Return to Desk Reflections


PLENTY OF LIGHT - Good to be back on the desk after a few days off with the family. It hasn’t been the best year on the performance side, though in many ways, 2017 has been a great year. I have taken a hit, and will be closing out with a loss for the year, but will do so knowing full well that this is a part of it and it happens. Overall, my performance has been strong in recent years and we were forced to battle against many headwinds this year. The biggest headwinds were the move lower in the US Dollar (which we managed to recover from), the ongoing push to record highs in US equities and intensely depressed volatility levels. Despite all of this, the setbacks haven’t even been all that bad, and I am very excited about the year ahead.

cartoon dec 21

THE HIT - On the FX side, we were actually relatively flat for the year. The big hit came from the equity portfolio, where a short SPX500 bet initiated at the start of 2017, moved against us all year, with the market extending the record run. While policy normalization did kick in as we had anticipated, it wasn’t able to knock the market on account of the distraction from US tax reform, which continued to propel the market forward. But all of the positives from tax reform have been priced in ad nauseam and it looks like those final drops are getting milked out as we exit 2017. With this behind us, those themes we highlighted as the basis of the short position at the 2017 outset should come right back into the forefront in 2018.

FX ONLY - As far as the strategy and portfolio structure goes, we will be converting the portfolio to FX only in 2018. The existing short position in the SPX500 will be moved out and we will provide an update on the position status as the year closes. Our firm's growth in 2017 has resulted in some amazing feedback with respect to the journal and trade updates and we have made tremendous efforts to increase the level of clarity as far as the positions go. I have personally taken extra steps to update each position with a note in the journal that gives a little more color on the trade I have taken, along with the inclusion of a stop-loss and max risk per position. The focus has always been FX, and there have been many requests to move the portfolio to FX only, which we are happy to accommodate. I am super excited about the move to Telegram, with the trade updates now coming through faster than ever through this amazing free application. If you haven’t gone into your settings to add Telegram as your delivery option for trade updates, I highly recommend it.

2017 was a challenging year for us but we have pushed through and feel stronger than ever.

OUTLOOK - Looking at these final days of 2017, I don't anticipate much change to the bigger trends out there and see the US Dollar closing out mostly under pressure, while the SPX500 continues to extend the run. Into 2018, on the currency side, there is still plenty of room to see more US Dollar weakness and as I have said many times, I like the major currencies the best as far as performance goes against the Buck. Look for the Pound, Euro and even Yen to outperform. The combination of a US administration that will be looking to turn to protectionist policies and a Fed that is expected to continue to lean more to the dovish side of normalization, should keep the Dollar on its back foot. On the SPX500 front, I do not expect more of the same and will be looking for that big shakeup in early 2018. Again, tax reform is out of the way, and we are staring at fundamentals that are far less supportive. Meanwhile, on the technical side, we are back to readings that are screaming out for at a very bare bones minimum, sizable period of corrective weakness. I will continue to keep you posted as far as the SPX500 goes, but I think we need to consider how end of year trends like to push and we shouldn't rule out a jump towards the 2720 area before that big correction comes. On the FX position front, USDJPY hasn't cooperated yet, while AUDNZD is moving a little but we expect big things here.


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