Global Macro Trading Journal

Quote from Ghost of Cutten:

Darkhorse I hope you didn't listen to this :D Looks like all safe havens getting whacked hard after yesterday's Fed talk. I still prefer shorting Yen or especially long bonds rather than PMs though - if we get nice growth and the reduction of fed QE, it's the 30 year bond that should get crushed the most.
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Already short yen and long bonds pre-breakout on both, though not with enough size. Came close to shorting PMs this week but talked myself out of it. That's what I get for chickening out...
 
Okey dokey then

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Other great moments in mag cover history

Feb 1999

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Not a magazine, but you get the picture. From 2000, now available for $0.01 on Amazon

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Quote from darkhorse:

Already short yen and long bonds pre-breakout on both, though not with enough size. Came close to shorting PMs this week but talked myself out of it. That's what I get for chickening out...
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'Not enough size' is easily rectified!

Shorting PMs seems like it will be quite correlated with being short bonds and Yen, so personally I think it wasn't necessarily a bad decision to chicken out. Out of those 3 positions I think PMs are the least likely to be a home run short.

One other point that occurred to me - the Yen move was very swift and stealthy, if you missed the initial breakout then there was barely any pullback to enter 'comfortably'. This could be an important lesson if the bond breakout is the genuine article and not a head fake. If a real move is in progress, the most important thing is to have on and stay in with a decent-sized position, not to try and finesse your entry to perfection.

A further macro point - if Japan is going the QE route, which is what has hit the Yen hard, then this could revive their stock market, moribund for 22 years and still down 75% from the highs. And almost no one is pounding the table to buy Japan. So, that's a market to keep an eye on (although you'd want to hedge the Yen exposure).
 
Quote from Ghost of Cutten:

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.
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Understand your point re: LNKD, however I believe you are generalizing too much in the area of growth stocks. There are growth stocks ala LNKD/Z/recent IPOs, and then there's the GMCRs/NFLX/CRMs. One is basically as you alluded to in your post above, the others are potentially hitting the top of their markets with ridiculous PEs.

Re: PMs, Yen, Bonds.

My 2 cents is that for fundamental and technical reasons, yen has much lower to go, bonds can run but will be choppy and lastly gold while weak has not given a definite sell signal. Buy the pullback if one in stock index.
 
Quote from Ghost of Cutten:

One other point that occurred to me - the Yen move was very swift and stealthy, if you missed the initial breakout then there was barely any pullback to enter 'comfortably'. This could be an important lesson if the bond breakout is the genuine article and not a head fake. If a real move is in progress, the most important thing is to have on and stay in with a decent-sized position, not to try and finesse your entry to perfection.

A further macro point - if Japan is going the QE route, which is what has hit the Yen hard, then this could revive their stock market, moribund for 22 years and still down 75% from the highs. And almost no one is pounding the table to buy Japan. So, that's a market to keep an eye on (although you'd want to hedge the Yen exposure).
More...

Yen is just beginning to break down on the weeklies, if indeed this is the beginning of Japan's slide to doom there ought to be plenty of chances to get in.

I'm not so sure about the Japanese market: granted it's down a lot, but it's been down a lot for more than a decade and in a bear trend during that time. It's not a 'blood in the streets' panic washout from which we can expect a sharp rebound. Dividend yield is only 2% (a few basis points above SPX), PEs at around 13 are low by U.S. standards but not that low. 13 is a level last seen in the 70s, when demographically and developmentally Japan was a booming future growth story rather than an aging country with a shrinking population and sclerotic economy. When you look at the high-flying exporters you don't see obvious bargains, but PEs in the high teens, twenties or more - compare with companies like Boeing and GE trading at 14-16 times earnings and similar dividends but without the added risks of investing overseas, different currency, etc.

The broad Japanese market could be a value trap in other words, book value isn't worth anything if you have no prospect of extracting it.

AUD short is something I've liked as a play on China - in this connection the Chinese government recently lowered growth targets, to some degree probably just adapting to what was already the reality. But I'd want to see a good deal more in the way of bearish PA before putting that one on.
 
I'm trying to see if there is value on the Dec 2013 Fed futures contract

There are 11 people in the Fed that believes rates should be at 0.25 by year end 2013 and 6(35%) that believe it should be higher

If you look at their forecast they expect GDP to grow 2.5%(The middle of the central tendency) in 2012, 3% in 2013. UR to be at 8.3% at year end 2012, 7.7% in 2013 and PCE inflation to be at 1.6% for 2012 and 1.75% for 2013(Again, I took the middle of the central tendency forecasts)

The risk here is that inflation picks up and they are wrong on the inflation forecast(I don't even think those forecasts are true, they just say that to anchor iexpectations). If that were to happen it would tip over some voters to the hike camp. It might go from 35% to 50-60%, it would be an unbalanced revolt because most of the hawks are Fed presidents who like to dissent whereas the Governors think long and hard before doing it(Presidents also have less seats at the actual voting committee). So its possible even in that scenario Bernanke is able to contain the revolt by having support from the Governors by that would also be a risk propostion

Frankly those contracts don't seem to be priced fairly okay, if there is an edge there is not large by any means(The edge was on the short side a few months ago, I flirted with it but never pulled the trigger, big mistake)

Of course if there is a recession/slowdown the contracts are totally mispriced but in that case I believe there are better bets out there, mainly shorting stocks/buying vol and buying the 30y bond
 
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