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Global Macro Trading Journal
- Thread starter Daal
- Start date
Arguing equities typically offer higher volatility-adjusted returns than corporate bonds is wrong on so many levels I don't know where to start.Quote from Ghost of Cutten:
corporate bonds (3-6% depending on credit risk), junk bonds (7-9%), or equities (6-10%+).
/snip/
choosing which investments offer the best trade-off of return vs risk
/snip/
equities offer more attractive opportunities relative to the risk involved
Quote from Ghost of Cutten:
But prices were only 15% or so lower than when he was saying equities suck. So the return is only 17-20% higher. If return X sucks so bad as to have no exposure, then return 1.2 X is hardly that appealing either.
If Hussman went 100% long during the crash, he is either a logically inconsistent hypocrite, or is operating on market timing rather than valuation. More likely IMO (assuming he's consistent) is he went somewhat long, which means he is waiting for a 1932 before getting fully long.
After the 2009 debacle (Hussman got little or nothing out of the huge rally) they apparently went back to the drawing board and came up with some short-term market timing strategies. But I think Hussman would agree that now is not the time to buy n' forget - or at least, there will likely be a much better opportunity for that down the road.
As it happens, in the letter today he indicated that they still haven't taken on any long exposure.
Quote from Ghost of Cutten:
<15 times earnings (<12 times once cash is backed out) is not comparable to 50-100 times earnings. With identical business prospects, the former is a screaming buy and the latter is a screaming sell. And the whole point of crashes, bear markets, and such, is precisely that they do throw up excellent companies at attractive prices. You either get value at dirt cheap prices, or prime growth stocks selling like a run-of-the-mill value stock (AAPL at <10 times ex-cash forward earnings is a good example - even MSFT would be cheap at that price, and MSFT is ex-growth).
The current street sentiment to AAPL (and large cap tech in general) is one of extreme scepticism as to the sustainability of their earnings growth, the complete opposite of 2000. Otherwise, they'd be at 30-40 times earnings, like high growth stocks often trade at. Yet, the earnings have showed no signs of slowing, in fact they keep beating spectacularly, and the stock keeps outperforming the S&P (as it has done during this crash).
When street sentiment is one way, and market action and fundamental data points are the other, you go with the latter - on big size. Divergence between reality and sentiment is where the biggest opportunities lie.
Of course the market is wrong all the time, but I find AAPL's case to be highly suspicious. Faddish, big-name new-economy tech stocks aren't supposed to be undervalued at frothy market peaks, such as the one we (probably, in my estimation) just left behind. I can't say I've investigated it to any great extent, but something smells fishy - and every now and again, market prices and valuations really do have a kind of prescience.
Now that the broader market action appears to be shifting, I suppose the thing to do is to observe as the indices decline over the next few months, and see if AAPL holds firm during that time.
I find this research note from William Buiter quite informative, I'm inclined to agree with his conclusions(EU has large financial resources to deal with the crisis, panic has been overblown)
http://www.zerohedge.com/news/eurobonds-ruled-out-eurobong-still-play
I would like to hear others opinions on this
http://www.zerohedge.com/news/eurobonds-ruled-out-eurobong-still-play
I would like to hear others opinions on this
Well, some of his points are valid. However, I don't think there's any doubt that Europe in theory has the ability to deal with its issues (as Trichet never stops point out, the Eurozone as a whole is relatively healthy). What's in doubt is the presence of political will to make it happen. On the EFSF, I would agree with his point that size is more important than the rating, but it's hard to actually quantify all these things. It's certainly not true that the AAA doesn't matter.
Quote from Specterx:
Of course the market is wrong all the time, but I find AAPL's case to be highly suspicious. Faddish, big-name new-economy tech stocks aren't supposed to be undervalued at frothy market peaks, such as the one we (probably, in my estimation) just left behind. I can't say I've investigated it to any great extent, but something smells fishy - and every now and again, market prices and valuations really do have a kind of prescience.
Now that the broader market action appears to be shifting, I suppose the thing to do is to observe as the indices decline over the next few months, and see if AAPL holds firm during that time.
Just one more thing about Apple ... I own some suburban apartment buildings, renting to mostly young professionals. A trip through their apartments shows Apple products everywhere. I suspect a peak into their 401Ks would show the same. The Apple Store in King of Prussia (i was there yesterday) is mobbed in the same way folks slept out overnight to get in on new housing developments 20 miles in the desert outside of Phoenix in 2005. Apple may be the stock of the next decade (it certainly was one of the stocks of the previous decade). However, I will leave it to others to partake in those coming riches.
Quote from ralph00:
Just one more thing about Apple ... I own some suburban apartment buildings, renting to mostly young professionals. A trip through their apartments shows Apple products everywhere. I suspect a peak into their 401Ks would show the same. The Apple Store in King of Prussia (i was there yesterday) is mobbed in the same way folks slept out overnight to get in on new housing developments 20 miles in the desert outside of Phoenix in 2005. Apple may be the stock of the next decade (it certainly was one of the stocks of the previous decade). However, I will leave it to others to partake in those coming riches.
Those apple stores have been chock full of people for years. I used to think it was Peter Lynch gold until one day I found out what everyone is doing in there: waiting around for a tech in the back room to fix their broken iphone or ipod.
Good one.
There were overnight lines for crap subdivisions in Arizona for lots of years too. The ones who bought early enough made lots and lots of money.
Understand, I'm not making a bearish call on Apple. Just pointing out the trendiness of both its products and its stock, and I just don't like to get involved with something so universally known and owned. (talking investments, as the Ralph household has more than one recently purchased apple product in it, and likely will have at least 2 more within weeks).
There were overnight lines for crap subdivisions in Arizona for lots of years too. The ones who bought early enough made lots and lots of money.
Understand, I'm not making a bearish call on Apple. Just pointing out the trendiness of both its products and its stock, and I just don't like to get involved with something so universally known and owned. (talking investments, as the Ralph household has more than one recently purchased apple product in it, and likely will have at least 2 more within weeks).