Macro Trading Fantasy Camp
By:
Macro Man Thursday, July 31, 2008 10:17 AM
Readers in Europe may not be aware of the American phenomenon known as the "fantasy camp." This is a primarily (though not exclusively) sporting phenomenon wherein members of the public (usually middle-aged men) pay a not-insubstantial sum of money to spend several days playing with old and retired professionals, many of whom are nonetheless younger than the customers.
The camps are sold as offering a taste of "big league experience", though unsurprisingly the quality of play is anything but big league, as this photo from the Chicago White Sox fantasy camp suggests.
Macro Man is pleased to offer readers a bit of a "macro trading fantasy camp", which aims to give them a taste of what it's like in the market crucible (while carrying the added benefit of being free of charge and not requiring you to dress up in an unfeasibly tight-fitting suit in public.) The incident described below actually occurred yesterday, though some of the key particulars are hypothetical. Enjoy!
THE BACKDROP
You are running a macro portfolio for Fantasy Capital Management LLC, a diversified multi-strategy hedge fund. You started the year well, making money on short equities and short USD/JPY. From mid-March through the end of May, however, you endured a torrid time; equities and USD/JPY squeezed, and your attempts to play incipient rate cut cycles in Europe went disatrously wrong, leaving you flat on the year.
Fortunately, you had a nice June hopping on the short equity train, and you even had the foresight to get out early this month in the vague neighbourhood of the lows. This has left you up 4% year-to-date. It's better than cash, but you're going to need to do better than that if you want to outbid the kleptocrats for that chalet in Courchavel you've got your eye on.
THE TRADE
Being a clever person, you've observed that FX carry is en fuego. Given that equities still seem squeezy, you've decided to put the pedal to the metal and take a large position in the best carry pair in town: short USD/TRY.
There's one small problem, however. The ruling party in Turkey, the AKP, has overseen an unprecedented period of growth and stability in Turkey, and even helped kick-start the arduous EU application process. Unfortunately, they also have ties to the conservative religious community, which is a no-no to the fiercely secular armed forces and constitution.
It's such a no-no, in fact, that a lawsuit has been filed to outlaw the AKP and to ban Prime Minister Erdogan from public life.
The above story is the opinion of the author only and it does not reflect
iStockAnalyst opinion. Further, the author is not personally advising you
regarding the suitability of the story for your investment needs. In no event
iStockAnalyst will be liable for any loss or damage including without
limitation, indirect or consequential loss or damage, or any loss or damage
whatsoever arising from or arising out of, or in connection with the use of this
information. Please consult your investment advisor before making any investment
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