Archive for January, 2010
Victor was in town for business for a few days and while we were at breakfast this morning he mentioned a good book to read. So naturally, I thought I would in turn mention it to you. It’s called Fiat Money in France, by Andrew Dickson White. [I also recorded about 11 minutes of HD video with him that I'll post in the next few days - classic Victor - great stuff. It's just us at the table, not a fancy presentation, fyi, but no one can top his candor.]
I just looked the book up as soon as I got in, and it turns out that the book is available for free on the internet b/c there is no copyright in the US. You can also down load it from Amazon to your Kindle for free also.
Here is an excerpt:
Early in the year 1789 the French nation found itself in deep financial embarrassment: there was a heavy debt and a serious deficit.
The vast reforms of that period, though a lasting blessing politically, were a temporary evil financially. There was a general want of confidence in business circles; capital had shown its proverbial timidity by retiring out of sight as far as possible; throughout the land was stagnation.
Statesmanlike measures, careful watching and wise management would, doubtless, have ere long led to a return of confidence, a reappearance of money and a resumption of business; but these involved patience and self-denial, and, thus far in human history, these are the rarest products of political wisdom. Few nations have ever been able to exercise these virtues; and France was not then one of these few.
Sound familiar?Read More
In 2006 Muhammad Yunus was awarded the Nobel Peace Prize for show(ing) himself to be a leader who has managed to translate visions into practical action for the benefit of millions of people, not only in Bangladesh, but also in many other countries. Loans to poor people without any financial security had appeared to be an impossible idea. From modest beginnings three decades ago, Yunus has, first and foremost through Grameen Bank, developed micro-credit into an ever more important instrument in the struggle against poverty.
Yunus’ concept of the micro-loan and how he envisioned it to change the world inspired Joel Bender and Kayoko Mitsumatsu to found Yoga Gives Back, a non-profit organization that coordinates fundraisers throughout the world.
Yogis Anonymous (YA) will hold its Yoga Gives Back fundraiser Saturday, January 30 beginning at 7:30 pm. Ally Hamilton said in a recent interview, “We’ve been doing a lot of giving back recently, especially with Haiti.” YA held 3 fundraisers for Haiti relief efforts.
The 2-hour Yoga Gives Back fundraiser @ YA will feature 4 esteemed yoga instructors from Yogis Anonymous, besides Hamilton, including Chani Nicholas, Charlie Samos, Meredith Hines, and John Sahakian.
The event will also feature live music through the voice and hands of Hamilton’s YA co-founder (and husband) Dorian Cheah, as well as Daniel Stewart, Emily Kerns, Jeff Harris, and Greg Klimuck.
You are encouraged to register online as space is limited. Refreshments are provided by the awesome generosity of Sambazon Organic Acai Beverages and Whole Foods Market Santa Monica.
Most of the other YA instructors wanted to share their love and compassion with the Los Angeles community, for Haiti, and in support of Yoga Gives Back. Read them, recite them, and see how you might be inspired by them. There are 18 YA instructors who each provided 6 for a total of 108 inspirations – the significance of which is very spiritual. The full list is below.
Mary Beth LaRue (pictured above) said “I want to use my yoga every day, at least once…and use Facebook less” while Chani Nicholas said, “I’m going to practice radical acceptance.”
I loved this from Charlie Samos the most: “to never be forced to take a bow, but rather to surrender, receiving the lesson, and with one breath and beat of my heart, to stand tall, with acceptance and wisdom.”
Brock Cahill added, “Acknowledge the blessing of choice, and make firm decisions based on the the intrinsic and devine wisdom of my soul” while his wife Krista said, “I want to bring more awareness to preventive medicine.”
Ashley Turner mentioned “To be more loving in every moment–most of all to myself — and to practice yoga more…” And this is from an instructor who teaches at several schools…Jai Ho!
Photo of Mary Beth LaRue courtesy of Ashley Turner Photography.
This article originally appeared in the Huffington Post.Read More
If you are self-taught and are want to become a professional trader – either Prop Trader or CTA – you have your work cut out for you. You are unknown and will stay that way unless you go out of your way to change that. You are at a distinct disadvantage to those who’ve been trained at a big firm and have colleagues and relationships they can tap.
That said, the trading world loves a guy coming out of left field with a new slant on things, so don’t be discouraged – you just have to want it more. Also to consider, many folks with a pedigree lack ambition – their character is not fully developed yet b/c they haven’t had to struggle to much.
Most traders are great on the quant side, but they are horrible at marketing – and marketing is how you’re going to get noticed. The good news is that I’ve been there and if you follow the steps below, you will go a long way towards getting noticed, getting an allocation, and saving an enormous amount of time in the process.
Get a professional Head Shot
Pay the money to have it done. Don’t take the best one off of your Facebook page b/c you know how to right-click your mouse or do a Command-Shift-4 screen grab. You will use it for years and the ROR on it will pay for itself.
You can use hypothetical results from your backtesting to market, but you’re better off having at least 3 months of actual trading
Two years ago, I knew of guys raising a few million from allocators based upon their hypotheticals. This is not the market for it right now, however, so IMHO you’ll do much better with at least 3 months of actual trading performance. As long as your drawdowns in within model, that’s ok. You’re not going to get an allocation on the first meeting anyhow – you just looking to get on the allocators’ respective radar screens.
Most importantly, you want their permission for you to send them your month-end numbers. You will do this via email to someone named Britney who is most likely an assistant. Don’t take it personally, and whatever you do, always be very generous with your Thank You’s and Please’s. Be prepared to send data for MONTHS…
You need to get followed like in Social media
There are a few online places that you can upload your data and c.v. to. Online places like AutumnGold and IASG are 2 good places to start. Once you’ve got those covered, look into Altegris Investments in La Jolla, CA.
You’ll want to have a short bio that gives anyone reading it the meat and potatoes of who you are. IMHO, Less is more. If your bio is 5 pages, it’s a bore and you look full of yourself. In the trading wold, your P&L is your credential – end of story. No one cares how smart you are, especially when you’re starting out. Keep it brief and full of talking points only.
Side Note: If you have one of those moments in life that you’d rather not remember never mind talk about, here’s how to handle it…
Don’t put it in your written bio. During the in-person or phone interview, you’ll sense that there will be an appropriate time to tell who you are speaking with. Most allocators WILL do a full background check, so if you have something to say, you’re 1,000 x better off telling them in person before they see it on some sterile report.
Outcome: If nothing else, you will garner a lot of trust by looking the person in the eye and telling them the story. Everyone knows that it will be hard to do and you score big points for bringing it up and being honest on the onset of the relationship.
Don’t be a cliche
Don’t say you’re the next Bud Fox or whatever or deploy overused quotes from movies or popular culture. You’ll look like a jackass. Be yourself and speak your own strengths – whatever they might be. If you are lucky enough to get an allocation, it will be for everything you bring to the table, and CLARITY of what you CANNOT do. Knowing both is an absolute strength.
In other words, you will be joining a stable of very talented traders who’s collective abilities will play off one another in a portfolio. If you feel like a jerk writing these things about yourself, ask a good friend for 3-5 things that they admire in you, especially about your character.
I’ll have Part 2 for you in the next few days.
I am not affiliated with any of the firms mentioned here.Read More
A judge ruled that Canadian trader Brian Hunter was found to have manipulated the Natural Gas market on the NYMEX. The exchanges now should move in and ban him permanently from trading.
Bloomberg News said on its website, “Hunter knew that New York Mercantile Exchange natural gas prices could be manipulated and set out to do it, the administrative law judge, Carmen Cintron, said in an 80-page ruling issued on a commission docket today. The ruling is subject to review by the full commission.”
“It is found that Hunter intentionally manipulated the settlement price of the at-issue natural gas futures contracts,” Cintron wrote. “His trading was specifically designed to lower the NYMEX price in order to benefit his swap positions on other exchanges.”
Hunter was the head energy trader at Amaranth Advisors LLC, an investment advisory firm, when it ceased operations.
At its peak, Amaranth managed $9 billion in hedge fund assets, but lost $6 billion in natural gas due to highly leveraged trades Hunter amassed for the firm. Hunter reportedly leveraged his trades for Amaranth 8:1. To put that into perspective, at their most aggressive posture, most other traders will not exceed 3:1 leverage over their entire portfolios, never mind one position in their portfolio. [These trades put Amaranth under, but were not part of the recent ruling for market manipulation.]
What Hunter did to warrant the manipulation ruling was what locals refer to as banging the close. By flooding the NYMEX with Sell orders in Nat Gas in the last 10-15 minutes of trading (the Close), Hunter found that he could manipulate the price downward as there were no likely buyers for the type of size he was representing for sale.
Hunter concurrently held similar Nat Gas positions at the ICE that were much larger. Those positions are called look alikes, because they a not physically settled like their counterparts at the NYMEX are. After First Notice, those long contracts can be delivered against. This is true for any commodity.
Conversely, ICE contracts are settled financially, like the S&P 500 for example, so a trader does not have to worry about getting delivered against. Hunter was short his contracts, so he did not have to worry about delivery in this case. His goal, however, was to artificially depress NYMEX Nat Gas contracts so as to lower his larger ICE look alike Nat Gas contract position and burgeon his account balance. Herein is the manipulation.
Hunter was manipulating the price downward, so if anything, it may have benefited consumers. However, manipulation in any market manner is unlawful. He likely affected other traders who might have had to contribute higher amounts of margin (collateral) for their commodity accounts in order to maintain their positions.
Hunter’s attorney Matthew Menchel said, “The FERC should never have presided over this matter, which is outside its competence and jurisdiction. Its decision means nothing in our view, and the FERC will have to accept the consequences when we get to the DC Circuit, which the FERC has been trying to avoid for the last few years.”
I disagree. And arguing some technicality does not vitiate the finding that he deliberately manipulated the Nat Gas market. He has personal responsibility for all his actions at all times.
You have the letter of the law and the spirit of the law. Hunter’s behavior seems to have violated both in this case.Read More
It’s fun times these days to be a commodity trader / blogger. There is no mid-range to the comments. Most of the criticism or descending comments I get on anything I write about the role of commodity traders usually has the undertone of populist anger around TARP. I try to present a balanced argument to the anger that is misplaced on managers of commodity hedge funds and CTAs who get lumped in with the big banks who benefited from the bailout.
Wall St. is divided by partisan lines. But in the United States, Republican and Democrat politicians are Corporatists. The terms Democrat and Republican refer to how individuals are registered to vote, or who takes a certain side of an argument. The recent SCOTUS ruling means that China Investment Corporation can sway elections here in the US. Trends persist.
I do not have a political agenda, unless of course you think that being a proponent of preserving individual liberty and personal sovereignty is an agenda, then I have one. In my paradigm, I am responsible for everything that happens in my life…good and bad. I cannot blame anyone for my failures or the times when I’ve had bad luck. That is so foreign to me anymore, I don’t think blaming others for my failures would even feel good.
When Refco went under, I lost my one and only client at the time. And we were dealing with their Indian subsidiary…we were shot by friendly corporate fire. But, no one held a gun to my head and said “bank on one large client.” That was my doing. I admit to having visions of putting a 38-ounce Louisville Slugger to the forehead of Phillip Bennett, the now imprisoned Refco CEO, but that was just a mask for my fear of losing everything. There was no TARP money for me. There wasn’t an SBA loan either. There were friends and family, and my sense of persistence and determination.
I’m not a fan of any politician on either side of the aisle. For the life of me, I don’t know how anyone can idolize a politician. Nor do I idolize my mentors Ed Seykota, Victor Sperandeo, and Jim Rogers, for example. They continue to be kind and generous with me. I celebrate their mentoring and teaching and I pay it forward by sharing as much of it as I can with the readers on my blog for free.
My debate is not with those who criticize me or the commodity futures industry – I don’t think they fully understand how risk transfer markets work. It is with arrogant members of the academic community and especially those in the self-interest groups who believe in abolishing individual freedom and free markets to exert power or control over others.
Economically speaking, academics think in terms of pay-grades and tenure. I think because of that, it seems, they decree a sense of what is fair and what is not. They have no choice but to accept that there is only so much they can earn for all their teaching skills. Frankly, I believe that teachers, instructors, and professors are underpaid, but they do not stand on a higher moral ground because of the choices they’ve made professionally.
Special-interest groups are myopic at best. Whereas Wall St. benefited handsomely from the Greenspan and Bernanke Puts (Put Options), special interest groups want Legislative and regulatory Call options: they want all the upside, but don’t want to pay for the option.
Professional investors earning huge sums of money each year, while the rest of the country is hurting is not an injustice. It’s progress. And trying to cap one’s income or legislate one’s behavior takes the United States backwards, not forwards. Education is the answer – especially in financial literacy. Education is what will close the gap, and IMHO it’s far better to encourage individuals to progress, than to truncate or retard their growth.
The whiners who blather about “what is fair” have already surrendered their power. They are in the camp that the government or a regulator should decide an individual or a group’s fate. I suggest that they learn to trade to better manage their risk or to enhance their compensation. It might also give them a new found sense of liberty. Fairness is a form of reality.
Americans are hurting now, and I genuinely feel for those who are out of work or have suffered through the real estate crash, have been laid off, or downsized. My father was in a labor union and spent months out of work in the late 70s. It was very painful financially and emotionally. I don’t blame President Carter: he made some very stupid decisions, but so did Presidents Nixon and Ford.
I teach anyone who wants to learn and I love when students argue because I know I’m challenging their set-in stone beliefs. My classes have a wide-array of students from various backgrounds and ability levels. Essentially, I teach Risk Management in the form of commodity trading to all types of traders, investors, and hedgers:
- CFA Charter holders who want to go beyond their professional studies of their charter
- Equity Mutual Fund managers who want to learn more about the cyclical markets of commodities
- MBAs, CMTs, Ph.D’s, and CFA’s who manage Equity or Fixed Income portfolios who want to manage basis risk
- Forex dealers
- Individuals who want to become CTAs or commodity investors
- Individuals who are looking for a change in career
My classes are very heavily represented by the hedging community.
- Energy companies
- Energy wholesalers
- Agriculture firms
- Electric Utilities
- Firms that use crude oil distillates to produce their products
- Individuals and firms who want to hedge an adverse move in a currency their dealing with
I am no apologist for a trader’s bad behavior on either side of the transaction. If a large trader can dominate the market, it hurts me, so naturally I’m against it.
If a commodity user or producer does not engage in hedging, and the commodity in question is an integral part of the business, then they are at the same time, foolish, gamblers, and irresponsible.
This post originally appeared in at The Ludwig von Mises Institute. You should read the comments there too – very insightful.Read More