Global Macro Trading Journal

"When this asymmetry is present, there is not a lot of margin for error for being a pessimist; quickly, it becomes an awful financial decision. This leads one to think that being an optimist by default is a superior mindset. An optimist needs to capture just a few highly successful investments in his lifetime to make a lot of money and retire. A pessimist, usually, needs to be right constantly and keep having great ideas to generate returns. I say usually because there are some examples of people that got very rich very quickly by being pessimists, like Nassim Taleb in the crash of 87, John Paulson and other investors in the crash of 2008 and big name fund managers like George Soros and Stanley Druckenmiller."

"But for every pessimist that got rich that way there are hundreds or thousands of people that got rich by being optimists, just consider that most people become millionaires by owning real estate or by opening a business. A pessimist, even when he is right, ends up hurting himself because he gets the illusion that he can be unbalanced in his mindset and that is ok. If his name isn’t Stanley Druckenmiller, chances are it isn’t ok. In the long-run, he ends up paying by missing out on opportunities. A pessimist, even when he wins, loses."
 
Daal said:
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
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I would note that this is similar to the NY type guy who talks shit about a certain stock/technology but does not have any short position on it and says "I'm not fighting this tape/trend/freight train". He will yap away all day long about how this or that is a bubble and is 'ridiculous' but follow his intuition that no position is warranted. Usually because he learned from the school of hard knocks that fighting exponential trends is a fools game, but that does not stop him from yapping away about how stupid the investment is, how much it is going to crash, etc , etc

Effectively he HARMS people by inducing them to sell/short/avoid a certain investments by using his concious mind when making bearish comments but uses his intuition when making trading and investing decisions . This seems wrong to me
 
I'm reading Outliers by Malcolm Gladwell, this book is fantastic. I had avoided buying this book years before because I had read some negative articles about it saying that he was wrong about some stuff but its mostly bs, what he says in the book I find it very hard to debunk (People skill + luck have an advantage over simply skilled people, and therefore they will become the outliers especially in a winner-take all society, I don't need a large study to believe something that is so obvious). But there is one fascinating thing that he talks about, the idea of "Hofstede's cultural dimensions theory"
https://en.wikipedia.org/wiki/Hofstede's_cultural_dimensions_theory

This thing is great, it helps explain a lot of what happens in society due to the fact that there is certain culture inheritance/trends. For instance, the US is the country with the highest individualism index, people are expected to take care of themselves, be self-reliant. Its not a surprise that an author such as Ayn Rand found a lot of success there, in more collective countries, she would have no chance.
I realized that this is what I was trying to get at by saying that New Yorkers have a certain tendency vs people from San Francisco, its not something that people can get very easily because there are plenty of individual exceptions (so people might say 'I know this person and he is not like that') but there is an overall tendency and thats what I was getting at

Furthermore, knowing more about my country tendencies (High respect for authority, collective, doesnt like uncertainty) I can better understand myself and fix my own flaws and weaknesses, as well as understand why they are hard to fix (we are influenced by people we spent time with so it might require constant vigilance). I highly recommend Outliers
 
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Daal said:
I'm reading Outliers by Malcolm Gladwell, this book is fantastic. I had avoided buying this book years before because I had read some negative articles about it saying that he was wrong about some stuff but its mostly bs, what he says in the book I find it very hard to debunk (People skill + luck have an advantage over simply skilled people, and therefore they will become the outliers, I don't need a large study to believe something that is so obvious). But there is one fascinating thing that he talks about, the idea of "Hofstede's cultural dimensions theory"
https://en.wikipedia.org/wiki/Hofstede's_cultural_dimensions_theory

This thing is great, it helps explain a lot of what happens in society due to the fact that there is certain culture inheritance/trends. For instance, the US is the country with the highest individualism index, people are expected to take care of themselves, be self-reliant. Its not a surprise that an author such as Ayn Rand found a lot of success there, in more collective countries, she would have no chance.
I realized that this is what I was trying to get at by saying that New Yorkers have a certain tendency vs people from San Francisco, its not something that people can get very easily because there are plenty of individual exceptions (so people might say 'I know this person and he is not like that') but there is an overall tendency and thats what I was getting at

Furthermore, knowing more about my country tendencies (High respect for authority, collective, doesnt like uncertainty) I can better understand myself and fix my own flaws and weaknesses, as well as understand why they are hard to fix (we are influenced by people we spent time with so it might require constant vigilance). I highly recommend Outliers
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And what's funny is that he talks about how NY air traffic control people are much more of dicks/assholes than other places, as a result, this actually has an effect on Aviation (the whole Aviation chapter is awesome). In my experience, this assholeness correlates well with contrarianism/skepticism which can easily lead to fighting convexity in markets
 
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Its important to note that the 70% 30% balance that I referred to is what I believe it good for an investor's mindset, not to a portfolio (say 70% stocks 30% bonds) or the ideal balance for a trader. The portfolio allocation will depend on a lot of things like opportunities, cheapness of the markets, risk tolerance, etc. And those things change overtime. The % I came up with has more to do with the mindset of the investor rather than anything else. If I had to hire a stock manager, I would try to find a balance like that because the best stock managers have that sort of tendency (skepticism/selectivity but an with an inherent biased optimism).

For traders, the balance can be almost anything and it can work. I know great traders that are 80% bearish and 20% bullish, they day and swing trade stocks short and it works wonders for them. If they tried to become more bullish, it could easily hurt their performance. So they do not need 'balance'. Only a trader knows what kind of balance he needs, it comes from experience, knowing yourself, testing, trial and error, etc.

I do think that on investing and most wealth creating activities, that 70/30 mindset balance makes it EASIER to make a lot of money because it is aligned with convexity more often
 
Daal said:
I understand Taleb a lot better now, these people live in such a ridiculous bubbles that a lot of the time, the ONLY way to get through their heads is to humilate them socially and intelectually. If you just act nice, they will put out this ego defense field and rationalize crap to defend their patethic egos and points, and then life goes on. But if they hit rock bottom because they get absolutely destroyed by someone else, they might 'get back to earth'. I know that there is a lot of people that report overcoming ego issues after hitting rock bottom. I know for traders that's how it works you think you are the greatest until you hit a drawdown, then you are humbled back to earth and get over past ideas/beliefs/crap

I was trying to do that with this intelectual yet idiot, but he quickly ended the debate and wished me good luck. I got to say, I'm tempted to email him again anyway, the shit that he is saying is so absurd that deep down, he knows he is full of shit. Its just that all that ego consumes and confuses his intelligence
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For what it's worth, Taleb blocks a lot of people on Twitter. It appears that he doesn't take nicely to people who disagree with him.

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m22au said:
For what it's worth, Taleb blocks a lot of people on Twitter. It appears that he doesn't take nicely to people who disagree with him.

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I agree. He is intolerant and appears to have grandiose/ego tendencies. He reminds me of Ayn Rand, they might have good ideas but they are awful examples of how to behave. Taleb will list all many great reasons for lashing out at some people, he will say its all based on logic and the greater good but I tend to doubt that. At least to some extent his ego seems to guide him. I'm a centrist on this (as in most issues), sometimes lashing out makes sense, sometimes being nice makes sense. Taleb default option for dealing with academics/critics seems to be to offend them, I doubt this helps them change their minds. If anything, it probably just makes them more committed to their previous position
 
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