The Swiss team have done themselves proud once again. Words fail me. A superb analysis. Lets see if they can win the European technical team for 2013 as they did in 2012.
To the report specifically. There is much to digest here. What I continue to admire about their approach is that it’s probability driven. I.e. They are accept the randomness of world events and policy actions. Their approach is not dogmatic and insistent therefore but flows with the market as events unfold. This, in my own experience and analysis, is exactly correct. No one can say with any certainty where the markets will head and what time line they will follow as there are simply far too many participants that can influence price. But the markets are not random either. We can outline cyclical and secular trends. And inside the market we can examine the inter market correlations, indicators and aggregated price information across sectors and leading instruments. This knowledge informs us and together with fundamental and pattern price trading entry and exist setups can provide both an alpha and a positive beta to your wealth management.
In my opinion this is the “trading nirvana” K. Tharp and indeed all traders seek. It is a recognition that we live in an imperfect, chaotic system of billions of variable parts. But a system that conforms to rhythms and patterns over time. These can (and often are) interrupted or suspended by policy actions and or geopolitical events. Nominally price can (and will in the coming years) show false signals but relatively the patterns and correlations will sustain.
Hats off to the Swiss team again.Without delay here their stunning 2013 technical report:
For those less technically minded her the Swiss teams more multi discipline 2013 report:
For my own book 2013 was an in line year. My returns were in step with the averages for the developed world indexes. Therefore I out performed the Emerging Market indexes. I also out performed measured in gold and I strongly out performed measured against the CRB broad commodity index. More interestingly 2012 marked the first year in several now that equities out performed bonds. Bond funds under performed. Its a clear indication if any were needed that the bond bull market is tired and last little or no room to run on. Once you get down to zero (and negative real interest rates) where can that bull go? This event has significant fund flow implications which are at a very early stage of evolution as is evidenced by Lipper fund flows etc.
Well, I am in process of putting up an end year review of my own book inc a quarterly print as well. Against most bench marks, as explained above, I gained a positive beta on around half of my total wealth, which is good.
(I say ‘half’ as half of my wealth is invested in residential property assets on the euro main land. These are up from the initial investments (and significantly so in pounds terms as pounds were exchanged at the 1.46 level vs the euro. But these haven’t added to my wealth for the last 4 years or so. I.e. prices are flat. Even accepting this, in real terms deflationary effect on wealth, due to the out performance of the other half of my wealth i’ve out performed inflation which is good but i am unsatisfied with these dead residential property assets. And this is under review. Again i’ll explain more on my thinking in my review and forecasts to be published soon).
In spite of a good performance in 2012, as i said a few times in q4, i have a ‘glass half empty’ feeling as the precious metal allocation under performed and the metals did not go parabolic as I thought they would in q4 2012. A large option call position looks to be expiring Jan18th at the money or thereabouts. The bullion miners under performed once again.
FX was kind once again but as we step into 2013 the pairs look less obvious than they have in the prior 3 or 4 years directionally. As there are almost no positive yielding crosses the fx margin beta is unlikely to bet there for 2013 from where we stand today. This will affect profit but also risk as long equity positions are vulnerable if the fx hedge is less clear. I didn’t intend to pre empt my 2012 year end nor the 2013 allocations and themes so enjoy the Swiss team’s view and expect to hear from me shortly.
Keep it coming team Capsyn. Its been a pleasure and without the noise we see on other boards and invest sites. Many posts really assisted this year and I thank you for those. (You know who you are).
Keep it tight post mid year as h2 2013 could be more tricky if the long equity trade becomes a crowded trade, as i suspect it will do. Price and flows will show the way as they always do.
All the best guys and good luck for 2013.
Rich
(13 votes, average: 5.00 out of 5)
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