Ah, that's because you're disregarding the negative carry... Which is OK to do if you expect the blowup to occur tomorrow. However, if you have to wait a few years for the blowup to arrive, you're gonna die a death of a thousand cuts. JGB GC is <10bps, so for every year your 10y JGB just sits at 1% you lose 90bps in negative carry and 13bps in rolldown. 10y JGB yield has fluctuated between the extremes of 50bps and 200bps for the last decade or more. So you go short 10y JGB at 1% and assuming nothing changes, you could make max 100bps, lose max 50bps on a mark-to-market basis, but pay smth like 113bps/year for the privilege. One advantage is that the volatility of this position is likely to be low. Still does that sound like a good investment, unless, of course, you expect the blowup to happen very soon?
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Global Macro Trading Journal
- Thread starter Daal
- Start date
I completely agree... All I care about is the underlying process, rather than the conclusions and outcomes.Quote from Kassz007:
Indeed. Personally I don't care if a guy has got 100% of his last trades correct. If the idea he's currently touting sounds fishy to me, then it's useless. History has nothing to do with future performance, which is why it can be dangerous for people who follow a certain personality and think one of their trade ideas is good because they've been right x amount of times in the past, or made x amount of money for investors last year.
I'm speaking generally, not necessarily about the Bass topic.
Quote from Martinghoul:
Ah, that's because you're disregarding the negative carry... Which is OK to do if you expect the blowup to occur tomorrow. However, if you have to wait a few years for the blowup to arrive, you're gonna die a death of a thousand cuts. JGB GC is <10bps, so for every year your 10y JGB just sits at 1% you lose 90bps in negative carry and 13bps in rolldown. 10y JGB yield has fluctuated between the extremes of 50bps and 200bps for the last decade or more. So you go short 10y JGB at 1% and assuming nothing changes, you could make max 100bps, lose max 50bps on a mark-to-market basis, but pay smth like 113bps/year for the privilege. One advantage is that the volatility of this position is likely to be low. Still does that sound like a good investment, unless, of course, you expect the blowup to happen very soon?
113bps, thats very close to the CDS isn't. Assuming a large haircut it doesn't sound all that bad
Maybe, but you'd better get your timing right, no? Western punters have tried to do this trade early every year (when you still have bullets to get the heroic trade on) for nearly a decade now. Like clockwork, by mid-year they're stopped out when they've run out of patience. Einhorn introduced a slightly new dynamic to this last year, but it's just a variation on a theme. And you can't do this more efficiently in options, 'cause the skew is mental. So, really without much more detailed analysis that can give you an edge in timing, this trade, IMHO, is extremely poor and a perfect example of superficial, top-down, lazy thinking and insufficient analysis. I don't know what exact arguments Bass, in particular, makes, so if there's more depth and bottom-up detail in his thought process, I would gladly change my mind about him.Quote from Daal:
113bps, thats very close to the CDS isn't. Assuming a large haircut it doesn't sound all that bad
And yes, the ccy is yet another issue...
Quote from Daal:
http://blogs.ft.com/martin-wolf-exc...lly-have-a-public-debt-problem/#axzz1dyq6xjNg
Here Wolf raises a possibility for solving Japan's debt problem. Buying back its own debt after they decline(But first extending their avg maturity)
I have never read about this strategy before(Or maybe I have, the instances of governments 'printing money' to pay their debts might be just that)
It seems that the flaw in this plan is that it assumes that market will be ok with buying more Japanese debt right after they monetized a good chunk of it. Furthermore inflation should be running higher than target after the monetization(Probably way higher)
But if he wants the government to pay the debt directly rather than print money that would require massive confiscation of private wealth from their citizens, politically seems unlikely
They won't extend maturities either in all likelihood
Seems unlikely it will ever be put in place in any event
Because people on TV, in many cases, aren't much better than your grandma's banker. They always present their case, based on cherry-picked evidence. Furthermore, you can't challenge their views, so these people can get away with all sorts of shoddy reasoning and sometimes just outright bullsh1t. So, unfortunately, I don't know of an alternative to doing your own legwork and taking anything anyone tells you with a healthy dose of skepticism.Quote from Debaser82:
Martin, why do you frown upon people coming on to TV telling about their economic views and investment strategies?
You realise how fragile most people are listening only to their bank clerk or portfolio manager and how costly this has been to so many these past years?
You know my grandma's banker tried to swing her Lehman bonds 2 weeks before they collapsed?
Quote from Martinghoul:
Because people on TV, in many cases, aren't much better than your grandma's banker. They always present their case, based on cherry-picked evidence. Furthermore, you can't challenge their views, so these people can get away with all sorts of shoddy reasoning and sometimes just outright bullsh1t. So, unfortunately, I don't know of an alternative to doing your own legwork and taking anything anyone tells you with a healthy dose of skepticism.
In my view the medium of television has the advantage of offering a wide range of views.
You have one talking head who says the Dow is going to 20K, the next says it's going to 0. Take a side.
When confronted with a personal advisor of any kind chances are reasonably high you end up in a doctor patient relationship where the supposed expertise of the one party too often takes the uper hand. They are also trained to do this.
But other then that I agree, there is no other option really then doing your own homework. But ofcourse mom and pop have to have the time, interest and capacities to do so (age,what if you don't speak English, don't have internet,...).
Quote from Martinghoul:
Because people on TV, in many cases, aren't much better than your grandma's banker. They always present their case, based on cherry-picked evidence. Furthermore, you can't challenge their views, so these people can get away with all sorts of shoddy reasoning and sometimes just outright bullsh1t. So, unfortunately, I don't know of an alternative to doing your own legwork and taking anything anyone tells you with a healthy dose of skepticism.
Straw man alert. Bass (or Einhorn or Ackman or any number of other guys worth listening to) aren't Bob Fucking Dahl coming on CNBC every day saying stocks look cheap. These guys do insane amounts of research and their conclusions are backed by facts and, more importantly, math. What a ridiculous statement to try and lump some true investing giants and great minds with the well-dressed, well-groomed, slick Ned Riley's of this world.