We don’t leverage. It’s exhilarating on the way up. But terrifying on the way down
Risk Consideration:
In the unlikely event that markets do meander for some significant amount of time, the Calls lose value, but the S&P shorts earn a contango of about 4% per annum, partially offsetting the losses on the Calls. So losses should be very manageable.
Consistent outperformance can only be achieved with a consistent strategy.
Our Vision Of The Future
We enter positions after a thorough macroeconomic review to determine market direction.
Technical analysis helps select specific instruments and entry points.
Most trades are based on our six-month outlook. Occasionally, we trade based on our one-year view if it significantly diverges from our six-month outlook to mitigate risk.
We are In constant learning mode. We analyze, and have views on, where various markets will be in the 2 and 5 year time frames so that we can compare those views to reality as time passes. And as the future reveals itself. We feel that is one good way to continuously improve our awareness of how the world works.
Current Outlook:
Equities may have some room to rise but we believe they will turn very bearish within the next year. Hence, while we are currently long, we carry protection, as explained above, in case the market downturn happens sooner.
Higher returns have merit only if they are achieved without higher risk
Risk Mitigation
From 40 years of trading experience, we understand the importance of risk management. We understand all too well that to recover from a 50% loss requires a 100% gain to get back to break even. So we enter positions cautiously, considering the risk of potential failures first, and only then do we ponder the potential for success.