Global Macro Trading Journal

http://www.bloomberg.com/news/2012-...res-gain-5-billion-led-by-amazon-s-bezos.html

“Most of these billionaires got super-wealthy because they had one big position, one big activity they were a majority owner of, that did amazingly well.”

Food for thought...

p.s. still interested in AMZN short at some point -- just not yet

Amazon's profits continue to underwhelm, with an operating margin of just 1.5%, or $192 million. To put that in context, that is about the operating profit Apple earned per day last quarter. Yet Amazon's valuation, net of cash on the balance sheet, is more than a fifth of Apple's.

http://online.wsj.com/article/SB100...70024148709552.html#mod=most_viewed_markets24
 
I just thought of something else the currency risk of the foreign gov bonds can be controlled by shifting the share of domestic/foreign stocks in the stock portion up to the desired level of the investor. So the argument 'but there is additional FX risk' won't do it
 
Furthermore he doesn't need to invest in yields that are 'mispriced', we are talking about a float like cash, all it needs to happen is for it to return 0.01% or more that it already adds to networth gains every year. Even if say German yields are 1% but the correct theoretical price should be 0.5% because of risks one doesn't know, it doesn't matter because its ALL profit

For investing this cash to be a bad idea the return on financial assets(specially safer assets) would all have to become negative in nominal terms in the long-run. A totally absurd argument
 
Quote from Ghost of Cutten:

Gold didn't go down during the 1970s (late 73 to early 75) recession, it rose enormously. The bulk of the fall occurred in 1975-76 once the recession had ended and the fear-bid evaporated.

Which asset is better is determined not by guesswork, but by what the economic theory suggests, and what the historical data confirm. Commodities and gold are both sensitive to inflation; but commodities are much more sensitive to economic demand, whereas gold is a crisis-hedge of sorts and often performs quite well during times of systemic stress. So the theory predicts that commodities should do worse in recessions than gold. And if you look at the data, that is exactly what happened. In the 6 US recessions since the USA went off the gold standard, gold outperformed the CRB every single time, sometimes by large margins (e.g. in the 1973-75 recession you cite, gold outperformed the CRB by 70% - a far wider margin than the outperformance in 2008). Gold also has much less correlation with stocks than commodities have with stocks.

So, both theory and data give very strong reasons to prefer gold over the CRB as part of a portfolio, for its crisis-hedging and lower correlation properties. The only reasons I've found to prefer the CRB is when gold is made prohibitive to own, or when gold is in the parabolic blowoff phase of a clear and historic market bubble (e.g. 1980). And in those cases, the CRB is still not a great diversifier, its much more correlated and riskier in recessions, so I would own less of it and hold a bit more cash instead.
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You make a number of good points. It seems that you are correct in this regard. I would like to know where you got your correlation data between gold with stocks and commodities with stocks and how far back it goes
 
Let me correct I mistake I posted. The cost of financing a gold futures position for 1 year is a little over 1%(not a previous completely off figure I used, I have no idea how I didn't see that). The futures are cheaper than the ETF (GLD with 0.4% expense ratio) 2 months out. At 3 months is quite close, you can call it a tie. So the FREE FLOAT effect happens only with 3 months out futures or less, with more its really cheap float(True cost = 0.4% expense ratio - the rate of financing the futures)
 
Good discussion between Daal and GOC so far. I'd just like to add there is a timeframe restraint as well. Someone who is young can attempt to risk a fat tail however unlikely, because there is a lifetime to make up for the difference. Someone who has say a 5 year rolling horizon because the individual is very old may not be inclined to take that risk, even though there maybe positive expectancy. Comes back to risk vs reward.
 
Quote from jj90:

Good discussion between Daal and GOC so far. I'd just like to add there is a timeframe restraint as well. Someone who is young can attempt to risk a fat tail however unlikely, because there is a lifetime to make up for the difference. Someone who has say a 5 year rolling horizon because the individual is very old may not be inclined to take that risk, even though there maybe positive expectancy. Comes back to risk vs reward.
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But even taking age consideration it's simply not possible that having free cash around is inferior to not having. Because you can always do nothing with it. This is not even an opinion, its mathematically irrefutable

At the very least, having free/cheap cash around should save the trader from having to pay retail interest rates on borrowing funds(To support macro bets)
 
Quote from darkhorse:

http://www.bloomberg.com/news/2012-...res-gain-5-billion-led-by-amazon-s-bezos.html

“Most of these billionaires got super-wealthy because they had one big position, one big activity they were a majority owner of, that did amazingly well.”

Food for thought...
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There's a survivor bias problem there though. Let's take entrepreneurs who make their first $10 million. Is it net profitable, as a group, for them to sell half their stake and diversify? Second, and more important - is it net positive in terms of life satisfaction?

So, out of 100 entrepreneurs who hit 10 mill, let's say 1 makes 1 billion+, 4 make 100 mill, 15 end with 10 mill, 30 end up with 1 mill, and the rest lose everything. That's 95 out of 100 people who would have been financially better off by hedging at the $10 mill mark, AND they took far less risk to get this superior outcome. And the 5 that scored big, the difference in satisfaction between 50 mill and 100 mill, or 500 mill and 1 bill, is marginal, it could be zero or may even be negative (security concerns, adverse publicity, loss of privacy etc).

The lesson then is that in most cases you need to be highly irrational - ignoring risk; gambling with money you can't afford to lose to get money you don't need - to maximise your chances of becoming one of the world's richest people. Probably only a small fraction of the world's billionaires actually reached that goal whilst following rational risk/reward trade-off decisions.
 
Quote from Ghost of Cutten:


So, out of 100 entrepreneurs who hit 10 mill, let's say 1 makes 1 billion+, 4 make 100 mill, 15 end with 10 mill, 30 end up with 1 mill, and the rest lose everything. That's 95 out of 100 people who would have been financially better off by hedging at the $10 mill mark, AND they took far less risk to get this superior outcome. And the 5 that scored big, the difference in satisfaction between 50 mill and 100 mill, or 500 mill and 1 bill, is marginal, it could be zero or may even be negative (security concerns, adverse publicity, loss of privacy etc).

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I find it highly unlikely that out of 100people who manages to growth to 10mil USD networth, 80 would lose at least 90% of this. But it's also quite likely a large amount of those people would hedge their wealth.
 
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