Seasonality trades in Hang Seng Index (HSI) & Dollar Index (DXY)

Years ago when Asianmacro was about to graduate from university, he did well at interviews (or perhaps sufficiently lucky enough) to secure a position with a top Wall Street investment bank as a trader even before graduation.  But thoughts of pursuing a PhD & even becoming a professor did cross my mind.  However, the thought of forever needing to prove that your thesis & research is ‘right’ empirically or scientifically is way too much use of whatever brain-cells that was left in me … so Wall Street here I come more than 20 years ago!

Unlike Strategists, Economists, Analysts & other spin-masters from investment banks’, brokerages or asset management firms that can usually throw tonnes of information & justifications on why you need to buy, sell or hold … whatever that they want you to believe in; Asianmacro does not want to nor need to.  It’s my money that I am risking & I can believe in the brevity of thought, analysis, decision & execution.  Detailed & overly myopic empirical or scientific proof reminiscent of what a professor or PhD candidate needs to do might more often than not cloud the view of the forest from the trees.

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Looking at the above heatmaps for Hang Seng Index (HSI) & the Dollar Index (DXY), you cannot help but notice that statistically speaking, HSI has fallen while DXY has risen in May over the last 10 years more often than not by a considerable margin.

Is it the ‘Sell in May & Go Away’ catalyst for risky assets at play … or is it something else? It’s really too much use of my brain-cells and perhaps just a sufficient bet in short HSI (which I did on the break of 22,000 for May14 futures) and DXY June14 futures now at 79.15 (from 79.20 to 78.90) that gives you participation if this seasonality happens again but without breaking the bank & your sleep if it does not.

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Making a home run

Asianmacro has not posted since the 1st week of May to smell the roses into early summer and also in travels across Europe.  Looking back in the past where I have been in the futures open outcry pit, a bank market maker and then proprietary trader, followed by stints as a hedge fund portfolio manager … I came to realise that the most amount of money is only made slowly over time when you can sit comfortably on a position and for your investment thesis to bear out (*assuming that you have correctly done your homework and not stopped out way beforehand).

This meant that position sizing must be such that for longer term trades to bear out and perform well to make that home run, it must not be over-leveraged such that you cannot sleep at night with all the gyrations and noise that the market will invariably move like a butterfly flapping its wings at the slightest breeze!

Notice how Warren Buffet always appear to be such an investment stud with most of his positions reaping home runs more often then not and covering his losses or ”mistakes” elsewhere.  Mr. Buffet has the ultimate advantage in having a ”cheap & almost free float” of investment capital via the perennial annuity premiums collected from his insurance business (where the cost is even lower than deposits obtained by banks who similarly will lever up to make loans & other investments).  This allowed him to almost ”never cut loss or stop out of his positions” and we all know that even a broken clock will tell the correct time twice in a day … Mr. Buffet can in fact be proven right most often than not as ”in the long run, we are all dead” does not apply to his investment style.

Asianmacro certainly do not have the good fortune of owning an insurance company and also with the capital size of Mr. Buffet.  Nevertheless, as highlighted above, from the 20 years of cutting my teeth and learning from the losses made while accepting with humility that I was probably more lucky than smart with my winners … In any given year, there are probably about 1-3 real serious tradable themes that you can express via a trade that is ”medium” term of 3-12 months of more in investment horizon that will be the 10-baggers.   Most of the other time when you are fiddling & twiddling your fingers, you should not be doing anything much unless you have the systems, tools, inclination and skills to do some short term noise & gyration trading … you could be expending more energy than ever for very small incremental returns.

If you look at my postings this year, my 3 medium term thematic trades consistently were:

  1. Long USD preferably via DXY futures on medium term U.S. economic recovery.
  2. Short AUD/USD where the lucky chaps down under end their spell of good fortune.
  3. Short China and/or underperformance of Asian equities.

They have all performed well YTD 2013 and there is no reason to close out the trades or a change in the theme.

Asianmacro will probably be eating, drinking, lazing and snoozing a lot more over summer.  But will try to wake up from my stupor now & then and post again (*on shorter term gyration noise opportunity) and potential medium term thematic trades as I start my re-assessment for H2 2013 into 2014 outlook in deploying my capital again.

Good luck!

 

 

 

*Asianmacro is a beach bum managing his own wealth. Besides deciding what to have for lunch (or hitting the gym sometimes), he is mostly found listening to loud music while trading and investing for himself. While every care has been taken in preparing the information in and/or materials, such information and materials are provided “as is” without warranty of any kind, either express or implied. In particular, no warranty regarding accuracy or fitness for a purpose is given in connection with such information and materials. The opinions expressed do not constitute investment advice and independent advice should be sought where appropriate. In no event will Asianmacro be liable to you for any direct or indirect or any other damages of any kind arising from or in connection with your reliance on any information in and/or materials attached herewith. Asianmacro may already have or intend to have a trading or investment position in the financial instruments or products referred to in this communication. This is not intended as an offer or solicitation for the purchase or sale of any financial instrument and Asianmacro may also have interests different from or adverse to your interests.