Global Macro Trading Journal
- Thread starter Daal
- Start date
I must have short-term traded the Brexit worse than you. I was bullish almost the whole day Tuesday. Yet SPY stayed in like a 60 cent range, where every rally would come back down. I would get in and out for a small loss over and over. At some point I just got sick of it and gave up. That was like within 1 hour and 30min off the the close. That was the bottom. 201.40 or so was when I threw the towel. SPY went up 8 dollars since them. Non stop with every dip getting bought aggresively, I did rebought some at 202.5 and sold the next day at 204.40, but that was chump change for the size of the move.
ETF and futures day trading is my weakness. Its too liquid and moves around back and forth too much. Makes you doubt your position
The risk is econ weakness and rate cuts. Or just the possibility of negative rates. Not even the actual chance of that, but the market believing it could happen. Interest rate futures would go into a short-squeeze mode that would be hard to ride out
My strategy this year has been to be long a resonable amount of risk assets (anywhere between 10-50%) but holding plenty of hedges in case the market took a dive lower as investors mood changed due a number of risk factors. For these hedges I favored US bonds (with more duration as stocks went higher), gold and some shorts on SPY. On the bond side I was lucky, even though the stock market continued to plow higher, so did the bonds. I didn't expect that. Gold is doing well. The only real problem was on the SPY short (I only took a small part of the position off during the Brexit thing) but I still like this approach
What is going on is that central banks are compressing risk premiums globally, this is quite unsustainable and at some point will blow up (I cant prove it but my gut as a trader and investor just tells me that there is little chance this will unwind quitely). But you don't want to be the guy who is in 100% cash because this game has been going on for years and might very well continue for years. You also don't want to be the guy loaded up on risk assets or even worse, long with leverage. Thats why I favor my approach, a resonable amount of risk with some tactical hedging.
I do feel that US bonds are not likely to continue to work as a hedge because they are getting very pricey. I actually decreased my durations last week even though that was the opposite of my initial plan. So I will have to figure out other ways to hedge
The hedging I find it important otherwise its hard to hold some of these postions because when everything starts to fall apart, it becomes very tempting to sell, hoping to avoid what it feels like a 'certain' drop
What is going on is that central banks are compressing risk premiums globally, this is quite unsustainable and at some point will blow up (I cant prove it but my gut as a trader and investor just tells me that there is little chance this will unwind quitely). But you don't want to be the guy who is in 100% cash because this game has been going on for years and might very well continue for years. You also don't want to be the guy loaded up on risk assets or even worse, long with leverage. Thats why I favor my approach, a resonable amount of risk with some tactical hedging.
I do feel that US bonds are not likely to continue to work as a hedge because they are getting very pricey. I actually decreased my durations last week even though that was the opposite of my initial plan. So I will have to figure out other ways to hedge
The hedging I find it important otherwise its hard to hold some of these postions because when everything starts to fall apart, it becomes very tempting to sell, hoping to avoid what it feels like a 'certain' drop
http://www.businessinsider.com/stock-market-strength-is-about-the-equity-risk-premium-2016-7
This has some interesting data that can explain some of what is going on. Especially after the Brexit sell-off. The sell-off lead to a rush to risk-free assets, pushing their yields down. Then stocks became even more attractive relative to bonds, which lead to a rush into them, specially after it became clear that central banks were going to be supportive.
"The equity risk premium is still some 2% higher than its historical average over the last 30 years — so it could fall further. This gives the S&P 500 room to rise another 200 points, Deutsche Bank estimates."
I dont agree with the assumption that this has to go to its historical norm but it does explain a key driver behind what is going on
Also, new all-time highs tend to be bullish
http://www.businessinsider.com/all-time-high-is-mother-of-all-buy-signals-2016-7
This has some interesting data that can explain some of what is going on. Especially after the Brexit sell-off. The sell-off lead to a rush to risk-free assets, pushing their yields down. Then stocks became even more attractive relative to bonds, which lead to a rush into them, specially after it became clear that central banks were going to be supportive.
"The equity risk premium is still some 2% higher than its historical average over the last 30 years — so it could fall further. This gives the S&P 500 room to rise another 200 points, Deutsche Bank estimates."
I dont agree with the assumption that this has to go to its historical norm but it does explain a key driver behind what is going on
Also, new all-time highs tend to be bullish
http://www.businessinsider.com/all-time-high-is-mother-of-all-buy-signals-2016-7
I started to short some Feb 2017 fed futures. I want to hedge a bit my gold and bond positions. Its a cheap hedge because the market is quite skeptical of a rate hike. I wish I started earlier as I could have gotten better prices..
Looks like the Brexit thing is being shrugged off and US data has improved. I still dont have a ton of conviction so I'm scaling in, feeling my way into this hedge
Looks like the Brexit thing is being shrugged off and US data has improved. I still dont have a ton of conviction so I'm scaling in, feeling my way into this hedge
Since I own PSH, i thought about writing some random thoughts on HLF. This FTC action removes one of the scenarios that I was worried about, that Ackman was wrong and HLF would sue him for damages and try to get billions out of him (just the lawsuit could send his investors fleeing). Now with the FTC essentially agreeing with his thesis (except for the use of the term pyramid scheme), the top regulator has documented and wrote reports that Pershing could use to defend itself. There is no chance that HLF would ever try to pull that off now
The FTC demands are great, they essentially will make HLF prove that its not a pyramid by forcing them to separate distributors who are in only for self-consumption and the ones who are in for the "business opportunity". HLF will be forced to prove that most of their sales are coming from real sales (from people trying to lose weight) and not from churn of people trying to make money off the business opportunity. It will be the Ackman vs Hempton showdown about who is right
Given Ackman's deeper pockets, superior track record and the fact that the FTC almost agreed with him (by saying they dont believe the company's numbers with regards to that showdown and they sounded very skeptical about the company's claims)
I'd say the odds favor him being right.
Once the US operation is proven to be a farce, it will be hard for the company to sustain investor confidence. The stock multiple will get creamed
The FTC demands are great, they essentially will make HLF prove that its not a pyramid by forcing them to separate distributors who are in only for self-consumption and the ones who are in for the "business opportunity". HLF will be forced to prove that most of their sales are coming from real sales (from people trying to lose weight) and not from churn of people trying to make money off the business opportunity. It will be the Ackman vs Hempton showdown about who is right
Given Ackman's deeper pockets, superior track record and the fact that the FTC almost agreed with him (by saying they dont believe the company's numbers with regards to that showdown and they sounded very skeptical about the company's claims)
I'd say the odds favor him being right.
Once the US operation is proven to be a farce, it will be hard for the company to sustain investor confidence. The stock multiple will get creamed
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I suspect the FTC avoided the pyramid accusation because they company wouldn't play ball and they would have to spend years in court fighting them (and in the mean time, if it was a pyramid, people would continue to get hurt). Since HLF is a global company with deep pockets, they decided to force the company to prove itself. They removed the pyramidical practices and got cash for the people who were screwed. They did a decent job
If Ackman turns out to be wrong and most of the sales are indeed from distributors who want to consume themselves, HLF numbers will prove that and I don't think he will have any problem doing an expensive block cover to get out. The people who are expecting a giant squeeze will be dissapointed. When something is as expected as that, lots of people antecipate, as the stock rises, they take profits and prevent the squeeze from happening. Thats what happened in 2013 when the chasers all got bagged at 80 bucks a share