Global Macro Trading Journal

If I do end up being long stocks with like 40% of my assets, I will probably be heavy on the bond side too. I will probably will have to go back on the old days in this journal and the previous one where I was tracking FOMC members and speeches like crazy to make sure I had a good guess on what the Fed was up to
 
I don't know what your targets are but risk premia are wide enough that in Equities you can earn the same return today on 1/4 the risk you had to run 2 months ago.
 
I like that idea of selling puts on stocks you want to buy. I'll probably use that with US stocks. The Thai market doesn't have that alternative, so I'm just buying outright companies that pay good dividends and will grow in years to come.
 
justrading said:
I like that idea of selling puts on stocks you want to buy. I'll probably use that with US stocks. The Thai market doesn't have that alternative, so I'm just buying outright companies that pay good dividends and will grow in years to come.
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I think that's a better approach than selling puts in this environment. If you like the stocks, it's possible that in a week, the stocks are up 10-15%. The premium form selling of puts will not compensate you for that. And if we selloff hard (another 10-15% in stocks) your premium will offer little comfort.
 
El-erian was on bloomberg talking about how he does not expect a US recession in 2016 because people underestimate the resilience of the US economy. He sees 2% growth this year and a 30% chance of recession in 2017. He talks about how this is a transition from a valuation level where the Fed was keeping stocks artificially high to a world where that doesn't happen. I'm not sure the Fed won't come to the rescue again. If you look at the statements over the past few years, they seem supportive of the idea that they will be delaying hikes until the S&P500 is back above its top bollinger band. This is a form of support, will it be enough? It remains to be seen but it should help. Although I'm sure people will be cautious about ripping stocks above 2000 like idiots again
 
SPX is off almost 10% from Dec 31 close. If you believe there is no recession, yes now is looking very attractive. Problem is, SPX doesn't need a recession to close say -10-15% for the year. We could see SPX off 20% before we make a multi year rally, the question is: what's your drawdown tolerance?

I'm with the camp of ST we are oversold in SPX, but if we ironically can't stage a rally to '15 highs, SPX could see sub 1800 or even 1700 1st. I'm not keen on those drawdown numbers.
 
jj90 said:
SPX is off almost 10% from Dec 31 close. If you believe there is no recession, yes now is looking very attractive. Problem is, SPX doesn't need a recession to close say -10-15% for the year. We could see SPX off 20% before we make a multi year rally, the question is: what's your drawdown tolerance?

I'm with the camp of ST we are oversold in SPX, but if we ironically can't stage a rally to '15 highs, SPX could see sub 1800 or even 1700 1st. I'm not keen on those drawdown numbers.
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That kinda of drawdown doesn't look that bad honestly. If you bought a good value stock at the close friday (1880) and the most it can drop is to 1700, thats a 10% drop. But if you got some bonds and its indeed a good value stock, its likely to drop less than the market. So we are looking at a 5% overall loss in the bad scenario. Throw in a tactical short on ES/SPY/QQQ at the right moment and you will have barely any loss. An ideia is to sell some calls on SPY/ES if markets rip back to 1950
 
With regards to the resilience of the US economy. If you look at the effect of 9/11 in the economy, it can give you a good idea of how it handles shocks. In the 4 Qs up to Sep 2001, the economy grew by a 2.5% avg rate, after Sep 2001 for the next 4Qs, it grew at 0.89% avg rate. So it shaved 1.5% of GDP growth rate. I doubt we will see this much shaved off the economy this time around, a strong US dollar hurts and a weak China hurts the export sector and maybe another sector here and there (energy and mining, etc). At the most we are talking about a 1% shave off GDP (and even that, its a big IF). In the last 4Qs the economy grew by 2.55% on avg, if you take 1% away, thats still 1.55%. Far from contraction territory

So it looks like the economy is fine, the question is, at what multiple people want the SPX in this enviroment?
 
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