Thursday, August 4, 2011

Here We Go Again

As I've detailed over the last month, market volatility appeared suppressed due to all the liquidity thrown at the problems:

Volatility is finally picking up and I want NO part of it. So today, I closed out most of my long volatility positions (with the exception of those tied to commodities and Treasuries... I think we're going one way or the other here) and happy to sit on cash until dislocations become wider or markets calm down a bit. We seem to be are treading in awfully familiar territory, which brings to mind a great Operation Ivy song.

Here We Go Again


  1. Jake -

    over the course of, say, the last 5 yrs, are u ahead or behind on your investments? (investment fmv greater than cost basis)

    i'm just always curious as to whether someone such as yourself, who actively invests, is actually coming out ahead.

    i'm thinking of dipping my toe in again, but i'm not convinced i can actually make money.

    i am convinced, however, that i can lose it...

  2. i am a LOT less active than likely appears on this blog because whenever i make a comment on an asset class or the economy it probably appears that i am trading. i actually don't "trade" very often (i do "roll" a lot of my option trades, but i don't view them as new trades) except at what i view as inflection points. at inflection points, i typically move to cash at a much higher level than most. in addition, within my non-trading account (i.e. my 401k) i rarely transact.

    net net trading account, i am up over the course of my blogosphere life (since early 2008 - prior to that i was in b-school and broke so not trading). relative to a traditional allocation of 60% equities / 40% fixed income (just to make a reference) i...

    * significantly outperformed in 2008 / early 2009 (i derisked early)
    * significantly underperformed in march 2009 through the end of the year (i had strong absolute performance, but remained underweight equities)
    * was relatively flat in 2010 (rode high yield / em vs. equities)
    * had been underperforming this year until the recent sell-off (my long vol position got lucky), so i would guess i am now up a bit.

    all of that said, my performance is less important relative to a benchmark and more important to my risk tolerance. i will typically outperform during bear markets and underperform during bull markets. the important aspect of investing IMO is to manage risk relative to one's risk tolerance. so for me, managing my own portfolios is important as i can manage the risk, not the returns.

    hope this vague answer was helpful.