Trade Idea Generation. the process of writing and thinking..LETS DO IT

[APXG]

barron / ahnuld,

please explain WHY putin would want to do all those scary things you mention(beyond staying in power for another 57 years).

[ahnuld]

http://www.forbes.com/markets/feeds/...fx2415556.html

Its easier to take over than negotiate and no one seems like they care enough to stop him. He already started the nuclear jet flights back up again, and he controls pretty much the enitre russian "free" press. Just seems like the natural escalation to do after he changes the russian constitution so he can rule longer than the now maximum 8 years.

[DcifrThs]

[ QUOTE ]
barron / ahnuld,

please explain WHY putin would want to do all those scary things you mention(beyond staying in power for another 57 years).

[/ QUOTE ]

i don't know the amount you've read on putin but the more you read about him the more it makes sense that he wouldn't do anything else but those things.

he is from the intelligence service...i think it is called now the FSA (or federal security agency or something like that...don't remember now). he employs those in "the service" and really is the epitomy of cronyism in that regard.

he uses (i.e. has used) his power to put those companies with whom he is close with in great position w/ contracts and keeps those with whom he's worked well with in the intelligence field well fed thanks to the govt.

he can do these things now b/c russia has done a good job of keepign its finances in checka nd b/c it has been very lucky in the recent past that natty gas and oil has shot so high.

so the answer to your "why" question imo is simply "because he can."

Barron

[whyherro]

Barron, how much analysis do you generally think is necessary before executing trades like the one you mentioned? Like do you typically think idea synthesis is enough or would you plan on cranking numbers for these before executing?

[DcifrThs]

[ QUOTE ]
Barron, how much analysis do you generally think is necessary before executing trades like the one you mentioned? Like do you typically think idea synthesis is enough or would you plan on cranking numbers for these before executing?

[/ QUOTE ]

you can't execute anything w/o cranking #s imo.

you have to know what the volatility of that position could be...and what it could be if you're wrong by some % etc...in addition the corerlation to your other positions and the expected return (where you'd exit and why ...)

blindly going into any position w/o a good amount of research isn't smart imo.

my goal here is of synthesis of the global markets and thena deeper dive into a small number of trades coupled with a less deep dive into a larger number of trade ideas.

i'm building (and i guess have built) a very nice excel spreadsheet with a ton of data i've gathered from teh internetz. gunna be fun [img]/images/graemlins/smile.gif[/img]

Barron

[whyherro]

Agreed. I assume you are developing sample trades for recruiting?

Btw - something I have been wondering about (don't work in trading) - when you think about volatility is there a curve or distribution you have in mind (mathematically)? I get the feeling the normal curve probably isn't used anymore...

[DcifrThs]

more stuff to ponder, though this surely isn't news to most:

the weak dollar is likely to get weaker beyond what is priced in via interest rate diffs/capital flows.

specifically, the AUD/USD and NZD/USD pairs are undervalued (i.e. should be higher vs. the dollar) as well as the CAN/USD.

both the growth diffs and interest rate diffs favor these pairs as the US current account is still at 6% of GDP and requires an unsustainable inflow of $7bil per working day. the productivity that has reduced the need for a further fall in the dollar has fallen off in the past decade.

i have futher compiled some great data on PPP of those currencies and it seems the USD is overvalued relative to the AUD by 1.81x according to the PPP calculation. however obvious disclaimer: PPP isn't tradable as only a small % of decomposed currency excess returns can be attributed to it (most are interest rate diffs and growth diffs, which are correlated)

i think this just helps to clarify some of the data behind the bets.

Barron

[DcifrThs]

[ QUOTE ]
Agreed. I assume you are developing sample trades for recruiting?

Btw - something I have been wondering about (don't work in trading) - when you think about volatility is there a curve or distribution you have in mind (mathematically)? I get the feeling the normal curve probably isn't used anymore...

[/ QUOTE ]

the sample trades are both for fun and for recruiting. i was asked by a hedge fund owner for trade ideas and gave him a few off the top of my head but would like to get a more systemized view written down to email him.

in terms of the distribution fo price changes, a normal approach is still taken (and i take it) with the proviso that i understand and give a large weight to the possibility of the unexpected and thus err on teh conservative side.

ideally, the distribution would follow a power law of something like mandelbrot's multifractal model of asset returns:

|P(t+dt) - P(t)| ~= Ct(dt)^alpha(t)

where Ct and alpha(t) are the prefactor and Holder exponent respectively. Ct refers to the length of the memory of the process and alpha(t) refers to the degree to which a trend is likely to be continued.

for Ito processes, alpha(t) is 1/2 everywhere. if alpha(t) is > than 1/2, there is less randomness in the sense that a move in one direction is more likely to be followed by a similar directional move. when alpha(t) is < 1/2, a move in one direction is likely to be followed by a move in the opposite direction and thus price changes appear "more random"

the probelm with this methodology is that the estimation of alpha(t) and(to a lesser extent) C(t) is unbelievably crucial. small changes in those variables can lead to huge changes in the results so it is not a very robust method for incorporating into portfolio ocnstruction though there are some improvements that make it better.

it also becomes mathematically difficult.

Barron

[ahnuld]

PPP is horribly horribly off when looking at Canada vs USA (canadian prices 10-30% higer across the board). But of course it takes a few years for these things to work, hence my opinion that there has been a real interest rate hike of 3-4% in canada during the last year.

[whyherro]

Gotcha, so basically a cautioned normal approach. I've read a tad on the mandlebrot idea you mentioned, it just sounds incredibly difficult (maybe impossible) to work with.

Whats the job market like these days for macro hf analysts?