Global Macro Trading Journal

Well I think it's time to dump VRX. 3 quarters and no turnaround since my entry. Forward P/E is no longer a bargain with continued revisions lower.

While profitable on a gross basis, they just don't make enough currently to service the debt. It has to go but to do that they have to sell off core assets. Catch 22 of death.
 
As far as VRX goes, Ackman sold late last year to generate a tax loss for his investors. He did not buy back that stake. If he doesn't buy again within 1 week (reflecting that the lack of purchases were related to issues related to having inside info), I'm going to size down. That will be the first time his behavior has not been consistent, since he has access to all execs, it would signal he is worried about something
 
ES up +17 points. Short and bears realizing how fragile the bear thesis is. "Trump is crazy! Its the end of the world" Now this Wharton graduate and sucessful businessman is not acting in a way that implodes the US economic strength, shocking!
Only the idiots are surprised
 
People cry on twitter how this 'market makes no sense' 'im skeptical' 'time to take profits'. We have been seeing 4 months of the SAME nonsense being spouted by these bears. The fact that they said this at 2200 wont stop them from saying at 2350. Then at some point we will see a 80 point pull back (possibly from a much higher level) these folks will be saying 'see, i said this had to pullback', neglecting the fact that their 'short' call was made from 150 points lower
Odds are, the US will see 8 years of a administration that will work towards helping businesses. It's just retard to be short, either outright or through random bearish comments (unless they are masochists).

This market makes perfect sense, these bears just need to look a little harder. They need to forget politics and focus on other things. In a way, this is true justice, all the biased folks that use their politicial views to trade and invest are now being spanked by reality. How much money have they given up so far? There is still years and years of this left
I'm sure there will be pullbacks, but structurally it makes no sense to skeptical of equities.
 
"Valuations are high" has probably cost people more money than anything they ever read from 'strategists' and investment books.

Its just such a horrible reason to sell due to:

-Taxes on accumulated gains (hurts compound returns)
-People are short valuations from birth (most people need real income, more assets and wealth to live on/retire). Selling increases that 'natural short'
-A bear market driven by valuation is a GREAT THING. Effectively, its a bear market that leads to a temporary loss (by definition, so its an opportunity to buy more cheaper), unlike a Greece style collapse (driven by economic destruction which leads to a PERMANENT loss for the most part) or a massive earnings recession (corporate profits collapse as a % of GDP)

Are there times to sell because of valuations? Oh yes, but if people were to ignore valuations all their lives, they would probably do much better than if they 'learned' about them. For every bubble that they don't sell during the peak, there will be several huge opportunities that they missed because they were 'worried' about valuations

Nobody even knows the valuations of US equities anyway, because no one knows where earnings will be doing during a significant macro regime shift (like now)
 
Let's say someone doesn't sell during a bubble (because they never heard about valuation), how bad is that mistake? I question whether that is much of a mistake at all. Bubble spotters/skeptics usually are WAY too early in their 'analysis' so they miss a HUGE run-up before the blow up. The bubble blind investor will accumulate a large amount of profits before the collapse so even after the collapse, they will be alright.

But it isn't about the size of the mistake but also about the probability around them. Bubbles are so rare but periods where markets offer a positive return but low (by historical standards, so valuations would be 'expensive') are super common and making a mistake there will cost A LOT more because it happens all over the place.

I conclude therefore that looking at valuation is likely to do more harm than good to most investors. Especially for people who home biases (they tend to invest in the domestic markets and not look globally for opportunities)
 
An investor without a home bias would be ok if he learned about valuation because he at least will be buying European or EM equities now. The guy with home bias (most investors) are screwed because they will just sit in cash or bonds and be out of equities while waiting for the "shiller PE to mean revert". That's a serious mistake IMO, that person would be better off never hearing about valuation their whole life
 
I suppose the statement 'people are short valuations from birth' is not precise, people are short valuations (the avg valuation) during their working years, in the other periods they are long valuations. Before birth, they are long valuations because bubbles and bull markets helps their PARENTS to be wealthier, this leads to a better quality of life early on and a larger inheritance. After they grow up and they start to work, they are short valuations because the portion of their income that is not spend (savings) needs to be invested, the lower the average valuation over their working years (the higher the average expected real returns) the better as they compound savings at a faster rate (and declines driven by mean reversion in valuations are a good thing).

At some point they will get to a point where money brings less and less benefits, if they accumulated enough, it might not even matter anymore what happens to valuations (they got enough to live comfortably even if they never produced another 1% in real gains). But to the extent that they want to donate a lot of money after death or during a period before death, they are LONG valuations because the want bull markets and bubbles to happen so they can leave a bigger amount (perhaps a larger inheritance to their children as well)

So, unless you are unborn, is far from a working age (like children), is retired already or is about to die, forget this nonsense about 'valuations are too high', its just going to hurt people to listen to that
 
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I'm a pretty big bull for this year, but I just won't chase these prices. Yes, everyone and their mother is looking for a correction, but having sold out longs from last year earlier this year I just cannot bring myself to buy here. Even Eurozone and EM's are getting stretched. If I was long already I would hold and add on dips, but for people in cash I feel it warrants staying out for a little.
 
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