Author: Khojinur Usmonov

A student at Baruch College (CUNY) in NYC, majoring in economics. Double minor in Business Writing and Data Analytics. Starting trading forex at age 15. Started investing in equities at age 17. Currently 22 years old and trade three asset classes; forex, equities, and commodities. Twitter: @Khojinur30

Forex Portfolio Performance: Inception & 2016

 

WHAT A YEAR! Market sell-off. Complete reverse afterwards. Full of surprises, from Brexit to Trump (not for me since I predicted them).

During the global markets crash in August of 2015, I completely lost all the money I made that year plus some more in forex. Witnessing markets free fall – faster than Luke skydiving 25,000 feet without parachute – for the first time ever crushed my account to death. (For the record, I wasn’t trading in 2008 and had absolutely no idea what was unfolding that time).

Thinking euro will go to the parity level by the end of 2015, most of my positions were crowded in shorting EUR (The Big Short). Just when I thought euro would follow the markets, it acted as a safe-haven.

Lessons learned the hard way:

  • Always keep enough cash for emergency and/or new opportunities (could not make new trades)
  • Do not keep most things in one place (EUR short)
  • Do not let the perceptions – media, traders, experts, you name it – fool you (“Euro is not a safe-haven asset”)

Taking all these lessons, I completely changed my strategy and will continue to tweak it to adapt to the current conditions. After taking a break from trading in September (2015), I opened a new forex account.

Started off strongly, with high standard deviations, but enough for me to sit through that. High-risk/High-reward. As I continued tweaking my strategy, I reduced the swings in the P/L.

Figure 1: Forex Portfolio % Returns Since Inception (09/29/2015)

Starting in August 18 of this year (2016), my returns have been very stable, trending upwards (see Figure 1). It went from 144.49% return to 184.42% as of the last trading day in 2016. Last August, I made a significant chance to my strategy which led to stable returns trending upwards. I continue to tweak my strategy little by little until significant change is needed. Repeat.

Since inception (09/29/2015), I have returned 184.42%. In the second half of this year, I deposited more money into the account. In turn, the % returns you see in the pictures above and below, has a huge difference in nominal amounts.

Figure 2: Forex Portfolio Performance Since Inception

In 2015, I returned 117.48%. This year, I have returned 32.82%. Since the inception, percentage of profitable trades are 50.70%, with the average gain per trade 3.82 larger than the amount of average loss per trade.

Sharpe ratio is 1.13 (not good yet), with average monthly return of 11.01% and 33.79% standard deviation of monthly return. Compounded monthly rate of return is 7.22%.

I predicted Brexit and profited bigly off it. 30.77% of the profit came from pair GBP/USD. Thanks Brexit. How did I predict Brexit?

Predicting Brexit – 6 tweets
Figure 3: Top 3 FX pair P/L as a % of the total P/L

Largest loss was 5.21%, from pair AUD/USD. I don’t know what to blame except myself.

As to predicting Trump’s win, the profit was a fraction of Brexit profit, via other pairs than Mexican peso currency. The day after the election, the peso suffered its largest one-day drop since the Tequila Crisis of the 1990s. Too bad I did not have access to peso pair at the time. How did I predict Trump win? Tweet 1, 2.

If you invested $1,000 in me at the inception, that money would have been worth $2,844.23 today.

You can still invest in me. Minimum investment is $1,000. Contact me for more details.

Thank you.

Update: “Equity/Commodity Portfolio Performance: Inception & 2016” article is posted.

Eli Lilly’s Stock Price Should Continue To Fall Further (Seeking Alpha Article)

Summary

  • Failure of trial III Alzheimer drug, Solanezumab, is a major setback for Eli Lilly.
  • Lilly’s spending relative to the industry is following the same pattern as in 2005 and 2007, before its stock price got cut in half in over a year.
  • While Lilly is strengthening its pipeline in the diabetes space, it will not be enough to stop the stock from continuing to fall as they face stiff competition.
  • Four drugs accounting for 29.6%, or almost $1.5 billion of its third-quarter sales, are due to lose their compound protection this month and next year.

To keep reading more, the article is available on Seeking Alpha. Or copy/paste: http://seekingalpha.com/article/4032921-eli-lillys-stock-price-continue-fall.

Biggest Failure of My Career: Hedge Fund Club

 

Do not train a child to learn by force or harshness; but direct them to it by what amuses their minds, so that you may be better able to discover with accuracy the peculiar bent of the genius of each. ― Plato

It is Wednesday, February 27, 2013. I’m giving a speech in front of 50-70 people on why they should elect me as their treasurer for Key Club at Edward R. Murrow high school.

During my junior year in high school, I became a member of Key Club, an organization which provides its members with opportunities to provide service, build character and develop leadership. This was the first club I ever joined, after avoiding all clubs and school events for 2 years.

After the speeches for all positions, members were to vote a person of their choice for each position. Unfortunately, I became in 2nd place for the treasury role. Well actually, I was in the last place since there were only two people running for the position. It was not a big deal for me anyway.

Several months later, I was sitting in my room staring at the news and currency charts. I was thinking about my future; college and career.

As I was thinking, I promised myself I would open my own club in college. What kind of club? I don’t know. But, I will open a club. Only time will tell.

A year later, I’m sitting in the same room staring at the news and currency/equity charts. I was weighting the costs and benefits of attending certain colleges. After being rejected from my number one choice, Columbia University, I had to choice between Binghamton University and Baruch College.

Why not Binghamton? Tuition was over $24,000, $14K had to come out of my own pocket (unless I got scholarships; not guaranteed). In others words, I would had to take out a student loan, which I promised I would never take. Lastly, the campus was four hours away from the financial capital of the world; New York City.

On the other hand, one major reason I wanted Binghamton was that I would move out from my parent’s house and be independent. But, the benefits were heavier on Baruch’s side. To this day, I still live with my parents; rent-free with……um……no……um……..no responsibilities.

During my first semester at the city university, I started going to Finance & Economics Society (FES) club. At the end of the semester, they were few positions open, one of them: Sales & Trading. I applied for it, got interviewed, and got accepted into the program. I got accepted not because I stood out from the crowd, but because there was no competition at all.

Joining a club with some smart people that conducted themselves professionally, was uncomfortable for me. A confront zone is a beautiful place, nothing ever grows there.

Over the next three semesters at FES, I learned incredibly so much both career-wise and personal-wise. Two important skills I gained were debating and leadership, thanks to Kenneth Tjonasam and the team. As the director of the S&T program, Kenneth challenged me and others to give our own ideas and asked us tough questions when we gave it. And he did much more than that.

Charles Schwab got paid a million dollars a year in 1920s, because of his leadership skills;

Why did Andrew Carnegie pay a million dollars a year, or more than three thousand dollars a day, to Charles Schwab? Why? Because Schwab was a genius? No. Because he knew more about the manufacture of steel than other people? Nonsense. Charles Schwab told me (Dale Carnegie) himself that he had many men working for him who know more about the manufacture of steel than he did.
Schwab says that he was paid this salary largely because of his ability to deal with people.

That’s how good Kenneth was. Except in this part, he is also a genius.

In the middle of sophomore year, I had a flashback; sitting in my room and promising myself I would open a club. At the time of the flashback, I was sitting in my room staring at the news and currency/equity/commodity charts. Without contemplating, I planned to start Hedge Fund Club (HFC).

I wanted to share my passion with others and give back to the Baruch community. The purpose of HFC was;

Hedge Fund Club’s purpose is to trade financial instruments actively while allocating different asset classes effectively. To maximize capital and minimize risks, the club will use top-down approach and technical analysis to find the best investment opportunities. The club will offer opportunities for the Baruch Community to get know the hedge fund industry and network with the people in the industry, developing Baruch College’s exposure to the hedge fund industry.

Over the next several months, I filled out the papers the student government wanted, in addition to finding a club adviser. My team and I chose Bruce Kamich, well respected and highly talented technical analyst professor at Baruch College. Professor Kamich was the best fit for the HFC’s mission and I’m thankful for his advice. I have yet to take his class.

And finally, the student government asked my team to hold three HFC meetings before an interview with them to get the club chartered.

My team (Vice-President – Thomas Jing, Secretary – Jamal Moody, and Treasurer – Jinay Shah) and I held the meetings in April and May, attaining 14 members. For the undisclosed reasons, the interview was forwarded to early September. Over the summer, I along with my team worked on most of the PT presentations and outlined the meetings for the fall semester. September came and there still was no interview. To sum up, there’s no HFC anymore (unless someone else starts it).

I take full responsibility for the failure of Hedge Fund Club. This is the biggest failure of my career. And this will definitely go into my book.

The reasons for the failure is classified. It will be declassified in my book, or when I’m on the cover of Forbes. (Few people know at this time).

I will continue to guide people who might be interested in markets/trading/technical analysis/investing/blogging. I will continue to meet with them during my own time.  I will continue to have conversations with them. I will continue to debate with them. I will continue to ask “why” if the reasons are not clarified.

While the vision and the goals for HFC will not see a light anymore, I will let it shine after college. I plan to create my own program and/or join a mentorship program.

I have seen extremely talented students. I want to make sure they use their brain for something they love. I have seen students with a strong curiosity in a subject (mostly finance related). I want to make sure they continue to build their knowledge foundation and guide them, but it’s up to them to choose which road to take. I have seen students with no clue what they want to do when they grow up. I want to make sure they go out of their confront zone and try out new things.

Wander around the unknown and you might just discover your passion. – Khojinur Usmonov

Pressure Builds Up In EU Following Italy’s Shocking Referendum Loss

This article was initially posted on The Ticker, Baruch College’s (the college I currently attend) independent, student-run newspaper.

After a defeat in a constitutional reform referendum, Italian Prime Minster Matteo Renzi has resigned as he previously promised in case of a “no” vote to the constitutional revision plan. This referendum was meant to strengthen Renzi’s hand by stripping the Senate of its many legislative powers and speeding up the decision-making process.

With 59.1 percent of the votes being “no,” an anti-establishment political force took control once again, following the example of the Brexit referendum and Donald Trump’s election. Renzi, a centrist, was accused of failing to restart the country’s flagging economy, which has barely grown since adopting the euro in 1999.

The referendum raises questions about Italy’s ability to work efficiently. Since 1946, Italy has had 41 different prime ministers and has gone through repeated political turmoils.

In response to the referendum, Brexit campaign leader Nigel Farage, who is also a vocal supporter of Donald Trump, tweeted, “This vote looks to me to be more about the euro than constitutional change.”

Parallel to Brexit and Trump’s victory, the Italian referendum showed voters the rhetoric of populist parties like the Five Star Movement, which campaigned against the constitutional reforms.

Renzi’s collapse comes after the defeat of a far-right candidate in Austria. It is a blow to the wave of anti-establishment anger across the western countries. Norbert Hofer, a far-right candidate from the Freedom Party of Austria, lost by seven points to independent candidate Alexander Van der Bellen. While the far-right may have lost this election, the rise of populism is gaining the support of the Freedom Party for the next national election in Austria, set to be held before spring 2018.

Matteo Salvini, the leader of Italy’s far-right Northern League, tweeted, “Viva Trump, viva Putin, viva la Le Pen e viva la Lega!” which translates to “Long live Trump, long live Putin, long live Le Pen and long live the Northern League!”

In addition to supporting the Trump presidency, the Five Star Movement and the Northern League favor rougher immigration policies. Both parties have promised to hold a referendum on Italy’s membership in the eurozone and renegotiate Italy’s public debt.

Markets have mostly cooled off from the aftershocks of the Brexit and the Italian referendum results, but elections in several key European countries next year’s might not make recovery easy for investors. Renzi’s departure could lead to an early election.

Italy is now another country on the list of European Union members that are likely to hold a general election in 2017, joining France, Germany, Netherlands and the United Kingdom.

Italy’s election would be held in early 2017. The potential victory of the populist party will create uncertainty about the economic prospects of the eurozone’s third biggest member state.

Italy’s banking sector, currently with $4 trillion in assets, is suffering from low profitability, lack of economic growth, ultra-low interest rates and a surplus of bad loans. The FTSE Italia All-Share Banks Sector Index is also down 51 percent over the past year. A change in the government could mean further delays in solutions to the banks’ problems.

Banca Monte dei Paschi di Siena — the world’s oldest and Italy’s third largest bank — recently failed the EU bank stress test.

The bank’s stock is down 83 percent since 2007 as bad loans progressively increase. The bank is now desperately looking to raise capital and sell 28 billion euros in bad loans.

The only solution Italy has at this moment is to “rely on the EU to provide more fiscal rescue packages, to prevent Monte Dei Paschi from becoming insolvent,” said Kenneth Tjonasam, the director of portfolio management at Baruch’s student-run fund, Investment Management Group.

Italy’s debt as a percentage of its gross domestic product stands at 133 percent, second only to Greece’s 183 percent. Unlike Greece, Italy is so-called “too big to fail,” as it is also the world’s third largest government bond market.

The French vote is also crucial. National Front Leader Marine Le Pen called Brexit a “victory for freedom,” and her party is leading strongly in the polls. The two-step election for Europe’s second largest economy is scheduled for April 23 and May 7, 2017.

Even if the Five Star Movement and the Northern League win the election, they still have to hold a referendum on Italy’s membership in the eurozone and actually win it. If they do, “Italexit” and “Frexit” could be enough to destroy the entire currency bloc.

Around the same time, British Prime Minister Theresa May is expected to invoke Article 50, triggering a two-year countdown to Britain’s official exit from the European Union.

Even if the euro-skeptic parties fail to gain power, anti-establishment sentiments in the country will not go away.

“The Italy referendum ‘no’ vote is only a small speed bump to the ideal of a far-right movement that’s taking place across northern EU countries. The time frame to restore the Italians to path of stability, both politically and financially is uncertain,” Tjonasam added.

Meeting the Bank of Japan Governor, Haruhiko Kuroda

After meeting the former chairman of the Federal Reserve, Bernanke, last October – I met the current Bank of Japan governor, Haruhiko Kuroda, this October.

I asked Mr. Bernanke a question and did the same for Kuroda. This time, I also got a handshake.

We’ll come back to that.

The Brookings Institution, a nonprofit public policy organization, hosted a conversation with the governor on Saturday, October 8. The event was held in Washington D.C., where the think tank is based. The event was nearly 1.5 hours long, starting 4:00 P.M.

David Wessel on the left. Haruhiko Kuroda in the middle. Alan Blinder on the right. Photo credit: Kenneth Tjonasam
David Wessel on the left.
Haruhiko Kuroda in the middle.
Alan Blinder on the right.
Photo credit: Kenneth Tjonasam

I live in New York City. It took about 10 hours on a bus to go to D.C. and come back, as well as about $70….all for an hour of event. At least I got some work done on the bus. Time well spent.

It was all worth it since I’m in love with economics and finance.

Kenneth Tjonasam, also a student at Baruch College and the smartest person I ever met, went there as well. He asked a question before me.

Back to the question.

This time, I didn’t blank out, as I learned from my first experience meeting a high-profile person.

I asked “What do you think is the biggest threat to the financial markets today? Lack of liquidity? Regulations? Algos and HFTs? Or whatever?” (I should have said “Or something else?”). There’s video available below. I ask the question at 1:17:55. Kenneth asks his question at 1:17:18.

This is a question I ask nearly everyone in the financial services industry. Some have said illiquidity. Some have said regulations. No one have said algos/HFTs. One person I met on Thursday said “lack of growth.” 

I find this question quite fascinating, considering regulations and algos/HFTs (technology) are partly responsible (or you can argue entirely responsible) for the lack of liquidity.  

Did Mr. Kuroda answer my awesome question? No!

After Kuroda answered the first 3 questions, the moderator, David Wessel, took 4 more questions. I was the 6th, which is my favorite number. When it came time to answer my question, David said “We don’t have time for more questions.” (1:26:05).

I’m sure Kuroda is happy for dodging my question.

Kuroda's evil laugh
Kuroda’s evil laugh

Besides the disappointment of time, the experience was great. I’m thankful to the Brookings Institution for the opportunity to be at the event. It’s only matter of time before I’m on stage there and a moderator asks me questions. Who’s the next high-profile person I will meet? Janet Yellen?

….and Kuroda is really short, with a perfect smile.

Khojinur Usmonov with Bank of Japan Governor Haruhiko Kuroda
Khojinur Usmonov with Bank of Japan Governor Haruhiko Kuroda

A conversation with Governor Haruhiko Kuroda, Bank of Japan.

Industry Game Changer: How The Tel Aviv Stock Exchange Is Changing US Real Estate (Seeking Alpha Article)

Summary

  • A decline in CMBS markets have led to new ways of raising capital for US real estate players — and opening doors of opportunity for new waves of capital.
  • The EB-5 visa program has been a popular source of capital but concerns of fraud have put the program under a microscope and could end this year.
  • With fewer financing options and high interest mezzanine loans, real estate businesses are looking elsewhere for cheap capital, namely Israeli bonds.
  • Israeli bond issuance takes four-to-five months, with future issuances taking less than a month — a game changer for players who need capital fast.

To keep reading more, the article is available on Seeking Alpha. Or copy/paste: http://seekingalpha.com/article/4009155-industry-game-changer-tel-aviv-stock-exchange-changing-us-real-estate.