Global Macro Trading Journal

Ackman said there were several billions dollars worth of stuff that people never even knew were salable assets. Now VRX is selling skincare brands no one cared about for over ten times revenue
"today announced that it has entered into an agreement to sell its CeraVe, AcneFree and AMBI skincare brands to L'Oréal for $1.3 billion in cash. The CeraVe, AcneFree, and AMBI product lines have annualized revenue of approximately of $168 million."
 
Fun stats:

Since 1928, looking at annual data, the S&P500 has an annual SD of returns of 19.55%
Skewness of -0.215 and Kurtosis of -0.1232
Gold has a SD of 18.86%, Skewness of +1.65 and Kurtosis of +6.31. Similar volatility but tail risk profiles are vastly different. Stocks are more vulnerable to unpredictability, gold benefits from it (at least in a lot of scenarios). My "vol of vol" and "vol of negative SD" calculations showed something similar but that was dumb because I could have just calculated skewness/kurtosis and found that

So another way to answer "why own gold, it doesn't pay a dividend" is to say, it makes a portfolio more resilient to an unpredictable world

I think Buffett does a lot of harm when he talks about 100% equity allocations of the same country and trash talks gold because MAYBE that's a good idea for a US based investor but its almost certaintly a big mistake when people from around the world hear that and do it in their country. Some guy long 100% in Peru equities is so vulnerable to extreme events, it isn't even funny
 
This is also why when Hempton shorts small and mid caps, he cant claim he is taking less risk than the market. That is only true if he is defining risk as 'short-term correlation to the S&P500'. Sure, if there is a crash or financial crisis, having those shorts will look great but he is also increasing his portfolio kurtosis and most of it will be negatively skewed (the short squeezes, the time's he is wrong, the times he mistimes the short), thefore, his risks (more broadly defined to include tail risks) go up, not down. Over long periods of time, maybe even metrics such as portfolio SD vs market SD might change dramatically, when extreme events deliver their surprises
 
Chuck Krug said:
You were talking about shorting increasing portfolio risk earlier
Another way to look at it is: https://www.thestreet.com/story/920199/1/the-itsci-streetside-chat-robert-wilson.html
Where Wilson says he presses his longs harder because he has short positions.
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You can only make money with growth stocks. That's so true. He was so lucky because there was a lot of industry booms in his time.

I am doing PhD in Finance and my research results also suguest that there is excess volatility when markets in a bear trend. But given that there is a lot of uncertainty going on during a crisis, it makes sense.

Given the expected appreciation in US dollars, I expect that overall US markets will underperform in 2017. A good time to short but also a good time to buy would be underperforming stocks.
 
Chuck Krug said:
You were talking about shorting increasing portfolio risk earlier
Another way to look at it is: https://www.thestreet.com/story/920199/1/the-itsci-streetside-chat-robert-wilson.html
Where Wilson says he presses his longs harder because he has short positions.
More...

I believe he could have done the same thing without the shorts. That's pretty much what Buffett does, presses his longs beyond 100% exposure (that is, he uses leverage) IF he is able to secure a stable funding source (float insurance, bond issuance, etc)
Dalio suggests applying leverage to an optimal allocation decreases risk (and it would be achieved by juicing the returns from bonds by using futures). So perhaps 'pressing longs' but adding bond futures at the same time (even beyond an optimal allocation) would be a way to generate a similar effect
Using shorts a little bit of an illusion, while short-term risk metrics improve (such as correlation to the market) longer-term its possible (perhaps even likely for the majority of investors) that most (if not all) risk metrics will get worse. Thats because it takes a fair amount of time for the higher kurtosis/negative skewness to show up on the P&L. Since its the tails that matter, one can 'get lucky' for a long-time until the judgement day comes.

That said, I do think there is SOME room for shorts to reduce risk. I mentioned 2 weeks ago a potentially superior plan which would involve a 'basket of hedges' which would involve safe haven bonds, gold, one or two of the best shorts you can possibily find (and selectivity is the key) but sized properly, some cash, plus other ideas, etc
 
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I believe it was also a psychological factor for Wilson: He wouldn't risk being 150% long if he didn't have the 50% short hedge on. Even if he mentioned that over his career he broke even on his shorts.
 
Chuck Krug said:
I believe it was also a psychological factor for Wilson: He wouldn't risk being 150% long if he didn't have the 50% short hedge on. Even if he mentioned that over his career he broke even on his shorts.
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I guess that could work for some. For me it would be the opposite, in these last 4 years being involved with short-term trading of micro/small and mid caps I really got to see the destructive power that they have to short accounts. I got hurt in some of them (KBIO being the most extreme example) and I got to develop a lot of respect and caution about them. Having 10-20-30% of my networth short in non-S&P500 stocks would just keep me up at night. Either there will be too many stocks (in which case, my picking is likely to be bad) or there will too much concentration and I'm heavily exposed to a short squeeze. I rather own a hedge basket (with many things in it) and ocassionally (if I see a news/catalyst) short ES/SPY if I think markets are headed to a correction. Last year I put many SPY shorts, the net was a tiny loss of less than 0.25% but it did help me hold though the noise

If someone is THAT good at timing small cap shorts, why wouldn't that trader be good at timing SPY shorts? Sure there will be differences in terms of liquidity/efficiency but its so hard shorting non-big cap stocks that if one learned that, Id argue the trader can learn to time shorts in the index. The latter skill is a lot more scalable and useful, not to mention less risky
 
And as far as S&P500 index shorts go, as it gets closer to inaguration it becomes more likely there will be a buy the rumor sell the news type effect so its a potential short trade. Its hard to time it but I got an eye on doing that soon
 
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