And so the frustration continues. Struggling to make headwinds, it will come ……
With an increase in Shanghai Stock Exchange volatility and some exciting stuff happening on the macro front i.e. Greece, things are no longer as boring as they have been for a while. I will only make one comment regarding economic jawboning.
Everyone is talking about an increase in interest rates in the US later this year, even Janet Yellen. However the IMF warns strongly against doing so as the economic recovery is simply too fragile, with recent economic GDP & consumer numbers backing this up.
This is precisely what my point has been, despite market analysts repeatedly reporting the strength of the US economy and the global recovery for that matter. What is clearly evident with the Greece default rerun is that using Zero Interest Rates does nothing more than provide “life-support”, very rarely does the patient come off life-support and function normally. To achieve normalicy one needs a viable prognosis and then the appropriate medication. We have not witnessed this in terms of the global economic recovery. All we have seen is zero interest rate life support.
On a happier note, the Freestyle fund has taken poll position on an absolute return basis with much lower volatility. Still early days but things are looking like they may get quite exciting in the coming months.
Before discussing the subject line, I just wanted to update you on the performance of the Sefirot Freestyle Fund. I remain very satisfied with the progress to date, and the fact that we are not making money in the current environment doesn’t bother me in the least. It does however confirm to me that managing a fund with other peoples money using my style is an exercise in masochism in the extreme.
Yesterday in therapy I was discussing a lucid dream/feeling that has come and gone for the last 10yrs with my Jungian analyst. I raised the image/feeling not knowing exactly where it was coming from and its meaning. Dr Andre being the expert he is helped me connect the dots.
I have been intellectualizing a particular relationship lately and have repeatedly admitted that it doesn’t bother me because I know its for the best. In fact I have been quite proud of myself for being able to rise above the situation and do the “right thing”. However, this is where things get interesting as I have been experiencing these lucid image and emotional flashes and couldn’t see that in fact my unconscious was telling me that no matter how much I intellectualize the experience the emotions are real and need to be felt. If you ignore these repressed unconscious emotions then they will erupt to the surface as a complex.
I feel a million times better that I have zoned in on these feelings and now that I am acknowledging them I am feeling more centered.
This insight is equally applicable to the markets. There is no way to ignore the emotions driving the markets the primary emotions of fear and greed need to be “felt”. However, the world we live in today with news coming from every angle and mavens in their thousands writing on blogs (just like me) trying to explain each and every new data piece and its significance, are doing the markets in their genius a disservice. The market and her participants need to feel! We intellectualize emotions at our peril with market complex eruptions the likely result.
Take a step back from the markets and look at what possible emotional message could be communicated to you. If you do and experience the balance of intellect and emotion then you are likely to be in a much happier safer place.
I have taken on a new job in a different city to the one I live in. Things are pretty hectic for me at the moment, but the portfolio remains within the range of comfort.
Markets are incredibly vulnerable and I have stripped out the volatility, with a skew towards volatility if it should materialize in a meaningful way.
Not much to report other than to say I am really happy with how the Freestyle portfolio is performing.
It is well outperforming its benchmark on a risk adjusted basis, and is currently running with an extremely cautious 0.04 beta to the market. The portfolio is now in a very defensive mode and anticipates further weakness in the broader indexes. However the market may well decide to continue its great levitation in which case we will remain cautious for the next few months but may entertain some beta.
In summary we have had 3 positive months and remain very calm and unphased by the current new index highs. We love extreme markets and by most accounts we find ourselves in a market in the 97th percentile or higher from a valuation point of view. One last important note to self. Remember how long these over valued markets persist. Always look at the market internals as well as the broader monetary policy before getting too defensive.
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