On Transparency

I began this blog for a few different purposes.  First, and by far the most important, I like to write and rant.  I just can’t imagine a time when individuals were not able to self publish this easily.  I’m a relatively young guy, but not having this ability just blows my mind.  The ability to have your voice heard, no matter who you are, what your credentials, education, resume, is amazing.  The meritocratization (is that a word?) of information transmission is a huge leap forward for mankind, I say that with the utmost sincerity, it is a human revolution.

Second, I though I had the ability to teach others a thing or two about how to operate properly in the markets.  I think I’ve done a pretty decent job at that, I regularly receive e-mails thanking me for the information I put out there.  Thank you for listening.

And third, I wanted to build a name for myself and my firm through sharing my ideas.  Finding an investment manager these days can be a daunting task for many individuals and institutions.  Where do you even start?  If you aren’t wealthy enough to have your money managed by AQR Capital or any one of a number of first class hedge funds that I would give money to in a second, what do you do with it?  If you are smart enough to understand that passive investment strategies, dumb asset allocation, and long only mutual funds are hazardous to your financial health, how do you find an active investment manager that you trust?

It is one of my goals on this blog to be as transparent as possible, about my ideas, my strategies, myself, and my performance.  It is only in this way that someone of my background can make a name for himself, allowing my intellect and performance to speak for itself.  I’ve been trading from a young age, and had a great mentor in David Geller who taught me the right way to trade and manage other’s assets.  I was part of a sophisticated hedge fund up in White Plains, NY where we put up some great performance numbers and made a lot of clients wealthy.  But my mentor unfortunately passed and I was forced to move on and start my own firm, honestly before I wanted to.  I didn’t have a family member who was a managing director at Goldman Sachs to place me in a sweet spot on a trading desk.  I started my own firm out of necessity and understood that the only way I was going to raise money beyond friends, family, and a few other acquaintances, was to put together a real track record, be as transparent as possible, and display my intellect.

I know many out there in the same or similar situations.  There are a lot of great traders out there who don’t have the type of connections to get them spots on trading desks at hedge funds or big banks.  I want to speak to them right now.

If you’re good, I mean truly good, be completely transparent.  If you run an investment management firm as I do and are looking for quality clients, be completely transparent.  Build your brand through your blog, through sharing on StockTwits, through helping others.  Many can’t see past the fact that there is no immediate payoff for sharing this information.  Be patient.

Being transparent with your performance is an important piece of the equation.  Unfortunately I am not allowed to post the performance of any specific account managed by Surfview Capital, it’s against the rules.  I can not connect to any of those services that track your performance and share it on Twitter.  I can not share pages that directly link to brokerage accounts like stocktickr.com (which by the way is a great service).  What I can do is create a “model portfolio” which does not represent any specific account, but does represent my trading and performance, and share that.  I hope one day the SEC allows me to share a nameless portfolio, but as we know, they are always one step behind everyone, including the social media world.

I share this model portfolio on the Trading Book page of this blog.  That page is just a very simple embed of a Google document.  I want to take a moment to show you how to build a page in Google docs that you can embed and share.  There are plenty out there you can search for which will help you, but here are the general features you need to code in to the sheet, and believe me, it’s extremely simple.

First, start with building the current holdings portion of the page.  Google docs allows you to write very simple code that automatically updates the price of stocks.  I won’t get into as much detail as what the formulas are, anyone who took simple algebra can figure it out.  This is the general setup you need to show current holdings and the performance of what is in your portfolio.  One little tip, remember to use the symbol “a” where there is no position, if you don’t put anything you get a NULL and that screws up the whole sheet.

Next, build the part of the sheet where you enter closed trades.  This is very simple algebra as well, you can figure it out.  Make sure to add up your total P&L in dollars at the bottom.  As you go on in time and enter more transactions, add addition rows at the bottom.

Now here’s where it gets a little tricky.  The four categories up here need to be linked to the previous two sheets.  Here’s the short explanation.  When you start, enter your portfolio value in the portfolio value category.  Then add to that the cell in the current portfolio part which represents the P&L of your current portfolio.  Then add to that the cell in the closed positions part which represents your closed P&L.

Cash is simple, just subtract the total market value of open positions from the portfolio value category.

Total P&L is simple as well, just add the P&L cell from your current portfolio to the closed P&L from the closed transactions part of the sheet.

The alpha part is pretty simple.  Create a row like this and put in the price of your benchmark on the date you start the sheet.  It’s exactly the same as the current portfolio holdings part.  Then, simply subtract this from your total P&L category in the alpha cell.  Use simple algebra to do the percentages.  Remember to start the benchmark category with the same exact total market value as your portfolio.  You can see here that the benchmark bought 926 shares of SPY to match up with the model portfolio amount that I started with which was $100,000.

The current portfolio part of the sheet does not handle short positions, so you need to make a separate part for that and link it as well, the same exact way you did with the long positions.  You can easily enter short positions in the transaction sheet by throwing a *-1 after the P&L calculation in the formula.  Remember to write Short Sale next to the transaction.

That’s pretty much it.

This is obviously more useful for swing/position traders like myself.  There are many other sheets out there that are better than mine, but this is easy for me and it’s simple to build.

At the end of the day it takes 3 minutes more me to update, I look at my total trading book on interactive brokers, how many shares I traded, and I just divide to get a representative number of shares for a $100,000 portfolio.  Transaction fees are calculated into the average position price on IB negating the need to track it on here.  The only thing not taken into account are management fees.  So yes, the performance shown on this sheet is sans management fees and better than that of my clients.  I don’t find the need to show that on here, it’s the trading performance that counts.

I encourage you to use this sheet or build your own.  Transparency, get some.

Full Disclosure: Nothing on this site should ever be considered to be advice, research or an invitation to buy or sell any securities, please see the Disclaimer page for a full disclaimer.


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