Anti-Asimov’s Three Laws of Robo-Advisory

  1. Falsely affirm that nobody can beat the market
  2. Substitute the idea of wealth maximization with the idea of cutting-off the management fees.
  3. Don't disclose anything about the underling portfolio optimization model and avoid showing possible future portfolio dynamics.

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Trump trade: case study of DAX intraday on 09.11.2016

Donald Trump's victory on 09.11.2016 was likely as surprising for markets as Brexit was. However, the expected (and factual) aftermath was completely different. This case is good to learn when you should urgently sell and when notIntraday sketch of DAX on 9.11.2016 Continue reading "Trump trade: case study of DAX intraday on 09.11.2016"

Einstein’s rating agency: easy and clear for everyone

Recently we revied the performance of Einstein, a German trader who managed (without a leverage) to make almost 2000% in less than three years. LetYourMoneyGrow.com translates his investment grades in layman's terms:

  1. Tenbagger - the stock will grow ten times within 3 years.
  2. Doubler - the stock will grow twice with a year
  3. Outperformer - the stock will be better than peer group by factor 2
  4. Money - one may but not necessarily need to buy the stock
  5. No-hoper - one will neither lose nor earn money with this stock
  6. Pinocchio - the board does not get along with the truth
  7. Brief - one may but not necessarily need to sell the stock short
  8. Short - one can earn money if sells this stock short
  9. Snot - avoid buying this stock, do sell it short!
  10. Snot to the power of 10 - target zero, total loss, blacklist and megashort!

A Russian Frank Cowperwood: Oleg Barmin’s case from risk management point of view

Oleg Barmin Book - КнигаБарминаAs I read Oleg Barmin's book "Я помню всех, кто мне когда-то не перезвонил" (I remember everybody who once did not call me back) I saw a lot of parallel to Theodore Dreiser's Financier Frank Cowperwood (Charles Yerkes). Like Cowperwood (who being a teenager bought and re-sold a soap with profit), teeny Barmin bought a frozen fish, smoked it and re-sold with profit. In the age of 21 he built a flourishing car business ... and like Cowperwood was wiped by crisis and was imprisoned (however, only on remand). Like Cowperwood, he rose again (in florist business). Though Barmin had not (yet) built something like London Subway, he is only 35 and who knows, maybe we will see more parallels with Cowperwood...
In spite of such praising summary the post is going to be critical: we will concentrate on what Oleg missed from risk management point of view.

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My Fund Somewhat better than DUCKS is 1 year old: a festive but fair review

My wikifolio ("Somewhat better than DUCKS", ISIN: DE000LS9HDK3) is investable from 28.10.2016. It surely beats the DAX (main German stock index) both on absolute and risk-adjusted performance. Though I am very proud of my performance, I provide a closer look at it and show that sometimes I had just luck and sometimes I could have done better. I always preach for the rigorous and cold-blooded performance analysis and the best sermon is to demonstrate it by the example of myself.

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Big Data and Deep Learning, a technology revolution in trading or yet another hype?

Summary:

  • BigData and DeepLearning are popular buzz words nowadays. But the number of the genuine success stories is relatively small.
  • In trading the BigData technology is mostly associated with automatic analysis of the news and sentiment in social networks. But unless you are Google or Reuters, you will never be the one who gets the news first. Additionally, a market reaction both to news and sentiment is often vague and amorph.
  • Large deep neural networks closely resemble a human brain, which also has a lot of neurons, interconnected in many layers. But it doesn't mean a breakthrough to a real artificial intelligence: all is not gold that glitters.
  • a positive side: trading is only a part of the financial world. Likely, BigData + DeepLearing has a high potential in adjacent areas like risk profiling and credibility analysis.

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The Maximum Drawdown succinctly explained in 3 minutes

The maximum drawdown (MDD) is likely the most important measure of risk in practice. We explain how to calculate it and why you should keep it under control.  Remember, if the MMD reaches -50% the portfolio have to grow +100% in order just to compensate the previous loss!


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A simple scenario simulator for Vanguard optimal portfolio

Vanguard optimal portfolio - 100 scenarios - sample simulationThere is yet another Roboadvisor from Vanguard Group. As any RoboAdvisor, its recommendations are far from perfection. However, I like it (at least more than others) because the Vanguard guys managed to make it simple. On the other hand I am quite disappointed that they do not show how a suggested portfolio may evolve (and I am quite sure that legendary John Bogle would be disappointed too). That's why I made a simple scenario simulator on my own. It is based on sample with replacement.
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Update (12.10.2016) to K+S, Lufthansa, Osram and WTI

Recently I wrote about K+S and Lufthansa, Osram and WTI Oil.
Let us review this opportunities:
1) K+S: as I expected, it grows. I reduced (with small profit) my position to 2% of portfolio and (so far) will be keeping it.
2) Lufthansa: I emphasized that though I, myself, bought a little bit, I don't recommend others to do it because the LHA stock is dubious. Further the stock fell about -8% and I sold it by stop-loss. Currenly it grew about 9% from its local minimum and I recommend to sell: Lufthansa might soon "fly out" of DAX.
3) Osram: as I expected, it falls. I watch it but IMO it is still prematurely to buy.
4) WTI Oil: as Putin announced that Russia supports OPEC, oil prices jumped 3% on 10.10.2016. I halved my position with a small loss. Currently oil gradually falls again and I keep the rest of my position. However, the risks are high.