At 10:06 EST Tuesday, news broke from Dubai-based Al Arabiya that the Iranians had sieged a US cargo vessel in the Gulf. Brent and WTI spiked within minutes as the algos went wild. However, both markets failed to breach yesterday’s high. Within an hour, the market erased these gains as it turned out this was […]
Contrary-opinion trading is perhaps the best solution to market madness and noise; it is a “thinking man’s” trading tool. A Contrarian is a person who takes an opposing view, especially one who rejects the majority opinion, as in economic matters. So, in a nutshell, if a CTA / Money Manager is trading as a contrarian, […]
As our marketing efforts gradually shift from focusing on individuals to institutions, we have been asked recently, more than once, to provide a theoretical framework for our investment philosophy and trading approach. Although our trading results continue to validate our strategy, we were more than happy to take on this challenge, go back to review the genesis of our ideas from over a decade ago and review why our methodology still stands to reason.
When investors think of risk, they usually associate it with volatility. This probably stems from Nobel Prize winning economist Harry Markowitz’s use of volatility in the 1950s and fellow Nobel Prize winner William Sharpe’s use of volatility in creating his self-named method of risk adjusting returns. The lower the volatility of a given investment theoretically indicates that investment carries less risk. Risk, however, could be viewed from a different angle. The impact of a high volatility investment on a portfolio can be mitigated by the allocation size given to that product. By normalizing for volatility, theoretically, high and low volatility investments can have equal impact on a portfolio’s total return. This leads us to a different way to view risk. Risk is the difference between the anticipated worst loss and the realized worst loss.
Most people know Ebenezer Scrooge as the cold-hearted, tight-fisted, “Bah, humbug!” guy from the Charles Dickens novel, A Christmas Carol. But was it really the “happiness of Christmas” that grated on Scrooge’s nerves, or was it something else that caused his foul disposition? Indeed, it wasn’t a lack of status that made Scrooge grumpy. He […]