After experiencing the brutal bear market of 1973-74, Tom felt the need to find a way to hedge his risks. This allows you to find the right combination of uncorrelated assets, technical indicators, and adjust the weightings as needed to ensure that you have enough to fill the holes in stock drawdowns while preserving most of the upside potential. A multi-year quest to provide protection began. Balancing risk and reward, both in the financial markets and in his personal life, has enabled Tom to maintain a calm disposition.
Tom Basso’s career:
Tom Basso is an American hedge fund manager. He was the president and founder of Trendstat Capital Management. He is the author of two of his books: Panic-Proof Investing and the self-published The Frustrated Investor. In 1998 he was elected to the board of directors of the National Futures Association. Basso graduated from Clarkson University in Potsdam, New York in 1974, majoring in chemical engineering. Prior to his career in the trading industry, Basso worked as an engineer at Monsanto. He became a Registered Investment Advisor in his 1980 and a Registered Product Advisor in 1984. Basso founded Trendstat Capital in 1984, where he served as CEO until his retirement. He retired from active trading in 2003 and currently manages his own portfolio and provides guidance to aspiring traders.
Disclaimer
Trading in financial markets involves the risk of loss. Podcast episodes and other content produced by Chat With Traders are for informational or educational purposes only and do not constitute trading or investment recommendations or advice.
Topic and timestamp:
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- 0:00 Reunited with Tom for the first time in 8 years
- 5:55 Hedging goals
- 8:54 Inspiration for hedging
- 10:50 Early strategies and experience in hedging
- 15:30 What inspired Tom to install a hedge before the 1987 accident?
- 19:50 Individual hedging as governments face a race to the bottom
- 21:30 Different types of bear market hedging
- 24:08 When adding or removing hedges
- 27:30 Correlation and diversification
- 30:30 Ideal correlation
- 31:50 Tom diversifies various assets
- 37:18 Adds Bitcoin futures to enhance diversification
- 40:10 Correlations that change over time
- 43:40 Correlation of global stock markets
- 50:28 A few trades can make a difference
- 55:20 Behavioral Economics
- 1:00:25 See your life like a movie
- 1:04:30 How to contact Tom