Our LC Momentum model holds stocks as its core position. Long term empirical evidence across global equity markets shows equities significantly outperform all other major asset classes since 1900[1]. Morgan Housel recently published an article about the last seventy years of US stock market returns, and how they have to regularly climb the wall of worry.
In case you do not follow world economic events, you might want to be aware of the fact that Italy’s banking sector is teetering on the edge of collapse. Bad debts held by Italian banks make up seventeen percent (17%) of all outstanding loans in the country. This equates to about 360 billion euros or 20% of the entire GDP of Italy.
Living through a track record is very different than viewing it on paper. Even the most efficient track records in history have periods where they would have been very uncomfortable to stick with. Warren Buffett has had multiple 30-50% drawdowns in his career. In the world of indexing, there is nothing magical about the S&P 500.
Peak to valley, from June 1998 – March 2000 Warren Buffett’s Berkshire Hathaway lost over 50%. In the same period, the S&P 500 returned over 45% and the Nasdaq 100 returned over 315%. A new client said to me the other day “I’m in this for the long term, but if after a couple years I don’t see any gains then I’m going to tell you this isn’t working.”
I was asked a great question the other day by a member. He had done some math and noted that the reported dividends received by dividend ETFs (such as SDY, VIG, and others), was LOWER than it should be, than if you just took a weighted average of the EFF's holdings.
“Two roads diverged in a wood, and I took the one less traveled by. And that has made all the difference.” So wrote Robert Frost in his 1920 poem, The Road Not Taken. How does it relate to trading you might ask?
Our Anchor Trades strategy went live almost five years ago, and it is a good time to analyze this trading strategy's performance. In my Seeking Alpha article I asked the readers Could This Strategy Be The Holy Grail Of Investing? It's time to revisit the concept and the results to see if a fully hedged strategy can still produce satisfactory returns.
This article covers some basic stuff related to options owners. What are your choices when you own an option? You have three choices: sell it, exercise it or allow it to expire worthless. And that’s true whether you own a call or a put. Each choice has its pros and cons. Each choice might lead to different profit outcome.
A few days ago a one of the Steady Condors members asked if the past performance of Steady Condors was in line with our expectations, and would we expect it to perform better over time. His concern was that our real results are worse than the backtesting. My response was:
Remember Canarsie Capital, the hedge fundrun bythe former head of risk management at Morgan Stanley and a 28-year-old former Galleon trader, which blew up in January, prompting Owen Li, the former Galleon trader, to tell investors that he was "truly sorry" for losing all their money? Well, Lipled guilty to securities fraud.
I'm asked many times if we can use unusual options activity to make some good profits. In my opinion, using unusual options activity as an indicator for impending price moves is difficult, subjective, and dangerous. Yet many "options guru" pretend to build a whole "secret system" around this phenomenon.
It is so tempting to begin trading options. Too many novices hear/read stories about earning 10% per month and, believing that nonsense, want their share of the ‘free money.’ They take a couple of lessons or read a chapter or two and believe they know what they are doing. A typical mindset is: ‘How difficult can it be if people are making 10% per month?’
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