Calling a Top

I have quietly sat by while the markets have continued to climb to incredible heights.

Selling my remaining 50 SPY at the market open, which will leave me with a short bias to the market. I hope to write a summary of my year from a cruise ship next week in the south pacific islands.

The Cultural Complex

I have a Jungian based book in my library called The Cultural Complex compiled by Thomas Singer and Sam Kimbles. I was delighted to hear that Tom Singer was visiting and speaking to the Jungian Society in Sydney, so last night I went along to his talk. Tom is a psychiatrist and a Jungian analyst, his area of interest is how cultural complexes manifest in different countries. It is always a kick for me to meet the author of a book that has had a profound effect on my life (2 other come immediately to mind – see below*)

This is a subject that has tremendous meaning for me, as a few years ago I coined the term The Market Complex to describe my world view on how the cultural complex plays out in our trading world.

Before we go further lets understand what the great man, Jung, had to say on the complex:

The complex has a sort of body, a certain amount of its own physiology. It can upset the stomach. It upsets the breathing, it disturbs the heart – in short, it behaves like a partial personality. For instance, when you want to say or do something and unfortunately a complex interferes with this intention, then you say or do something different from what you intended. You are simply interrupted, and your best intention gets upset by the complex, exactly as if you had been interfered with by a human being or by circumstances from outside. (Jung 1936/1976)

The idea behind the cultural complex is that there is another level of complex that exists within the psyche of the group. From here you can see where I am going with my thesis of The Market Complex. Have you ever felt overwhelmed by an irrational force that drives your trading in an unexpected direction? These impulses are often attributed to neuro-chemical reactions operating at a primal level of brain function. However, they can also be attributed to the emotional charge of ideas that tend to cluster around an archetypal core shared by individuals belonging to a group.

These are big philosophical ideas rooted in a more esoteric branch of psychology so we don’t need to get bogged down in the jargon. The key point to walk away with is that the market as a collective can often behave in a way that makes no sense to ones own rational understanding, and even more alarming we can sometimes do things that almost feel like we are acting under the influence of an unknown force.


* Prof Burton Malkiel – A Random Walk Down Wall Street

* Prof Sanford Drob – Kabbalistic Visions: C.G. Jung and Jewish Mysticism & Reading the Red Book: An Interpretive  Guide to C.G. Jung’s Liber Novus.

Preparing for launch

First to get the trades out of the way selling 100 SPY at the open to lighten up my broad market exposure. I still hate this market and think it is expensive.

The bulk of my time and energy is now focused on the launch of on the 20th May. I will write more when my schedule allows it.

Herewith Sefirot Freestyle Fund performance to date, in terms of the stated goal we are winning with a Sharpe Ratio of 0.42 vs 0.11:



Feeling Disloyal

I am feeling terrible that I am not posting on this site, like I would like. I am however tweeting a lot these days and can be followed on @mickson

As we have just finished Feb I wanted to post our returns. On the positive side of things the fund is profitable; however the strength of this bounce/new high coming has surprised me. I continue to opt for a very most index exposure. I have been toying with buying some non-correlated instruments of an exotic nature, but I have decided to stay away from it and stick to my main objective of beating the S&P500 on a risk adjusted basis.

Lastly, I am currently reading Market Mind Games by Denise Shull who I had the pleasure of meeting in New York in December. I will reserve comments until I have completed the book, but I will say I am impressed with her mindfulness approach. I am just wondering if I can accept her overriding philosophy within a Jungian context. Until later….. launch scheduled for May and occupying almost all my attention.


Chemical Reaction

I am going to put forward a controversial theory that came to mind.

Working within a neuroscience framework we know that people release hormones like cortisol (related to stress) and serotonin (related to happiness) within a normally distributed range. Then we have some people, call them outliers who either produce too much or too little of these hormones. Think here of your ADHD or extremely nervous trader.

I recall more than a decade ago reading Nobel Laurette Prof Robert Shiller’s book “Irrational Exuberance” where he questions the volatility in the stock market prices, when the dividends driving valuations move much less than the price. His thesis is that there must be more to valuation than simply discounting future dividends. The volatility ingredient in the mix is the emotional context of the trader/investor.

I would like to suggest that perhaps the volatility in the markets is simply an expression of the hormonal chemical reaction in the trading population. Here is a 5yr chart of the VIX (volatility index).


Feeling Well

I haven’t posted for sometime. I have been capturing some of my spontaneous thoughts on my twitter feed @mickson but in essence my thoughts have been almost exclusively focused on the new startup PsyQuation.

About 3 weeks ago I got some sort of flu virus and tried my best to beat it. I took things slow and mostly got on top of it. Then 2 weeks ago I went to Hong Kong to meet my partner and cofounder for a brainstorm session. We had a great week but the time zone and unfamiliar climate contributed to me catching a new virus in my left eye. Wow how crappy one feels when affected by a virus.

Last week I was in Melbourne where I tried to shake the virus, I took it very easy over the weekend and feeling a lot better today.

I say all this while my daughter suffers with a chronic rare condition at the age of 16, having spent most of her life fighting one ailment after another. I feel so weak and moody, and basically pretty useless with the “man flu”. I think however I am suffering also from a broken heart, as a father watching his precious child suffer. I wish this was a more positive sounding post, but this is how I feel right now.

The markets to me seem once again bipolar. This is not an ordinary time. We are seeing volatility and potential manic markets, and then shhhhh, quiet. It feels like the more the market wants to express its feelings the more it is inoculated with medicine to keep quiet. I maintain we will soon see the mother of all breakdowns.