http://online.wsj.com/article/SB10001424052970204368104577136531481564726.html
(you might have to do the usual to get the full article).

If you *bought* JGBs in the mid-90s on a 3:1 levered basis, you would have earned a compound average annual return of 12% a year for 15 years. Behold the power of carry.

12% per annum and 40-50% drawdowns - not too appealing. Although better than the stock market's return to risk ratio.

 

[ralph00]

Quote from Butterball:

You're missing Dalio's point when you blow off his analogy with 'that's the past'. He brings an example of an asset class that did well 15 years going forward five years after the credit growth bubble popped (1990 in Japan). Much of the western world is right now is between one and three years into the bubble deflation process, in other words at around 1993 in 'Japan time'.

Markets have a way of accelerating this sort of thing the next time around. As I recall JGBs were still yielding north of 3% in 1996, still plenty of room between that and 0. Euroyen futures markets at that time still priced in a series of rate hikes. Now we have the U.S. 10-year already camped out below 2% and the Fed telling us and the whole world knowing the FF rate will never again be raised in our lifetimes. I'm not saying Treasuries are set to enter a bear market, but a lot of that alpha has been priced out.

 

[Martinghoul]

Quote from Ghost of Cutten:
12% per annum and 40-50% drawdowns - not too appealing. Although better than the stock market's return to risk ratio.

How do you figure that? I mean the drawdown figures...

Quote from ralph00:
Markets have a way of accelerating this sort of thing the next time around.

Most certainly true, that...

 

[ralph00]

Quote from Ghost of Cutten:

You're talking about following intraday market chatter, whereas he is talking about end of day checks of your P&L - two totally different things.

You have to check your statements daily anyway, to identify position errors, looming expiries, large moves in your open positions, and so on, so you are going to notice your P&L regardless. Might as well build sound records and performance monitoring while you are at it.

Like he said - you can't know what you are doing right and wrong, if you aren't looking at what is helping or hindering your performance. How can you improve if you aren't sure whether it was Euros, soybeans, or some Canadian junior miner that most impacted your performance recently? I can understand not looking daily at long-only, cash-only investment positions (things you would hold for 1 year+), but surely with futures and shorter-term plays it requires frequent attention?

Again, depends on your style of trade. Other than my long-term stock holdings (whose price I rarely look at), I have very few positions open and with the slightest bit of calculation in my head, can glance at the front page of CBSMarketwatch and figure where I stand in a few seconds. I just have an issue with putting my exact account value to paper intraday or at the end of the day. Puts my energies in the wrong spot.

 

[Butterball]

Quote from Ghost of Cutten:

12% per annum and 40-50% drawdowns - not too appealing. Although better than the stock market's return to risk ratio.

Where are you getting 40-50% drawdowns from? The corrections in JGB futs were 7-8% in 98, 03 and 08. Add in TIBOR financing and you're closer to 22-26% DDs.

 

[ralph00]

A rare move for me, just bought shares in Zillow (Z). I've loved the site for years and it gets better every month, it seems. I've been waiting for a spot to buy ever since its IPO. This company is wildly disruptive to the horrid real estate agent business in this country. If the managers play their cards right, it could be another Amazon (the only difference is I expect Z to make money).

 

[Ghost of Cutten]

Quote from ralph00:

Again, depends on your style of trade. Other than my long-term stock holdings (whose price I rarely look at), I have very few positions open and with the slightest bit of calculation in my head, can glance at the front page of CBSMarketwatch and figure where I stand in a few seconds. I just have an issue with putting my exact account value to paper intraday or at the end of the day. Puts my energies in the wrong spot.

I'll explain why it's mistaken to do this, regardless of trading style. First, mental calculation takes longer than just looking at the P&L column in your spreadsheet. Secondly, it's less accurate. Even if you are out by only 0.1% per day, that is an error range of 5% each month (60% each year!). Third, you need to check your statements daily in case of errors (or unauthorised account withdrawals, excess/mistaken broker fees etc) anyway. Fourth, if and when you put on more complex positions like options or spreads, they are much harder to calculate mentally. Finally, even if you can calculate your P&L to perfection, it is always superior to have a way of double-checking that. Systems with backups, double (or triple) checks and failsafes are always more robust than those without.

I agree with not staring at P&L during the day, if you are a longer-term investor/trader. But even for long-term holdings, you need to check the price once each day, as a signal. If one of your stocks is up or down a significant amount one day (e.g. 5%+), then there is probably some news (and at the very least, the price action has changed a lot), and you need to double check to see if it could have further price impact. What if your biggest holding just had its finance director or auditor resign? What if a stock you are monitoring just got a take-over bid? BP or Olympus holders who didn't watch the price of their stock each day certainly paid for that laziness and complacency.

Checking your statements daily is an essential task of any serious market participant. Not bothering to do it is like a racer not bothering to check his engine oil, a skydiver not checking the packing of his parachute. It cannot help in any way, and can only cost you in the long run. Sure, it's always tempting to be lazy, and I bet everyone has backslided sometimes on these kind of things, but anyone who is serious about their trading needs to make it a habit and stick to it.

 

[Ghost of Cutten]

Quote from ralph00:

A rare move for me, just bought shares in Zillow (Z). I've loved the site for years and it gets better every month, it seems. I've been waiting for a spot to buy ever since its IPO. This company is wildly disruptive to the horrid real estate agent business in this country. If the managers play their cards right, it could be another Amazon (the only difference is I expect Z to make money).

I agree about the potential on this one, but what about the valuation and the risks? It's at a huge multiple of sales, and has no assets or profits to speak of.

 

[Ghost of Cutten]

Quote from Butterball:

Where are you getting 40-50% drawdowns from? The corrections in JGB futs were 7-8% in 98, 03 and 08. Add in TIBOR financing and you're closer to 22-26% DDs.

Well, I was short JGBs back around 2003/04 (can't remember exactly) and they went from 145 to around 128 on the futures, if I recall. That's a 12% drawdown, 36% if using 3:1 leverage.

Anyway, 3:1 leverage on long bonds with such a low yield is suicidal. If Japan ever does serious money printing, you are toast.