Monday, July 11, 2011

The Smartest Man in Europe is Very Cautious

So I went to Peru for a week and it was great fun, lack of oxygen and tired legs sided with some wine and ceviche and bull-heart on a stick. Thank you Mr. Pisco Sour.

It was only 2 out of 8 days day I got OUT of bed AFTER 6am. All the other days started really early in a great adventure!

I will get some photos posted some time this year. My notebook at home is screwed and I need a new one to edit all the .RAW files taken with my new 5D Mark II!

So... I am back and those little positions are doing fine, huh?
5y German CDS is bid 53bps (ask = 55bp), +13bps x suggested entry, x5yr duration = 70bps gain. Net of carry ~ 61 or so bps.
The CADMXN is 12.14, about 2% above the entry of 11.91. Net of carry still some 1.5% gain in a very little volatility cross.
The USDCNY 3y Call 6.80 is bid at 1.76%, so little gain still from the entry of 1.63%.

Other positions like short CLJ2CLK2 (crude) started in March... doing great since then.
The Currency Basket is doing also very well, at its high since June of last year (the one below is actually different. The suggested gained 3.76% instead of 6.63%)
Long Gold / short Silver is also doing remarkebly well.
The short IBOVESPA futures x short USDBRL futures is also doing very well since started in April 11th.

Losers were Put Fly on the S&P 500 index in April and the Yen swaptions which I guess will only work when there's inflation / money printing in Japan...

Approx returns, excluding trading costs for the futures...


Crazy price action going around, huh?
During this trip to Peru I chose "Soros on Soros: Staying Ahead of the Curve" as weight-increase for my luggage (you know, 4kg of photography gear wasn't enough).
I find Soros a fascinating figure and this book, the second by him that I read, couldn't be different. Good insights in investing, philosophy (which I am not deeply fond of, first book, a bio, was a bit boring) and history! It was fun to read that he started his fund at the age of 38-39 and his only partner was Jim Rogers, another character who is on top of my favorite investors/writers list (read a good 4 books from this fella).

And the person interviewing Soros for part of the book was none other than Byron Wien! So I took the time to write back again here on the blog and post an interesting document by Blackstone, commentary by Wien.

I give great credit to investors with a large experience, both because they study history and markets and because they are old enough to have actually participated in markets for decades. We have a bunch of bull-market-surfers in Brazil and now this is reflected in a lot of the hedge funds' performances.

That is why I bring this piece to you here.

*Disclaimer: charts and data are presented as I receive/see them. Sources are usually not checked for validation and my own calculations are of 'back of the envelope'-type. I am aware that some math that I do myself might be wrong and/or misleading to some extent. In financial markets the rate of change of economic data is often more important than the actual level and the perception of 'what is priced in' is more important than 'what is actually going to happen'. This is actually the way people pick entry and exit points. So... yes, sometimes you might say 'This guy is an idiot, this is way wrong!' with a high conviction, being right. Not to worry. Markets are made of expectations and the clash of conviction between its participants. Portfolio managers know that being an idiot is sometimes profitable and being smart is often a bad choice. It is all reality, sometimes good, sometimes bad. By the way: corrections to my analysis and intelligent debate is welcome. theintriguedtrader AT gmail do com

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