Global Macro Trading Journal

ralph00 · Mar 12, 2012

Quote from jj90:

Re: AMZN

Just polling the thread if there are views on other high flyers, namely LNKD and CRM. As a group, the high P/Es are a tempting but tentative short, IMO that timing is more essential than fundamentals.

For LNKD, I really don't see how they are going to grow revenues at a pace that would justify a P/E at that lvl. CRM is playing accounting games IMO with non-GAAP, and eventually will get called on it's bluff.

I saw a great line somewhere today (can't remember where) that LinkedIn is one Facebook press release from becoming Monster Worldwide (i.e. stock decimated).

I'm an owner of Zillow since the New Year. Not counting my chickens, as it's a high multiple, high vol stock that can move 20% for basically no reason, but if I had to choose (and I have chosen) from some of these recent tech IPOs or high PE multiple stocks, it'd be $Z by a mile.

Specterx · Mar 12, 2012

Quote from darkhorse:

You folks still bullish precious metals moreso than not?

I'm starting to openly wonder if gold and silver are near-term shorts. Chart patterns and MAs are pretty bearish, and the various forward-moving scenarios don't look good for PMs:

* If general recovery continues and U.S. markets stay healthy, Fed remains withdrawn, arguing for firmer $USD and low-to-no inflation global growth.

* If global slowdown meme takes hold, slowdown fears intensify and all risk assets get hurt -- likely including PMs.

Winning scenarios for PMs from here seem to be either

* Global recovery accelerating to frenzied pace, "crack-up boom" style, in which case liquidity can't be withdrawn fast enough by CBs

* Slowdown / crisis fears get serious enough for another nuclear-level liquidity injection

Both of those last two scenarios seem highly implausible, at least for next few quarters. Add heavy retail participation in gold as inflation hedge story and maybe PMs are dogmeat here.

I think another "nuclear level liquidity injection" is inevitable, though as you say probably not for some time. PMs for me are a secular investment play not a trade, so long as the overall fundamental drivers remain in place (i.e. global economy does not return to durable 'normal' growth, debt and deficits stay high, central banks keep printing). Personally I see no prospect that these will change in the foreseeable future and I'll take any price weakness as a chance to add.

Assuming we even see such weakness... The price action in gold doesn't look bearish to me (sideways consolidation in a steady, stable uptrend). Silver is a bit iffier. My reckoning of sentiment on both is that it still has a long ways to go before we reach a real "mania" type of state, and every decline in gold is met with a flood of news articles declaring the end of the bull.

Daal · Mar 12, 2012

My personal rule is not to short secular bull markets. Since that is my view on the commodity sector, I can be bullish or neutral but not short

trefoil · Mar 12, 2012

Quote from Daal:

Details on Hussman model
http://online.barrons.com/article/SB50001424052748704759704577265360531477348.html

"â¢ the Standard & Poor's 500 trading at more than 8% above its 52-week exponential moving average

â¢ the S&P 500 up more than 50% from its four-year low

â¢ the "Shiller P/E," based on the cyclically adjusted trailing 10-year earnings, developed by Yale economist Robert Shiller, greater than 18; it's currently 22

â¢ the 10-year Treasury yield higher than six months earlier

â¢ the Investors Intelligence's bullish advisory sentiment over 47%, and bearishness under 25%; in the latest data, the numbers were 47.9% bulls and 26.6% bears"

"WHEN ALL THOSE CONDITIONS OBTAIN, as they very nearly do now, look out below. In 1973, a 48% collapse ensued over 21 months, and in August 1987, there was a 34% plunge over the following three months. Since that ancient history, losses of 10% to 18% ensued in the 1998-2000 period, followed ultimately by a plunge of more than 50% in the dot-com bust of 2000-02. And in 2007, a correction of 10% culminated in the 50%-plus plunge of 2007-09 (see chart)."

Hussman 2000-2009 record is actually excellent, he missed the rally and that hurt his record lately but if he is correct again(And I view that as likely) he will be ahead of the S&P500(The standard benchmarks for mutual funds, not hand picked investments that did well) by miles once again

If the details are as you posted, a couple of criticisms:

1. Most of it is based on mean reversion, and mean reversion is inherently dangerous. Trading a mean reversion strategy with anything other than options is, IMO, a recipe for blowing up.
2. Re the 2nd condition specifically: this is based, I'm sure, on historical data and backtesting. The problem with it is that since 2000 volatility, over the long term, has increased significantly. Over the short term, there's been a huge change in how the market is traded since 2000 (the line between pre and post 2000 is actually very sharp and well defined), which I won't go into since it's part of my strategy. But the latter is a function of the former: people change what they do if they get more unsure, which of course is what happens when volatility rises. So a rule based on a certain percent change over a certain period of time is going to be prone to failure in a period like the one we're going through now. It'll be right eventually, but defining "eventually" could kill you.

ralph00 · Mar 13, 2012

Quote from Specterx:

Turns out IB doesn't offer trading on the Athens exchange, even though some of the major symbols can be pulled up through one of the German data networks.

That would leave only GREK and a handful of cross-listed shares.

I don't suppose there's any obvious way around this that doesn't involve opening an account at a Greek broker?

My ML broker set it up for me. I'm not buying Metka just yet.

Ghost of Cutten · Mar 13, 2012

Quote from darkhorse:

You folks still bullish precious metals moreso than not?

I'm starting to openly wonder if gold and silver are near-term shorts. Chart patterns and MAs are pretty bearish, and the various forward-moving scenarios don't look good for PMs:

* If general recovery continues and U.S. markets stay healthy, Fed remains withdrawn, arguing for firmer $USD and low-to-no inflation global growth.

* If global slowdown meme takes hold, slowdown fears intensify and all risk assets get hurt -- likely including PMs.

Winning scenarios for PMs from here seem to be either

* Global recovery accelerating to frenzied pace, "crack-up boom" style, in which case liquidity can't be withdrawn fast enough by CBs

* Slowdown / crisis fears get serious enough for another nuclear-level liquidity injection

Both of those last two scenarios seem highly implausible, at least for next few quarters. Add heavy retail participation in gold as inflation hedge story and maybe PMs are dogmeat here.

What about 2 years more of rock bottom rates despite sound economic recovery, and credit expansion starting up again, stoking inflation fears? That seems like a pretty bullish scenario for PMs. And with the current debt loads and fragile banking system, politicians and bankers have every incentive to inflate away the problem.

Rates might only go up once the public becomes more scared of inflation than unemployment.

The more salient question is this - are PMs a slam-dunk, trade of the year candidate on the short-side right now? No. So why deplete time, focus, and capital wondering if this will work? Stick to the high percentage conviction plays with great risk-reward ratios.

Ghost of Cutten · Mar 13, 2012

Quote from jj90:

Re: AMZN

Just polling the thread if there are views on other high flyers, namely LNKD and CRM. As a group, the high P/Es are a tempting but tentative short, IMO that timing is more essential than fundamentals.

For LNKD, I really don't see how they are going to grow revenues at a pace that would justify a P/E at that lvl. CRM is playing accounting games IMO with non-GAAP, and eventually will get called on it's bluff.

You cannot compare a dominant retail business doing 40bn in sales, with a market cap of 80bn, with a startup social network doing 500m in sales, and a market cap of 9bn. The scope for growth in the latter is clearly much greater, merely due to its small size. The economics are totally different, the outlook is different, the valuation is different - it is frivolous to compare them.

Also, growth stocks aren't valued on historic earnings, they are valued on future earnings estimates - as in, what will they be earning in 5 or 10 years time. So forget today's PE because it is irrelevant, what matters is the 2020 EPS and whether today's price under or overestimates the likelihood of getting there. A growth stock might have negative earnings for 2012, but be making 5 billion a year by 2020. Whereas a 'cheap' value stock might be making 1 billion this year, and be losing money 5 years in a row by 2020. Historic earnings are almost irrelevant for businesses undergoing rapid change (whether positive or negative).

Take a look at some past growth stocks e.g. YHOO, MSFT, CSCO, DELL etc (or even earlier AAPL) during their growth phases and look at what PE they sold at and how their EPS grew, and what that all meant for the valuation of the stock.

Daal · Mar 13, 2012

C failed stress test by 0.1 while JPM passed by 0.4
And the difference is a large dividend hike and huge buybacks?Way to go Fed

Ghost of Cutten · Mar 13, 2012

Quote from darkhorse:

AMZN "secular short of 2012:"

http://www.firstadopter.com/2012/03/amazon-com-amzn-is-the-secular-short-of-2012/

Let's say AMZN is a great short. What's the best way to play it?

1. Short outright immediately, as a hedge against other longs in your portfolio. If so, what % of total capital should be short AMZN?
2. Wait for a bear trend in the stock, then place a trading short (with a stop etc).
3. Buy some long-dated puts.
4. Write bear call spreads each month.

Ghost of Cutten · Mar 13, 2012

Quote from Daal:

Details on Hussman model
http://online.barrons.com/article/SB50001424052748704759704577265360531477348.html

"â¢ the Standard & Poor's 500 trading at more than 8% above its 52-week exponential moving average

â¢ the S&P 500 up more than 50% from its four-year low

â¢ the "Shiller P/E," based on the cyclically adjusted trailing 10-year earnings, developed by Yale economist Robert Shiller, greater than 18; it's currently 22

â¢ the 10-year Treasury yield higher than six months earlier

â¢ the Investors Intelligence's bullish advisory sentiment over 47%, and bearishness under 25%; in the latest data, the numbers were 47.9% bulls and 26.6% bears"

"WHEN ALL THOSE CONDITIONS OBTAIN, as they very nearly do now, look out below. In 1973, a 48% collapse ensued over 21 months, and in August 1987, there was a 34% plunge over the following three months. Since that ancient history, losses of 10% to 18% ensued in the 1998-2000 period, followed ultimately by a plunge of more than 50% in the dot-com bust of 2000-02. And in 2007, a correction of 10% culminated in the 50%-plus plunge of 2007-09 (see chart)."

Hussman 2000-2009 record is actually excellent, he missed the rally and that hurt his record lately but if he is correct again(And I view that as likely) he will be ahead of the S&P500(The standard benchmarks for mutual funds, not hand picked investments that did well) by miles once again

This is pure data-mining. Data-mining doesn't work reliably in complex systems, and financial markets are a complex system. His sample size is incredibly small and based only on one stock market - the US market. He has not tested this data on the dozens (probably hundreds now) of stock markets in the rest of the world. He has done no out-of-sample testing either. It's worthless unverified bunk.