What is this blog about?
This blog will focus on my global macro views and asymmetric trading opportunities that are based on those views. Asymmetric trades refer to trades that offer returns that are several multiples of the capital risked over a multiyear holding period.
Who are you?
I am a private investor based in Toronto who loves to follow financial markets. In the past I have started up an outsourcing business and an online business. My educational background is an undergraduate degree with high distinction in math and economics from the University of Toronto.
What kind of an investor are you?
Basically, I am a global macro investor. My strategy is to uncover emerging or reversing macroeconomic trends, which I call ‘macro themes’, that are out of consensus opinion, but which I have a high level of conviction will occur. I then try to construct a trade that will offer me at least 3x what I risk within 5 years if the macro theme plays out like I believe. The trade could utilize bonds, equities, derivatives or currencies. I allocate approximately 20% of my portfolio to the trade.
Other than my macro theme trades, the remainder of my portfolio is dedicated to long/short ideas based on value investing principles. Occasionally, I may also take advantage of multi-day or -week short term trading opportunities with a tiny portion of my funds.
What is your investing track record?
I have been investing since 2003 racking up returns of over 25% per year. I lost money at first experimenting with different styles like day trading and growth investing before settling on my current strategy of making big bets on asymmetric trades based on my macro themes. Over my career I have closed 3 macro theme trades.
The first macro theme I discovered was in 2004 and I called it ‘Gold Revaluation’. It was based on my analysis that US money supply growth and US dollar overvaluation implied a much higher gold price than the $400/oz price at the time. I played the rise in gold by owning a basket of junior exploration companies that increased several fold until I closed out the position in 2007.
In 2006, I called my second macro theme ‘US Financial Crisis’ where I foresaw the bursting of the US housing bubble, the economy falling into the worst recession since the Great Depression, and taxpayers bailing out several financial institutions. I initially played it by betting against some of the more over leveraged banks, but later I went long fed funds futures with some leverage. This turned out to be the greatest trade I ever made returning 20x my initial capital by 2010.
In 2010, the third macro theme I formulated is what I call ‘The Rise of Green Energy’. At the time the US government was offering massive grants and guaranteed loans to alternative energy developers. I thought this would help, in particular, geothermal energy companies earn extraordinary returns on their new projects. Unfortunately, what I overlooked was that economically viable geothermal resources are very difficult to find, expensive to develop, and prone to reoccurring technical problems during production. By late 2011, when I realized that they would never come close to earning what I projected, I lost 50% of my investment, but gained a very expensive learning experience.
Currently, I have open two macro theme trades. First, is what I call ‘China Financial Crisis’ which is similar to my past theme of the US Financial Crisis, where China’s housing bubble deflates, the economy experiences its worst slowdown in decades, and the government bails out systemically important institutions. I am shorting Chinese and Australian stocks, certain commodities, and iron ore producers.
My second macro theme that has yet to play out is based on my belief that we are entering a period of what I call ‘US Economic Resurgence’. The ending of US household deleveraging, a recovering housing market, and a lessening of foreign energy dependence should lead to a transition from a period of subpar economic growth to a period of above average growth. I am currently betting on this outcome by owning shares of a basket of US financials.
My past success has made me confident that I am a skilled investor, but I also accept the possibility that my track record isn’t very long and it could all be just luck. So please don’t blindly follow my trades.
What do you hope to gain from this blog?
By writing out my thoughts and making it publicly available, I feel motivated to do exhaustive research thereby crystallizing my thoughts. I also hope to get feedback, particulary criticism that may expose flaws in my views.