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Stress-Free Trader (The Lawrence Chan Blog)

Full time index & forex trader, occasional consultant to hedge funds / institutions, my work leads to my not so normal view of the financial markets. My blog mostly talks about trading, market behaviours and other musings.

Originally this blog is supposed to be organized in a separate website like what most authors do but I don’t think I will maintain it properly that way. So here it is as part of this website.

Schedule – Regular blog post every Friday with occasional additional posts when I feel like ranting.

In case you are curious of what I do outside of blogging here:

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Catch Up, Orderly Mess and Alternative Investments

2015 Oct 9 Fri 13:03:14 | by Lawrence

iStock_000016001290XSmallTrying to catch up with emails, projects and everyday task over the past few days. Learned a few things from the experience. They are quite funny.

First, failing to clean up inbox for more than a week means many hours of work. Just identifying and deleting the spams already took hours. I did not know I depend on email so much these days. All utility bills, credit card statements, etc. are now all electronic.

As somebody who always think of the disaster scenario, this question pops up in my mind. What if the internet is disrupted permanently? What will happen to all those people, including me, who depend on the net so heavily for everyday tasks?

Second, I have quite a number of articles that were half done before September. I have trouble picking up from where I left off hence the delay of publishing new ones. I am sure the writer’s block is temporary. For my readers, there is nothing to worry about for now.

Third, the ongoing project of upgrading the real-time trading assistants has been progressing very well without my interference. Obviously my consistent requests to twist things here and there were very counter productive for my programmer. I must say it is a very good lesson for me.

My place is still in an orderly mess. I mean, I managed to organize some of the stuff in the right place and sorted the rest of the boxes but I am nowhere near completing the task. Just looking at the 20 boxes of books with one glance I already procrastinate. Damn those books are heavy!

This coming week I have several business meetings (or virtual meetings) to attend to. The talk of alternative investments has generated quite a lot of interest. Some business associates from my past are asking if I could structure the fixed income approach of backing proprietary trading into something formal so that it can be run as a fund. It is easy for me to do it myself for friends and family (well, am still doing it) but structuring this into a business will have quite a number of hurdles to overcome.

This alternative approach to investing can be big going into the future as banks and central banks are no longer providing the necessary guarantee on fund safety with their bonds and short term notes. Thus a void is left behind and there could be a huge market to monetize this idea. Will keep you all informed on this interesting development.

Fellow Canadians, Happy Thanksgiving!

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Global Top in Real Estate Markets

2015 Oct 2 Fri 11:18:34 | by Lawrence

iStock_000003464820XSmallMany people who invest in real estates including majority of the people in the industry think that they can see the trend. In other words, they think they know where the price for certain region of properties will go in coming 6 to 9 months. In reality, research shows such belief is not true at all. At best, investors in real estates are just lemmings surviving in the macro trend of the global economy.

I am talking about this because a conversation happened among several friends who are thinking of buying houses. The reason for doing so is very interesting – they will not be able to afford it if the realty market continue to rise at the current rate. Interestingly, they are all thinking about the same thing with the same twisted logic in their minds.

For seasoned traders, they would be thinking about the same thing like me – isn’t this exactly how emotional traders rushing in to buy the top and sell the bottom? Their minds are thinking of the potential that they may not be able to participate in the move if they do not act immediately. What they failed to pay attention to is the fact that the trend may not last.

The real estate market I am talking about is Toronto, Canada. The conversation is interesting enough that it drove me to make several calls and send a bunch of emails to see if similar thing is happening in other major cities. Well, it turns out to be true in quite a number of major cities all over the world. In fact, it has been the driving force on higher end real estates for quite some time already.

In general, bull run in realty markets do not last for more than 7 to 10 years. Not every bull run in real estate ends in a crash like what happened to Canada back in year 1989 or what happened globally back in year 2000. There are times for which realty markets can simply go sideway to absorb the excess due to low demand. The problem, however, is that for realty markets to stay strong, we need an expanding global economy. Right now, the risk of global economic slow down is too high to be optimistic about the future.

To make the situation worse, governments will not be able to collect enough tax from corporate profits and personal income as both will suffer significant setback during bad times. The only thing the governments around the world can turn to is to tax those people who are trapped. What is better than realty tax and related special fees on the real estate within a country? As no one can move the property somewhere else, there is no way to avoid paying up the taxes. Tax hikes will put price pressure on the realty market as investors will look for alternatives instead.

Robert Shiller warned for months that unlike the year 1929, everything is overvalued since the beginning of this year. Everything means government bonds, real estate and lately the stock markets are all in overvalue territory. Since Dr. Shiller is usually early with his warning like what he did in pointing out the dot com era was a bubble, it means that we are stepping into the real dangerous time period for which if global economic down turn starts, all these asset classes will suffer.

As a day trader, I couldn’t care less about the real estate markets. Using data provided by various real estate associations here, I would say that the realty market of Toronto dropping only 30% across the board should be considered lucky over a 7 to 15 years slump. Since I am no expert in realty markets, I am making this projection purely based on STOPD. Let’s see if my theory can perform on realty markets like what it does on financial markets.


Demand for Alternative Investments

2015 Sep 25 Fri 10:28:46 | by Lawrence

Prints available for saleWhile dealing with my chaotic quest of relocation, I got the chance to talk to several ex-clients turning into personal friends from my hedge fund days. It is interesting that many of these seasoned investors are quite worrisome about the future outlook for return on investments. Their point of views are both insightful and interesting.

In short, they do not see good long term investment opportunities on a global basis from real estate to stock markets. To these investors, government bonds are now no good. Risk of significant setbacks in real estate and other standardized investment vehicles is telling them to scale back on all kinds of regular investments to raise cash instead.

But then the cash sitting around becomes a problem – should they put them to use or should they simply sit on it until the expected financial storm has passed?

This led to an interesting idea of investing in alternative investments.

The alternative investments include backing proprietary traders with fixed interest rate instead of the hedge fund approach of profit sharing. I have done this before for my friends when I was young so it is not something new. The key to success in such investment is that you have to know the trader very well. The other factor is to limit the amount of money to a small percentage of your net worth so that the investment will not impact your portfolio significantly.

There are also other form of alternative investments. For example, an investor can help funding a local small business in exchange for decent interest payment. Due diligence is important with this type of investment. Hence the investor has to be either very knowledgeable about the business or know the operator of the business very well.

Very interesting change in mentality among these long term investors makes me think the concept of financing and investing could be facing drastic changes in coming years.

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70 Some Boxes and Counting

2015 Sep 18 Fri 17:54:53 | by Lawrence

Finally, the pre-arranged day to move has arrived this week and the movers were on-time. Everything went smoothly as long as I do not care about the hiccups in-between. 70 some boxes were unloaded into my new place with furnitures and other stuff. I could hardly walk around my new place. Lots of unpacking to do. Yet, more importantly, I have to free up enough space for the items not moved yet. Next week will be all busy again. According to 20-80 rule, I will have to waste most of my time on the last 20 percent of issues to be taken care of for this move. No matter what though, it will be done before the end of September. Back to unpacking and secretly enjoying my time-off from trading over this weekend!


Downgrading From An Industrial Strength Kitchen

2015 Sep 11 Fri 13:25:54 | by Lawrence

iStock_000010513082XSmallMy brother-in-law came by yesterday helping me to clean out the kitchen. A task I thought supposed to be a simple exercise to throw the unnecessary things away turned into an all day fun. Little did I know that over the years we have acquired so many kitchen items. Due to the mass scale cooking we used to do, including cooking lessons for our kids, we have multiple sets of pots and pans. Dinner ware probably enough for a midsize company party. And all these cooking appliances … I am amazed as we sort out the stuff I will not need. Dropping off a car fully loaded with cooking appliances and utensils to Goodwill is a sight to be seen. Some of the stuff, however, are not accepted by Goodwill. The thought of all these functional equipments being thrown away feels wasteful. Yet, I do not have the time to sell them slowly through ebay or other means. This tells me the existence of the online 2nd hand markets actually has certain requirements to operate one successfully. Not moving anytime soon is definitely one of them. Relenting the decisions of what to throw away in the kitchen to my BIL is the best decision I have made for the kitchen area. He is way more knowledgeable than me about everything related to cooking. If I have to go through all the stuff myself to guess what will be useful and what will not be, it will take days before I can clean out the kitchen. Now it took just a day. Enough ranting, back to clean up and packing.


2015 Sep 4
Moving Is A Full Time Job

Three days into the month, I think I threw away at least some 20 lateral boxes of items. Unpacking boxes that moved with me from one place to another over the past 20 years yet never opened feels like opening time capsules. What a way to start the mo …

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2015 Aug 27
Busy Month Ahead

Disruption to Regular Schedule This coming month I have to move to my new place. I need to schedule movers, pack things and throw away a lot of things. I thought it would be easy to do but it turns out there are hiccups that I did not anticipate. I …

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2015 Aug 21
Volatility Is Back and Question About Home Run

As I explained weeks ago, volatility would be back. And here we are, the volatility index (VIX) has printed a new high for the year today. People were laughing back then questioning my sanity. It does not prove me right and that they are wrong. Ins …

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2015 Aug 14
Opinions Are Bad For Your Trading

Several members have been exchanging emails with me discussing the potential of a major market shock in near future. One thing that stands out among the group is the way how this discussion has affected the traders involved. I think it is worth talki …

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2015 Aug 7
The Lack of Good 2-in-1 Laptops for Trading, Research and Note-Taking

I have been waiting for a good 2-in-1 laptop for a long time now. My primary requirements are simple – high resolution for charts and order entry, can work well as a tablet for note-taking, and most important of all, long battery life. It turns out s …

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