Posts
Apologies for the long delay from MCFX. We passed our own 20% down take-a-break marker. The catalyst being obvious from the first line of our last post. Long equities. Okay, so the bear-market rally we were harping on about. Yep. That one that didn't happen. Well exactly. Pretty harsh.
We disappeared to France to take some time abroad to ponder things. We came back more bearish EUR longer-term though wary that Ireland may be bailed out by Europe at any moment which may cause some painful volatility.
We've been jobbing bits and pieces in smalls - none of it successfully. Only trade we still believe in is long GBPCHF which we've jobbed quite successfully and still hold.
Other macro thoughts include that we are giving up on equities. We still believe at some point they could have a massive rally but longer-term we are coming around to the theory that the cult of equity is over. I think the pain this time will be too long. There will remain tradeable opportunities over the coming years but I'm no longer convinced that equities will necessarily be higher in 5 years time than they are now. At least not in real terms. In nominal terms they probably will but surely there is a better way of playing that reflationary trade?
However, relative value we can't help but feel that long German equities against short Spanish equities will be a great trade (thank you MPPI for this idea). Amazingly, they've performed roughly similiarly over the last few years. We can't help but feel that Spanish equities are horribly screwed to put it nicely. They are stuck in a deflationary environment with increasing unemployment. I don't like having outright equity exposure so hedging with German equities makes sense. They are quite highly correlated being in the same investment bracket for most funds but the divergence should grow.
Another idea which MCFX's brother has been talking about is long oil vs short gold. I like long oil over a longer-term period. It will rocket again at some point: the thing about oil is the supply side is much stickier than the demand side. Falling demand has been the story of this collapse in oil prices but supply is also falling, albeit slowly, but eventually just as viciously, and when demand starts picking up that supply won't be able to come online again so quickly. It's also a way of playing the reflation trade. So longer-term we really like long oil.
Gold we also think will do well in the impending world inflationary environment. The problem is that anecdotally every Tom, Dick, Harry and Mary are in this trade. There is not enough gold around to make the gold ingots demanded by the private sector. This worries me. I think gold can take a horrendous whack short-term.
So in conclusion, while we like the thinking behind this trade as a relative way to play the commodity reflation story, we just think that the timing of both parts of the trade is very very difficult.
That's all for now. MCFX is returning to France next week - this time to formally improve his French. I may update from abroad but only if I'm inspired - and these markets are seldomly inspiring me nowadays!
Good luck!
Friday, 27 February 2009
Wednesday, 11 February 2009
Equity madness
Ok MCFX is getting carried away again. I am buying equities like there is no tomorrow. SPX March future to be precise. Since last night, I've been adding little chips to the core position mentioned yesterday. We are very leveraged... but stops are staggered and some very close. A 1% move in stocks causes a move in excess of 4% in our fund. Madness.
But we plan to keep on adding if it rallies from here. Against that, we'll keep on tightening up our stops. Between all our current positions, including our initial entry at 843.5, we've entered at an average of around 832 in the March future. And we're risking a total of about 7% of our fund at the moment.
We also now have short EURAUD again having sold at 1.9838 for the March IMM date. We picked our entry level nicely on this one with the rally overnight not going much higher.
And finally we have long GBPCHF on again entering at 1.6658 for the June IMM date.
MCFX is using some of his spare time to research more and more the press around previous bubbles / crashes. It's easiest to find articles on the Asia crisis, Russian crisis, LTCM, and the Internet boom so this is where I am focussing. I'm hoping it will give me a greater insight to market psychology around bear-markets - but bizarrely all this doom-and-gloom reading is only making me more bullish. I have become entrenched in my view that a decent rally is on the horizon; whether bear-market rally or genuine start to the new bull-market I am less convinced, though still definitely err towards the former option. Having already expended so much capital on all the previous false dawns, I'm keen to catch it when it happens. This kind of attitude is what kills traders / funds. Being too aggressive too early. Though I do the current market sentiment is ripe for the move. And I will tighten up my stops aggressively as, and if, the market runs.
The fund is currently down 13.7508% ytd. Upsetting. Though given current position size in equities, this will probably change significantly in one direction very soon. We must remember that this fund is targetting 100% returns on the year. Which means that we are looking to make nearly 9% average per month. Average. Including down months. So -13.7508% is in no way denting our plans - only our ego.
Good luck!
But we plan to keep on adding if it rallies from here. Against that, we'll keep on tightening up our stops. Between all our current positions, including our initial entry at 843.5, we've entered at an average of around 832 in the March future. And we're risking a total of about 7% of our fund at the moment.
We also now have short EURAUD again having sold at 1.9838 for the March IMM date. We picked our entry level nicely on this one with the rally overnight not going much higher.
And finally we have long GBPCHF on again entering at 1.6658 for the June IMM date.
MCFX is using some of his spare time to research more and more the press around previous bubbles / crashes. It's easiest to find articles on the Asia crisis, Russian crisis, LTCM, and the Internet boom so this is where I am focussing. I'm hoping it will give me a greater insight to market psychology around bear-markets - but bizarrely all this doom-and-gloom reading is only making me more bullish. I have become entrenched in my view that a decent rally is on the horizon; whether bear-market rally or genuine start to the new bull-market I am less convinced, though still definitely err towards the former option. Having already expended so much capital on all the previous false dawns, I'm keen to catch it when it happens. This kind of attitude is what kills traders / funds. Being too aggressive too early. Though I do the current market sentiment is ripe for the move. And I will tighten up my stops aggressively as, and if, the market runs.
The fund is currently down 13.7508% ytd. Upsetting. Though given current position size in equities, this will probably change significantly in one direction very soon. We must remember that this fund is targetting 100% returns on the year. Which means that we are looking to make nearly 9% average per month. Average. Including down months. So -13.7508% is in no way denting our plans - only our ego.
Good luck!
Tuesday, 10 February 2009
What happened to MCFX?
This is the frequent question I've been hearing recently...from the multitudes (5 people) who follow this blog.
MCFX has no real excuse. Though since I live in London, I feel I can unashamedly blame the weather and once in a millenium (something like that) snowstorms. Everything else seems to have died in this country once the snow hit the 2cm mark. It's quite worrying how the whole country came to a halt for weather that is relatively common place throughout much of Europe.
On top of that, MCFX has been distracted by the enjoyments of unemployment. Bloomberg connection has been cancelled and we have largely tuned out from the markets. This tuning out was aided by the fact that we got cleaned out on the equity dip at the start of the month. We bought in too aggressively and got punished. We followed up that idiocy by not cancelling our stop-entries on the topside and then getting hurt on some of those as well as the bounce was volatile. Frustration abounded.
Overall we lost over 8% through equity idiocy since our last post - a tremendous chunk of our capital. Fortunately we made good money on our currency positions (apart from AUDJPY which we got stopped out with at the start of last week) - in the last 24 hours, we have stopped out of the rest of our positions with decent profit. EURGBP around 0.8800, GBPCHF around 1.7000 and EURAUD around 1.9500 for our respective dates. We have orders to re-enter these positions for the same dates around 0.9120, 1.6650 and 1.9850 respectively.
We have also charged back into equities today on this afternoon's dip. Way too enthusiastically again. We are chasing it seems. We are risking about 5% of our portolio having entered around 838 level for the March SPX future. Stops vary from 815ish level down to 805ish level.
Will try to get back into the swing of things soon. And update on some developments. And our different perspective on the markets now that we have taken a step back and do not have the daily swathe of bad data.
Good luck!
MCFX has no real excuse. Though since I live in London, I feel I can unashamedly blame the weather and once in a millenium (something like that) snowstorms. Everything else seems to have died in this country once the snow hit the 2cm mark. It's quite worrying how the whole country came to a halt for weather that is relatively common place throughout much of Europe.
On top of that, MCFX has been distracted by the enjoyments of unemployment. Bloomberg connection has been cancelled and we have largely tuned out from the markets. This tuning out was aided by the fact that we got cleaned out on the equity dip at the start of the month. We bought in too aggressively and got punished. We followed up that idiocy by not cancelling our stop-entries on the topside and then getting hurt on some of those as well as the bounce was volatile. Frustration abounded.
Overall we lost over 8% through equity idiocy since our last post - a tremendous chunk of our capital. Fortunately we made good money on our currency positions (apart from AUDJPY which we got stopped out with at the start of last week) - in the last 24 hours, we have stopped out of the rest of our positions with decent profit. EURGBP around 0.8800, GBPCHF around 1.7000 and EURAUD around 1.9500 for our respective dates. We have orders to re-enter these positions for the same dates around 0.9120, 1.6650 and 1.9850 respectively.
We have also charged back into equities today on this afternoon's dip. Way too enthusiastically again. We are chasing it seems. We are risking about 5% of our portolio having entered around 838 level for the March SPX future. Stops vary from 815ish level down to 805ish level.
Will try to get back into the swing of things soon. And update on some developments. And our different perspective on the markets now that we have taken a step back and do not have the daily swathe of bad data.
Good luck!
Subscribe to:
Posts (Atom)