Coffee with Professional Commodity Trader (Part 3)

I recently spent nearly two hours taking in a lot of sun and a conversation with NK, a professional commodity trader. Today I continue presentation of miscellaneous notes from the meeting.

• Because I feel my forte is in strategy development and analysis, I do not want a future job in the financial industry to center around sales. NK agreed, saying that he does not really enjoy talking to customers. He also doesn’t want to be personally responsible for their accounts.
• On a personal note, the latter is one reason why I haven’t been more aggressive in pursuing a money management career. If I have been able to do it for myself, though, then isn’t the logical next step to scale up and do the same for others (see second-to-last paragraph here)? Why not suggest people allocate up to 20% (this second-to-last paragraph) of their portfolios to my trading strategies? Is this mini-series convincing enough?
• NK enjoys working with farmers, who he generally finds humble and informal. He can be dressed down when meeting with them in person as opposed to having to wear a shirt and tie every day.
• Because they believe in their agricultural products, farmers like to be “long everything” (i.e. futures and call options).
• As farmers live and breathe crops and livestock, I live and breathe equities although I hardly want to be “long everything.” Despite over 14 years of full-time trading with decent performance against the benchmarks, I spend more time planning what to do if stocks tank with regard to hedging or even profiting from the downside.
• Unlike the buy-and-hold thesis marketed by retail financial services, I am not convinced that stocks will always rise. Why can’t US stocks do nothing for 30+ years like Japan has experienced with the Nikkei since Dec 1989? NK said that he invests in some Japanese small caps and knows their price history enough to realize Japan’s late-1980s equity market made the US Dotcom bubble look small in comparison (they have now overcorrected to the downside, though).
• For US equities, NK thinks we are due for a major correction or at least a couple years of sideways action because the Fed is currently less accommodative (runaway inflation). If the market were to crash, don’t expect a dovish Fed to save the day [predictions still don’t hold much weight for me no matter who they come from].

I will conclude next time.