TTU80: Managing Your Emotional Capital ft. Mike Coleman of RCMA Asset Managementz – 2of2

Top Traders Unplugged

Niels Kaastrup-Larsen

Business, Business News, Investing, News

4.8 • 670 Ratings

🗓️ 20 April 2015

⏱️ 64 minutes

🔗️ Recording | iTunes | RSS

🧾️ Download transcript

Summary

In the second part of our conversation with Mike Coleman, we explore the different commodity markets and how RCMA trades them, and look back at the drawdowns that Mike has gone through and what he has learned from them. We discuss risk, idea generation, and what it takes to build a successful firm.

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In This Episode, You’ll Learn:

How correlation plays an important role in what Mike does.
What he thinks of the current oil market and the outlook for oil.
How they use relative value trading and what that is.
What process they have for getting an idea into an actual position.
How they have a different relationship between trader and analyst than other firms do.
How he defines risk and how he looks at risk management.
What he has learned from the drawdowns he has gone through.
How to get the investor’s confidence in the manager to a place where they don’t drop out at the worst time.
Why regulatory risk is something that keeps him up at night.
How his strategy has changed over time.
If it’s possible to backtest any part of his strategy.
What the typical investor in his firm looks like.
What location means for a business like Mike’s.

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Transcript

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0:00.0	In addition to protecting and preserving your physical capital, there's also the concept of emotional capital.
0:10.0	You know, as a general rule, you don't want to be in a position where your emotions are clouding your judgment.
0:16.3	We talk a lot about does it feel like a struggle?
0:19.3	Does it feel like, you know, we're fighting the market?
0:22.3	And a sort of general learning over the years has been if it feels like a struggle, if it
0:27.5	feels like you're fighting, you should probably scale down or get out.
0:33.3	It's not every day you meet a trained robber trader who at a mature age of his life decides
0:40.0	to set up his own fund management business and ends up building it into one of the world's
0:46.0	largest discretionary commodity only fund management businesses.
0:51.1	So you can imagine that I learned a lot from speaking to my guest today, and I'm sure
0:55.7	you will too. Welcome back to Top Traders Unplugged, where the best traders in the world come to
1:01.9	share their experiences, their successes, and their failures. Let's rejoin the conversation with
1:07.1	your host, Veteran Hedge Fund manager, Kastrop Larson. You mentioned that briefly when you said the difficult times in 2011, you know, markets were highly correlated, et cetera.
1:29.6	I mean, when you talk about these, you know, ratios, to me, it doesn't sound like correlation plays a big role, but it probably does somehow.
1:38.9	How does it play a role in what you do?
1:41.0	So correlation plays a big role in our risk, you know, because we're running a VAR model.
1:51.0	Right.
1:51.7	And so to the extent that things are getting more or less correlated, then our VAR model
1:58.6	would be allowing us more risk or less risk.
2:02.0	Okay.
2:03.6	At a more macro level, you know, a challenge always for us is how do you weight the fundamental analysis against the statistical side? As well, against technicals and against macro drivers
2:21.4	so we're actually just seeing a great example of it in the petroleum market so in the last
	...

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