Incident Report Aug 2024 (Part 1)

I have vowed to complete much unpublished content pertaining to catastrophic losses. I’m not talking general, theoretical terms like this mini-series defining what a catastrophic loss is, either.

I am talking about the detailed incident reports I aim to do after a horrendous drawdown in order to learn and prevent future recurrence. Unfortunately, the aftermath usually leaves me numb, paralyzed, and wanting to do ANYTHING BUT any sort of postmortem. I’d rather run and hide, bury my head in a pillow, and stay that way for a very long time. As discussed in these final three paragraphs, it’s demoralizing and depressing. Grief isn’t just for friends, family, loved ones, and pets. It’s for material and financial loss as well.

Today I will complete the first part of two such incident reports. The draft was written 10/9/24 about a recent losing incident. That would have been an acceptable delay except that I’m only finalizing it now: a full 18 months later. In any case, as you read keep in mind the writing is about an event two months earlier.

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I’m sorry to report that August 2024 is my latest episode of catastrophic loss. August (perhaps starting mid-July? I’ll look back to see) has been ugliness in the making with VIX jumping from ~14 to 36 (65 intraday) at its worst point.

I meant to compose this entry the weekend of Aug 10, but I always seem to have trouble sitting down to document such bad news. Maybe it’s the impeding discussion of failure. The previous one was 2022 or 2023 and the delay was long. In this instance, enough time has passed such that I feel I know exactly what I’m going to write. I’ll be interested to compare this incident report with the last and I won’t be surprised if there are many overlaps. I had the plan then. I didn’t follow it. I still have the plan. I need to follow it. I can’t tolerate more sudden, extreme equity drops. It’s an emotional setback that takes a tremendous psychological toll. The current episode wiped almost six months of gains in very short order.

On the positive side, things could have been worse. I closed 25-33% of my total position on a Friday rather than waiting to see because the market was not yet fully into backwardation (surely other indicators were already firing, though). It’s important to acknowledge my own progress and celebrate the small wins. Another being my latest equity trough [hopefully] a stairstep higher than the previous meaning I did not give back all the gains. Despite still underperforming since the early part of 2019—which does not at all make for a good feeling—I should celebrate and take a victory lap.

I will continue next time.