Global Macro Trading Journal
- Thread starter Daal
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And what I'm saying becomes even more true when there are capital gains taxes involved (even more when the rate is very high). Because by exiting you will be reinvesting into something else a lower amount (due to the taxes) and there is the chance that rates will go down in the future, thus rewarding waiting. So the problem is a lot more complex than some journalist running a DCF thinks
Having said all that, I'm watching Damodaran's free Valuation classes on youtube currently. I do think DCF and what he teaches has some value. This is my philosophy, I'm not Anti-Intelectualzing, Pro-Trump, Anti-Academia or anything like that. I'm anti-bias, I like learning from all sources, considering different points of view and taking the best of each school of thought. I wanna be right and play markets right, not feed some inner desire to have my old views 'win'. I also like to have many different tools in my toolbox
If you look at the main things about the Trump agenda, they all seem to have gone bad.
Healthcare is on life support, Tax Reform is already facing big bumps (no Healthcare fiscal savings to fund it and the Border adjustment tax is now dead, that tax was going to be a big part of the funds) Infrastructure looks unlikely, the Mexico wall is not doing so great, seems like no one is for it except Trump.
I'm all for keeping an optimism bias when dealing with stock investments but I also got to have some prudence. As a result, I plan to "rebalance" my portfolio in the next few days. Essentially, cutback on US investments that have run nicely (BRKB, OAK) and keep some dry power to rebuy things lower (or new things). Wont be a huge change (because I do think that my investments are cheap) but I do think that psychologically, it makes everything a lot easier when you lock a bit of gains when prices are high. When things falls, you don't feel like an idiot which makes it easier to make good decisions. EWZ was a great example, I locked gains during decent times and when it crashed, I was in a good position mentally and pretty much avoid mistakes on it. Now its coming back up
Sep-Oct is also seasonally bad for US stocks. It might pay to raise a little cash and add a little to Spitznagel style put positions right now...
I will also hammer ES/SPY short outright if the right catalyst hits the news (tax reform dying). But I wont alert that here because it will just make it more difficult to manage the trade. Shorts are a bitch to manage, when you go public on it, it just makes it even more difficult
Healthcare is on life support, Tax Reform is already facing big bumps (no Healthcare fiscal savings to fund it and the Border adjustment tax is now dead, that tax was going to be a big part of the funds) Infrastructure looks unlikely, the Mexico wall is not doing so great, seems like no one is for it except Trump.
I'm all for keeping an optimism bias when dealing with stock investments but I also got to have some prudence. As a result, I plan to "rebalance" my portfolio in the next few days. Essentially, cutback on US investments that have run nicely (BRKB, OAK) and keep some dry power to rebuy things lower (or new things). Wont be a huge change (because I do think that my investments are cheap) but I do think that psychologically, it makes everything a lot easier when you lock a bit of gains when prices are high. When things falls, you don't feel like an idiot which makes it easier to make good decisions. EWZ was a great example, I locked gains during decent times and when it crashed, I was in a good position mentally and pretty much avoid mistakes on it. Now its coming back up
Sep-Oct is also seasonally bad for US stocks. It might pay to raise a little cash and add a little to Spitznagel style put positions right now...
I will also hammer ES/SPY short outright if the right catalyst hits the news (tax reform dying). But I wont alert that here because it will just make it more difficult to manage the trade. Shorts are a bitch to manage, when you go public on it, it just makes it even more difficult
Long URA with stop at $12, about 1.5% position but I might add more. Uranium stock ETF, its down 6 years in a row, 90% drop. The recent price action shows some signs of a bottom, high convexity or reward to risk so I'm taking a shot. I plan to trail profits on the way up and hopefully gain many multiples of my risk
From a newsletter I subscribe to:
"I got to know David Tice back in the late 1990s, during the last great Melt Up. We often spoke at the same conferences.
Tice was one of the only guys – on TV and in print – loudly sounding the alarm that the late 1990s tech-stock Melt Up would have to come to an end. He was also putting his money where his mouth was, betting against the flimsiest companies and buying precious metals in his fund.
But what happened to Tice after that?
Porter and I hadn't heard much from him in the last decade or so.
It turns out, Tice sold his money-management business in the 2000s. And he spent his time doing completely different things...
One interesting thing he did while out of the markets was to become the lead investor in the movie Soul Surfer...
Soul Surfer told the true story of Bethany Hamilton. Her entire arm was bitten off by a shark while surfing as a kid, but she recovered and returned to the water and became one of the world's best female surfers.
(Porter and I were surfing buddies as teenagers, so we loved the movie. I'm still in the water today at age 46. My latest obsession is "foil surfing" – see the gray box at the end.)
The movie was a risk to make, but Tice succeeded... It cost $18 million to make this movie and it grossed $48 million worldwide."
So David Tice, the supposed big bear that likes to short, makes a fortune being long/optimistic on something in a period where bear strategies stopped working. And this story is similar to Jim Chanos, the big short who actually makes his money through fees and being long the equity of his fund rather than ACTUAL capital gains derived from short sales (in that front, he has little to show for with his flat cumulative performance from 1985 to 2005).
That confirms my theory that its a lot easier to get rich with convexity being an optimist (so, being the complete opposite of Nassim Taleb, the chief advocator of convexity) by the sheer fact that there are a lot more bull years compared to bear years as well as the fact that a lot of bullish exposures have unlimited upside and exponential gains versus limited and logarithmic gains in bear bets.
Yes, you can 'structure' a bear bet to have a convexity payoff (say, by buying puts) but that does not change the fact that the underlying market behaves in a way that is antagonistic to that. John Hussman has been thinking he is 'long convexity' with his put buying for like 10 years, with little to show for. He is actually short convexity but the structure of his bet gives the illusion that such is not the case
"I got to know David Tice back in the late 1990s, during the last great Melt Up. We often spoke at the same conferences.
Tice was one of the only guys – on TV and in print – loudly sounding the alarm that the late 1990s tech-stock Melt Up would have to come to an end. He was also putting his money where his mouth was, betting against the flimsiest companies and buying precious metals in his fund.
But what happened to Tice after that?
Porter and I hadn't heard much from him in the last decade or so.
It turns out, Tice sold his money-management business in the 2000s. And he spent his time doing completely different things...
One interesting thing he did while out of the markets was to become the lead investor in the movie Soul Surfer...
Soul Surfer told the true story of Bethany Hamilton. Her entire arm was bitten off by a shark while surfing as a kid, but she recovered and returned to the water and became one of the world's best female surfers.
(Porter and I were surfing buddies as teenagers, so we loved the movie. I'm still in the water today at age 46. My latest obsession is "foil surfing" – see the gray box at the end.)
The movie was a risk to make, but Tice succeeded... It cost $18 million to make this movie and it grossed $48 million worldwide."
So David Tice, the supposed big bear that likes to short, makes a fortune being long/optimistic on something in a period where bear strategies stopped working. And this story is similar to Jim Chanos, the big short who actually makes his money through fees and being long the equity of his fund rather than ACTUAL capital gains derived from short sales (in that front, he has little to show for with his flat cumulative performance from 1985 to 2005).
That confirms my theory that its a lot easier to get rich with convexity being an optimist (so, being the complete opposite of Nassim Taleb, the chief advocator of convexity) by the sheer fact that there are a lot more bull years compared to bear years as well as the fact that a lot of bullish exposures have unlimited upside and exponential gains versus limited and logarithmic gains in bear bets.
Yes, you can 'structure' a bear bet to have a convexity payoff (say, by buying puts) but that does not change the fact that the underlying market behaves in a way that is antagonistic to that. John Hussman has been thinking he is 'long convexity' with his put buying for like 10 years, with little to show for. He is actually short convexity but the structure of his bet gives the illusion that such is not the case
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If you look at what Mark Spiztnagel learned from the Taleb Empirica failure as well as his own studies, its that you had to be selective about which periods to do the put buying (he reserves those to periods where valuations are very high) as well as to use that put buying as a tool to get long MORE stocks in a portfolio (because you are insured against bad events).
So effectively, decrease the amount of put buying over an entire cycle(a less pessmistic view) and buy more stocks (an straight up optimistic view). Usualy the ones with high Returns on Capital Invested (what he calls Austrian Investing 2)
So, essentially he found out that the stock market convexity (its unlimited upside and limited risk as well as its habit of rising exponentially) had to be respected. Convexity in the puts COULD NOT offset the convexity of the underlying market and he adjusted his strategy, by BEHAVING more bullishly (even if he will continue to TALK bearisly, like Tice)
Spitznagel is like a more bullish Taleb, which confirms what I was talking about before. Consistent wealth creation in markets is very much tied to a good balance between optimism and pessimism, in most instances
It took me a long-time to realize all of this but I'm just posting this all here for free. If anyone learns anything from this and becomes more balanced then I'm happy
So effectively, decrease the amount of put buying over an entire cycle(a less pessmistic view) and buy more stocks (an straight up optimistic view). Usualy the ones with high Returns on Capital Invested (what he calls Austrian Investing 2)
So, essentially he found out that the stock market convexity (its unlimited upside and limited risk as well as its habit of rising exponentially) had to be respected. Convexity in the puts COULD NOT offset the convexity of the underlying market and he adjusted his strategy, by BEHAVING more bullishly (even if he will continue to TALK bearisly, like Tice)
Spitznagel is like a more bullish Taleb, which confirms what I was talking about before. Consistent wealth creation in markets is very much tied to a good balance between optimism and pessimism, in most instances
It took me a long-time to realize all of this but I'm just posting this all here for free. If anyone learns anything from this and becomes more balanced then I'm happy
The Chanos thing is fascinating because he is an INSURANCE TOOL that is used by people that have, usually, lots of bullish positions. His actual fund does not make money (just pull up the numbers from valuewalk.com) but his RELATIVE performance is terrific. He was flat when the SPY returned 10x over 20 years. So he is a good little hedging tool for portfolio managers that went some peace of mind/insurance. Pretty much like Spitznagel buys puts and says it enables him to buy more stocks (although, the Spitznagel model is a lot less capital intensive)
A lot of confusion happens because these gurus TALK in one way but BEHAVE in another. Thats one of the reasons why it took me so long to learn this. You cant listen to these people, you got to analyze the mindset/heuristics/biases/behaviors/events of people that made it big and see what can be learned
A lot of confusion happens because these gurus TALK in one way but BEHAVE in another. Thats one of the reasons why it took me so long to learn this. You cant listen to these people, you got to analyze the mindset/heuristics/biases/behaviors/events of people that made it big and see what can be learned
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With regards to this idea, I finished my Wall Street vs Silicon Valley article and already got back from someone that did the grammar corrections. I'm sending to a few people to get some feedback on and whether they disagree with the logic of the argument (one of these people is actually Nassim Taleb, I will send him the article in a letter format next week to see what he has to say about it). Once I'm finished I will try to find a place to publish it and will post the link here