Brazil stocks

m22au said:
I'm not sure if you read the article I posted above which profiled John Hempton.
(Did you read the article?)

He has similar views to mine - no need to worry about short-term gyrations if appropriate position sizing is used.

Again I'll quote Hempton, as it seems you may have missed it:

"The thing about shorts is that you often know the endgame entirely. ... Gravity tends to work. But you don’t know when.The whole thing is seductive because the profits are guaranteed if you can hold the position. This can be very hard because a stock can go up five times before it collapses."

and

"To offset that timing risk, we want to have a small stake in hundreds of shorts."

SID could very well go bankrupt. There is no need to worry about a bounce from 0.97 to 1.31 today if it's going much lower than 0.97.

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The thing is, there is another way to play these. Which is to only get involed when these trash stocks are overextended and time them well in the shorts. You get the benefit of being able to play them bigger (and hence, you wont need a lot of these to make more than many small shorts) and the approach will have an overall sharpe ratio. I interviewed an specialist of this approach (he usually shorts overextended small cap Nasdaq stocks but sometimes OTCs as well) and will add to the 2nd edition of my book. I can send you the PDF of the the unedited chapter if you want. He goes by the nickname of lx21 on twitter. he has an website as well

I believe this year he made a lot of money shorting VLTC with big size
 
That said, I like the approach of having many small swing shorts. I do that all the time but I only do these when I know that the chance of a squeeze is really small.
 
www dot twitter dot com/AllThatIsSolid/status/649930912071872512
"If BRL can't even strengthen against USD on a day like today, Brazil really is f..."

Although as some commenters point out, BRL weakness could be a symptom of general risk aversion.

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The problem with shorting Brazilian stocks is that they are at 11x PE and 5% div yield after 2 years of recession. Those are cyclically depressed earnings and yields. When they return to normal (as a market economy always does) they will rise. So effectively, they are at something like 7-8 PE's 6-7% dividend yields. Its really hard to make money shorting very cheap markets. Specially given headline risk, at any hint of the impeachment going forward, buyers will go nuts. Unless one is talking about a daytrade here and there, positioning short the brazilian market is very dangerous

I do know of a trade to bet against brazil that I actually like, short the BRL against AUD/NZD/CAD. Shorting BRLUSD is dangerous because a lot of that is just a bet on commodities, and with commodities down so much and everybody being bearish on it, its just a dangerous exposure to have. If they pop 10% all the bullish arguments that you can't find anywhere, all of the sudden will appear everywhere and the world will look a lot different (almost like a conspiracy). But with the AUD NZD and CAD, you isolate the commodity component because they correlate to that as well. To do the trade one would short the BRL in the CME contract and buy AUD NZD contract etc
 
Daal said:
The problem with shorting Brazilian stocks is that they are at 11x PE and 5% div yield after 2 years of recession. Those are cyclically depressed earnings and yields. When they return to normal (as a market economy always does) they will rise. So effectively, they are at something like 7-8 PE's 6-7% dividend yields. Its really hard to make money shorting very cheap markets. Specially given headline risk, at any hint of the impeachment going forward, buyers will go nuts. Unless one is talking about a daytrade here and there, positioning short the brazilian market is very dangerous

I do know of a trade to bet against brazil that I actually like, short the BRL against AUD/NZD/CAD. Shorting BRLUSD is dangerous because a lot of that is just a bet on commodities, and with commodities down so much and everybody being bearish on it, its just a dangerous exposure to have. If they pop 10% all the bullish arguments that you can't find anywhere, all of the sudden will appear everywhere and the world will look a lot different (almost like a conspiracy). But with the AUD NZD and CAD, you isolate the commodity component because they correlate to that as well. To do the trade one would short the BRL in the CME contract and buy AUD NZD contract etc
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Man, what you are writing makes sense. I agree.
But it is like casting pearls before swine.
m22au did'nt, doesn't, will not understand basics.
Let him dream.

CM
 
Daal said:
The problem with shorting Brazilian stocks is that they are at 11x PE and 5% div yield after 2 years of recession. Those are cyclically depressed earnings and yields. When they return to normal (as a market economy always does) they will rise. So effectively, they are at something like 7-8 PE's 6-7% dividend yields. Its really hard to make money shorting very cheap markets. Specially given headline risk, at any hint of the impeachment going forward, buyers will go nuts. Unless one is talking about a daytrade here and there, positioning short the brazilian market is very dangerous

I do know of a trade to bet against brazil that I actually like, short the BRL against AUD/NZD/CAD. Shorting BRLUSD is dangerous because a lot of that is just a bet on commodities, and with commodities down so much and everybody being bearish on it, its just a dangerous exposure to have. If they pop 10% all the bullish arguments that you can't find anywhere, all of the sudden will appear everywhere and the world will look a lot different (almost like a conspiracy). But with the AUD NZD and CAD, you isolate the commodity component because they correlate to that as well. To do the trade one would short the BRL in the CME contract and buy AUD NZD contract etc
More...

Thanks for your thoughts Daal

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