How the events of July 13 affect my trading approach

By Michael Melissinos

[This passage is taken from our Q2 Investor Letter]

From a trading perspective, the event alone plays ZER0 role in our process. Only to the degree in which it affects the trends of the markets we monitor is all we care about. Writing this letter only a few days after the attempted assassination of Trump, I am not seeing a material affect on market trends. Stocks, energy and precious metal commodities and the U.S. Dollar (vs. most currencies) remain in uptrends. Agricultural commodities and government bonds remain in downtrends or in consolidation.

Perhaps other traders hold the view that this event “changes things” or changes everything. Maybe they foresee a weaker Dollar. Or lower interest rates. Or that defense stocks will catch a bid. All of that is not our concern. What may happen in the future is not our concern. What is our concern is observing the markets through the lens of our definition of the “trend” and managing our downside risk.

We are open to anything happening. We are comfortable with uncertainty and budget for it. We make small bets because we know there’s a healthy probability that our decision may not work out. It’s not our style to develop strong opinions or beliefs about the future. We detach our feelings and views from the markets. We cannot control what they do, only what we do.

So, after reading the first three paragraphs, as well as pretty much anything else I’ve said in my blog or on podcasts, you know it’s futile to ask me about what I think July 13th means for the markets. The answer is and always be the same: I don’t know…and I don’t need to know in order to manage money properly.

Knowing the future isn’t required for protecting capital effectively or seizing opportunities as they come up in real time. That’s the truth. Entrenching yourself in the financial community will likely leave you feeling that you cannot believe that, but it is true. I’m comfortable with this unpopular and uncomfortable truth. It’s a core principle of what I, and you, the investor, believes — otherwise, you wouldn’t invest with me or any other trend-following manager.

There’s power in knowing we don’t know. It’s an advantage. It’s a survival trait.

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