Absolute return vs Benchmarking

An absolute return trading strategy is one which attempts to make the most money possible without being limited to a comparison to a typical index such as the Nifty, Dow etc.

Relative return managers are measured how they perform relative to some pre-determined benchmark like an Index.

In my opinion, benchmarking severely restricts a Portfolio Manager. You are a part of a herd and that is what we don't want to be a part of.

Is Dubai the next bubble to go bust?

Dubai is on the verge of defaulting on its 50 billion pound debt. This could be the latest bubble and trigger off the next down leg in the market.

http://www.thefirstpost.co.uk/56620,business,is-dubai-about-to-default-on-its-50bn-debt

All around we are surrounded by bubbles. Gold, crude oil, stocks. When the next leg of the bear market gets underway it is going to be a bloodbath.

Wall Street's Naked Swindle

An interesing story on how somebody with insider information at the highest level on the Bear Sterns collapse made billions using put options

http://www.rollingstone.com/politics/story/30481512/wall

DOW at 50% retracement of fall from 2007

The Dow and the S&P 500 having retraced 50% of their bear market declines and are testing major down trendlines drawn over 2007/2008 peaks.

Société Générale tells clients how to prepare for potential 'global collapse'

http://www.telegraph.co.uk/finance/economics/6599281/Societe-Generale-tells-clients-how-to-prepare-for-global-collapse.html

What is a bear market?

Anyone who invested in stocks in mid-1929 in US and held onto them would have to wait for almost his entire life before getting back to even.

Most people have only seen bull markets in the last 30-40 years and hence the bullish bias in analysts.

A prolonged bear market can be brutal and destroy a person's lifetime of investments. Today nobody can say with 100% certainty whether the current rally is a new bull amrket or a bear market rally. The nifty can be testing 2200 soon or could be touching 7000 also. We should be ready for either scenario.


All asset allocation decisions should include a strategy to profit fom falling markets.

Volatility - good or bad

It is not easy to develop a trading model that is not volatile and also gives high returns. Volatility is what creates the high returns investors want from the market in the first place. Investors become so frightened by viewing peaks and drawdowns. In systematic trading with a positive edge big swings in equity are very much anticipated and do not signal a loss of control.

Trend following models have 2 requirements: The need to preserve capital during losing periods so you can stay in the game until a winning period and the need to preserve psychological fortitude to keep playing.