Global Macro Trading Journal

luisHK said:
Interesting, is EWZ such a bad proxy about the Brazilian market ? from your chart it appears the market in USD term is down around 50% from its 2007 top whereas EWZ is down around 78%.

CH1973, do you suffer any whitholding tax from your brazil bonds ? Although considering I live neither in the US nor in Brazil our tax treatment in this regard might be different. I might be interested in EUR, HKD and RMB bonds as well, need to check but i think some brazilian bonds are listed in HK

Good to see this thread beeing lively gain.
Besides Daal i'm not sure where you got your data October is overall negative, check the link below, it only ges back to 1991 but from memory when I was more into seasonals it's been overal positive for several decades.
Talking about seasonalilty (with a political backing for this one, as governments have better chance to get elected with a strong stock market and are likely to push it up especially bfore the national elections) the period before the US presidential election is also bullish, although so far this year it has been struggling.

http://jeffhirsch.tumblr.com/
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Acutally I confused the data. Its september that is negative
http://www.businessinsider.com/average-monthly-returns-since-1929-2013-8
However, the data still shows that its one of the worst months. But what this doesn't show is the psycholgical factor. I don't think it was a coindicence that crashes tend to happen that month and that the last bull market topped on that month (and then crashed the next year on that month)
 
The september negative return probably reflects that people tend to antecipate the issues in october and sell ahead of time. This is just a theory but I'd be surprised if its not true
 
Daal said:
I posted a study last week the talks about this issue. The fed model (using interest rates to value stocks) is not right because one is comparing a real return (the earnings yield) with a nominal return (the bond yield). its a lot more complicated than that, Assness did a terrific job explaining why this is incorrect. Honestly, I think thats the best paper I've read in my life, the guy just did a great job explaining a complicated topic in very simple language. I plan to read more Assness papers, the guy knows his stuff. You should check it out. In Brazil, there is even an additional benefit, dividends are tax free (correct me if I'm wrong), meanwhile, interest income from bonds is not
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Daal my argument was a simple one.... If you have cash invested in overnight rate in Brazil and abroad and you want to run $X risk in brazilian equities you are better of to use the cash you have abroad because the overnight rate in Brazil is 14.25% while abroad is zero (or negative depending where you have your cash)... In this simplistic approach I am assuming you will run the fx risk as well, if not you can hedge the FX risk trough the CME and on top of the equity performance (in BRL) you will get an increment since you will be buying a USD Future with USD Rates way above Libor...
 
luisHK said:
Interesting, is EWZ such a bad proxy about the Brazilian market ? from your chart it appears the market in USD term is down around 50% from its 2007 top whereas EWZ is down around 78%.

CH1973, do you suffer any whitholding tax from your brazil bonds ? Although considering I live neither in the US nor in Brazil our tax treatment in this regard might be different. I might be interested in EUR, HKD and RMB bonds as well, need to check but i think some brazilian bonds are listed in HK

Good to see this thread beeing lively gain.
Besides Daal i'm not sure where you got your data October is overall negative, check the link below, it only ges back to 1991 but from memory when I was more into seasonals it's been overal positive for several decades.
Talking about seasonalilty (with a political backing for this one, as governments have better chance to get elected with a strong stock market and are likely to push it up especially bfore the national elections) the period before the US presidential election is also bullish, although so far this year it has been struggling.

http://jeffhirsch.tumblr.com/
More...
LuisHK I purchase these bonds trough an offshore company and I will have to pay taxes when this company pays dividend or there is a capital reduction...
 
CH1973 said:
Daal my argument was a simple one.... If you have cash invested in overnight rate in Brazil and abroad and you want to run $X risk in brazilian equities you are better of to use the cash you have abroad because the overnight rate in Brazil is 14.25% while abroad is zero (or negative depending where you have your cash)... In this simplistic approach I am assuming you will run the fx risk as well, if not you can hedge the FX risk trough the CME and on top of the equity performance (in BRL) you will get an increment since you will be buying a USD Future with USD Rates way above Libor...
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If you have money abroad and you want to earn the overnight rate you can buy BZF. At IB, you can even beat the brazilian bonds that earn the overnight rate because sometimes they will lend out the shares and you will get the short fees. BZF delivers the interest in the form of rising NAVs. Plot BZF against BRLUSD, it goes down less than the pair
 
The difference is the liquidity (BZF has much less) and the fact that BZF is really the 2month rolling interest rate. They use NDFs with expirations around the 2-3 month market so sometimes it takes a while for it to 'get' the new interest rate

There might be another issue conscerning short-term capital gains distributions (and withholding taxes) but thats not a problem when the thing only goes down
 
Daal said:
The difference is the liquidity (BZF has much less) and the fact that BZF is really the 2month rolling interest rate. They use NDFs with expirations around the 2-3 month market so sometimes it takes a while for it to 'get' the new interest rate

There might be another issue conscerning short-term capital gains distributions (and withholding taxes) but thats not a problem when the thing only goes down
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I didnt know about this ETF, but I personally dont like very much using ETFs for this purpouse if I can build the same exposure myself using futures...Check the graphic attached, a comparisson between the ETF and BRL and you will see there is a day in 2011 that whoever was holding this ETF suffered a major loss not direct related to BRL....
 

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CH1973 said:
I didnt know about this ETF, but I personally dont like very much using ETFs for this purpouse if I can build the same exposure myself using futures...Check the graphic attached, a comparisson between the ETF and BRL and you will see there is a day in 2011 that whoever was holding this ETF suffered a major loss not direct related to BRL....
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I was holding the ETF that day. It wasn't a loss, it was the year end capital gains distributions. The ETF gaps down by roughly the same amount of the capital gain distribution. It was a tax free 'dividend'. These days there MIGHT be a tax on the short-term part of the distribution (I need to check with the green trader tax firm), but most of the distributions tend to be long-term and these are tax free
 
CH1973 said:
I didnt know about this ETF, but I personally dont like very much using ETFs for this purpouse if I can build the same exposure myself using futures...Check the graphic attached, a comparisson between the ETF and BRL and you will see there is a day in 2011 that whoever was holding this ETF suffered a major loss not direct related to BRL....
More...
as far as the CME futures go, I just don't see how I can use that. The spread is too wide and there is the constant need to rollover (due lack of liquidity in the back contracts). The implied cost of having to roll over the contracts (paying the spread and commissions) will wipe out a lot of the benefit
 
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