Global Macro Trading Journal

That said, there are some counterpoints to my thesis
Gundlach raises some of them
http://www.barrons.com/articles/gundlach-bond-yields-could-hit-6-in-five-years-1478929496


Gundlach says he hasn’t formulated an opinion yet on what’s next for the stock market, partly because of the difficulty of reconciling opposing forces: on the one hand, pro-growth policies, and on the other, higher rates, which would pose competition for stocks. “If rates stay around these levels, it is probably a net positive for stocks,” he says. “But if they move sharply higher, I don’t see how stocks withstand it.”

Moreover, he says, “the structure of the U.S. economy and the pricing of the stock market are predicated on 1.5% Treasury yields and zero short-term interest rates.” Rising rates would hurt the U.S. housing market and possibly dent corporate stock-buyback programs. Buybacks helped boost share prices in recent years and were funded, in many cases, with borrowed money.
 
But that goes back to the point I made before, if stocks tank because real rates are rising, is that bad thing? The expected returns going forward for both stocks and bonds will be quite a bit higher, that's a great thing in terms of future wealth compounding
 
If stocks were to tank because of a collapse in profit margins, that would be a pretty bad thing since expected returns would not rise much. A decline based on higher real rates is much more beneficial to an investor
 
Due my bullish US market outlook, I added to my PSH position (about 2%). I'm looking to hedge the HLF short by buying the stock.
PSH HLF short is ~10% of assets. I'm looking to knock that down to ~2.5%. That way I'm very much protected against a squeeze (and Icahn seems committed to create one)
I mentioned that HLF is likely to be dead money until Q3 2017 (when Q2 earnings come out, first report after FTC changes) but the stock now is down a fair amount and Icahn could come out and try to tender this thing, out of pure ego
I think he will wait until that report (because he doesnt know what will happen) but I got to hedge at least some now. As it gets closer to the report, I'm likely to go be 100% hedged, maybe even small net long for the reasons I mentioned a couple weeks ago
 
Buying PSH at a 15-20% discount to NAV (as it is priced right now) with a HLF hedge, to me is a very good deal. I get big upside on VRX and with very little downside. If Ackman were to die tomorrow, its quite likely I would make the bulk of that discount in gains as they would slowly liquidate over months. And over the next few years, at some point, he will likely have a hot streak and that discount will revert to something like -5% or even 0% which happened in the past
 
http://www.reuters.com/article/us-i...d3e4&utm_medium=trueAnthem&utm_source=twitter

Hendry said there were three legs to the trade, although he was only prepared to talk about one of them: the spread between 10-year Italian IT10YT=RR and German government bonds DE10YT=RR, which he expects to widen as stresses mount.

The spread, which he began buying earlier this year, widened to 180 basis points on Monday, a two-year high, up from 153 after the election last week of Donald Trump as U.S. president, and from 126 in mid-October.

The market's use of the spread as a gauge of sensitivity to the stability of the European Union was also seen earlier in the summer, after it blew out from 123 on the day of Britain's EU referendum to 153 the next day.

Hendry said a parallel could be drawn with Britain's withdrawal from the gold standard in 1931, when one key member leaving prompted others to follow. "Just one member leaves and it becomes extremely vulnerable," he said.
 
He is betting that Italian spread will widen but says he is still has positive carry on the trade. So he is probably long some of the other spreads, maybe Belgium or something
 
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