Archive for August, 2011
Sperandeo: American Spectator Article
Victor and I are teaching another Master Class in the fall. Email me if you’re interested. Details to follow.
In the meantime, Victor wrote an article called “The Fed’s Philosopher King” for the American Spectator magazine.
“In the Communist Manifesto, Karl Marx listed ten absolute principles for overturning capitalism. Number five on his list is the most relevant when discussing the Federal Reserve: “Centralization of credit in the hands of the state, by means of a national bank with State capital and an exclusive monopoly.”"
It only gets better from there…
Read MorePortfolio Heat: When Corn Starts Popping
(click graphic for larger image)
When your portfolio heat increases too fast, too soon, you need to cut your position size(s) down to lower the overall risk to your portfolio. Else you have a Jiffy Pop portfolio…
Great corn infographic from an the article The Factors Driving Food Prices at the CME Group’s Open Markets blog that delineates things that affect corn prices and thus, portfolio heat. Above and beyond supply and demand are these 9 factors that all add up to what corn trades for on the CBOT. You can spend a lifetime studying “farmland,” for example, and what other crops compete for acreage (it’s soybeans).
You do not need a higher level of uncertainty of too many of these facets to dramatically increase your portfolio heat. When the portfolio heat rises too fast and the corn starts popping, pro traders will cut their positions fast — not because they don’t believe in the trend anymore — but because their main concern is to manage risk.
Read MoreMutual Fund Industry Is A Corrupt Lobby – Learn To Trade
With years of less than average performance (compounded) and marketing budgets that would eclipse make Channel blush, the mutual fund industry took it broadside this weekend.
David Swenson, author of the phenomenal book Pioneering Portfolio Management, wrote an editorial in the New York Times called The Mutual Fund Merry Go Round.
Swenson knows much about manager selection: he’s the CIO of Yale’s Endowment. Swenson offers: “Why isn’t there more of an outcry? Investors naïvely trust their brokers and advisers. Most understand too little about financial markets to make informed decisions, intervene too frequently in counterproductive ways and gather too little information about portfolio holdings to evaluate results. Investors like to believe they are doing well, even when they are not.”
Relative performance, as opposed to absolute performance, will keep you eating government, grilled cheese sandwiches.
Most advisors are not worth the 1% management fee they get. They are parroting what they’ve heard someone else say. They are by no means portfolio managers. What boils my blood most is that they are taught to diversify and walk away. Diversification is the extend of risk management in a wirehouse. What a joke. Trading is knowing how to manage risk. That’s it. Learn to trade so that you can at least keep your losers small.
Investing in equities is not worth the downside risk if you are intelligent enough to know where to look for the risks. Stocks may be cheap by some historical standard, but they can get cheaper and the values can get much better as the prices continue to drop. Then you have to deal with the dead money…
You will know where to look on October 6.
Inner Voice of Trading is endorsed by Bill Dunn and Victor Sperandeo, to name a few.
The foreword is written by Ed Seykota.
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