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Global Macro Trading Journal
- Thread starter Daal
- Start date
CNBC said Trump is supposed to leave inauguration and sign executive orders right after. We will see what comes out of that. Perhaps he will start his 'crazy' act early. As I said, I wouldn't want to be short volatility in his first 30 days. I got a good amount of long-term US bonds, IWM short and my gold positions as hedges
I was thinking about that high interest rates (with high inflation) leading to low PEs and low interest rates (with low inflation) leading to high PEs. Its probably not completely irrational. And even Asness describes some instances where its rational to do that. In my Brazil data, during the hyperinflation the volatilty of the stock market was 70%+, whereas in the post-hyperinflation it was 40% (same thing happened in Germany in the 20s, vol was huge). To the extent that high inflation leads gets investors to think there is some chance of hyperinflation, it could be rational to demand a higher return in equities, so PE would have to fall. There is also the political instability that comes out of that.
In addition, inflation (like Asness describes) leads to some level of confusion over earnings (due issues like depreciation, interest costs and other things) and clarity over the value of firms. This might lead investors to require a higher return on equities as compensation
So that phenomena could be at least partially rational.
I dont think this effect will play out (certainly not nearly as much) with Trump though. Expected inflation is likely to move from a 1.5% ish level to maybe 2-2.5% level. Its not a 70's style inflation that leads to those large revaluation of risk premiums
In addition, inflation (like Asness describes) leads to some level of confusion over earnings (due issues like depreciation, interest costs and other things) and clarity over the value of firms. This might lead investors to require a higher return on equities as compensation
So that phenomena could be at least partially rational.
I dont think this effect will play out (certainly not nearly as much) with Trump though. Expected inflation is likely to move from a 1.5% ish level to maybe 2-2.5% level. Its not a 70's style inflation that leads to those large revaluation of risk premiums
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A supreme court justice judge from Brazil died in a plane crash yesterday. He was the most important one because he was dealing with the corruption scandals of the people that have immunity (politicians currently in office). There is some uncertainty over who will take over as replacement in those car wash legal cases but I'm reading that the President of Brazil has to appoint a new judge and that judge will automatically take over the cases (although there is another possibility).
If that is so is a huge positive news for Brazilian assets. Essentially it means that the President will control Congress (since there are so many corrupt folks there that need legal help), the Judiciary (by appointing whoever he wants to control the corruption cases) and the Executive. The appointment has to be confirmed by the Senate but a lot of folks in the Senate are screwed legally, so they will go along with pretty much any appointment
Effectively the President has guaranteed he will not be removed from office before the end of his year (late 2018) and that Congress will have to pass his reforms (entitlements, labor, and others)
Its bad for justice but good for markets
If that is so is a huge positive news for Brazilian assets. Essentially it means that the President will control Congress (since there are so many corrupt folks there that need legal help), the Judiciary (by appointing whoever he wants to control the corruption cases) and the Executive. The appointment has to be confirmed by the Senate but a lot of folks in the Senate are screwed legally, so they will go along with pretty much any appointment
Effectively the President has guaranteed he will not be removed from office before the end of his year (late 2018) and that Congress will have to pass his reforms (entitlements, labor, and others)
Its bad for justice but good for markets
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I never really spent much time researching the UK but this whole Brexit thing is so ridiculous. The way I see, the EUR is like a gold standard for the countries in it, it prevents countries from easing monetary policy when hard times hit. They are subject to the ECB and their germanic tendencies. As a result, the countries that are in the EUR zone will have economic depressions every 10-30 years instead of once every 100 years.
On the other hand they get free trade, free movement of capital and labor (and perhaps less wars), on balance one COULD argue the country is better off. I dont know if it would be right to argue that, those depressions hurt the countries so much (Like in Greece) and those scars (legislative and psychological) last a really long-time. But one can make the argument, specially if the country intends to bail out of the EUR when the depression hits (And Greece should be doing that right now).
But with the UK, they were getting the benefits (free trade, movement of capital and labor, less wars) without the costs. Its crazy to leave
On the other hand they get free trade, free movement of capital and labor (and perhaps less wars), on balance one COULD argue the country is better off. I dont know if it would be right to argue that, those depressions hurt the countries so much (Like in Greece) and those scars (legislative and psychological) last a really long-time. But one can make the argument, specially if the country intends to bail out of the EUR when the depression hits (And Greece should be doing that right now).
But with the UK, they were getting the benefits (free trade, movement of capital and labor, less wars) without the costs. Its crazy to leave
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A supreme court justice judge from Brazil died in a plane crash yesterday. He was the most important one because he was dealing with the corruption scandals of the people that have immunity (politicians currently in office). There is some uncertainty over who will take over as replacement in those car wash legal cases but I'm reading that the President of Brazil has to appoint a new judge and that judge will automatically take over the cases (although there is another possibility).
If that is so is a huge positive news for Brazilian assets. Essentially it means that the President will control Congress (since there are so many corrupt folks there that need legal help), the Judiciary (by appointing whoever he wants to control the corruption cases) and the Executive. The appointment has to be confirmed by the Senate but a lot of folks in the Senate are screwed legally, so they will go along with pretty much any appointment
Effectively the President has guaranteed he will not be removed from office before the end of his year (late 2018) and that Congress will have to pass his reforms (entitlements, labor, and others)
Its bad for justice but good for markets
I think there was a decent chance his plane was sabotaged to benefit the criminals. I was thinking about all the people that could die that would benefit the corrupt politicians, he was the one whose death would benefit them the most. Its a conspiracy but I think David Sklansky (the poker theorist) has a math theory that backs some conspiracies:
The Sklansky theory goes along the line of:
% chance of the event: In this case a plane crash during a rain. Lets say the chance is 0.1%. Its not very high because the pilot clearly thought the conditions were ok for a flight.
% chance of the alternative theory: Lets say there is 99% chance the conspiracy theory is wrong. So the chance the plane was sabotaged to benefit criminal is: 1%
So there is 99% chance the conspiracy is wrong. Yet, its 10 times more likely the conspiracy is right as compared to a regular plane crash (1% ratio to 0.1%).
He talks about this theory in his book Poker, Gaming and Life, which I highly recommend
I think there was a decent chance his plane was sabotaged to benefit the criminals. I was thinking about all the people that could die that would benefit the corrupt politicians, he was the one whose death would benefit them the most. Its a conspiracy but I think David Sklansky (the poker theorist) has a math theory that backs some conspiracies:
The Sklansky theory goes along the line of:
% chance of the event: In this case a plane crash during a rain. Lets say the chance is 0.1%. Its not very high because the pilot clearly thought the conditions were ok for a flight.
% chance of the alternative theory: Lets say there is 99% chance the conspiracy theory is wrong. So the chance the plane was sabotaged to benefit criminal is: 1%
So there is 99% chance the conspiracy is wrong. Yet, its 10 times more likely the conspiracy is right as compared to a regular plane crash (1% ratio to 0.1%).
He talks about this theory in his book Poker, Gaming and Life, which I highly recommend
Even though I think the theory is solid, its possible that its much harder to apply to airplane crashes. Especially when we are talking about NON-COMMERCIAL planes (either small planes or big planes that don't belong to the big companies). These smaller planes might have a much bigger standard deviation terms of crashes vs sucessful flights and this could lead to mistakes when assesing the true probability of a crash. Indeed, recently a 1 plane company tried to save some fuel and that lead to the death of almost an entire brazilian soccer team along with most on board. These smaller companies (or the smaller planes) might have more dispersion around their safey measures or other things. While big companies have a lot to lose so they have more discipline
Sklansky himself made a mistake on the crash of Steve Fossett
http://forumserver.twoplustwo.com/4...ve-fossett-my-bayes-coincidence-theory-13199/
He thought there was a conspiracy and he was faking his own death but eventually his body was recovered
https://en.wikipedia.org/wiki/Steve_Fossett
One this is for sure, I probably would avoid boarding a small plane or a big plane that belong to a '1 plane' type company
Gaming and fooling regulators isn't a hard thing to do, smaller companies or small private planes might gamble and try to game them more often (after all, they got less money for compliance). Eventually it blows on their face and the regulators close the loophole but while the loophole/trick is going on, there is a higher CHANCE of a crash. It just doesn't show up in the crash statistics simply because crashes are rare. When it does show up (the crash occurs), its only 1 crash and regulators learn that they need to close that trick. Meanwhile all the risky flights from before are not computed. And the smaller companies/planes are trying to find a new trick again. It also appears that smaller companies have less experienced pilots so it doesn't help