Note to a friend on the market

I just wrote this note to a friend of mine on where I stand. I don’t talk that much about my trading, and I tend to post a lot less when I am in California (opportunity cost is very high here), but I thought the note below might be a useful follow-up to the Toxic Migration case I made a few weeks ago.

Dear X,

I am riding the equity calls I bought a week or two back, and actually added to them late last week. I closed out my USDMXN short yesterday. And I got scared out of my EUR position before today’s move (emotions got the better of me. Bad process on this). I rebought silver in much smaller size and sold that this morning. The copper chart had been shaping up since 8/21. This had added to my bullish bias, and had me looking for a place to get long. The slight pullback after the breakout of 3.50 gave me my chance, so now I am long copper futures and riding it. Entry pt was about 3.50.

I think the tail risk reduction was the impetus for all of this and it has triggered the post-Labor Day underperformance anxiety we talked about. I thought it was going to happen before Labor Day, but it didn’t. Now the bears are back on their heels and worried about career risk. Moreover, the ECB and the Fed haven’t put their cards on the table yet. They are more powerful when we have to guess which cards they are holding. For these reasons—unless we get truncated by Sept 12th—we should continue to run. I don’t know what the odds are for Sept 12th and I suspect there are workarounds anyway (more lifting by the ECB), so I am going to continue to run with my positions.