Global Macro Trading Journal

Daal said:
But you dont have any long-term stuff? You just jump in and out of trades?
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I do have long-term stuff... In fact, all my stuff is long-term, really, which means that I ignore the day-to-day noise. The difficulty lies primarily in finding decent long-term trades, which will not blow you up.

So, for instance, I try not to care about the timing of the Fed moves ahead of time. If they do things and the mkt moves, I will look at the mkt and try to find opportunities. However, trying to figure out whether it's Sep or Oct or whatever? No, thanks...
 
Martinghoul said:
I do have long-term stuff... In fact, all my stuff is long-term, really, which means that I ignore the day-to-day noise. The difficulty lies primarily in finding decent long-term trades, which will not blow you up.

So, for instance, I try not to care about the timing of the Fed moves ahead of time. If they do things and the mkt moves, I will look at the mkt and try to find opportunities. However, trying to figure out whether it's Sep or Oct or whatever? No, thanks...
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I see. I brought up the decision in the context of the Fed futures trade, which is short-term. But even without, IF they did hike in Sep, that would be a big deal. It would suggest some kind of framework change by the Fed, this could have implications about valuations going forward, and how much cash I should/should not deplay in the coming weeks...
 
Daal said:
I see. I brought up the decision in the context of the Fed futures trade, which is short-term. But even without, IF they did hike in Sep, that would be a big deal. It would suggest some kind of framework change by the Fed, this could have implications about valuations going forward, and how much cash I should/should not deplay in the coming weeks...
More...
Well, I am not sure at all that this extrapolation makes sense... IMHO, the Fed is on a gentle glide path, with occasional pauses to reassess the landscape, especially if things get wobbly. To me, whether it's Sep or Dec, there appears to be absolutely no drama in the proceedings, at least for the moment.
 
Markets caught a bid. Brainard just burried any chance of a Sep hike, there will be a hawkish statement but thats about it. To rush a hike with a few dissents would be just ridiculous
 
another good one

He talks about how a stock and bond mix right now have the worst expected returns in the history of the data (2.5% real), calls it an expensive market but not a bubble

I disagree with him some on HFT, mainly because its an issue of law enforcement, which is important in a market economy..
 
The way I'm protecting myself against this expensive market is to limit the amount of risk taken, holding plenty of cash and low risk bonds to be able to reinvest in case things take a turn down. I believe this is prudent given how long markets have been pushed by central banks
 
Reestablished SPY short today, a bit before open. I wont be able to alert when i get out or in because things change too quickly
 
I mentioned that this type of sell-off (bonds and stocks at the same time) could be a good thing. One interesting calculation for that

Lets say someone is in 30% in stocks, 30% in bonds and 40% in cash
In the stock side, he is expected to get 4% (off inverted Shiller PE), in bonds 2% and on the cash 0%. A 10% drop in stocks along with a 10% drop in bonds, will push the expected return to 4.44% in stocks, 2.22% in bonds (it might be less than that to the extend that the drop in stocks is justified and reflects lower future returns, but lets leave that out for simplicity).

If the person then invests the cash at the higher expected return, the loss off 10% in stocks and bonds is offset by the fact that now the cash will growth faster as it gets invested in cheaper stocks and bonds. By how much? some rough calculation here show me that off that loss (10% of 30% and 10% of 30%, a total of 6%) is now offset by an additional gain of 1.5% over the next 10 years because the deployed cash will now return more (so the real loss is really 4.5%, its actually even lower than that because I only considered the next 10 years)

But there is more, if the person also has income coming in, there will be the opportunity to invest part of that income at lower prices too. That is harder to calculate because you never know at what price markets be as the income comes in but there is a "gain" to the extent that markets drop. So in reality, in terms of expected value, it could be actually the case (depending of how much income is coming in) that the investor actually GAINED even though his broker balance shows that he is poorer. As a long he doesnt turn into an idiot and fails to redeploy cash at the lower prices

Of course, its possible that there is no higher expected returns after the drop if markets are perfectly reassesing future real returns and the drop is due higher expected inflation, lower corporate profits, etc. But markets are not known for doing that, they are known for freaking out for no reason, for overshooting, for having BS rallies and sell-offs

So I hope this market implodes so I can loadup in good stocks, good bonds, good REITs. Worse thing that could happen was if the SPX and TLT marched to the moon and everybody kept chashing yield for years
 
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