A trader who shorted oil, for 1B USD profit, just bought a pile of Clovis Oncology shares

Let me just start with the fact that I saw that Stanley Druckenmiller’s protege, Zachary Schreiber, filed an SEC 13-G joint acquisition form and looked and saw that 7.7% of Clovis Oncology was just purchased by Schreiber’s hedge fund, PointState Capital. Assuming I read that form correctly, it looks like he also bought another 5.2% via a second investment fund, Steel Mill Partners LP. I was caught off-guard and wanted to dig into why anyone would buy CLVS shares.

(Correction: A kind reader’s suggestion prompted me to take another look at the PointState’s filings. The total shares they have is  equal to 7.7% of Clovis, with 5.2% of Clovis shares held via Steel Mill Partners (and PointState is the managing entity).)

The following should be the link to this 13-G filing, just made the other day, November 19, 2015.

http://www.sec.gov/Archives/edgar/data/1509842/000095014215002460/0000950142-15-002460-index.htm

Many of you know of Zachary Schreiber as the man who made 1 Billion USD dollars this year from shorting oil, and as a protege of Druckenmiller and also formerly of the Bass family office. Druckenmiller thinks Schreiber will become a superstar investor over the next 15 years. So I guess we’ll be reading a Jack Schwager interview of him sometime between now and 2030. Right now PointState Capital has about 3.5 billion dollars under management.

All of you already know Clovis Oncology shares were hammered after the FDA issued a request for more information a cancer drug under development called Rociletnib. Clovis had screwed up: There was a problem with non-disclosure of the data it apparently knew about during its Nov. 5 conference call. They used a mix of confirmed and unconfirmed drug response data and then they also reported that drug efficacy was lower than initially publicized. Right now the market assumes AstraZeneca will win with its now approved (as of Nov. 13) drug Tagrisso, which apparently has a better reported response rate.

You would think it’s game over for Clovis BUT seeing the Schreiber buys seems so strange and I wanted to take a look.

I mean yes, many hedgies have been burned by in all kinds of trades, and we won’t get into that. This was not a case of doubling down however and marathon conference call discussions. It looks like PointState had maybe 50,000 shares before the implosion and now recently bought 7.7%  (or 2.95M shares) + 5.2% (1.996M shares)= 12.9% of Clovis as of Nov.19. Am I crazy in assuming this just happened and 140 about 80M USD or so was spent for shares that traded for 560 320M or so just a few days before?

Why is this drug a big deal? After reviewing the American Cancer Society, the company site and other sources, I am just beginning to see the big sad picture: (Please accept my apologies as I get a handle on this material)

There are about 1.35+ million new cases of lung cancer a year and 85 to 90% of them are “non-small cell lung cancer” (“NSCLC”).

There is a subset of these cancers that Rociletnib is meant to target: Epidermal Growth Factor Receptor (or “EGFR”) mutation. (About 10 to 15% in Caucasian and 30 to 35% of East Asian of the NSCLC cases are from this EGFR mutation.) There are drugs that are used for this mutation but the problem is that THEN about 60% of those treated also get a follow-on resistance problem with a secondary mutation that may follow. Rociletnib is meant to for this problem.

After some awful math, I estimate about 250,000 or so new cases annually. Please accept my apologies, this is unnerving to put down into raw estimates about how many people will get a certain kind of cancer per year. We begin to get the idea now why this the market was willing to pay 120+ per share for Rociletnib plus two other drugs, Rucaparib (meant for Ovarian Cancer) and Lucitanib (breast and a different kind of lung cancer).

The FDA apparently gave Clovis “breakthrough status” for Rociletnib and Rucaparib. “Breakthrough status” means that “the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints…” The definition of “breakthrough status” is as follows: http://www.fda.gov/RegulatoryInformation/Legislation/SignificantAmendmentstotheFDCAct/FDASIA/ucm329491.htm

The drug being tested for ovarian cancer, Rucaparib, was in Phase 2, and the results seem encouraging:

http://phx.corporate-ir.net/phoenix.zhtml?c=247187&p=irol-newsArticle&ID=2054581

The FDA, in it’s approval of AstraZeneca’s Tagrisso, provided the official scary stats about lung cancer in the U.S.: “Lung cancer is the leading cause of cancer death in the United States, with an estimated 221,200 new diagnoses and 158,040 deaths in 2015, according to the National Cancer Institute. The most common type of lung cancer, NSCLC occurs when cancer cells form in the tissues of the lung.”

http://clovisoncology.com/products-companion-diagnostics/rociletinib/

To sum up:

(1) Schreiber, an up-and-coming successful and smart hedgie, has bought almost 13% of Clovis Oncology, after it imploded. That’s assuming I read that 13-G correctly.

(2) Clovis has a drug they screwed up on providing data on, which may or may not have been fraud. I’m leaning towards incompetence and not outright lying. It may or may not be good as AstraZeneca’s version. However, the problem with this type of cancer is drug resistance and so Rociletnib could still be very important even if other drugs are available.

(3) Clovis has two other drugs that were not mixed up in this request for more information, Rucaparib and Lucitanib. Rucaparib also has “breakthrough drug” status and the phase 2 results look encouraging.

(4) Although Clovis shares have been hammered they may in fact keep imploding since we are close to year end and everyone who got hurt may want to close this one out for 2015 and forget about it. Falling knife here.

(5) It will take time for this work out, assuming it works out at all, so there might be more time to buy shares as “call option” on Clovis’s possible validation.

(6) The overall markets are getting less and less risk-loving. It seems like we are riding herd on a handful of leaders, private companies aren’t as loved with these recent on the books markdowns. This means fewer willing willing buyers.

(7) Schreiber has 3.5 billion under management at PointState. This trade is amounts to less than 5% of fund assets at risk for PointState.

(8) This may in fact be like a lottery ticket to being invested in successful cancer drugs circa 2017/18.

Personally, I normally buy with price trends and this thing has cratered, which could have been a short BUT the way it broke meant it couldn’t have been shorted anyway. I suspect securities litigation law-firms are hard at work at the moment and I don’t blame them, considering how the data was handled and shared since it does look bad and not just a matter of incompetence. That said, I need to think about it, it does seem tempting but I’m not likely to risk more than 1/2 to 2% of equity and I still need to go over this one more time and determine the right time frame. I think more experienced traders will be able to come in and flip, but I don’t have the right set-up to do that.

 

 

 

 

Comments »

John Hempton of Bronte Capital just gave everybody a heads up on an allegation that might be true, just not where it was thought to be.

It looks like Hedge fund hotel holding debacle Valeant Pharma, although for the moment clear of “channel stuffing” in the U.S., as alleged by Citron Research, may in fact have been doing it Eastern Europe. This is all too strange and almost hard to believe.

We may have all been obsessed about the wrong pharma wholesaler, according to a Slovenian business news site (www.finance.si) which reports issues at potential party at the heart of the VRX mess: a company called PharmaSwiss. There are currently denials, and the coincidental very recent termination of several employees, including a finance director. A question mark is why PharmSwiss, which insists that product volume in fact down for the year, suddenly needs a warehouse from another wholesaler called Kemofarmacija.

Is this all a head-fake or a witch hunt?

Random: The Volkswagen cluster-farfegnugen mess all started with a small research firm doing emissions testing, without any awareness they would stumble on a global fraud, uncovering the too good to be true diesel story that came from VW. Why is always this way? When too good to be true turns out to be too good to be true.

Apparently this is early days and there is more to reveal and I was genuinely waiting for the dust to settle to see if in fact this was just another “salad oil swindle” recovery in the making.

Here is the link to Hempton:

http://brontecapital.blogspot.com/2015/11/channel-stuffing-by-valeant-in-europe.html?spref=tw

and to the Slovenian news article:

http://www.finance.si/8838444/Slovenia-involved-in-Valeant-scandal

 

Comments »

And just like that, the only game in town, the “FANGS” are back, at least for today.

Some random thoughts on this quartet:

I read the bulk of this year’s return is getting funneled through the current four horsemen of Facebook, Amazon, Netflix and Google. So lots of traders are long the FANG and short the rest or hedging with index puts or futures?

Did I read this correctly? Druckenmiller went heavy into Facebook and Amazon? It’s almost like he wants to relive the last war but really he’s not, these companies are operating on built out “stack” of hardware and software which wasn’t quite as developed 15 years back, which has enabled Facebook to exist and spread out like crazy and for Amazon to keep on not retaining its earnings after it has hoovered up every old brick and mortar dollar on planet retail.

I have no idea if Facebook will be able to completely pivot into messenger and make money on it. I have no idea if it becomes Zuck’s walled video streaming garden which puts the necks of  fellow FANG members under its sneakers as people begin to steal, share and stream monetized images under FB’s stately pleasure dome. Speaking of the last war metaphor, the browser wars have long been over. The current battle is for your attention on your hand computer, via the “messenging app”. It’s all been repurposed from middle school sexting to Chinese capital flight investors buying and selling real estate thousands of miles away in shiny steel and glass piggybanks in New York and every other western metropolitan safe haven. Aside from that be prepared for “how to” success stories on making money via marketing on Facebook.

Google is alphabet but will it be alpha? I don’t know if Joshua Brown is right. I liked his tweet about the search engine as the money printer and the rest as the furnace to burn all that lovely endless money. I sure hope not, I plan to park money into shares at the next opportunity for a decline worthy of a Yahoo.

Amazon is every damn retailer I used to go to. It might become my local pizza shop too. God help some of you more adventurous types if they make deals with the Japanese manufacturers of lifelike doll companions and embed AI in them, you’ll never leave for the mall ever again. And God help us all if it pivots into an age of buy backs and dividends. Be careful what you wish for.* By then Amazon will be a dowager that’s lost its looks and an investor base tolerant of no earnings all in return for the “first Trillion dollar company” El Dorado narrative.

*Just look at IBM and all those lovely buybacks. (I watch IBM from a cloud provider perspective. It used to be called “CTR” for those old machines its used to make hence “Calculating Tabulating” but it kept evolving. We’ll see if he Oracle of Omaha’s money management hires will be correct in their investment.)

Netflix is eating up HBO’s space but watch out for the unbundling/cord-cutting. I’m personally hoping they make a deal with all the sports channels. If that happens, you buy the cable companies as just fat data pipes and they’ll stop doing “3 in 1” sales of telephone, tv, etc. But being a “studio” is a risky proposition. You either end up with content worthy of Game of Thrones or you end up with content that goes straight to digital broadcast TV (sans the digital decoder). Throw Amazon in with this too since they have a studio as well pizza delivery drones. Be prepared for Netflix and Amazon Studio stars as Youtube “celebs” might become yesterday’s news-swipe and jump ship.

YOU KNOW WHEN I would think of selling? Magazine covers. You know what I mean. But that’s print and no-one reads that so maybe we’ll all be okay.

 

 

 

 

 

Comments »

We are hopefully just bystanders during the next phase of an implosion cycle for former market paragons now morphing into new pariahs in the marketplace. It’s all of a piece: public equity stocks held by the hedgie giants of the money management world, the last adopter private VC investments by equity mutual fund wannabe institutions, within an atmosphere of farfegnugen fraud (hello Volkswagen), questionable science brought to healthcare providers and vendors, and the not so minor coup de grace to an entire industry laid low by a complicated energy relationship I call “Saudi America”.

I noticed that both Sunedison $SUNE and Valeant Pharmaceuticals $VRX continue to bleed in the after-hours. The latest 13Fs paint a picture of overpaid professionals who operated in cynical fashion courtesy of herding behavior. Who needs to be different and stand out when you can buy what “everyone” else is too and dump it 90 days later.

I cannot imagine the recalculations going on at shareholder fraud law firms with institutional clients. They’ll have visions of settlements dancing in their heads, come plum pudding  and mistletoe time.

I’ve read convincing sounding arguments in recent trading sessions by traders who may have undergone yakuza style adjustments to their portfolios. A few may adopt knicknames like “lefty” by year’s end with a lovely knife collection to present to the IRS.

I just want to know how it is that so many “2-and-20” titans manage to promote their analytical and execution prowess, in the face of jumping on board a trade and then dumping it. Does it take an Ivy league degree to do what the other guy is doing, get burned and then dump a position, one or two quarters into a year, all the while your marketing department and fund of funds vendors are pushing your alpha generation image?

Right now, the tune played by  “Ackman and The Tailcoats” is a mournful dirge.

Meanwhile legendary value investor, Jeremy Grantham has come to buy, at Motel 6 bargain prices, shares of Valeant Pharmaceuticals, which just last quarter traded at prices akin to booking a suite at the Burj. I’m going to guess that GMO’s 7 year model and returns will show an awesome win circa 2022. Others by then will be on their next fresh new fund, sans high water mark issues, having pulled another “First Union”, “JC Penney”, etc, etc. Big-time mulligans and you’ll always get funded no matter what.

By the way this gripe isn’t just about Valeant, Sunedison or Ackman. We could be having this conversation about Tilson shorting Netflix about 18+ months ago (and THEN going long) or Schiff and Paulson talking gold, gold,gold regardless of it going down, down, down. It’s all good and it’s all 2-and-20 on OPM and completely outrageous given the analytical and risk management development resources at their disposal.

Meanwhile elsewhere in OPM-land, think about all that money raised in Oil & Gas, courtesy of a Fed sponsored near-zero bound credit environment, probably engorged by yield hungry funds with what I imagine have become increasingly permissive covenants. No worries, bondholders, you can get past “bagholder” status and reemerge as new equity investors probably by 2020/2025. Distressed investment masters like Marc Lasry are probably getting ready to make their next billion(s). Soon many value players will be acquiring assets all over the damn planet, formerly leveraged at penthouse suite valuations, for subbasement/secret torture room level workout prices.

Let’s not talk about the magical thinking taking place in whatever is going on at some private companies. Blood tests which have turned into blood letting for large institutional vendors desperate to keep up with the times. I can’t imagine what happened at the board of a major corporation which vetted a investing in marketing an unproven blood test for which they would later take a loss to the tune of almost a third of a billion dollars.

Speaking of taking a loss, why is a legendary equity investment “buy-and-hold” stalwart like Fidelity playing with 2015’s version of that old game from the 1960s, “letter stock”, and marking up and down the paper sponsored by someone who had pimples when the housing market was imploding. What is that about?

YES, there is a legitimate purpose and function to raising and allocating capital for real economic activity which could lead to prosperity for untold millions in terms of new services, technologies, therapies, employment and retirement planning. It has a cost however, in the form of friction, of waste. There is a downside to blind ebullience. The aftermath of pedal to the metal on a sweet ride while blindfolded happens from time to time. BUT right now, we are seeing some stuff for what it is, that it was money that was pushed at ludicrous speed and has gone straight to plaid. It has always been thus, since “continentals” were traded post revolution in a young new post-colonial America and it will come again.

And there is a bright side to the tumult of distress and disaster. Stronger, wiser and more able hands come into the picture. Lemons become lemonades. The “story stock” becomes a real industry that eventually is taken for granted as the norm. Progress and life goes on. And a new story emerges to captivate our animal spirits and we begin all over again anon.

Normally, I avoid both consuming and creating the noise but it has come storming in and has taken on a fevered pace. I appreciate that you spent two minutes of your life on my rant, truly.

This has been an extemporaneous, off-the-cuff rant about the lemming trades taking place among the elite of the street all over the damn place, and it’s nothing new, it’s just the current version of it.

NOTE: This was provoked by seeing Valeant $VRX dipping in the afterhours. I have no position in it. I may be talking  out of my ass but I am not “talking my book”, just venting.

 

 

Comments »

This idea was triggered by Zach Schreiber of PointState Capital who offered a pick at Robin Hood Investor Conference. Schreiber was the Druckenmiller protege who recently shorted crude oil and made a billion dollars.

$FINMY Finmeccanica of Italy, is a 30% state owned industrial, aerospace and defense giant with 50,000 employees and 100 offices globally, kind of an Italian GE or UTX to oversimplify it. In fact the CEO Mauro Moretti seems to have pulled off a “G.E.” and has dumped non-core businesses in order to focus on aerospace and defense. The company is contemplating a name change as part of modernizing its brand but that seems pointless given the significant name recognition in industrial, aerospace and defense circles.  What is NOT pointless was Schreiber’s estimate that this giant would double in size in a just a couple of years.

Inspired by reading about Finmeccanica, I did a quick scan for other aerospace/defense plays that were also going up.

$DASTY Dassault Systemes

$LMT Lockheed Martin

$RTN Raytheon

$NOC Northrup

$OA Orbital ATK

 

Comments »

I have been discussing an investment theme, since my start within iBankCoin’s Peanut Gallery, which I have labeled “Pariahs on Parade”, a collection of beaten down, hated and troubled investment groups. The “Pariahs” all start with the letter “S”, and all of them have begun a slow and distrusted new upward trend. These pariahs are about ready to become serious longs over the next 12 to 24 months in my estimation. I included Shanghai, the “Soviets”, Sugar and now we have South America, in the form of Argentina. All the charts I have been using and sharing since I started are weekly price bars over many months to help me get past the stressful daily noise and find serious new trends.

You might recall Argentina has been in a decade-long fight with billionaire hedgie Paul Singer, who passed on a restructuring offer of 30 cents on the dollar (or about 600M USD) for sovereign bonds he bought for less than 50 million USD and he wants to be paid 2.3 billion, and went as far as seizing a warship to get his point across. I have to give Singer credit for his ability to hold his breath for so long. We won’t have to hold our breath for 10+ years, however, to make some great investments now in Argentina.

I admit it’s a tough idea to pitch. This is a country that had THREE presidents in less than TWO weeks about 15 years ago, certainly not encouraging recent history. It has become a deadbeat in the international capital markets, after 8 years under the Kirchners, and cannot borrow money. Reserves have been drawn down to almost nothing, there is a fiscal deficit of about 7-8% and a wide reality gap between the official exchange rate and the grey market for dollars.

A glimmer of light at the end of a long tunnel: there has been a general election for a new president on October 25 which did not have a decisive winner but there will be a runoff election in a week. There are two candidates left: Scioli, a former governor who is sort of an “heir” to the current administration but likely is a candidate who has to toe the party line to get votes and Macri, the more “market friendly” candidate who has acknowledged Argentina has to take some bitter medicine to be allowed back to the financial markets. The country has an opportunity to reestablish its credibility and credit and I have read there is roughly a quarter to a third of a trillion dollars parked outside the country ready to come back home as soon as economic honesty returns to the country. I read that even the farmers who went on strike and hoarded their grain got ready to get back to business. The age of “Consumerist China” has begun and they will certainly demand grain and beef. Things are happening and we have time to profit from it.

Out of this mess, there is a bull market taking place and the ingredients are in place for a massive trend. This used to be the richest country in the hemisphere over a century ago, and there’s room for a revival.

Below is the Merval index. Already signs that a bull market is building a serious breakout. Narrative aside, there is attractive price action at work.

 

AND NOW FOR OUR WAY INTO THIS idea with the following ADRs:

$GGAL Galicia Financial Group and $PAM Pampa Energia are at the head of the class for me, followed by

$BMA Banco Macro

$BFR Banco Frances SA

$EDN Empresa Distribuidora y Comercializadora Norte SA

$TGS Transportadora de Gas del Sur

Financials and infrastructure stocks like the above seem to be signaling optimism, despite the mystery as to who will be the next president.

      

 

 

 

Comments »

Hedgies are cutting back on Sunedison.

Einhorn reports dumping 25% of his position, or about 6.2 MILLION shares. I will have to see what his cost basis is but I recall the burn he got in homebuilders and housing and his admission that the “big picture” is a factor even in value investing.

Loeb is out.

Cooperman of Omega also took a knife to his holdings.

The upside, if any, is that at last there’s a washout. Problem is Einhorn and Cooperman are serious value players, and both have taken hits across the board on a variety of positions. TerraForm is squeezed by not being able to get financing, and so it’s a no-go for taking things off of Sunedison’s balance sheet, and that “warehousing” for cash margins on wind projects is a bitter consolation prize. The window for borrowing is unlikely to reopen anytime soon. Einhorn’s pick from Robin Hood is a Natural Gas play that has spun of coal – a decidedly non-alternative energy play, Consol Energy.

The Fly has already alerted you about the latest about the rumors of reclassification, RE: recourse vs. nonrecourse loans. That is a big question mark that will be resolved but right now a big fat question mark.

This is now in the hands of credit markets. Dangerous playing with the equity tranche, unless you came in ages ago and don’t need the money, until the picture over balance sheet and liquidity becomes clearer.

Comments »

Right now I am preparing and waiting on a weekly basis to short the EURO, CRUDE and the AUSSIE. It’s all in many ways about going long the dollar. The BIG EXCEPTION is the Japanese YEN. I keep fretting about “risk off” and what could happen with YEN, so I’m holding off until I can see what to do. CAUTION, I use weekly price bars, I’m not pulling any triggers…yet but it’s coming I think and it sucks, I was hoping to go long instead and pyramid up.

You can say short commodities, crude oil, the Aussie, or the Euro but it’s all about buying greenbacks. NO, that does NOT mean I’m expecting a rate hike. I mentioned in an earlier post, if all the runners in a race are going slower than you or sprinting backwards, you can stand perfectly still. The rest of the world has issues and they might well fight each other off to keep exporting and propping up local economies by cutting the cost of credit locally. The emerging markets are effectively short the dollar via dollar denominated debt. That appears to be part of the demand underlying dollar bids.

Yes, it’s a cliche that the USD is still a safe haven but that doesn’t make it less true, particularly at the moment. Gold might be the disaster preppers’ favorite and it’s a nonelectronic way to go hide, I mean save, some money but it’s cash money that everyone is still using. If something else was the world’s current reserve currency then you and I would be going long or hoarding that instead.

I am feeling out the following potential trades, and it might happen within the next few weeks. If the weekly price action and averages follow suit, these trades will be triggered after the turkey is served and before presents are refunded at the mall or shipped back to Amazon.

Watch ADX in the charts below. Once the lines flatten and turn, that’s it, go long the dollar. IF NOT, then we are in the clear to seriously think about going long raw materials.

It’s almost time to roll to March 2016 contracts. (I am working with wide price ranges but with these weekly price bars, it’s to be expected).

$6E_F @ 1.075 +/- 0.02 becomes resistance. In plain english this darn thing could bounce up and down around 1.075. I mean PAR as resistance? It’s crazy but the markets have been indeed filled with surprises.

$CL_F, $QM_F  @as 42.5 +/- 2.5 per barrel becomes resistance. Same here, in coming weeks it could be 42.5/barrel with back & forth driving short term traders nuts and still be a valid sell. Round numbers, can be scary as well exhilarating, and $40 could turn into a horrific ceiling for those looking to go long. Personally, I was hoping for the beginnings of going long the most destroyed oil service plays that had the most leverage to oil but that is not the case right now. Maybe someday I can get to build a decent trade in Seadrill or some other play.

$6A_F  as 0.70 +/-.0 2 cents become resistance. Last one, yes, this could be 0.70 cents and go back and forth. Since markets are obsessed with round numbers, it could break 0.70 decisively and plow straight to 0.69, 0.68, 0.67, etc and not look back but we’ll see.

I am also looking at 2016 PUTS as an alternative to trading forex or futures.

$FXE MARCH 2016 PUTS, with strikes above 105+ @ about $5 per contract

$USO APRIL 2016 PUTS, with strikes above 14+ @ about $2 per contract

$FXA MARCH 2016 PUTS, with strikes above 70+ @ about 2 per contract

These are all approximations at this time. We won’t know where the trades take place but these are decent estimates and give a feel for what will be put to risk per trade.

 

Comments »

I have noticed two things about human nature and the markets, after what I saw in the past couple of weeks throughout the twitterverse, Stocktwits, Facebook and on individual blogs, and I want to talk about that.

Charts and ideas are almost secondary to the process of trading and investing. HOW many ideas did you get that blew up in your face in the past year or decade? How many signals did you take or ignore? Please consider what I have to share in the next three paragraphs.

First, people crave certainty, presented in a wonderfully written exposition with a great deal of detailed and sweet sounding precision. If a “great argument” to do something, is however offered while disregarding prices, it is incomplete commentary for trading purposes. Even if a trading idea is filled with great arguments, it’s still dangerous noise, if it is thrown at you without a risk management framework, without an in advance plan of attack. Every trading thesis is incomplete and prediction is basically impossible in terms of timing and actual valuations. Price targets are useless in aggregate without plans for exits. Entries are useless without a plan for “WHAT IF”.What if the plan goes wrong and that punch in the face you just got was not the one you expected after weeks of roadwork and Mickey training you to running like greased lightning? What was your trade size? What is your current exposure to other similar ideas? Are you already loaded up on a ton of trades and if so, how many of them have locked in profits? How liquid is that position? Will bid ask spread out wider than a Kardashian’s…media deals? So many questions may have gone unanswered, except for the isolated and fanatically precise sounding narrative behind a trade. Beware FALSE PRECISION.

Second, I notice the other thing about humanity and the markets are that we are heavily invested in the past. Many are hardwired, with their biases imprinted by some moment of glory or gloom in their trading/investing lives, like baby ducks seeing momma for the first time. Many have a knee-jerk reaction to the present thanks to the past. That past experience is either based a brief moment of victory a trader hopes to repeat, or regret filled phantom pain they fear revisiting. Imprisoned by the past, some dispute any possibility for change (for the better or worse) as impossible. Since it happened once before, many are anchored to the past as an imprint for the future with 100% certainty. (“It can’t possibly go any lower” or “It can’t possible go any higher”.) Here, traders are blind to many concepts, including: the permanent impairment of value, a temporary but frightening drawdown ripe for a true turnaround upwards, or that the current level of animal spirits (high or low) and the current pricing (optimistic or pessimistic) is never going to change. Again, risk management is useful for risk taking, without the need to bet the farm or one’s ego. You can indeed challenge a status quo, conventional “truth” without ending your trading career. YOUR PAST does NOT DEFINE your DESTINY.

Third and last paragraph on this topic. It is better to be roughly right than precisely wrong. And it is more important to control how, and how much, you trade than what you trade, or at what prices you enter, or what your target price shall be. I think in the long run all systems have losing streaks. I don’t care how much back-testing is done. There isn’t enough raw data to create a sample size to protect you from an asteroid headed your way. In fact, just this weekend, one small asteroid came streaking past earth, at a level 2/3s of the elevation that satellites orbit at, and we have been more aware about asteroids thanks to Bruce Willis 🙂 Good thing it passed us by, and that it was relatively small. Still, with “F=MA” and an asteroid hitting you, assuming it didn’t break up on reentry, it would be very painful but that is for another blog to cover. I think individual ideas are great but they are useless without a focus on an overall plan. What’s your size? What’s your time frame? What’s your methodology or do you not really have one in place yet? My ideas, your money. My time frame, your expectations. Think about the mismatch problems here. Think about correlation, are you trading 3, 4,5, or 100 different ideas or are they all really just one big freaking, leveraged correlated play? HOW YOU TRADE is MORE IMPORTANT than WHAT or even WHEN you trade.

Since, I was generously allowed to join iBankCoin, I have presented a few ideas, with a lot of humor and I’m happy with them, my methodology leaves me comfortable with a reasonable risk/reward probability and my risks per execution are small enough to not hurt but large enough to matter. I know my time frame, I have my methodology and most of all I have a respect for sizing and the enormous respect for the possibility an asteroid to come crashing through markets and sectors while I’m asleep. Just look at what goes on in our messed up world constantly. If you don’t think about the cost and consequences of your choices within the context of a greater process of planning then you are in trouble.

Additional thoughts regarding risk management: On a mechanical, process driven basis, please consider risking on average about 1/4 to 1% per trade or something like that, and as the profits come in, pay for more proceeds with those winnings if you plan to pyramid. (I apologize to all experienced traders for the arrogance of giving unsolicited advice on execution techniques like sizing. I hope older and wiser traders will understand I mean well.) As for trading “like a pig”, ala Druckenmiller’s anecdote about Soros’s admonition to not pass on a trade that has “conviction”, that is for those with experience, a bankroll and sufficient resources, both intellectual and financial, to determine a specific idea is worthy for trading “large”. For the love of all that is good, if your intent is to be decent professional trader, do not think about “doubling down” in the context of rescuing a trade. What are you trying to prove? Don’t tell me about averaging down, for if you are indeed averaging in pieces to build a position, then you would NOT telling me or anyone else about your entry price, since that doesn’t matter. But if that actual entry did matter then obviously you were not being 100% honest since you might have been hoping that was the “bottom” in a long or a “top” in a short.

About ALL about my posts: My ideas are all within a context of weekly price bars and slow as hell price trends.

This post helps to describe part of my biases about trading. If you don’t like it, that’s ok. I honestly don’t think anyone is going to read this but I’ve been bursting to talk about this after seeing a lot of the trader talk online in the past couple of weeks.

Tickers come and go. Markets come and go. We MUST remain.

 

 

 

 

 

 

Comments »

The current market action, both in near-term price action and across the social networks streams is all about things going down in flames. Plenty of hyperbole to go around for both bulls and bears. Amazing that we had a decline this late summer too and then all of sudden everyone forgot all about it and we had a good chuckle come the turning of the leaves. It really does pay to take a look at things from a more distant vantage. I use weekly price bars and so what this has been a turn in the making for the US Dollar. This whole narrative can be reduced to price.

I have read some wonderful narratives, to both inspiring and chilling effect, for why “this is a buy” or “that’s a piece of garbage”. I respect all viewpoints but I can’t only buy and sell at what the market offers and focus on risk management.

The image of those little lights you see is in today’s “teaser pic” is space object WT1190F, likely a booster rocket stage coming back down to earth and burning up, just like Ackman, Einhorn and Dinocorn valuations have in recent sessions.

I have one FANG play, $AMZN, and Exchange stock $ICE both have shot up like rockets and while quiescent from a sedate weekly price bar point of view, appear from the hourly and daily point of view poised for an ugly reentry. We shall see. Bets are small enough to not injure but big enough to have added points. I await orbital insertion or an stop loss splashdown by year’s end.

 

Comments »