≈ A good intention gone bad. ≈

— “You’re not a big believer in modern portfolio theory. Why?”

— “Modern portfolio theory fails to put the correct emphasis on what matters. And what matters at the end of the day is the extreme loss. What we do as portfolio managers, as investors, is trying to maximize our rate of compounding over time and when you do that what matters is the big loss. It’s not the volatility, it’s not the sort of smaller ebb and flows in your P&L. Just think of it this way if you don’t believe me: if you lose 50% in one year, it takes almost two years of +50%, positive returns to get back to zero.”

— Mark Spitznagel for Bloomberg, February 2019 —

The modern portfolio theory is incomplete. A lock without a key, a prayer without faith, an unmailed letter, a deck without a joker. Balancing returns and risks to reach the said efficient frontier does not tell the whole story, which can lead you to unpleasant results.

Forgive us for hammering this topic so much but it is our duty. This is so important to us that we’ve dedicated three editions of the Trading Justice newsletter to Portfolio design, Money management, and Reward to Risk ratio, the Holy Trinity of Trading. Once you have these foundations in place, pristine, sharp, first class, you can shoot for +1,000% returns.

Call it misinformation, greed or the Instagram effect, but people are always shooting for higher returns first. Obviously, when you take care of the Holy Trinity instead of shooting for the moon first you won’t get that beautiful motivational headshot for Instagram, the app which solely goal is to convince you that everyone has a better life than you.

Building wealth is a military/religious, silent and introspective long-term task. The perfect match for the Holy Trinity of Trading.

Grab the February edition HERE and the March’s HERE.

Chart of the Day

Mirror, mirror on the wall

The first chart is the Dollar Index. The second one is the Euro Futures. They complete each other, almost candy by candle. Today is FED’s day. The Federal Open Market Committee (FOMC) publishes its latest monetary policy declaration at 2:00 PM EST. Today, we will know Which bird we’ll be raising, a hawk or a dove. It will be very interesting to watch these currencies move.

Video of the day

Universa’s Spitznagel on Fed Policy, Hedge Funds and Insuring Market Risk

Universa Investments Chief Investment Officer Mark Spitznagel sits down with Bloomberg’s Erik Schatzker to discuss the next market crash, the size of the hedge fund industry and worries around hedging market risk.

Today’s line up

Traders Lounge 11PM EST

Join the coaches in this live lounge, ask questions, discuss ideas or just sit back and listen to veteran traders discuss market conditions.

The Coaches Show Replay

If you missed last night’s episode where Coaches Tyler Craig & Greg Holmes talked about the VIX and buying protective puts or would like to watch it again, check it out here.

Bear Market Survival Guide MasterMind Group 8:30PM EST

Owners of our premium system The Bear Market Survival Guide are invited to attend. System architect, Tyler Craig, will be showing how to apply the principles taught in the course.

Halftime Report 12:30PM EST

The Halftime Report starts at 12:30 EST and covers what news is driving the market, chart analysis from the movers and shakers of the day and fun in a way that only Matt and Tim can deliver.

Market Recap

The Market Recap is designed to give you a quick overview of the day that was. While brief, this report is designed to cover all of the major events that drove the markets that day and help you plan for the trading day ahead.

Trading Justice Episode 313: The Holy Trinity of Trading – Position Sizing

In this episode, we review the markets during the Skyline segment. The Feature Presentation is an interview with Christian Sisson about his recent writings in the Trading Justice Newsletter about The Holy Trinity of Trading, and specifically Position Sizing. Finally, it’s March Madness, and the boys go through their bracket picks for the NCAA basketball tournament.

Financial freedom is a journey

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