This month I was able to speak with Dario Michalek of Vision Capital.Mr. Michalek is a licensed Commodity Trading Advisor registered with the NFA, trading client funds in both pooled and segregated accounts.His trading approach is long term trend following, 100% technical and his market diversification ranges from trading the basics to Sunflower seeds.
Mr. Michalek tell me a little about how you got started in trading in the commodity markets and your experience up to date.
I started trading full time in 1999, after three years trading primarily in stocks and options I realized that futures and commodity markets provide greater diversification and more opportunities than any other investment category. It was also in 2002 that the basic ideas and philosophy behind our current investment methodology began to take shape.
I feel that managed futures is an industry that is finally getting the recognition it deserves and I expect tremendous growth in the next 5-10 years as investors begin to see the value added by including managed futures to their traditional investment portfolios. I’m very excited to be part of this trend.
The end of 2008 and so far for 2009 has been a roller coaster for some long term traders, what do you attribute this to?
We would attribute this to extremely high correlation and volatility among all sectors and markets like we have never seen before. This type of environment provides many great opportunities for profit but the risk of loss is much greater as well so staying discipline and controlling risk becomes paramount.
Do you think the current market environment will continue to be volatile for trend followers?
Yes, but this also creates a great opportunity for us as managers to look closer at risk management and improve on existing models. There is much that can learned from this current market environment.
What markets have you seen the biggest moves in so far this year?
Like I mentioned before volatility has been very high so we have seen some incredible moves in a very short period of time, natural gas Jan-Apr -50%, crude oil Jan-May +80%, cotton Mar-May +50% and probably one of the most extreme moves was in the S&P 500, down nearly 30% from Jan-Mar and then up about 40% by May, talk about a roller coaster.
Are there any markets that you think are due for a big move either to the up or down side?
I think probabilities are high that we will see the S&P 500 trade below the March lows in the next 3-5 months, which will surprise many.
What would you say is the most important rule when trading in the commodity markets?
To follow a set of rules.
Now, I would like to congratulate you on your performance of 114.81% in the new 2X program last year which was from inception Sept 08 to Dec 08.Now I have to ask about the current performance as of April 30th, YTD -2.36% with a maximum drawdown of 16.26%.Can you tell me what contributed to such large gains and what is causing the current drawdown?
From Sep-08 through Feb-09 we were well positioned to take advantage of the bearish climate developing in many of the markets and sectors we monitor, in the last few months we have seen reversals in the same markets and have given back some of those profits but we feel that this is temporary and that the major down trends will resume and we will be able to take advantage of the opportunities ahead. The current drawdown is within our risk tolerance and should provide a lower risk entry point to invest.
As I mentioned in the introduction you are a 100% systematic trader.In these market environments do you ever feel it might be necessary to allow for some discretion?
Discretion for us comes in the form of research, modification to our investment models as well as monitoring for new markets that can be added to our existing portfolio. But ones the trades are made its all 100% systematic, taking the emotion and guess work out of trading as much as possible. I feel that the strengths of being 100% systematic largely outweigh any weaknesses and believe that following a discipline and consistent approach will give us an edge in the long run.
Changing gears a little.I think it’s important we address the bounce we have seen in the equity markets.What are your thoughts on this and how do you see it affecting the performance of futures traders?
I feel that the recent bounce in equities is only a correction within a larger down trend and that the next major move from here is back down to new lows. Besides the chart patterns providing several clues indicating this to be the most likely scenario we are also seeing extreme optimism among investors believing the worst is over and that this is a good time to get back in the markets confirming from a contrarian point of view that we should see new lows in the not too distant future.
Thank you for taking the time to talk with me today.
My pleasure,
Dario Michalek
President and CEO
Vision Capital Management
Interview by Angela Wisdom
Past performance is not indicative of futures results
