There's a Difference between Failure and Fiasco!!

One of the advantages of living in Chicago is that from time to time you can run into successful traders that are willing to talk. In fact, just in our little office of a hundred or so there are quite a few. In fact Andy, the owner has a Gulfstream and a few multimillion dollar houses, all paid for from trading. Trading success is not foreign to me. However what I want to talk about in this post is about one of the more unique traders I’ve come across over the last several decades. This trader, we’ll call him Steve, is a net options seller. This means that he sell’s premium and is looking for time and interest decay over the period the option is active. What attracted my attention was the fact was that he was consistently successful. Month after month, year after year his results were predictable. When asked what the “trick” was that allowed him to be so consistently successful his reply astonished me. His answer was simply this, that he was “willing to be wrong 90% of the time”. This was certainly a new answer and one I hadn’t heard before. I’m sure you’ve all seen the ad’s that say their system is 80% accurate and promises to make a fortune with little or no money invested and here was a guy that I knew was making money – and a lot of it – and he was telling me that he was doing it and being wrong 90% of the time. This was just too good to pass up so I begged him to tell me more. He did. Steve went on to tell me that the vast majority of options expire worthless so the odds were inherently on his side on any given trade. That I understood and knew but then he went on to tell about an experience that happened in 1988 that forever changed his approach to the markets and it’s one that bears retelling. In 1988 the implausible and the impossible happened. The good ole’ U. S. of A. had an honest to god drought. Global warming worked that year, unlike this one. I can remember driving to work at 6 AM in the morning and it would already be 85 or 90 degrees. It was hot. It was also dry and it was early in the growing season. The effects were predictable; the Grain markets went up – a lot. Steve had his customary positions on – short both puts and calls – naked, meaning he had no protection in case he has wrong, because he had the statistics and odds on his side. Besides that, it was too early in the season to have a sustained rally of any substance go against him for any period of time. Well, here’s what actually happened. The market not went against him, it went way against him. The impossible happened and the Soybean market went to $1.099 ½ in late June before topping out. As Steve told it the move nearly bankrupted him. And for all I know it may have, he wouldn’t be the first trader to go bust and won’t be the last but here’s what he came away from the experience with which is more valuable than all the money in the world. “Kid” – he told me – “plan for the impossible”. “What I learned from 1988 is that if I’d simply adjusted the position accordingly I’d have been okay”. “I didn’t and it nearly killed me”. “So today almost every time I make an adjustment I’m wrong. I’d say 90% of the time”. “It’s hard to do knowing you’re probably doing the wrong thing and taking money out of your pocket at the same time. But what I’m doing in insuring against possible catastrophe, like the one that happened in 1988 in the Soybean market”. What he told me was he was willing to accept failure to avoid fiasco. “The moral to the story is that if you can stay in the game, you can win the game”. Steve’s point was well taken, what he meant was that during periods when you’re dead wrong the markets you need to be able to manage it. Control it. And accept failure to avoid fiasco. The implausible/impossible happens all the time and it has to be planned and accounted for. Again - If you can stay in the game, you can win the game. That’s the Treasury Income Engine motto and what I learned from a guy that makes 90% bad decisions by accepting failure to avoid fiasco.

Y el avance sigue

En general volvimos a ver una subida de los indices de bolsa, commodities, rendimientos en renta fija, metales y energias. Con respecto a los commodities sigue quedando claro que la operacion sigue estando atada no solo a la oferta y demanda sino que de una forma muy importante a la actividad del dolar. Cada vez que vemos un moviento de retroceso en el precio de la moneda "Gringa" el precio de los commodities tiende a subir. Los indices de la bolsa siguen su carrera ascendente, el indice Stand&Poors muestra un alza de 41% desde los bajos de 12 anos alcanzado este pasado Marzo. Como deciamos ayer ni el avance del petroleo, ni el avance de los tipos de interes esta teniendo un efecto freno en esta subida. Por el lado accionario parecicera como los inversores se encontraran tratando de ajustar sus portfolios y no seguir manteniendose al margen de la renta variable, el apetito al riesgo vuelve a despertarse. Por el lado del crudo, una posible reactivacion de la economias mundiales en la sguenda parte del ano, esta haciendo que los precios se encuentren con firmeza entre los $72/$73 por barril.

LAS ENERGIAS VUELVEN A LA PALESTRA

Pareciera que los precios de las energias ignoran de forma pasmosa, las variables macroeconomicas y continuan su marcha ascendente iniciada a mediados de Abril de este ano. Cada movimiento al alza pone mayor peso sobre los consumidores y con las tasas de interes en la parte larga de la curva con un continuado y mantenido movimiento al alza, en algun momento va a empezar a hacer efecto en el precio de las acciones y en general en el sentir de los consumidores. Somos espectadores de una accion indecisa en el precio de los indices y como todo un conjunto de variables hacen los compradores no hayan suficiente poder para hacer nuevos altos en este movimineto. En el indice Standard&Poors los 950 puntos se muestran de momento una resistencia considerable.

LOS COMMODITIES SIGUEN SIENDO NOTICIA

Una vez mas vemos como los productos han seguido su buen comportamiento con precios al alza un dia mas.

En general todos los productos operados en los mercados de futuros han tenido un comportamiento alcista. Metales, energias, granos, cafe, etc han visto un dia positivo. Algunos como la soya y el cacao han seguido con su movimineto alcista, mientras que otros han frenado su caida influidos por la debilidad del dolar.

Manana martes los ojos estarn puestos en la subasta de las notas de 10 anos por parte del tesoro americano al igual que en el reporte del Beige Book, ambos datos muy cerca del cierre del dia de operacion.

DOLAR FRENA CAIDA Y ENCUENTRA COMPRA

Siguiendo la actividad presentada en la segunda parte del dia Viernes la moneda verde, ha encontrado compradores en el dia de hoy. La pregunta fundamental es saber si estos comrpadores han sido nuevos participantes en el mercado o ha sido simplemente cobertura de cortos. Sin duda ha habido una mezcla de ambos, pero nos inclinamos mas por un mayor numero de participantes cubriendo sus posiciones cortas que por un auge comprador. Las monedas emergentes no han sido extranas a este movimiento del Dolar. Las monedas emergentes se han comportado con debilidad frente al dolar

Debilidad a diestra y siniestra

Seguimos viendo como la debilidad del dolar ha seguido presnete toda la semana. En general y no solo las monedas del G-7 se han fortalezido contra el dolar, sino que las monedas emergentes han visto estabilidad frente al billete verde. Hoy Vienres el numero del desempleo para el mes de Mayo sera el catalizador de la sesion, tambien hay que seguir de cerca la actividad politica de UK, donde el gobierno de Gordon Brown se tambalea.

todos contra el dolar

Este grafico del peso colombiano, nos ifrece una clara imagen de la debilidad del dolar, no solo contra las monedas del G-7 pero mas importante contra las monedas de mercados emergentes. Peso Colombiano