Gold Continues Sell-Off 4/15/13

Gold continued the extreme sell-off it saw on Friday, when it dropped from about 1565 to 1500 (basis the June 2013 futures contract).  Over the weekend and into the New York opening on Monday, April 15, 2013, gold is seeing a breathtaking drop to the 1400 level.  This drop of about 10% shows why traders often have risk management approaches in place and act first -- and ask questions later.  Gold is now at two-year lows (at the lows of 2011 and 2012).

In futures trading, trend-followers are often seen as "reactive" -- but technical traders who follow trends have also seen their approaches be "predictive."  Other precious metals such as silver and platinum, and related markets such as the Aussie dollar are also selling off in sympathy.

More on the technical selling from the CME:

The gold futures markets opened in New York on Friday 12th April to a monumental 3.4 million ounces (100 tonnes) of gold selling of the June futures contract (see below) in what proved to be only an opening shot. The selling took gold to the technically very 
important level of $1540 which was not only the low of 2012, it was also seen by many as the level which confirmed the ongoing bull run which dates back to 2000. In many traders minds it stood as a formidable support level... the line in the sand. 

Two hours later the initial selling, rumoured to have been routed through Merrill Lynch's floor team, by a rather more significant blast when the floor was hit by a further 10 million ounces of selling (300 tonnes) over the following 30 minutes of trading. This was clearly not a case of disappointed longs leaving the market - it had the hallmarks of a concerted 'short sale', which by driving prices sharply lower in a display of 'shock & awe' - would seek to gain further momentum by prompting others to also sell as their positions as they hit their maximum acceptable losses or so-called 'stopped-out' in market parlance - probably hidden the unimpeachable (?) $1540 level.

The selling was timed for optimal impact with New York at its most liquid, while key overseas gold markets including London were open and able feel the impact. The estimated 400 tonne of gold futures selling in total equates to 15% of annual gold mine production - too much for the market to readily absorb, especially with sentiment weak following gold's non performance in the wake of Japanese QE, a nuclear threat from North Korea and weakening US economic data. The assault to the short side was essentially saying "you are long... and wrong".

Read more here:
http://www.cmegroup.com/education/market-commentary/metals/2013/04/pre-open-gold_3564.html


And why is gold selling off?  Some say it is the result of China's latest round of economic numbers (China GDP), and others report that stories of Cyprus selling gold reserves (related to the Greek crisis) is hitting the gold market.

Stock System Update: Long at 12 noon (10/11/12)

Our stock market systems are going from neutral to moderately bullish.  Our last stock system update flashed a warning on September 10, 2012 -- and went neutral when the S&P stood at 1433.  Currently, the S&P stands at 1438, so it was a fairly successful signal.

http://z-trader.blogspot.com/2012/09/stock-systems-flash-caution-330pm-91012.html

• Our long-term models remain bullish.
• Our overbought/oversold models are moving to moderately bullish.  
• As usual, short-term trends should help dictate your trading positions and risk management.  

Buffett, Leverage, Beta, and Risk (AQR)

Pensions & Investments (P&I) published an interesting article about hedge fund AQR's research about Warren Buffett's success.  AQR says that Buffett's success comes from the usage of leverage on low-beta and high-quality stocks -- along with good risk management.

In particular, P&I reports:




For the 35 years of data studied, controlling for standard equity market factors such as company size, momentum and value did little or nothing to explain Mr. Buffett's success. However, controlling for low-beta stocks and high-quality stocks (defined as companies that are profitable, growing and paying out dividends) — when applied to systematic portfolios AQR designed to simulate Mr. Buffett's investment style — did manage to account for the bulk of his outperformance, according to the paper. 

...

Betting Against Beta

led a growing number of money managers to launch low-volatility or managed-volatility strategies in recent years: that a portfolio of stocks with bottom-quartile beta can match or exceed the returns of the broader market with only a fraction of the volatility.

...


 “betting-against-beta” version of that factor — which involves going long and leveraging low-beta assets while shorting high-beta assets — can produce “significant risk-adjusted returns.”

...
AQR's argument that Mr. Buffett takes on considerable risk, meanwhile, isn't incorrect if the context is modern portfolio theory's definition of risk as a function of volatility, noted Mr. Hagstrom. However, Mr. Buffett would likely opt for his own context and argue that buying high-quality, safe stocks at low prices effectively reduces his risk rather than increases it, he added.

...

Leverage, Risk & Return

With leverage a dirty word for many pension executives struggling with crisis-level funding gaps, the fact that Mr. Buffett is “a very big user of leverage” should serve as a reminder that the returns he enjoys aren't possible “without taking a lot of risk,” Mr. Kabiller said.

One period exemplifying that willingness to take — and bear — risk was mid-1998 to Feb. 29, 2000, the final stage of the Internet bubble, when Berkshire's stock price dropped 44% even as the broad Russell 3000 index was climbing 26%, according to AQR.

Diversified Investment Vehicle

Mr. Kabiller said Mr. Buffett's skill in structuring Berkshire Hathaway as an investment vehicle may be almost as important as his skill in making specific investments. In particular, the company's insurance affiliates accrue premium payments years before the policies pay out, strengthening Mr. Buffett's ability to maintain leverage in environments where less deep-pocketed investors would have to resort to fire sales, he noted.

...

Access to Capital / Funding

... Mr. Buffett's “low-cost insurance and reinsurance businesses have given him a significant advantage in terms of unique access to cheap, term leverage.”

The float from that insurance business has provided, on average, 36% of the funding Berkshire Hathaway uses to lever up its portfolio, at a cost AQR estimates at more than three percentage points below the average T-bill rate.

Read more here:
http://www.pionline.com/article/20120820/PRINTSUB/308209983

The Example of Kodak (Trend is your friend)

The sad story of Kodak, once a powerhouse and film monopoly, has made the rounds lately, as the stock has dropped to around a dollar a share, from the mid-teens just 3 years ago, and the mid-20's 4 years ago.  The stock peaked at around 80 in 1999.

With a large cash hoard just a few years ago, and such a good brand name, many investors are surprised that Kodak declined so much over the past few years (even with the rise of the digital camera).

Click here to look at the chart.  The 3 or 5 year chart shows the big decline.
http://data.cnbc.com/quotes/EK/tab/2

Forbes had a good article on some of the history about Kodak -- why some believed they would succeed, and the story of some of their failures:

When Kodak was founded in 1888, quality was its “fighting argument.” It gladly gave away cameras in exchange for getting people hooked on paying to have their photos developed  — yielding Kodak a nice annuity in the form of 80% of the market for the chemicals and paper used to develop and print those photos.

Inside Kodak, this was known as the “silver halide” strategy — named after the chemical compounds in its film. Kodak had a fantastic success formula that keyed off of international distribution, mass production to lower unit costs, R&D investment to introduce better products, and extensive advertising to make sure consumers knew about Kodak’s superior quality.

Read more here:
http://www.forbes.com/sites/petercohan/2011/10/01/how-success-killed-eastman-kodak/

Many believed that Kodak, with it's cash flow and cash supply, would be able to recover from digital cameras.  One of the most highly-respected investment gurus, legendary Bill Miller of Legg Mason also believed in Kodak.

Maverick value investor Bill Miller has apparently sold his stake in Kodak (EK). Filings show that the manager of the Legg Mason Capital Management Value Trust (LMVTX), who put together a 15-year winning streak against the S&P 500 through 2005, sold 18.2 million Kodak shares late last year and during this year’s first-quarter for about $3.89 each on average.

The fund realized a $551 million loss through the divestiture, according to a report by Bloomberg.

At one time, Miller owned nearly a quarter of Kodak’s shares. He and other Legg Mason fund managers reportedly held onto the shares for more than a decade, even after Kodak suffered big losses.

Read more here:

http://blogs.barrons.com/focusonfunds/2011/06/28/legg-masons-bill-miller-unloads-kodak-buys-apple-pfizer/

It's actually interesting to us -- how different types of investors and traders can outperform the markets using various strategies.

One moral of the story, for us -- is that no matter what we "think," we will follow our trading systems and trading strategies (that we have researched, based on decades worth of data).  We generally follow trends, and use tight risk management controls.  In this case, following the trend may have helped some Kodak investors...

A Z-Trader's Thoughts on Recent "Vol" 9/25/11

Excerpt from one of our contributor's articles at SeekingAlpha:

Here are a few quick thoughts for these volatile conditions, during these difficult economic times:

• Don’t try and catch a falling knife. Most good trading systems will minimize risk and “stop losses” from accumulating. You can never tell how far emotions will carry a large market move.
• When “contagion” spreads, it is sometimes best to step aside and reduce positions because psychology and emotions can also spread – causing markets to move past any "reasonable" level.
• Many portfolio managers are reducing positions, so markets become more "correlated" to one another.
• “Diversification helps until it no longer helps.”
• Trade down to the level that lets you "sleep at night."
• From a trader's perspective, once the markets find footing, these "dislocations" may offer opportunities.

Read more here:
http://seekingalpha.com/article/295688-a-trader-s-thoughts-on-recent-market-volatility

Indy 500 and Risk Management

Yesterday's Indianapolis 500 race was a reminder about the importance of risk management -- and weighing the risks versus the returns of every action and trade. The leader of the race with one turn to go crashed -- and lost the race -- due to one lapse in judgment.

INDIANAPOLIS – One turn. One stinkin’ turn.

JR Hildebrand made it through 799 of ’em without any trouble. As the young Californian approached that final left, all he had to do was keep his car off the wall, speed down the main straightaway and collect a win in the Indianapolis 500 on his very first try.

Instead, Hildebrand made the sort of colossal blunder that will forever link him to the Jean Van de Veldes of the sporting world.
...
Hildebrand was faced with a choice when he came up on another rookie, Charlie Kimball, going much slower as they approached the fourth turn.

The prudent thing would’ve been to back off and tuck in behind Kimball until they were on the main straightaway. Then Hildebrand could’ve gone on by to take the checkered flag.

Instead, showing his inexperience, Hildebrand decided to stay on the gas and go around on the outside. That put him into “the marbles,” the tiny particles of rubber that gather near the wall, making that part of the track especially slick.

He never had a chance.

“Is it a move that I would do again?” Hildebrand said. “No.”

_______________

Similar analogies of experience, and weighing risk vs. returns can be made to investing and trading. We use computerized trading systems that take the emotions out of trading the financial markets. This keeps us disciplined and focused on idea generation and research.

Related info:
http://whowillwinthebiggame.blogspot.com/2011/05/indy-500-sport-psychology.html

Newsletter on Trading Systems (from C2)

In case you missed this newsletter from Collective2 (C2), we thought it was an interesting look at why some trading systems ultimately fail. The recent volatility in the futures and currency markets in January and early February caused some losses for trading systems, and we recently wrote a related article. I use Collective2 as a third-party tracker for trading systems.

Here is an excerpt from the Collective2 newsletter. Please click here for the entire article.

Three trading systems that failed

and what we can learn from them

A lot of trading-system sites like to brag about how people made money on their site.

... Every now and then we review bad trading systems on our site.

Why our obsession with failure?

Because failure, more than success, is interesting. Not just in a snarky, let's-kick-people-when-they're-down kind of way. When trading systems fail, it gives investors a chance to ask questions. Were there warning signs that should have been heeded? Is there anything that these failed systems have in common?

...

Conclusion

The point of reviewing these three systems is to learn from mistakes. The best kind of mistakes to learn from are the ones that other people make. (Learning from your own mistakes, while a powerful pedagogical method, hurts like hell.)

So what did we learn today?

1. Trading systems that engage in Martingale strategies can look good for a long time. But they always end the same way, and it's never pretty.
2. System developers that talk about golden harmonics and astrology and bird entrails should be treated with skepticism.
3. Even supposedly "low-risk" strategies have risk. There is no such thing as a free lunch.

Risk / Return, Profit Stats & Trading Systems

Investors often talk about Trading System X vs. Trading System Y -- and how a certain approach has a steadier pattern of returns versus another.  Note, however, that even long-term performance can disguise or hide the potential pitfalls of some trading systems.  For instance, a trading approach can have a great 100% return over 12-months, but individual trades can possess some scary drawdowns.

Many of us have seen these types of systems, and they eventually have a bad decline that forces a "closed trade" and/or marked-to-market recognition of the risk that was always there.  There have been many stories like this over the years.  Some of these traders use a martingale-type of approach (letting losses accumulate or even increasing exposure and/or doubling losing trades).  These methods can "hide" risk in the short-term -- but if overused -- will lead to large losses at some point. 

Many analysts study the risk / return figures on individual trades -- as well as the percentage of profitable trades -- to get a handle on overall risk.  These statistics can yield information about a trader's overall risk management approach.  In addition, hopefully, there is a real edge to the trading system's approach.

I have been a trader for over 15 years, and recently started to post trades on third-party tracker, Collective2.  Our most-established program, zFutures, is a diversified futures program -- and now has almost 200 trades tracked and more than 6-months worth of history on Collective2.  It is notable that this has been a good period for the futures markets, but we are pleased that potential investors are happy with the program's trade statistics.  In particular:

• The ratio of Average Profit from (Winning Trades) / (Losing Trades) is close to 2.
• The percentage of winning trades is currently over 50%.   

We recently started publishing our z-Trader Short-Term System on Collective2 as well.  This program focuses on the S&P (e-mini) -- and we note that the trade statistics are similar to zFutures (profitable trades almost 2x losers; and winning trades around 50%).

We don't claim to have a magic formula, but we do believe that we have an edge in the futures markets.  Our programs are based on robust research methods, including machine learning, on many years of historical data.  We use a systematic and computerized approach to managing trades and managing risk.  The financial markets are a competitive arena -- and a disciplined approach, combined with constant diligence - and constant research - are all necessary to earn excess returns from the financial markets.

Managed Futures Sector Report: "Caution Flag for Financials"

After several months of good returns in the managed futures and commodities arena, several futures market sectors are seeing "red" in early 2011. Many markets are seeing choppy market action and consolidation in January.

In particular, gold - which has been entrenched in a long-term bull market - has seen stiff resistance in the 1420 area and has seen a recent reversal. Today, the gold market took out recent lows and is sitting in the 1340 range.

Other related markets, such as the currencies and U.S. dollar have also seen reversals and whipsawing market action. In a nutshell, the financial and metals sectors of the futures markets have suffered losses. We have recently created a tradable Financials Program so that investors can track the performance of this managed futures sector, on third-party tracker Collective2. Note that the financials program includes metals.

On the other hand, the Commodities sector has held up relatively well during this volatile period. Various markets such as softs and cattle have yielded profits, which have offset losses in hogs and grains. The energy market has given up gains earned earlier in the month. Overall, however, the commodities sector remains slightly higher for the month. The performance of this sector can be tracked here, in our tradable Commodities Program.

Today's volatility has caused our systematic approaches to go into a slightly more "defensive mode." Risk management is one of the key elements to long-term investment success in the financial markets. The goal is to capture "profit opportunities" when they present themselves -- but to keep losses from accumulating when the markets are in a "whipsaw mode" -- and trying to "find" a "new equilibrium / price level."

Our trading models are currently signalling a "caution flag" for several markets -- and in particular, the financials sector. We do not believe that the long-term bull market in commodities is ending. However, we "try not to think" -- and instead -- follow our quantitative models that are based on many years of data and research. For now, if you are in these markets, please watch your risk levels and "stops," to prevent losses from accumulating.

The Financials Program and Commodities Program are good diversifiers to one another -- and combined, are a good proxy for a fully Diversified Managed Futures Program, which can also be tracked and traded. Please contact us for more information.


AN INVESTMENT IN FUTURES MAY RESULT IN LOSSES.

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.

Managed Futures Program and Risk

Our managed futures program, zFutures, has been appearing on the leaderboards at Collective2 for a while. There seems to be a glitch, but the program is still appearing on their System Finder filter:

http://www.collective2.com/cgi-perl/t200.mpl?want=finder

zFutures averages more than 2 weeks per trade, which helps its "realism," "slippage" stats -- as well as longer-term performance with respect to commissions. zFutures' components (z-Trader Financials and z-Trader Commodities) will have similar results in the long-term -- although this month, commodities have been profitable while financials have been consolidating / reversing.

With the recent volatility in financials, there has been a lot of chatter about risk management. We like Collective2's analytical tools. We note that zFutures has "Low" (or na) risk in every single trade it has made - except one, which was "Normal." In addition, the less-diversified Commodities & Financial components have "Low" to "Normal" risk levels. These programs are slightly more aggressive to achieve lower account sizes, but use the same trading approach.

Risk management and preventing losses from accumulating are key parts of all of our programs -- and are key to "surviving volatility" and good long-term performance.

AN INVESTMENT IN FUTURES MAY RESULT IN LOSSES.

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.

THESE RESULTS SHOULD BE CONSIDERED HYPOTHETICAL, WHICH CARRIES MANY INHERENT LIMITATIONS.

Trading Systems: Managing the Ebb & Flow of Futures Markets

Here are some excerpts from an article Carlton Chin of Adamah Capital wrote at SeekingAlpha on the recent sharp reversals in the futures markets -- and how trading systems need to find balance between profit opportunities, risk management, and potential losses (drawdown).

...The futures markets (both financials and commodities) -- and in particular, currencies, metals, energy, agriculture, and several softs -- have presented profit opportunities to futures traders. However, after a strong December, early January has seen some sharp reversals in the future markets.

...

Back in November, we wrote about the sharp reversal in the futures markets. At the time, we saw severe reversals even sharper than this week's moves... However, at the time (back in November), traders had to manage their risk -- and protect profits from potentially severe drops.

...

Managing the Ebb & Flow of Markets

There is a trade-off between "potential profit opportunities" versus losses -- and a "decline or drawdown" for any trading strategy. In a nutshell, traders must "surf" the waves of the markets -- and manage their positions and strategies through the inevitable "ebbs and flows" of the markets.

...

There are always risk and return trade-offs, but good research can help traders and investors capture profit opportunities in the financial markets. We have studied and developed trading methodologies that attempt to capture profits while managing risk. Please check out the results in this FX/Forex trading challenge (top few percent). In addition, several of our trading strategies can be tracked at this third-party tracker, Collective2.

We will follow our trading methodologies and continue to monitor and research the markets. Ongoing research and a systematic, disciplined, approach can help put the numbers -- and market action -- on your side.

__________

For the complete article at SeekingAlpha, please click here.

Risk Management, Kurtosis, Skewness & Extreme Value Theory

My article at SeekingAlpha.com was published as a full-fledged article - and I am now an official "Contributor" at their website. Someone asked a few good questions that I answered on the website. I also copied it below, since I thought it was good information.

_____________________

More realistic estimate of probabilities: I like semi-deviation as an easy-to-explain measure (volatility and risk to the downside). Additional measures that help describe return distributions -- would involve calculating additional "moments" such as skewness and kurtosis (the fat-tailed distributions that many investment strategists strive for = minimize losses, fattening profits).

More on Semi-Correlation: Semi-correlation is somewhat similar to correlation, except it studies periods where certain assets decline. This can give a "true" measure of diversification during financial crises.

There is also a branch of statistics that studies the probability of big dislocations such as crashes in markets (Extreme Value Theory) - which is very interesting...

My Article at SeekingAlpha - Portfolio Optimization and Rising Correlations

Here's a link to my article at SeekingAlpha.com.

In particular, it talks about "true" diversification amidst rising correlations and the evolving world -- and some implications for portfolio optimization. I show a tool I developed that I call semi-correlation. This statistic can show which asset classes offer more "true diversification" when many assets start moving together in a financial crisis.

http://seekingalpha.com/article/215457-portfolio-optimization-with-rising-correlations-and-an-evolving-world

My Article at SeekingAlpha - Semi-Deviation & Semi-Correlation

http://seekingalpha.com/instablog/677712-carlton-chin-cfa/79376-post-modern-portfolio-theory-semi-deviation-semi-correlation

The popular mean-variance approaches are well-documented methods of improving a portfolio’s risk-reward characteristics. The fact that Markowitz’s contributions to Modern Portfolio Theory have stood the test of time – more than fifty years later – shows the power of these methods. Over the years, additional models have been developed, that, for example, help investors establish reasonable assumptions and optimizer inputs such as expected returns, volatility (standard deviation), and correlations amongst asset classes.

.

.

.

Summary

It is important to study and measure true downside risk and the inter-relationships amongst various asset classes. More specifically, determine which particular asset classes may help when certain assets are declining in value. Semi-correlation as well as semi-deviation have proven to provide a more accurate picture – when applying portfolio diversification models.

In addition to improved risk measures and correlation studies, a variety of tools (such as Monte Carlo analysis) form a strong foundation for enhanced portfolio optimization and Post-MPT. On top of a “risk-management portfolio optimization engine,” robust alternative investment strategies add meaningful diversification and greatly improve expected risk/return characteristics to a portfolio.

Carlton Chin, CFA, is a specialist in strategic asset allocation, quantitative investment strategies, and alternative assets. Carlton has worked with institutional investors on asset allocation and is a fund manager. He holds both undergraduate and graduate degrees from MIT.

Trading Signals and Current Outlook

Our stock market models remain long right now. Depending on market action, our intermediate models may go neutral at the end of the week. The long-term models will remain bullish so that the net position will remain at least slightly bullish. In addition, there still appears to be enough bearishness out there so that contrarian investors can see a continued rise in the equities.

Futures Markets

Many of the futures sectors saw a vicious reversal from the middle of January until the end of the month. This caused losses for trend-followers. Our models had to manage risk and reduce positions a bit, but we generally remained long commodities and rode the recovery over the past two days. The long-term trends have not broken down, so our technical models look for some sustained moves. A look at some markets:

• Metals (precious metals and copper) - long
• Energy - long
• Grains - long
• Meats - short
• Softs - generally long (especially sugar, coffee, cotton)
• Currencies - transitional, so generally flat

Market Update: Stocks and Futures

The stock market saw its first big drop in months, with stocks dropping about -5.5% from their recent peak. We avoided part of the early decline in stocks, but our stock market models went long as "some of the air was let out of the recent balloon." Both Long-term and Intermediate-Term (overbought/oversold) models are currently long.

Futures Markets

After a nice run early in January for our futures portfolio, the dollar's recent strength and weakness in commodities caused whipsaw losses. As a result, we currently have small positions in the currency markets. We are still long several commodities markets, including metals and energy -- as well as several softs.

Traders need to monitor these positions because a deeper decline means positions should be closed out. Traders have to manage that risk...

Market-Moving Events

Today, the stock market opened about -2.5% lower due to the Dubai debt worries. This caused dislocations in many markets -- ranging from currencies (US dollar higher against all currencies except for the Yen), to commodities (precious metals, oil, etc. all lower, as the dollar strengthened), to fixed-income (bonds higher as global stocks dropped).

Times like these are why we like following our computerized and systematic trading approaches. Our disciplined approach takes much of the emotion out of trading the markets. Market-moving events create both opportunities as well as a warning sign to control risk (money management!).

Risk Management and Trading Systems

The core strength of many trading systems is the risk management approaches they use to manage and minimize losses. Today, our systems will "take some chips off the table" -- but will most likely re-enter many of these markets (as this will probably prove to be a "buying opportunity" to enter some of the more-established trends that have developed in the markets).

Some of these longer-term trends include:

• Short US dollar; long foreign currencies
• Long gold and other commodities
• Long bonds; long stocks

Stock Market Indicators

At current levels, our overbought/oversold indicators have shifted to "Long." Our Long-Term indicators remain long. Our short-term indicators are mixed because the market has rallied off of today's opening lows. Several sources believe that the Dubai worries will be a "blip" -- and our indicators currently agree.

Volatility Trading

Market-moving events cause big moves in volatility -- and today's downdraft allowed us to collect some good option premium.

Stock Indicators; Also: Correlated Markets

Our oversold/overbought indicators remain bullish. In addition, our short-term and long-term indicators are bullish. This caused us a little pain last week when the market declined, but we're riding this upward leg right now...

Correlated Markets

Recently, we mentioned how many markets had started to move together as stocks continued to move straight up from the March lows. Most commodities were generally moving higher (including energy, metals, grains, softs) as were risk-related / high-interest currencies such as the Aussie and Canadian Dollars.

When markets become correlated, traders must be careful and monitor their overall portfolio risk. Last week's markets were a wake-up call as currencies, gold and other markets followed the stock market's lead downwards.

Driving vs. Trading

As we get closer to Memorial Day and "driving season" -- I sometimes compare driving in traffic to trading. Once in a while, we're in the "fast lane" and we're zipping along. Happily, trading is sometimes like this (unfortunately, not often enough!).

Other times, the other lanes are moving faster. Cars are zipping by us... What do we do? Do we try to switch lanes as quickly as we can? Whenever we do that, it seems like our original lane "catches up" and we get passed by, yet some more. In this case, the "noise" of the traffic can get us. Similarly, the randomness or the "noise" of the markets can get the best of us if we are too hasty in our trading.

If we just stay in the slow lane forever, however, we sometimes see that there is a breakdown in our lane -- and that's the reason why we have been in the slowest lane! In trading, that would be the equivalent of just sitting on a loss until the loss becomes huge. That's a "no-no" as well.

In trading, we have to find a good middle ground... We can't be too hasty and get "tricked by the noise" -- but we also need to avoid staying in a losing position too long.

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Clients have asked us to perform customized research on projects ranging from trading systems, and hedging interest rate and / or currency risk, to portfolio risk management and asset allocation.

Please contact us for more information.