Eric on Top Traders Unplugged - March 2020

Eric, CIO of Standpoint, joins Niels Kaastrup-Larsen and Moritz Seibert for a discussion about trading futures and the importance of commodities and currencies in a portfolio. They also talk about the reason behind expecting positive returns from certain investment approaches and tell some stories about their experiences as money managers.

Key Takeways

  • In order to receive a positive return, investors are expected to endure a certain level of risk, volatility, and drawdown.
  • Using futures contracts to participate in fixed income can be very profitable during a rising interest rate period. Neils talks about how Dunn did this successfully back in the 70s and early 80s.
  • Eric uses the analogy of eating a burrito to illustrate that investors seem to like a strategy that is the ‘whole burrito’ rather than having to consume the chicken, the cilantro, the beans, and all of the other ingredients separately. Consuming these ingredients separately leads to disappointment and a sub-optimal experience.
  • By using futures contracts, it’s possible to have profitable trades when the price of the asset is not moving if the market is in backwardation or contango.
    • I’ve had to order books and have them delivered and then hand enter currency data from years ago. If you want to go back into the 1920s and capture the great depression there is no convenient solution for this.

      - Eric Crittenden, Standpoint

    • When you hold a portfolio that has 1,600 long positions you have a lot of corporate actions, you have a lot of dividends, and splits, and mergers, and divestitures, and tax optimization going on.

      - Eric Crittenden, Standpoint

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