And in the "Hypocrisy Never Takes a Holiday" Department

In response to JP Morgan's much more aggressive approach to investing the bank’s own funds than its competitors, Brian Moynihan, Bank of America's chief executive told an investor conference this week, that his bank did not pursue a macro hedging strategy of the type thought to be responsible for losses at JP Morgan’s CIO. Other bankers are questioning JP Morgan’s approach to customer deposits, and as these banks rush to distance themselves from JP, hypocrisy reigns supreme

Of course, it would have been quite refreshing if Mr. Moynihan would have gone on to say...


"We don't put the banks money at risk. At B of A we're old school, we prefer to rip-off our customers the "old fashioned" way. We like to nick our customers to death with inflated over-draft fees, and abuse them with improper, robo-signed mortgage foreclosures. We especially enjoy taking advantage of minorities, by selling them riskier sub-prime mortgages, even though they qualify for safer fixed-rate ones. And then to top it off, we like to reward our executives whom implement these policies with inordinately high executive compensation, and keep it a secret from the shareholders. However, we are extremely circumspect and conservative, when it comes to investing the bank's capital."


However; Hell hasn't frozen over yet, so I don't think we'll ever actually hear Mr. Moynihan, utter the truth.

The Importance of Being Earnest, A Serious Thought about Trivial Effort

Trading itself is a naturally solitary endeavor - everyone needs to develop their own individual methodology and execute and manage their trades by themselves. But, we all benefit greatly from collaboration in all the events that lead up the actual trade, i.e., research, methodology development, and support.

Please continue to post your thoughts and observations. The flow of ideas is the lifeblood of creative process and the raison d' etre for forums  and blogs. It is also, the most efficient way to build and expand a network of collaborators. This will geometrically increase the odds for generating new ideas which may add further robustness to our trading.

It is always interesting to look at market variables in different ways. Adding a new class or creating additional classes out of an existing class, creates a portfolio effect. Different classes of measure do not behave in the same way or at the same rate; similar to a portfolio of stocks not acting the same way as an individual stock. The portfolio effect then, diversifies our methodology, creates more viable trades, and adds robustness to our overall results.

Even a competent trader’s long run edge is smaller than one would think, due to variance, ever-changing-cycles, and emotional pressures. Add the deployment of HFTs, and the problem is compounded to the point where the whole is now greater than the sum of it’s parts. The result is a finite sample of viable trades in any trade population, in any given time period, that defines a point of diminishing returns (over-trading). It follows then; to be exposed to the full sample, you would have to be in front of the screen the entire time period, and have the ability to recognize every trade opportunity.

In order to take full advantage of the sample, the trader must then be able to hold a position (that goes against him), be able to add to a position (that goes his way), and always be able to take the next trade. The less skill a trader has, the less likely, the trader is going to be able to recognize a good trade, or manage it properly once he is in it.. Think about how many times a day, week, month, or a year, a trader fails to execute properly, and you will have an idea of how easy it is for a trader to diminish his probability of success. Now consider the sample size of viable trades, for a trader with one set-up, or a trader with a limited knowledge base and skill-set, compared to a trader with a portfolio of knowledge and skills.

The novice trader must have a sense of purpose and immerse himself in gaining trading knowledge. After the trader has reached the level of competency and profitability, he must continue to put in screen time, in order to add dimensionality and nuance to his trading. And in an era when markets are continuously changing, a trader needs to continuously develop fresh insights and perspectives, in order to adjust his trading and maintain expertise. There is a saying attributed to Woody Allen that states, “80% of success is showing up” which must mean, the other 20% is making the most of your time.