This is a nice graphic showing the 5 best and the 5 worst traders of all time.
Source: 888 Markets
The Economist had their EIU’s (Economist Intelligence Unit) cost of living around the world as the daily chart. I believe that these must be the most expensive cities to travel as well.
The comparison is done by using an index that is weighted average of 160 products and services. The New York is set to 100 to provide a base to compare all cities.
The Caracas is only on this list IF you use the official exchange rate to convert dollars to bolivars or vice versa. The real (read black market) exchange rate is only one tenth of this.
Not sure if I would like to live at any of the 10 cheapest cities, although Bucharest is not that bad.
It is always good to bear in mind the expenses associated with staying at certain cities. I have to say that I used to go quite often to Singapore, but nowadays the hotels have become sooo expensive that I just rather do a fly over.
The man himself famously started out by reading all the books in the Omaha Public Library with “finance” in the title. But today we have blogs, which can make the learning process a whole lot quicker.
There are lots of blogs out there on the subject of value investing, and the quality and content vary widely. Here are the 10 best value investing blogs for you to follow, and what you can learn from them.
Where to find it: http://contrarianedge.com/
Why to follow: Two reasons. One is that its author, Vitaliy Katsenelson, is a well-known value investor who’s been dubbed “the new Benjamin Graham” by Forbes. The other is the wonderfully eclectic nature of its content, veering from insightful analysis of popular stocks like Apple and Amazon to musings on Tchaikovsky.
Philosophy: “I invest, I educate, I write, and I could not dream of doing anything else.”
Sample post title: “Why Investors Hate Apple — and Are Dead Wrong”
Where to find it: http://www.valuewalk.com/
Why to follow: This site started in 2010 as a simple value investing blog, but has mushroomed into a popular site delivering breaking news, analysis and syndicated content from other blogs. Expect multiple posts a day, as well as useful resources like a list of books recommended by Warren Buffett, Charlie Munger and other gurus.
Philosophy: “Many academics claim investing is a random walk. We believe this to be partially true, but believe that value investing can outperform the market.”
Sample post title: “Follow Up On Technical Analysis And Why To Avoid It”
Where to find it: http://brooklyninvestor.blogspot.com/
Why to follow: Well, not for the design, which is old-school BlogSpot. The draw here is the supremely detailed posts analyzing individual securities, taking extracts from annual reports and investor presentations and explaining what they mean for investors. Even if you don’t plan to invest in the companies in question, the posts are a great insight into some good ways of researching a stock.
Philosophy: “Random Thoughts on Investing and Investment Ideas.”
Sample post title: “Alleghany Corp Investor Day”
Where to find it: http://alephblog.com/
Why to follow: Asset manager David Merkel has been blogging since 2007, covering a range of different topics but accumulating almost 700 posts on value investing. He looks both at individual stocks and more general investing principles, and his posts are full of detail but easy to follow.
Philosophy: “To fight for what is right in money management, and encourage readers to pursue strategies that reduce risk and enhance returns.”
Sample post title: “If Investing Were Free, How Would It Change What You Do?”
Where to find it: http://wexboy.wordpress.com/
Why to follow: This blog spends a lot of time analyzing Irish stocks, which may not immediately appear very useful to people from other parts of the world. But even if the companies are unfamiliar, the methods are classic value investing, picking over the numbers and trying to uncover value other investors have overlooked. And the breezy writing style makes it fun to read!
Philosophy: “I think the most valuable ‘skill’ any investor can wish for is a little dose of humility.”
Sample post title: “The Great Irish Share Valuation Project”
Where to find it: http://greenbackd.com/
Why to follow: Author Tobias Carlisle runs a value investment firm, and has some smart insights on value investing. His posts often introduce interesting research on subjects like negative enterprise value stocks, and present them in a way that the rest of us can understand.
Philosophy: “Deep value, contrarian, and Grahamite investing.”
Sample post title: “A Market of Stocks? Distribution of S&P 500 P/E Multiples Tightest In 25 Years”
Where to find it: http://www.valueinvestingworld.com/
Why to follow: This blog takes a cerebral approach, bringing in a broad range of articles on investing and economics that are relevant to value investing, along with quotes from people like Seneca and Einstein.
Philosophy: “Promoting the multidisciplinary approach to investing.”
Sample post title: “Marcus Aurelius quote”
Where to find it: http://www.grahaminvestor.com/
Why to follow: Posts here don’t come out very often – just once or twice a month – but they’re usually well thought out. And the worth of this site lies not just in the blog posts, but also in the stock screens to help you find investments that meet the criteria proposed by famed value investor Benjamin Graham.
Philosophy: “I am generally a long-term value investor and try to use as many of Ben Graham’s principles as possible.”
Sample post title: “Has Your Portfolio Suffered an ACL Tear?”
Where to find it: http://www.oldschoolvalue.com/blog/articles
Why to follow: A long-running blog, with five years of value investing posts, some of them collected into series of tutorials that are a great way to learn the basics. Owner Jae Jun also writes very detailed posts analyzing particular stocks using a variety of valuation methods to show you how value investing works.
Philosophy: “Provide practical and actionable value investing tools, tutorials and educational material to help empower the individual investor.”
Sample post title: “Stock Analysis Lesson with CommVault Systems (CVLT)”
Where to find it: http://longtermvalue.wordpress.com/
Why to follow: Some bloggers tend to trumpet their successes and gloss over their failures. This one is refreshingly honest, charting its owner’s real-life investing experiences and analyzing both what worked and what didn’t.
Philosophy: “Value Investing for the Long Term.”
Sample post title: “What went wrong in 2013”
CHICAGO, Feb. 26, 2014 /PRNewswire/ – Today, Jack Schwager, the best-selling author of the Market Wizards Series, which have sold well over a million copies worldwide, and FundSeeder.com announced that he is launching an international search to find the world’s greatest undiscovered traders. This Market Wizards Search will provide traders – no matter their background or location- with an opportunity to be profiled in his forthcoming book, Undiscovered Market Wizards. Traders may register online via Fundseeder.com, a website whose mission is to identify undiscovered trading talent and link them with seed investors.
On this historical launch to source new trading talent, author Jack Schwager said, “I am excited to be a part of FundSeeder.com and The Market Wizards Search. Over the past 25 years, I have interviewed countless traders. The exceptional ones have been featured in my Market Wizards books. One thing I have found is that many of the world’s best traders are undiscovered. I believe FundSeeder.com will be instrumental in finding new talented traders.”
In addition to the online Market Wizards Search, Fund Seeder and Jack Schwager will be announcing The Market Wizards Search Roadshow, a series of international conferences where traders and investors will have an opportunity to hear and meetJack Schwager. Jack Schwager will speak on the key trading lessons he gleaned from his interviews with past Market Wizards. Details will also be provided on how to be featured in the next Market Wizards book. FundSeeder.com will be announcing dates and locations of the roadshow in the near future.
Learn more at: www.FundSeeder.com
About Jack Schwager
Jack Schwager is a recognized industry expert in futures and hedge funds and the author of a number of widely acclaimed financial books. He is best known for his best-selling Market Wizards Series.
About Fund Seeder
Fund Seeder believes that some of the world’s greatest traders are undiscovered. Our mission is to identify undiscovered trading talent and link them with seed investors from all across the globe. Now, traders may build a proven track record, meet investors who are looking to source emerging managers and track returns, metrics and more. Visit FundSeeder.com
SOURCE Fund Seeder
In recognition of last week’s release of all 13 episodes of Season 2, we are reprinting – from our Chief Geopolitical Strategist, Marko Papic – an October 2013 review of the popular Netflix original series, House Of Cards.
Anyone who has watched the TV series House Of Cards could quickly imagine how Francis J. “Frank” Underwood would resolve the ongoing government shutdown in Washington. Underwood, played by Kevin Spacey, is the Democratic House Majority Whip from South Carolina’s 5th congressional district. Congressman Underwood would likely combine several tactics to cajole and bludgeon his way to compromise:
Underwood is a figment of some very good imagination (and a healthy dose of inspiration from the original BBC series protagonist Francis Urquhart), but the fiction does not stop with the show’s characters. The entire series portrays a Washington political arena that no longer exists.
While House Of Cards has been praised for its realistic portrayal of D.C. lingo and social interactions, it actually gets the politics wrong:
We still recommend House Of Cards because it does a good job portraying lobbyists and interest groups in Washington. It also illustrates the legislative process, the sausage making, realistically. In the series, “the American government” does not exist as an entity in and of itself, but rather as a setting where other characters pursue their interests. So while we recommend to our clients that they unwind with House Of Cards episodes after a long day at work, we also caution that they should not try to find Frank Underwood in the real U.S. Congress.
Here is a nice article on bitcoins from http://armstrongeconomics.com/2013/04/06/bitcoin/
The rise in Bitcoin to $147 is clearly a phase transition. Nothing moves in that manner that is sustainable. The cyber attacks are interesting. They could be major players seeking to disrupt the business to benefit short positions. Or it could be government attacks as well.
The problem Bitcoin faces is the same we all face. The core assumption that they can create an electronic currency out of the banking system and actually survive as an alternative to government, is a bit naive. The assumption is that governments will play by the rule of law. What stops them from simply storming the offices and criminalizing it as money laundering? At least Hitler respected the sovereignty of Switzerland. Today, it is all about money and they could care even less about international law. Switzerland had been forced to yield. They can shut down entire countries unless they comply.
In the 1970′s, when futures were starting, we had tax-straddles. Lets say gold was rising into January 1980 so you sold short Dec 1979 and bought Feb 2000 gold. You closed the trade taking the loss in 1979 and thus the money was moved from one year to the next. The IRS learned about the play, imposed mark-to-market on all positions, ending the straddles, and then went after all the records of firms and clients who participated charging fines, interest and penalties.
I seriously doubt that with the kill-switch, the ability of government cut off power and track every transmission, that any type of electronic money will ever be safe. The only solution is to leave for Asia, or push for major reform to end taxation and restore our liberty and privacy. Otherwise, there is no rule of law. They will do whatever they want. They can easily declare it to be money-laundering, and don’t forget, that is how they discovered Eliot Spitzer’s payment to a hooker that forced him to resign as governor of New York state.
Every country now has a cooperating money laundering department. They are tracking absolutely everything with no exceptions.
From RAPA Cap Intro - http://rapacapintro.com
Dear RAPA members.
We have finalized our top 5 traders who qualify for the A$1.2m allocation at the end of March. These stars have consistently produced superior risk adjusted returns:
I have mentioned on many occasions that the 5 qualitative points (5%) on offer are very important as they can make the difference in our decision on an allocation, as you can see the scores were close so take the time to write on your Wall and send us stuff. When we are considering an allocation we rely heavily (95%) on our RAPA Score but we need you to explain your process, your philosophy of investing, your edge, examples of how you invest, and anything else that can give us a level of deeper understanding. Don’t underestimate the power of communication.
I am sure that some of you are wondering how you would have done if you invested an equal amount, i.e. $20k each in our 5 trading stars over the last 14 months.
Michael Berman, Ph.D.
CEO & Co-Founder
“So I always ask the question: What would you like to do if money were no object? How would you really enjoy spending your life? Well it’s so amazing as the result of our kind of educational system, crowds of students say ‘Well, we’d like to be painters, we’d like to be poets, we’d like to be writers’ But as everybody knows you can’t earn any money that way! Another person says ‘Well I’d like to live an out-of-door’s life and ride horses.’ I said ‘You wanna teach in a riding school?’
Let’s go through with it. What do you want to do? When we finally got down to something which the individual says he really wants to do I will say to him ‘You do that! And forget the money!’ Because if you say that getting the money is the most important thing you will spend your life completely wasting your time! You’ll be doing things you don’t like doing in order to go on living – that is to go on doing things you don’t like doing! Which is stupid! Better to have a short life that is full of which you like doing then a long life spent in a miserable way. And after all, if you do really like what you are doing – it doesn’t really matter what it is – you can eventually become a master of it. It’s the only way of becoming the master of something, to be really with it. And then you will be able to get a good fee for whatever it is. So don’t worry too much, somebody is interested in everything. Anything you can be interested in, you’ll find others who are.
But it’s absolutely stupid to spend your time doing things you don’t like in order to go on spending things you don’t like, doing things you don’t like and to teach our children to follow the same track. See, what we are doing is we are bringing up children and educating to live the same sort of lifes we are living. In order they may justify themselves and find satisfaction in life by bringing up their children to bring up their children to do the same thing. So it’s all retch and no vomit – it never gets there! And so therefore it’s so important to consider this question:
What do I desire?”
From RAPA Cap Intro - http://rapacapintro.com
RAPA – MT4 Allocation, Signal Seller Paranoia & New Score Release
Dear RAPA members.
Over the weekend we chose 5 emerging FX traders that we feel have potential despite their short track records on RAPA. The Famous Five as per their usernames are:
We have setup each account with $10,000 and then we opened a 6th account with $50,000 which will begin by allocating $10,000 equally to each manager. However in the larger “optimal” account, we will rebalance at the end of each month and optimize our allocation to each manager based on their respective performance. This may see allocations decreasing or increasing; in the individual accounts the money allocated will remain constant provided the account is not closed due to excessive drawdown. The track records of these managers is still too short to squeeze maximum value out of their respective inter-relationships or reliance on their respective RAPA Scores, but this should be an interesting experiment to see if the tactical allocation overlay the RAPA management applies will add any value to the sum of the individual managers performance. The Famous Five have therefore scored a bonus of an additional $10,000 each to manage and earn fees on. Boy we are generous .
We have developed a technology we call RAPA Grabber which will enable us to show the real time equity curves of the managers we have allocated capital to. This addition should make for entertaining viewing; we hope to implement this on the site within the next 10 days.
During this allocation round I picked up on a very interesting phenomenon in the FX world which I believe places people in a major ethical dilemma and has caused the signal selling FX community to become paranoid. Let me take a few steps back to give you some colour regarding this insight.
When we added MT4 to our list of approved data importers we got a lot of requests to make our leaderboard dynamically update like some of our competitors; I researched this and found MT4 technology provides a very simple way for us to do this but then I realized that the minute you have an accounts investor password you have access to view the trading account real time and therefore apply copying software to mirror the account. This insight matched why so few successful traders were posting their returns on these social trading sites. It made sense to me and RAPA decided to report a more lagged performance in the hope that we would attract more serious traders who didn’t have to give up their signals real time and effectively be exposed to copying.
I am glad we took that decision but during the course of this current FX allocation I encountered the paranoia that these traders experienced when handing over their investor passwords to allow us to copy their signals. I want to thank these traders for entrusting us to act responsibly with their intellectual property. The RAPA team respects the hard work and dedication that goes into building an impressive track record and we commit to working with your signals with the utmost honesty and integrity. What this all means to those at a distance from FX signals, is that you could have an unscrupulous party selling or trading the trade signals of an unsuspecting trader.
You may recall last week I mentioned that DCM Capital were auctioning their brokerage that specialised in sentiment analysis on Twitter. They claim to have spent 350,000 pounds developing the business and attached an independent valuation of 3.5m pounds to the business. This past Monday the auction closed with the highest bidder at 120,000 pounds. I have my theories why this failed so dismally but will need to save it for another time as I have already over stayed my welcome.
In conclusion I wish to alert you to the fact that over the weekend or early next week, we will be uploading a new release of the RAPA Scoring algorithm. We have really pushed the cutting edge envelope on this latest release, we welcome comment as always and please feel free to pass this email around widely so we can expand the community. As our database grows we are able to do more and more empirical work and enhance our scoring calibration. Indirectly we all benefit by increasing the size of the community, in statistics more is always better than less.
Michael Berman, Ph.D.
CEO & Co-Founder
Cash has been stable as a share of market cap for the past few years, despite share price appreciation, which is a good representation of the degree of cynicism toward the sustainability of the U.S. economic recovery.
S idelined cash is still relatively high as a share of total stock market capitalization. This measure excludes the large allocations that have been made in recent years to corporate bonds and other fixed income funds and ETFs.
As confidence in the global economic cycle improves, cash holdings should diminish, especially since investors can earn an attractive yield on stocks. Relative to cash returns, the dividend yield spread has been stable since the 2009 spike, reflecting solid dividend growth.
According to our U.S. Equity Strategy service, it would be surprising for equities to peak before the cash mountain has at least declined to the level seen at the 2007 top in share prices, especially since the interest earned is even lower now.
Interested in a trial? Visit this link.
Jesse Livermore’s Trading Rules Written in 1940
- Nothing new ever occurs in the business of speculating or investing in securities and commodities.
- Money cannot consistently be made trading every day or every week during the year.
- Don’t trust your own opinion and back your judgment until the action of the market itself confirms your opinion.
- Markets are never wrong – opinions often are.
- The real money made in speculating has been in commitments showing in profit right from the start.
- At long as a stock is acting right, and the market is right, do not be in a hurry to take profits.
- One should never permit speculative ventures to run into investments.
- The money lost by speculation alone is small compared with the gigantic sums lost by so-called investors who have let their investments ride.
- Never buy a stock because it has had a big decline from its previous high.
- Never sell a stock because it seems high-priced.
- I become a buyer as soon as a stock makes a new high on its movement after having had a normal reaction.
- Never average losses.
- The human side of every person is the greatest enemy of the average investor or speculator.
- Wishful thinking must be banished.
- Big movements take time to develop.
- It is not good to be too curious about all the reasons behind price movements.
- It is much easier to watch a few than many.
- If you cannot make money out of the leading active issues, you are not going to make money out of the stock market as a whole.
- The leaders of today may not be the leaders of two years from now.
- Do not become completely bearish or bullish on the whole market because one stock in some particular group has plainly reversed its course from the general trend.
- Few people ever make money on tips. Beware of inside information. If there was easy money lying around, no one would be forcing it into your pocket.
Dear RAPA members.
Oh boy its me again, I wouldn’t bomb you with another email if I didn’t have something important to say.
An investor has just given RAPA A$50,000 to allocate to 5 MT4 traders by the end of next week, i.e. Friday 18th. We will be allocating a larger sum of money at the end of March according to our RAPA Rankings, but the allocation next week will be open to a more open screening process than just the Leaderboard Ranking. By this I mean traders with track records of 3 months or more and a good story.
For those trading forex on the MT4 platform, wanting to manage a live account with A$10,000 and earn a 1%pa management and 10% performance fee, you need to do the following:
My advice is to start these steps ASAP so we can start considering our best candidates. Have a great weekend.
Michael Berman, Ph.D.
CEO & Co-Founder
New from RAPA.
In our last email we introduced a new release of our RAPA Ranking algorithm. We claimed that our ranking system was superior to the traditional metrics used when making asset allocation decisions. Let us put RAPA to the test and see if this is in fact the case. For our newer members in case you never knew RAPA stands for (Risk And Profit Analyzer).
In this simple test we took from our leaderboard the top 20% of our RAPA Rankings and compared it to the top 20% on a percentage performance basis, and we did this every month from March 2011 rotating out of the accounts that were not in the top 20% on a Rank and Performance basis. This is what we found.
What you can clearly see in this example is that the RAPA Ranking method produces a significantly higher return with a much lower amount of risk.
Michael Berman, Ph.D.
CEO & Co-Founder
Over the past few centuries, Western cultures have been very good at creating general prosperity for themselves. Historian Niall Ferguson asks: Why the West, and less so the rest? He suggests half a dozen big ideas from Western culture — call them the 6 killer apps — that promote wealth, stability and innovation. And in this new century, he says, these apps are all shareable.
The Credit Suisse Global Investment Returns Yearbook 2013 (previous versions 2012, 2011) which are all updates to the great DMS book Triumph of the Optimists: 101 Years of Global Investment Returns.
Credit Suisse Global Investment Returns Yearbook 2013 (You may not want to be located in the US)
(Also perhaps an easier download location here).
Australia is often described as “The Lucky Country” with reference to its natural resources, prosperity, weather, and distance from problems elsewhere in the world. But maybe Australians make their own luck. In 2012, the Heritage Foundation ranked Australia as the Yearbook country with the highest economic freedom. Also in 2012, the Charities Aid Foundation study of World Giving ranked Australia as the most generous out of 146 countries in the world. Whether it is down to luck, economic management or a generous spirit, Australia has been one of the two best-performing equity markets over the 113 years since 1900, with a real return of 7.3% per year.
The Australian Securities Exchange (ASX) has its origins in six separate exchanges, established as early as 1861 in Melbourne and 1871 in Sydney, well before the federation of the Australian colonies to form the Commonwealth of Australia in 1901. The ASX ranks among the world’s top ten stock exchanges by value and turnover. Half the index is represented by banks (31%) and mining (18%), while the largest stocks at the start
of 2013 are BHP Billiton, Commonwealth Bank of Australia, and Westpac Banking Corporation.
Australia also has a significant government and corporate bond market, and is home to the largest financial futures and options exchange in the Asia- Pacific region. Sydney is a major global financial center.
Statement by Glenn Stevens, Governor: Monetary Policy Decision
At its meeting today, the Board decided to leave the cash rate unchanged at 3.0 per cent.
Global growth is forecast to be a little below average for a time, but the downside risks appear to have abated, for the moment at least. The United States has so far avoided a severe fiscal contraction and financial strains in Europe have lessened considerably over recent months. Growth in China has stabilised at a fairly robust pace. Around Asia generally, growth was dampened by the earlier slowing in China and the weakness in Europe, but again there are signs recently of stabilisation. Some commodity prices have firmed over recent months.
Sentiment in financial markets has continued to improve, with risk spreads narrowing and funding conditions for financial institutions becoming more favourable. Long-term interest rates faced by highly rated sovereigns, including Australia, remain at exceptionally low levels. Borrowing conditions for large corporations are very attractive. Share prices have made further gains. However, the task of putting private and public finances on sustainable paths in several major countries is far from complete and, accordingly, financial markets remain vulnerable to setbacks in these areas.
In Australia, most indicators available for this meeting suggest that growth was close to trend in 2012, led by very large increases in capital spending in the resources sector, while some other sectors experienced weaker conditions. Looking ahead, the peak in resource investment is approaching. As it does, there will be more scope for some other areas of demand to strengthen.
Present indications are that moderate growth in private consumption spending is occurring, though a return to the very strong growth of some years ago is unlikely. The near-term outlook for non-residential building investment, and investment generally outside the resources sector, remains relatively subdued. Public spending is forecast to be constrained. On the other hand, there are indications of a prospective improvement in dwelling investment, with dwelling prices moving higher, rental yields increasing and building approvals higher than a year ago. Exports of natural resources have been strengthening, though recent bad weather is affecting some shipments.
Inflation is consistent with the medium-term target, with both headline CPI and underlying measures at around 2¼ per cent on the latest reading. Looking ahead, with the labour market softening somewhat and unemployment edging higher, conditions are working to contain pressure on labour costs. Moreover, businesses are likely to be focusing on lifting efficiency under conditions of moderate demand growth. These trends should help to keep inflation low, even as the effects on prices of the earlier exchange rate appreciation wane. The Bank’s assessment remains that inflation will be consistent with the target over the next one to two years.
During 2012, there was a significant easing in monetary policy. Though the full impact of this will still take further time to become apparent, there are signs that the easier conditions are having some of the expected effects: the demand for some categories of consumer durables has picked up; housing prices have moved higher; there are early indications of a pick-up in dwelling construction; and savers are starting to shift portfolios towards assets offering higher expected returns. On the other hand, the exchange rate remains higher than might have been expected, given the observed decline in export prices, and the demand for credit is low, as some households and firms continue to seek lower debt levels.
The Board’s view is that with inflation likely to be consistent with the target, and with growth likely to be a little below trend over the coming year, an accommodative stance of monetary policy is appropriate. The inflation outlook, as assessed at present, would afford scope to ease policy further, should that be necessary to support demand. At today’s meeting, taking into account the flow of recent information and noting that there had been a substantial easing of policy as a result of previous decisions, the Board judged that it was prudent to leave the cash rate unchanged. The Board will continue to assess the outlook and adjust policy as needed to foster sustainable growth in demand and inflation outcomes consistent with the target over time.
News from http://www.rapacapintro.com
Dear RAPA members.
We mentioned in previous correspondence that we have been working diligently on improving our RAPA Ranking algorithm. The most important value RAPA can bring to its investment community is an effective way of measuring emerging traders skill and with that increase the odds of identifying traders who are likely to produce consistent above average returns. This is by no means a task that is complete but rather a dynamic work in-progress.
The bedrock of our 1st release algorithm was the Sharpe ratio, we have continued with this focus on risk-adjusted returns, but we believe we have significantly enhanced our product by incorporating the latest academic work from quantitative finance superstar Dr Marco M. Lopez de Prado. Marcos is the Head of Global Quantitative Research – Tudor Investment Corp and a highly respected academic who has designed the PSR (Probabilistic Sharpe ratio). PSR is designed to work with non-Normal returns applying the following 4 beneficial points; for those interested in the technical aspects we refer you to the paper here.
It allows us to establish the track record length needed to make an assessment.
It models the trade-off between track record length and undersirable statistical features (e.g. negative skewness with positive excess kurtosis).
It explains why track records with those undesirable traits would benefit from reporting performance with the highest sampling frequency.
It allows one to optimize a portfolio under non-Normal, leveraged returns while incorporating the uncertainty derived from track record length.
The simple English version is that PSR is excellent for evaluating traders who write naked options and those that use martingale entry strategies and also knowing when a trader has sufficient track record to make a judgement call. There are some highly technical aspects to the way we calibrate the formulae which we are happy to answer. We recommend the best forum for this technical discussion is via our LinkedIn RAPA Group.
We have also enhanced a feature that focuses on the drawdown characteristics of the traders account. All investors prefer their investment to be above the high water-mark but an account will always go into drawdown at some point, our formulae focus’s on the probability of drawdown and also its probability of recovery. We have worked with a large database to calibrate this measurement tool and it appears the statistical evidence from the CTA databases is that the natural threshold for max drawdown is 20%, any fund on our platform that demonstrates drawdowns in excess of 20% will therefore be heavily penalised.
Our final amendment has been our approach to rewarding accounts with longer track records, even though the PSR formulae rewards longer track records we believe this to be such an important factor that we have devised a progressive formulae that further rewards track record length.
As before we will continue to apply a 5% (5 point) subjective score towards the trader who describes clearly the philosophy and objective of the account strategy on his profile as well as providing typical examples of trade ideas on the profile wall. This is an often neglected aspect of the score and can make a significant difference.
We realise that not everybody will be happy with our new algorithm release. PSR is a new measurement tool, our quant team believe it to be a significant improvement on the Sharpe ratio. We have some good managers who will drop back in their rankings and urge them not to be discouraged, persistent risk adjusted returns will work in your favour over time. We do not disclose our proprietary weightings and our calibration mechanisms used in our RAPA Ranking but we will be more than happy to discuss any specific issues that you may have.
In conclusion with the addition of the MT4 community certain accounts have been uploaded that are demo accounts. Our policy is that only real money accounts will feature on the leaderboard. However, we will allow demo/paper accounts to be loaded onto a members profile but these accounts will not display on the leaderboard. They will serve as a reporting and information tool for our members.
Michael Berman, Ph.D.
CEO & Co-Founder
A good post from http://rapacapintro.com/journal/journal/Alexinterview
Dear RAPA members.
Welcome back to the trading year, we have been holding back on our communication to give you all time to settle into the work groove, especially those of you in the southern hemisphere enjoying the summer. Our community continues to grow in the 2+ months we have been live with 547 members at last count, $19.7m of real accounts reporting daily PnL, and a slow but steady growth in posts coming through the Wall feed. Don’t be shy have your say and get noticed.
In the next few days we will be launching an update of our RAPA scoring algorithm; as well as a download feature to assist the research community, but I thought it would be appropriate to kick start the year with an interview of a new member who has an interesting story.
This January 2013 we welcomed Alex Rabinovich and his hedge fund Chessica to the RAPA community. Chessica Asset Management is unique in that its two principals are both Chess Masters. On 20 January 2013, Michael Berman CEO of RAPA caught up with Alex to find out a little more background.
Hi Alex, I am speaking to you from a sun scorched Sydney Australia where the mercury has been hovering around the 40 Celsius over the last week. What is the weather like in Toronto?
Alex: It is not too bad and not as cold as people think. It was actually on the plus side most of the last week. Obviously not as warm as in Australia.
I read somewhere that you were the world junior Chess champion, can you tell us a little bit about your background, where you are from what you studied and a little bit about your chess accomplishments? Full disclosure I am a huge chess fan but not very good.
Alex: I was born in USSR, but my family moved to Israel when I was 12. This is where my chess really moved to a new level. I represented Israel in many European and World championships between 1993 and 1998. In 1996 I took the third place in Europe under the age of 18 and in the same year I took the gold medal in the world team championship for high schools. A few years later I became an International Chess Master. Through my career I was lucky to play famous chess players like Garry Kasparov, Bobby Fischer, Victor Korchnoi, David Bronstein, Peter Leko and more. I quit professional chess when I was 19. I obtained my Software and Management Engineer Degree in Tel-Aviv.
I believe chess styles are very reflective of the player’s personality, how would you describe your chess style?
Alex: My chess style is a mix of strategy and tactics. Looking back, I think my strength was always in my ability to exploit opponent mistakes and opportunities in general.
Tell us a little bit about Chessica who are the players involved and how did you get in business together?
Alex: Chessica is Victor Plotkin and Alex Rabinovich. Victor and I met through our chess circles and found mutual interests in chess and investments. We launched Chessica in 2010. Victor is a FIDE Master which is a very high level in chess. In fact, Victor is much more active a chess player than I am these days.
Can you summarise the Chessica funds trading style and tell us about what instruments you trade?
Alex: Chessica uses a proprietary options strategy. We are market and delta neutral most of the time. Our preference is always to apply our strategy to the most popular and liquid indices like NDX, Russell and similar. It allows for higher profitability and lower risk.
You have had 3 years of profitable performance
2010 = 19.7%; 2011 = 0.2%; 2012 = 37.3
The returns have been outstanding except for one very volatile period in August 2011, this question has probably been asked of you at every single meeting but what went wrong that summer?
Alex: August was a very volatile month on the markets and we would have lost 5%-6% in that month. Unfortunately Victor and I made a mistake with our choice of infrastructure at that time and during a 3 day storm, we had serious outage of internet and access to our investment platform. We have resolved that by adding backup infrastructure. The following months made up for that loss. It was a very expensive lesson to learn, but I am happy it happened when we had a lower AUM.
Chessica appears to be an option trading strategy, can you zone in on some of the aspects which you believe makes your strategy robust and likely to continue to produce market returns?
Alex: The beauty of our strategy is that we make decent returns in almost any market condition. We barely take side (Bullish/Bearish). Our strategy has been making double digit returns since 1995. Obviously the market is getting smarter and it is harder to reproduce those high numbers, but our 2012 returns do show that it is still doable.
When I look at your returns they display a strong beta to the broad markets, what is your typical market exposure that you are comfortable with, in other words does your fund always display a long bias to the markets?
Alex: Most of the time we are market and delta neutral, unless there is a clear sign for a market direction as for example in the beginning of 2013 when it was obvious the market is going up in the short term. In our letter to investors we outlined our outlook for the early 2013 as positive and that we took a bullish position. Having said that, in most cases we will establish a neutral position and will try and keep this balance for the investment term.
What kind of returns are you targeting on an annual basis and what type of volatility can we expect to encounter on the journey?
Alex: Our goal is for the investor to make 10%-15% a year. Anything beyond that is a bonus. We always prefer to lower the expectations and surprise our clients rather than underperform compared to their expectations. The volatility was drastically reduced with the new risk management policy that we implemented in 2012. We had 15 consecutive positive months. I think our last 15 months performance is around +60%. Currently the fund doesn’t charge any management fees. I think that combined with our modest returns is what makes Chessica a lucrative opportunity for investors.
Is there a daily limit of risk you are prepared to tolerate or is it an annual amount, can you tell us a little about your risk management process and tolerance?
Alex: We don’t have day limits as we are not day traders. We apply our risk management approach to our strategy. Our strategy already dictates the size of the portfolio, the exposure, the risk and what our position should look like to avoid unpleasant surprises when the markets open tomorrow.
Trading can be a stressful occupation, what do you do to relax, what interests do you have outside of the markets?
Alex: I am a big sports fan. I play Soccer, Volleyball, Basketball & Tennis.
What personal characteristics do you have that makes you feel that you are well suited to your chosen career of money management?
Alex: I can’t speak of my personal characteristics, but I think money management is about several things: (1) Experience in different market cycles (2) Understand the current market (3) Robust and profitable strategy (4) Discipline. If you have all 4, you are doing the right thing. If you are missing one of them, you better have another big advantage, because I truly believe these are fundamental to a successful investment manager.
Who are your hero’s?
Alex: I wouldn’t call them Heroes, but these people in this or another way had a positive influence on my decisions. My family, Amiram Kaplan( Israeli Chess Federation executive and a friend), Michael Jordan( my addiction to sport is probably because of him), Garry Kasparov( extraordinary chess player and person).
Alex it was great to talk to you.
We hope you enjoyed meeting Alex and we will try and do an interview with our members on a regular basis. Stay tuned for the upgrades I mentioned.
Michael Berman, Ph.D.
CEO & Co-Founder