What is Fiduciary Aikido?

What if you could play both sides of the trade?


Shouldn't it be a wash?


With a fiat currency, it is an impossibility, but close. Let's look at the Australian Dollar with a forward month shorted against an open long position in the pocket... over the time frame of a quarter...


Take a look at this. (with thanks to TD)


That is because the Australian Dollar is a well managed currency, and was in a very slight Backwardation over that time frame, keeping it both available enough while in short enough supply to prevent excessive inflation. They can conversely choke it back by creating a slight relative shortage, putting it in Contango. Clearly something else is at work there since it has to be impossible to make money with two opposing securities of the same underlying, this time being the Australian $ futures contracts for those months, right?

Well, Timing isn't just one of those things, it's nearly Everything! And then there are the trades themselves. How far are those Asking Prices, or what you get to purchase the contract for, apart from the Bid prices, or what you get to sell them for? You get to buy them for more than you can sell them at any given moment. Then there is the nature of the futures contracts themselves. Can you predict the future? Well, other than those who are able to read tea leaves as a secret Superpower, nobody can! The only certain thing about the future is its uncertainty. This isn't lost on the Futures Exchange either. They make up for it as best as they can by widening that BID/ASK spread of the forward future month, or even year, contracts.

But Ahhhhah, Grasshoppa! There is more to The Future than Australian Dollar Futures! Surely there must be some better underlying securities managed by complete imbeciles! The good news is that there is, and they are managed by You and Me and several thousand others! They are just as lousy at predicting the future. You have to believe that there is a way to turn the shortcomings of such a Perfect (cough, cough!) Well Oiled Machine as that to our Advantage. That is good because the Market gives them a well deserved spanking. Everybody loses!

Well, here is where we talk about, "Who always wins the Superbowl?" There are lots of winners, but some of them win at every Superbowl. They may not get a ring, but they win none the less. Budweiser comes to mind. Ticket sales too. And how about those guys that make all the snax? "That's the Vig!" the bookie/market maker says. "Can I put a Hundred on You to Win?" is likely your reply, at which point you might get punched and shown the door by being put through it before they open it. "Geddavuggouddahere! Capiche?" I did anyways... YMMV, Capiche?

Fiduciary Aikido can be painful in the learning stages as it is more physical than mental. Perhaps you can learn from my mistakes on my journey from White Belt Begginah to full Zircon Encrusted Black Belt with Fig Leaf Clusters dat nobody in their right mind goes left with!

Luckily, the Markets are marginally nicer to do business with than that. Not much, but a little anyways...