Global Macro Trading Journal

[Daal]

Some people understand this concept of balace between optimism/pessimism bullishness/prudence longs/shorts-insurance intuitively but they do not understand it at a more concious level. I'm all for having a role for intuition in decision making but becoming more aware of that balance (bringing it to the concious level) can provide a HUGE advantage that more intuitive people (or just flat out ignorant people) don't have.

For instance, if someone were to sit down every week (say, every sunday) and write down the sentence: If I were to become a more balanced investor I would....
and then write sentences to that phrase, over and over again as quickly as possible. I'm sure interesting answers would arise, new todo lists, habits would change, certain people from their social circle would be cut (those that are bad influences on the person's balance), new things would be noticed (that were not before) etc etc
These improvements would compound over months/years. Essentially, exponential improvements over a lifetime. While the intuitive guy who 'knows all of this' and thinks its 'obvious', will be there, with his glacial improvements. 10 years later he will have improved, but not by much, certaintly not as much as the concious person who put more effort in and was more aware of things the whole time...

 

[Daal]

Some people understand this concept of balace between optimism/pessimism bullishness/prudence longs/shorts-insurance intuitively but they do not understand it at a more concious level. I'm all for having a role for intuition in decision making but becoming more aware of that balance (bringing it to the concious level) can provide a HUGE advantage that more intuitive people (or just flat out ignorant people) don't have.

For instance, if someone were to sit down every week (say, every sunday) and write down the sentence: If I were to become a more balanced investor I would....
and then write sentences to that phrase, over and over again as quickly as possible. I'm sure interesting answers would arise, new todo lists, habits would change, certain people from their social circle would be cut (those that are bad influences on the person's balance), new things would be noticed (that were not before) etc etc
These improvements would compound over months/years. Essentially, exponential improvements over a lifetime. While the intuitive guy who 'knows all of this' and thinks its 'obvious', will be there, with his glacial improvements. 10 years later he will have improved, but not by much, certaintly not as much as the concious person who put more effort in and was more aware of things the whole time...

And I say this to hold myself accountable, I'm bringing back these sorts of 'sentence completion' exercises to my weekly routine. I learned about it back in 2002 (through the book, The Six Pillars of Self-Esteem) and it had a huge influence on me back then (it literally saved my life). I then did on and off since them (mostly off, honestly). But now I'm bringing it back, 1 day every week for like 20-30 minutes. That is one sentence that I plan to write on, but there will be many others.
I want to bring back the benefits of conscious exponential improvements instead of relying too much on gut/instincts

 

[sss12]

Good lord, you seem over-exposed. A few bad events at the same time and you're cooked. Is it wise?

@Overnight @Daal I realize this is slightly dated, but I'm just trying to understand Daal's portfolio in the context of the tread, which I've gotten a few good take always, thanks.

So my question, how is this portfolio in post 7433 "over exposed" in Overnight's opinion ? It is roughly 60 % equity plus reit, gold, FI and cash . Is there leverage I'm not seeing ?

 

[sss12]

The Chanos thing is fascinating because he is an INSURANCE TOOL that is used by people that have, usually, lots of bullish positions. His actual fund does not make money (just pull up the numbers from valuewalk.com) but his RELATIVE performance is terrific. He was flat when the SPY returned 10x over 20 years. So he is a good little hedging tool for portfolio managers that went some peace of mind/insurance. Pretty much like Spitznagel buys puts and says it enables him to buy more stocks (although, the Spitznagel model is a lot less capital intensive)

A lot of confusion happens because these gurus TALK in one way but BEHAVE in another. Thats one of the reasons why it took me so long to learn this. You cant listen to these people, you got to analyze the mindset/heuristics/biases/behaviors/events of people that made it big and see what can be learned

In addition to the TALK not matching the BEHAVIOR, the message is even more convoluted when conveyed through the media. Saw jeff gundlach speak awhile ago, what was reported on CNBC was almost opposite of his main take away.

 

[Daal]

In addition to the TALK not matching the BEHAVIOR, the message is even more convoluted when conveyed through the media. Saw jeff gundlach speak awhile ago, what was reported on CNBC was almost opposite of his main take away.

Absolutely. The media has a story they want to tell, they will not facts get in the way of a good story!

 

[Daal]

And I say this to hold myself accountable, I'm bringing back these sorts of 'sentence completion' exercises to my weekly routine. I learned about it back in 2002 (through the book, The Six Pillars of Self-Esteem) and it had a huge influence on me back then (it literally saved my life). I then did on and off since them (mostly off, honestly). But now I'm bringing it back, 1 day every week for like 20-30 minutes. That is one sentence that I plan to write on, but there will be many others.
I want to bring back the benefits of conscious exponential improvements instead of relying too much on gut/instincts

Here are the results of my first time doing that sentence stem exercise

In order to become a more balanced investor/trader

I will stop exposing myself to traders that harm my trades
I will stick with stops no matter what, I will only allow myself to cancel 1 stop per day (I have a habit of antecipating exits because I 'know' I will be stopped out, this has cost me so much over the years)
I will try to list fair and balanced people so I can expose myself to them more and learn from them
I will not resist facts that are against what I think
I will catch myself avoiding hedging/rebalancing when prices are up strongly and greed takes over
I will use my own bullishness as a contrarian indicator to lighten up some
I will use my fear as a contrarian indicator to add to positions
I will avoid chasing at all costs

The actual sentences were more simple versions of that (as the key is to write quickly not avoid 'thinking') but it captures the idea

 

[Daal]

I will stick with stops no matter what, I will only allow myself to cancel 1 stop per day (I have a habit of antecipating exits because I 'know' I will be stopped out, this has cost me so much over the years)

This is a new approach that I will be trying. I'm allowing myself to cancel 1 stop per day (to exit a trade sooner than planned) because I noticed that not letting myself to cancel any stops doesn't work. Its kinda like someone losing weight got to eat a little bit bad here and there otherwise they just quit the diet completely. So I'm on the 'one antecipated exit' per day diet. Lets see if it works

 

[Daal]

Here are the results of my first time doing that sentence stem exercise
I will stick with stops no matter what, I will only allow myself to cancel 1 stop per day (I have a habit of antecipating exits because I 'know' I will be stopped out, this has cost me so much over the years)

I wrote that one because its a habit that contradicts my analysis/gut/experience. I might be bullish on something but then get nervous because of noise, pretty soon I'm liquidating the trade and cancelling the stop because I don't want to 'lose more money', its a dumb move. I'm behaving in a way that contradicts what my methodology is telling me, it unbalances an already good situation. If I buy something and put a logical stop in it, its already a good balance between bullishness and bearishness (or vice-versa for shorts), I should not be messing around with that

 

[Daal]

A great example of talk vs behavior is Jeremy Grantham. Guy talks bearish for like 10 years and then you read about whats is in his portfolio, he is 70% long stocks (loaded with EMs) and 30% in cash (or something like that). He talks bearishly (a fragile behavior in the stock market, as usually you will be wrong exponentially) but behave like a prudent bull (a more robust behavior). This 'I will fade myself' attitute is usually a trick/technique that experienced practioneers learn after a long-time in the school of the real world. But a lot of the time, they don't understand or can explain the technique (its just an intuitive understanding). So when you listen to them, you dont get the wisdom of their intuition (the technique and the mindset that they are using in the portfolio), you get the crap of their concious mind. The "analysis" is that almost worthless because it goes against the way the investment reward its investors and is very fragile when applied without the techniques

 

[Daal]

From my article:

"What is the ideal balance between thinking like a Silicon Valley optimist and a Wall Street skeptic? It’s hard to tell exactly, and numbers represent more art than science but as a general rule, something like 70% optimism and 30% pessimism, in the long-run, makes sense. One should not be a bull or be a bear, investors should look to become prudent bulls (cautious but intentionally biased towards the bull side)."

"-Be careful when listening to financial gurus, a lot of them behave differently from the way they talk. Some of them will go to the media and warn people about all kinds of risks and then when asked whats in their portfolio, they say they have 30% to 50% of their net worth in stocks. They talk very bearishly (which leaves the impression that one ought to short the market or sell all their stocks) but behave more like a prudent bull. Usually they do this because they learned from experience the dangers of very bearish portfolios, as a result, they behave more like prudent optimists (a more robust behavior in the long-run)."

I like this term "prudent bull", it helps to persuade people with bearish tendencies (which should be most people that are unbalanced) to put the prudent term first. It feels less irresponsible, it makes it easier to get them to accept that a bullish bias is a good thing