Global Macro Trading Journal

Ghost of Cutten · Mar 21, 2011

Quote from Butterball:

I agree the fundamentals aren't good for Japan but how does being convinced of that give you an edge trading it? The fundamentals aren't good since at least 1998 and still no cigar.

I am not in the camp of those saying Japan won't blow up at just because it held up until today. Yes, there will be a pot of gold for people with far out fat tail long put positions on JGBs... at some point in time.

You have to wonder though: Will the payoff that will be eventually made by a few brave (lucky?) ones outweigh the strings of losses of those who have previously tried unsuccessfully?

To be a trader you need timing ability. You can't expect to profit from price movements if you have no ability to forecast when they will occur.

Butterball · Mar 21, 2011

Quote from Ghost of Cutten:

What an absurd post.

Long Japan stocks, short JGBs in 2003/2004 was a spectacularly profitable trade. The Topix 2nd section rallied over 400% in the next 4 years, with moderate pullbacks, and JGBs puked almost 20 handles. Even the N225 went up about 150%.

Apparently it was so absurd you didn't bother to read it properly. How did the trade pan out over a 10 year time period? It was a money pit. Analysis was correct, trade turned out to be a terrible loser.

Butterball · Mar 21, 2011

Quote from Ghost of Cutten:

To be a trader you need timing ability. You can't expect to profit from price movements if you have no ability to forecast when they will occur.

Exactly. And timing has absolutely nothing to do with a correct or incorrect macro analysis on the Japanese debt situation. You could be correct in an economic sense and the market still proves you wrong. That was the point I was making.

Daal · Mar 21, 2011

Quote from Butterball:

Apparently it was so absurd you didn't bother to read it properly. How did the trade pan out over a 10 year time period? It was a money pit. Analysis was correct, trade turned out to be a terrible loser.

But the cost of betting some of these fat tails can be very small. Someone long CDSs could have risked 3-4% of his networth with the potential upside of multiples of that over that 10 year if the analysis was correct

Debaser82 · Mar 21, 2011

As the Euro keeps rising I keep thinking but can only come up with Martin Armstrong as one of the very few analysts I know who saw potential strength on the Euro in 2011.

"Cyclially, we could see a high in 2011 above that of 2008."

10-15-2010

http://www.martinarmstrong.org/files/Show Me The Money 10-15-2010.pdf

Martinghoul · Mar 21, 2011

Quote from Daal:
But the cost of betting some of these fat tails can be very small. Someone long CDSs could have risked 3-4% of his networth with the potential upside of multiples of that over that 10 year if the analysis was correct

You can't buy these tails cheaply. Maybe whoever got into this trade initially a long time ago could have done it at such a low cost that they could sit on the trade indefinitely. At the moment, the mkts price all these tails in such a way that you can't afford to sit on them for years. Why otherwise would 5y JGB yields be at arnd 50bps?

Daal · Mar 21, 2011

Quote from Martinghoul:

You can't buy these tails cheaply. Maybe whoever got into this trade initially a long time ago could have done it at such a low cost that they could sit on the trade indefinitely. At the moment, the mkts price all these tails in such a way that you can't afford to sit on them for years. Why otherwise would 5y JGB yields be at arnd 50bps?

Wasn't the CDS being quoted at 50-60bps a few months back, you dont think thats cheap?

Martinghoul · Mar 21, 2011

Quote from Daal:
Wasn't the CDS being quoted at 50-60bps a few months back, you dont think thats cheap?

Sov CDS is a scam product... If you think you're guaranteed to get paid, you'd better think again and have an army of lawyers at your beck and call. I could go into gory details, if you like, since I spent some time looking at these things last year. More importantly, even if you were willing to take your chances with sov CDS, doesn't a willing BoJ make a credit event extremely unlikely?

Daal · Mar 21, 2011

Quote from Martinghoul:

Sov CDS is a scam product... If you think you're guaranteed to get paid, you'd better think again and have an army of lawyers at your beck and call. I could go into gory details, if you like, since I spent some time looking at these things last year. More importantly, even if you were willing to take your chances with sov CDS, doesn't a willing BoJ make a credit event extremely unlikely?

Actually you are correct there(Btw, was there any CDS on Argentina when they defaulted?). Your Yen trade might be a better idea(Though perhaps OTM puts on JGB could be avaliable)

CH1973 · Mar 21, 2011

Quote from Daal:

Actually you are correct there(Btw, was there any CDS on Argentina when they defaulted?). Your Yen trade might be a better idea(Though perhaps OTM puts on JGB could be avaliable)

If you dont like CDS (by the way I disagree with you, this is not a scam product, but is definitly not accessible to regular P.As) why don't you buy a long term low delta put option from any bank in Japan. I am sure that any sovereign event in a developed country will have huge consequences in banks shares.