I remember the cycle turn in 2007. I watched hundreds of hard working people's accounts and net worth evaporate slowly at first and then all at once. I recall the panic and the sheer lack of advice from major wall street firms who didn't want their clients to get out of the market. These big firms couldn't even correctly identify the cycle turn, let alone know how to trade it and manage risk around the cycle. It was really horrifying and one of the most frustrating things I've had to watch and deal with early in my career.
This is part of the reason why I started JRM. I tried to help as many people as I could - warning them to raise cash and buy puts - but there just wasn't enough firm-wide help and there wasn't enough traders with sufficient experience or training to assist so many clients with navigating the downturn. Luckily, I had been trading directionally for many years prior and was an options trader, so I could see it unfolding and helped where I could. But this was of no benefit to those with whom I didn't interact. The majority of clients and the firm didn't see 2008 coming and it was horrible to watch - doctors, lawyers, retirees, business owners, single moms - I agonizingly watched all kinds of people needlessly lose 50% of their portfolio in a matter of months simply because they didn't have a plan, a model, a process, or proper guidance.
Next, I got the opportunity to trade bonds on the institutional side and that too was a front row seat to the end of the world, only this time I witnessed many seasoned and experienced traders panic and blow up. In addition, many firms had no idea how to manage these liquidity issues and the directional panic.
Our desk enjoyed our best years during this alarming time by being long bonds (specifically US Treasuries) and we were directionally good at what we did. We rode the recessionary trends and outright collapses in market prices. We benefited from the flight to quality trades in treasuries and fixed income. Of course, it wasn't easy dealing with the heightened volatility even as bond bulls, but we remained nimble and we knew how to manage the wide swings and pullbacks. The potential coming recession will be no different and we have already begun to see huge moves and vol in both equity and fixed income markets.
That event, as well as the experience learned over the last 15 years has put me, our firm, and our team in an great position to take advantage of this similar economic environment and this next cycle. It is now our mission to help others not only prepare for a coming cycle downturn, but to actually profit and capitalize on it. This week was another fantastic example of our team executing and doing just that. In fact, some members of our team had record days today while others reached new milestones in their respective trading careers this week. For that, I'm truly proud of them given the extremely difficult market environment we are currently facing.
