Global Macro Trading Journal

"The U.S. demands came after Beijing offered to narrow the trade deficit by $50 billion, including by importing more liquefied natural gas, agricultural products, semiconductors and luxury goods, according to the person."

https://www.bloomberg.com/news/arti...-said-to-have-stalled-over-high-tech-industry

This "trade war" is over before even started it seems. The talks broke off but if China has already accepted to be a bad player (by offering to bring down the deficit by $50b) a deal is just a matter of time, they know their game is up
 
"If you haven’t read about Thucydides’s Trap, and if you’re interested in how it might apply to US relations with China, I suggest Graham Allison’s “Destined for War: Can America and China Escape Thucydides's Trap?” In it, he explains that in the last 500 years there were 16 times when emerging powers became as strong or stronger than existing dominant powers, and war resulted in 12 of them. "

https://www.zerohedge.com/news/2018...ts-raise-probabilities-capital-cyber-and-even

This is a kind of highly misleading (and irrelevant) figure that Dalio is throwing around. If it doesn't come attached to numbers, facts or ideas of how to time such events, then it becomes pretty much worthless. Timing is everything, if the US and China will go to war in 25 years, 'being worried' about it today is just downright damaging with hardly any benefit. I'm sure a lot of those 12 wars needed decades to build up (heck maybe some needed 1 century)
 
Daal said:
"If you haven’t read about Thucydides’s Trap, and if you’re interested in how it might apply to US relations with China, I suggest Graham Allison’s “Destined for War: Can America and China Escape Thucydides's Trap?” In it, he explains that in the last 500 years there were 16 times when emerging powers became as strong or stronger than existing dominant powers, and war resulted in 12 of them. "

https://www.zerohedge.com/news/2018...ts-raise-probabilities-capital-cyber-and-even

This is a kind of highly misleading (and irrelevant) figure that Dalio is throwing around. If it doesn't come attached to numbers, facts or ideas of how to time such events, then it becomes pretty much worthless. Timing is everything, if the US and China will go to war in 25 years, 'being worried' about it today is just downright damaging with hardly any benefit. I'm sure a lot of those 12 wars needed decades to build up (heck maybe some needed 1 century)
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A problem with Dalio is that a lot of the time he is sort of a rock thrower. He will talk big picture, he will talk about risks but frequently he will not give the investment implication of those ideas. He wont say if he is buying more stocks, selling stocks, buying bonds or selling bonds. You might get one impression from reading this stuff but then be surprised to learn (a year or two later when he wants to brag) that his portfolio or bets didnt reflect that view or aligned with it at all. Lately he has been talking a lot about risks, yet in Davos he talked about how cash was trash and stocks were the place to be, yet I really doubt he was buying stocks back in January (he might have been holding, but I doubt he was adding).
After the sell-off I'd bet he is closer to be a buyer rather than a seller (Because prices are more attractive but I cant prove it though) but you can get a completely different impression if you just read his rock throwing pieces
Its really dangerous to listen to gurus that only big picture but refuse to give the portfolio consequences of such view. When he talks about US and China war, I'm not that interested in his theories, what I want to know is, what have he changed or will change soon in his portfolio based on that? To me, portfolio changes say everything, the other things are just talk
 
Daal said:
A problem with Dalio is that a lot of the time he is sort of a rock thrower. He will talk big picture, he will talk about risks but frequently he will not give the investment implication of those ideas.
More...
He has financial products to sell, so he needs to get on the tube and in print and be perceived as a "thought leader."
 
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Some smart investors are saying that the raising of the rates by the Fed, should lead stocks to fall, but I'm not seeing where their math works out.

Current forward PEs for the S&P500 are 16x, vs an avg of 15 for the last 30 years or so. Meanwhile rates are still significantly lower than in the period where that avg of 15 was extracted from, especially for long-term bonds. Since 1987 US bond holders (10y) made an avg of 6.5% nominal per year in returns (and the 10y yield in 1987 was 8.8%). Obviously that is not a return that you can get from US gov bonds now.
So, if anything, it looks to me that equities are actually cheap relative to competing assets (bonds) and ok/close to avg vs the avg forward PEs.

This is why I bring up CAPE and the idea of looking at the past instead to the future (with EXPECTED earnings) as a potential huge mistake. The US government just passed a giant tax gift to US corporations, you would think that it would be NOW the time to be looking at forward earnings, instead of past earnings but some smart investors seems too phobic to `trust` analysts and rely on CAPE or trailing earnings, just as earnings are getting a bump upward. Am I crazy on this? Has the world gone mad? It seems that people dont bring up this enough, to me, this could partially explain why the forward PE is low despite low bond yields. If some investors are being dumb looking at CAPE and other things, it would lead to mispricings and opportunities
 
When Gundlach says that if the yield on bonds go over 3.1% that will break stocks, I just dont get it. It makes no sense to me
 
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That's some data I got on Forward PEs. I extracted these figures a while back and run a regression on excel of the next 10 year returns. I used the forward yield and the CAPE yield as a predictor of the next 10 year returns. Funnly enough, the forward yield actually has a higher R2 than the CAPE. But ok, its not a lot of data (only 1985-2017). But the same thing happened with trailing PEs vs CAPE going back 100 years.
So the CAPE is tied (i considered the losses a tie because they R2s were close enough) with both based on that data but when you combine with the catalyst that the US faces now (large corporate tax cuts), it just makes no sense to look at it.
Thats the real contrarian view I hold now, that US equites are actually cheap (16 forward PE vs still very low real interest rates) but I dont see why it should be contrarian, it seems to be very obvious by looking at the numbers
 
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