Martin Kronicle

I have been to India twice and it is a remarkable country. The people are very intelligent, hard-working, nice, and unassuming for their skills.

Here’s a great read in the The Economist about how the internet and mobile phones are creating efficiencies in the Indian commodity markets.

The New York Times reported that Google has applied to FERC for approval to trade power given it’s need for such across all its businesses. The new entity is to be called Google Energy. (Google Power would sound too much like a late 60s peace rally).

In the article, Google said that “it did not have specific plans to become an energy trader and that its primary goal was to gain flexibility for buying more renewable energy for its power-hungry data centers.” I believe that they probably burn through lots of energy, but they can also just hedge their power exposure – it would be simpler and cleaner financially. In order to hedge, they would buy power through futures and swaps since they need the commodity.

If granted permission, Google “would be able to sell any surplus power that result from these or other initiatives.” My guess is they will always have surplus to sell.

What do you think?

I’ve been thinking about holding a live Q&A on Twitter. Email me or DM me on Twitter if you have any thoughts on this. I’d be happy to do it on a regular basis if you thought it was beneficial.

You can Follow Me on Twitter and we can get this going. I’ll try to be available in several time zones so no one will be left out. I sleep in 2 hour intervals anyway.

How does one reconcile the apparent contradiction between most traders in Market Wizards for example who recommend risking no more than 2-5% of your capital on any trade and the comments of George Soros who says that the worst mistake a trader can make is to not be ‘bold’ enough when you are right, to not ‘really go for it’?

Is he saying one needs to just hold on to winners longer than one normally might or (what I think he is saying) to put far more capital at risk than normal when you are right?

I think risking 2-5% per trade is what Soros was getting at when he made that comment a while back. Market Wizards was written a long time ago when the environment was thin wrt CTAs – about the same time Soros made that quote. The industry is a lot bigger and more mature, as is the Institutional acceptance of placing funds in the Managed Futures asset class.

Nowadays, you’d get shot for that type of risk if you handle public money. No one needs a hero, just a competent risk manager. Putting it in historical perspective, I think the “2-5%” aspect became material when you look at traders who scale into trades, or pyramid, for example. If one risks between 0.50% and 1% per trade and gets long or short up to 4 risk units, you’d have between 2 and 4 % exposure if you placed your stops correctly.

I don’t know Soros to be a mechanized system trader, but like Jim Rogers, a fundamental trader. That said, it’s entirely possible that he himself legged into trades, long term trends, where he added to winning positions by the structure of the chart using support and resistance for risk management. That would be very different than measuring entries and exits by ATR. I’ve traded like this at times with outright directional trades as well as spreads.