trading
Monday 29 January 2024
"we are simultaneously everything and nothing."
It is a great paradox that individually we are simultaneously everything and nothing. Through our own eyes, we are everything--e.g., when we die, the whole world disappears. So to most people (and to other species) dying is the worst thing possible, and it is of paramount importance that we have the best life possible. However, when we look down on ourselves through the eyes of nature we are of absolutely no significance. It is a reality that each one of us is only one of about seven billion of our species alive today and that our species is only one of about ten million species on our planet. Earth is just one of about 100 billion planets in our galaxy, which is just one of about two trillion galaxies in the universe. And our lifetimes are only about 1/3,000 of humanity's existence, which itself is only 1/20,000 of the Earth's existence. In other words, we are unbelievably tiny and short-lived and no matter what we accomplish, our impact will be insignificant. At the same time, we instinctually want to matter and to evolve, and we can matter a tiny bit--and it's all those tiny bits that add up to drive the evolution of the universe.
The question is how we matter and evolve. Do we matter to others (who also don't matter in the grand scope of things) or in some greater sense that we will never actually achieve? Or does it not matter if we matter so we should forget about the question and just enjoy our lives while they last?Sunday 21 January 2024
"To be human is to get upset, angry, scared, envious, greedy, fearful, to go on tilt and sometimes to lose your shit altogether.
To be superhuman, is to still do all to that, because you’re human, accept you did that, because your human, then give yourself a break, forgive yourself, take the lesson. Then let go, move on, reset and go again as if it hadn’t happened at all."Tuesday 2 January 2024
Maximizing positive experiences is a brilliant goal! To make the most of this, try diversifying your activities, exploring new hobbies or interests, nurturing relationships, and seeking out opportunities that bring joy and fulfillment. Staying open to new experiences often leads to unexpected moments of happiness. Remember, it's about quality over quantity; finding depth in your experiences can often bring more fulfillment than chasing sheer volume.
Sunday 31 December 2023
Friday 29 December 2023
Happy and Prosperous New Year to everyone!
So, as we head into another new year, resolve to get your trading logic down to watching prices and reacting routinely to them using whatever you decide constitutes your own strategy of how you buy and sell. Clear your trading mind of predictions end execute. Maybe you’ll more easily enjoy the ride in 2024!
Thursday 28 December 2023
A compelling risk-reward profile.
The best part? It snatched up that land out from under Chevron's nose … and was rewarded with possible reserves up to 285.3 million barrels of oil equivalent, according to a recent, independent, third-party assessment.
Oh, and because Prairie is only just now hitting the NASDAQ, it's still under $70 million market cap … despite its potential reserves.
Tuesday 26 December 2023
Sunday 24 December 2023
Thursday 21 December 2023
"The American Tourist and the Mexican Fisherman."
An American tourist was at the pier of a small coastal Mexican village when a small boat with just one fisherman docked.
Monday 18 December 2023
Tuesday 14 November 2023
"Doing the Unsexy but Important Stuff"
In trading, numerous practices fall into the realm of being uninteresting, dull, or unappealing. Reviewing your performance and actions is one such practice. I'm not referring to a quick analysis of the day but rather delving deeply into self-examination—scrutinising yourself, your behaviour, your thoughts, and your actions and reactions. This is a fundamental aspect of 'being a student of yourself,' not solely 'a student of the markets.' Being a 'Student of Your Self' constitutes one of the hallmarks of the very best performers.
In this matrix, there are four squares. The square at the top left is designated for all your activities that are 'urgent and important.' This is where people allocate most of their time and energy, although quite often they end up engaging in numerous tasks that belong to the bottom-left square—urgent but not important. Consider the time spent inanely 'watching every tick' or dedicated to meaningless hours on social media."
It is however the top right square which, where time spent and devoted to, is what leads to great performance. This is the square where the stuff that is ‘important but not urgent, nor exciting’ or sexy, is done. This is where growth and elite performance capabilities spring from. This is where Kobe Bryant lived!
The Unsexy but Important Stuff of Trading
Journaling, reviewing, self analysis, planning, developing, working with mentors and coaches. Also doing the equivalent of training, such as going on courses, working with a performance coach to become better, learning new techniques or skills which may benefit you. Also attending events where you can learn from others. Spending time reading about and developing areas you are weak on. Reading books, whilst also taking notes on what you are reading where it matters. The same goes for listening to podcasts.
There are also activities which are more self-state focused; doing things that remove you from the noise and help you refresh and recover to become stronger mentally. Physical activities such as going to the gym, running, swimming, yoga, meditation, mindfulness, or just recuperating breaks.
The covey matrix is a matrix for life, if you don’t do the stuff on top right, or you keep putting the stuff in that space off, you are ‘selling yourself short’. You may not see it on a daily basis, but in the future if you aren’t achieving what you dream of, you'll one day look back and say, I should have done more of that stuff, I just could not be bothered at the time.
Wednesday 1 November 2023
Monday 23 October 2023
Sunday 22 October 2023
Wednesday 11 October 2023
Thursday 28 September 2023
Thursday 31 August 2023
"Where should I invest?"
Wednesday 16 August 2023
"Where should I invest?"
Two days ago we reviewed different investment philosophies. The 100% cash portfolio highlighted the considerable carry we can get from cash, the 100% stock portfolio reminded us that it is important to maintain a high level of risk, and the risk parity portfolio pointed out the benefits of bond-equity diversification.
Then yesterday we made a list of the key candidate components in our portfolio: cash, treasuries, value and momentum stocks, crypto, commodities and real estate.
Today we bring it all together. Our guiding principles will be: (1) be ready for a mid-cycle slowdown, (2) maintain carry, (3) maintain equity upside, because the market could continue to rally, (4) keep some dry powder to buy markets lower.
Step 1, we will divide our allocation in 2 buckets, risky assets and safe assets, and use the traditional 60-40 split. We can certainly be more sophisticated than that, but this is ok for now.
40% Risky Assets
60% Safe Assets
Step 2, we allocate to our safe assets. We probably want to keep 20% of our portfolio in cash to see if we can buy equities a bit lower than 20 P/E. The rest can go to Treasuries.
40% 10y US Treasury, 4.1% yield
20% Cash, 5.4% carry
Step 3, we allocate to our risky assets. Our standard play could be a half-half split between momentum and value, but we want to make space for real estate and oil. Given the extraordinary momentum of the Magnificent Seven, we don’t want to limit them too much as value still needs to demonstrate it works.
20% Magnificent Seven, 0.1% dividend yield
10% Value Stocks, 3-4% dividend yield
5% Oil, 8% carry
5% Crypto, 3.3% carry
In conclusion,
40% Risky Assets
20% Magnificent Seven
5% Value Stocks
5% Real estate
5% Oil
5% Crypto
60% Safe Assets
40% 10y US Treasury
20% Cash
If the market rises, our risky assets will go up and our safe assets will give us 4.5% carry. If the market falls, the appreciation in our safe assets will make up for our largest losses and allow us to tilt back into risk assets at lower valuations. Or at least, that’s the theory.
In practice, professionals will use past history and monte carlo simulations to assess the max drawdown you will likely experience - and tune your portfolio accordingly. But the result won’t be massively different from what you see above.