I’ve referred to Alex a few times in the Forums, but not by name. He is the former colleague who regularly had $100+ million P&Ls. I did not realize that he wrote a book late last year. As soon as I found out, I ordered it on Amazon.
Let me give you a little background. Even though we traded on the same desk and we both did many more trades than the average trader, I would say that the overlap was almost non-existent on the types of trades he did and the types of trades I did. What are the odds of two people trading similar products on a desk with no overlap in trades? He does a lot of very big picture “macro” trades, many of them with a multi-year time horizon, and I do primarily “micro” trades with a multi-week or multi-month time horizon. Because of his time horizon, he could be even considered a “macro macro” trader.
Most readers of my site are other fellow “micro” traders, focused on the 1-10bp trades. Back in the day, Alex used to regularly look for and find 50-100+bp rates trades (other than basis trades or carry trades). You can tell he’s still finding the big ones even in these markets. It’s really good perspective to get inside the mind of someone successful who has a different trading style.
The one thing I always thought was amazing about him was the way he was able to construct his portfolios. Rates go up, he makes money, rates go down he makes money, and rates sit there he makes money. This is especially challenging considering some of his positions could easily move 25% or more. Most traders get freaked out thinking about having even one trade that could move 25+% against them. He managed a bunch of them, and extremely well. I’ve seen him lose money on several occasions, but his portfolio always bounced back. I would have liked to see a portfolio management section of the book, but maybe there is a sequel in the works.
Part of his secret is that he understands the importance of carry. I stress it all the time, and he was one of my influences. He’ll discuss carry in the context of being long bonds, or long equities, or long carry in FX. You will see some charts in the book in the “non-traditional” way, which is to include the carry. People who don’t include the carry are missing the whole point of any trade.
The other part of what makes him successful is his analysis of trades. He has a great knack of picking what trades he thinks offers superior long-term value. He goes into a discussion of some principles that helps him differentiate good trades from bad. I have to applaud him for trying to organize some difficult concepts in macro trade selection into a framework. I think there are a lot of environment-specific factors that make generalization difficult. But he did a very commendable job at a difficult task. I’m going to read the book again later. I never read a book twice, but for this one, I’ll make an exception.
What I particularly enjoyed were his examples. Looking at the case studies, and what he was thinking at the time was very informative and entertaining – especially since I remember him discussing the trades during our weekly meetings. I actually caught myself reading in a Russian accent a few times. The funniest part was when he mentioned “alien invasion”, because when a manager would ask what could go wrong with a trade, he would occasionally mention “alien invasion” as one of the scenarios where a trade he really liked may go bad. Maybe you had to be there. There are tons of examples. He also had some examples of trades that didn’t go so well, and the lessons learned. Any time you can get a peek into what a great trader is thinking will be valuable.
As a warning, this is not the most “polished” looking book you will find. Don’t expect slick charts, attractive formatting or amazing prose. It’s all about the content. Think of it as that great hole-in-the-wall restaurant. When you have the chance to spend some time with someone near the top of their field, does it matter what color their socks are? Exactly.
The only caveat is that I have with the content is that I’m not convinced that his “One Chart to Rule Them All” (long US bonds) will last more than another 5 years. Yes – I know up to 5 years of carry is a looong time. I just think when the Baby Boomers (and related pension funds) start net liquidating (instead of net investing as they have been the past decades), we could see a massive break in many assets. But who am I to question the macro master?!?
A lot what he says transcends a particular trading style. I have a completely different style, but I do a lot of similar things he talks about in the book when I look for trades. When you read the book, look for things you can use. There are lots of valuable nuggets in here. You don’t have to agree with everything he says – this is what works for him, and he has a very long track record of success. Some things may not fit as well for your trading style, personality, office risk management or capital situation. But there will be a lot of useful information in here.
I consider myself an experienced trader, and I still got a lot out of it. Sometimes there are things you forget or haven’t thought about in a while – maybe that didn’t seem important at the time, but it may be important now. And in the coming weeks, you’ll see a tactical change of opinion I’ve had in the markets, and reading this book was one of the factors.
The book is only $20 ($8 on Kindle). I mean WTH?!? I can’t see how anyone who trades any macro couldn’t get several orders of magnitude of value out of reading this book. So if you want to be a home run hitter like Alex, you can start by doing this first “macro macro trade” and risk $20 for a Gurevich-like return.
If you are interested in big-picture macro trading, he is also on Twitter @agurevich23 and he has a blog http://alexgurevich.tumblr.com/