General Q&A #2 - Update

By: WGC | 2016-06-06

We haven’t seen much activity from you since August of last year, any reason for this?

My family just recently had a new addition, and I underestimated how much time commitment the first year (or two, based on what others have said).  Erratic sleep schedules, baby screaming, and being a new helicopter parent is the main reason for most of my inactivity since August-16.  However, recently things have begun to somewhat normalize, and I now I am able to get into the commitment of WGC.  The reality things have changed on the home front since August-16, and will be this way for probably the next year or so.  Priorities have shifted.  I advise any trader that has a newborn to probably take at least 6 months off as it is difficult to apply yourself to this type of job.

 

What has the performance in 2017 been?

Flat to up 10%.  I haven’t been that active, and while we have had some quantitative strategies running, there really has not been much happening.  WGC dodged most of the squeeze in the Trump rally this year (and also missed going long it as well).  As much as I would like to say that the proprietary quantitative strategies that WGC uses are viable, and they are, WGC makes considerably more money the more active I am in the market, managing around these strategies, which as you can imagine takes a lot of time commitment.

 

Are you going to update your performance?  Are you accepting new money?

I spoke with some local accounting firms on getting audits or reviews done for WGC.  But since August this was put on the back burner.  Since I’ve gotten several inquiries from investors over the past few years, serious investors want a legit audit.  I even suggested to prospective sophisticated investors that they can pick the auditor, but for whatever reason at that time the cogs did not move.  Since the performance isn’t audited, I haven’t decided to update it, since audited performance is what really matters.  As of this time there just really isn’t the demand or practicality to get a full audit yet since there is not enough demand yet.  Also I am not currently accepting any new money until WGC makes a new all-time high, and things in my life continue to “mellow out” even more back to normal to commit more to investors.

 

What can you tell us about the end of 2016?

In the end of 2016 we had a failure of one strategy.  This lead to a drawdown in the fund.  This is actually pretty normal since WGC was up considerably over the past two years.  It was pretty amazing to think about this strategy failing the way it did.  I think it is actually pretty important to write about in a future blog post, the penciled in title will be called: “Preparing for the 20-Sigma Move.”  But this drawdown occurred after shortly after the August-16 period which was as described above was not the best time for trading.  Since this strategy was mostly automated, the strategy failed on its own, however, it is the job of the trader to min/max the strategy, which at that time I was not fully able to do.

 

Would you consider WGC more of a hedge fund or a retail trader?

As a hedge fund I trade other people’s money, and it is legally structured as such, however I it is fair to say it is a retail trader in most ways because WGC lacks all the internal controls, technology, partners, and additional regulation other small funds could have to be called a full fledge hedge fund by other trader’s or investor’s definition. 

 

Why can’t I find you by looking you up through some regulatory body?

From my understanding, it also depends on the state, you don’t need to register until you have over 30MM in assets.  These requirements were loosened in Dodd-Frank.  I was planning on taking the financial advisor test and begin the registration process, which will most likely happen in the next 1-2 years, and definitely before I accept any more outside money.

 

What do you think the best trade over the next few years will be?

I think looking at interest rates.  The day Trump was elected we saw what appears to be a shift in perception of risk in the US Bond market.  Around the world we still have some pretty crazy, and backward thinking interest rate policies set down by governments/CBs.  I’m talking mostly about negative interest rates, and I think there will be a lot of opportunity in predicting higher interest rates over the upcoming years.  These trades can use futures or margin, and also trade out many years along their respective curves, so liquidity is there, even in less common markets.  I plan on writing a blog post on our website with the penciled in title of “Financial Immorality of Sustained Low Rates for Our Generation,” which primarily emphasizes that there is a whole generation of kids being raised who have no concept of saving money.  The devil’s advocate of this trade is looking at Japan (which to be frank, is eerily similar to our current predicament in America) where rates seemingly have not moved off an abnormally low base in over two decades; in other words, this trade idea might turn you old trying to materialize.

 

What do you think accounts for most of your returns?

Leverage to a certain degree.  When I do make some discretionary futures trades I seem to make a bit of money and able to cut losses when they go bad.  This is a similar pattern I’ve seen on fundseeder with other traders.  Most of the top traders with high returns are futures traders in some aspect.  Limiting risk to 1-2% of total trading capital is a great start for discretionary trading.