Good ideas bad timing and capitulation are all factors that influence investor decision making sometimes for better or worse.
Sometimes I have great trade ideas that work immediately and are incredibly profitable. Sometimes my ideas are dead upon execution. This is life as an investor and trader. Sometimes your ideas work and other times they don’t. Either learn to accept the fact you’ll be wrong about most of the time, adjust your risk framework accordingly, and party on, or find another line of work.
The reality is markets have many dimensions and investors attempt to make sense of incomplete information. If you want a better shot at success, the first step is to have a durable risk management framework to keep you out of trouble.
October U.S. CPI
October’s CPI data (excluding food and energy) was softer than expected and spurred a massive rally across asset classes on November 10th. Yes, CPI is cooling off which is good news, but it’s still way up there at 6.3%. However, the MoM rate of change is falling confirming inflation is reversing course.
This is exactly what the FED wants to see, but we’re not there yet. I don’t see the FED comfortable with CPI-ex above 3%. FED pivot, I think not.
Current Trades – flat
The trade idea from my post titled “How to play the Fed into year end” blew up almost immediately after the CPI data hit the wires. Both trades stopped out. Frustrating, absolutely! There’s no doubt about it, losing trades are never fun. That said, having a sound risk framework keeps you from risk of ruin. My advice, post-mortem all your trades or investments and find out what went wrong, learn from your mistakes and try again.
For now, I’m flat and looking for new ideas.
Final Thoughts
From a global macro perspective there are several themes to follow:
- if/when will a recession hit the US economy.
- impact from weak Korean exports.
- 3m/10yr yield curve inversion.
- fading China reopening narrative.
- continued weakness in oil prices.
Although this list contains up-to-date observations, the problem is this information comes with long and variable lags, therefore making forecasting difficult. The persistence of the decline in oil prices (leading indicator) combined with yield curve inversions tilt my perspective to a defensive tone short-term.
Thanks for reading!
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Invest at your own risk. Trade your own view. Do your own due diligence.
