Global Macro Trading Journal

He also makes a very good case why that based on fundamentals, bitcoin is actually undervalued. Its worth $161B right now, vs $10T of gold. But if you go down the list, bitcoin stacks up nicely vs gold as a store of value. Dalio says bitcoin is too volatile to be a store of value, apparently he never saw the gold charts from the 70's or 80s. In the 80s gold lost 80% of its value in real terms from the peak until its bottom
Bitcoin is just young, but the time its no longer young, it will be hard to make big money on it. It will become more like gold going up or losing 10-20% a year. By getting involved when its young right now the potential is multiples of the purchase price

And btc survived the 2017/2018, it proved that it wasn't pets.com. Dalio is just too blind to see it
 
Canary in the coal mine?
One of the best banks barely participated in the rally, now its a 52w lows
unknown.png


I'm more defensive than ever when it comes to US risk assets
 
Daal said:
Canary in the coal mine?
One of the best banks barely participated in the rally, now its a 52w lows

I'm more defensive than ever when it comes to US risk assets
More...

I don't think financials provide much of a useful signal anymore. The market is discounting COVID-related losses in lending to SMEs and leveraged landlords, plus an infinite future of ZIRP/NIRP and yield curve control. OTOH listed non-financial stocks and the bond market benefit from Fed support, while the massive monetary inflation plus promises of low rates forevermore is going to set off bona fide bubbles in the more speculative corners of the market.

With so many bulls blown to the sidelines and hoping with increasing desperation for a retest of the lows, it follows that either there will be no significant dip, or one will occur but against a backdrop of shock bearish news much worse than what the market is presently expecting - so what could cause that?
 
Specterx said:
I don't think financials provide much of a useful signal anymore. The market is discounting COVID-related losses in lending to SMEs and leveraged landlords, plus an infinite future of ZIRP/NIRP and yield curve control. OTOH listed non-financial stocks and the bond market benefit from Fed support, while the massive monetary inflation plus promises of low rates forevermore is going to set off bona fide bubbles in the more speculative corners of the market.

With so many bulls blown to the sidelines and hoping with increasing desperation for a retest of the lows, it follows that either there will be no significant dip, or one will occur but against a backdrop of shock bearish news much worse than what the market is presently expecting - so what could cause that?
More...

The S&P forward PE is 20x, the highest since 2002. In a period where honestly, this is the first since I started to macro trade where I have no idea what will happen. In 2008/2009 it was horrible but even at the lows of the market I had an idea of what would happen. I was completely wrong of course (I thought the US was headed to a depression) but I felt I understood the dynamics and had a view. Now there is no playbook, there is no analog (In the 1918 globalization was a fraction of what it was today, today even the Channel Islands have a public health crisis). In a situation like this I dont think it makes sense to pay top dollar for stocks
And the analysts forecasting that forward PE could easily be wrong to the downside a lot
So I cashed out my US equities (other than Freddie Mac preferreds, which I have no idea what will happen but the pay off is big enough I decided to stick with it). I'm long China stocks (20%) and what I had left from my Brazilian equities (5%) with a small short on SPY. Plenty of gold and bitcoin (plus a few percent in Galaxy Digital stock) and the rest is cash or short-term bonds. I'm defensive because there is some much conflicting info and uncertainty, and a lot of the conflicting info is medical which is hard to know what is correct or not.
I believe this is a period to preserve wealth rather than to try to get rich. Especially because I can try to get rich through daytrading. But as far as investing and position trading goes, I wanna keep what I have.
 
Just today I heard a podcast talking about how a corona vaccine is likely to have the same effect as the flu vaccine, that its effectiveness will be limited and you will have to retake every year (how they would vaccinate 7B people every year is beyond me). I cannot tell how likely this is to be correct but if it is, we are talking about a depression-like economy in several sectors for years to come (until the virus dies out naturally after several waves like in the 1918 pandemic). What about all these mutations of the virus? What if the vaccine is almost worthless the moment its discovered? We could be talking about 'social distancing' well into 2022. In a world with RECORD levels of debt (federal, state/local, corporate, consumer). That is a recipe for nasty depression
I dont know how likely this scenario is but its certainty a scenario. I rather pay up for stocks later than to hold it all the way down. I was quite leery of being long US stocks into a recession because of the risks of a UK 1970's style collapse (due big budget deficits and gov debt) but in a depression, I certainty have to play even more carefully.
By the time this corona crisis is over the US will be headed into an entitlement crisis (SS and Medicare). Long-term interest rates might very well explode especially as this Fed policy is likely to lead to inflation down the line.
I much rather be long China in the next 10 years vs US
 
Here is another reason why I'm skeptical of US stocks. The US deficit is going to be 30% after the Pelosi bill (assuming they cut it from the current price tag of $3T, if not it will be higher). And then its going to stay high for YEARS to come. Who is going to pay that bill? It cant be individuals, they have had a disproportionate smaller share of the economic pie of the previous decades and unemployment will be huge, it must be corporations which had RECORD profitability going into this. Those corporate tax cuts will be rolled back and new taxes will be implemented, or some version of the such. The IRS will crack down hard on those offshore schemes that AAPL and other companies use. There is no other way. Its either that or the Fed will foot the bill, which would lead to hyperinflation. There will be inflation and monetization but they cant foot the entire bill, its just too much money. So the people thinking that after the recovery corporate america will be back to its record profitability will be mistaken in my view, they will foot the bill for the recovery. Specially if Biden wins, but even if Trump wins it might happen

Meanwhile China debt to GDP ratio is 50%, the deficit is forecasted to be 5%. They have much more leeway for a continuation of a debt bubble. I much rather own KWEB vs QQQ. And I dont even like China, in terms of politics. I think they are run by assholes and douchebags, but I have to face the facts. They are actually doing great in terms of policy, both in the corona response as well in the fiscal and monetary department. Meanwhile Trump and Pelosi are out of their minds. I'm sure China will face setbacks, maybe even a banking crisis, but I think that will be a buy (like 2009 was in the US) but the US empire looks to be peaking and I dont want to own this train wreck on the way down

In fact, a trade to watch is a US dollar reversal for a long-term short. There is a nice short-squeeze right now but at some point, the numbers will matter and the USD will be a big short. I dont know when, it could be tomorrow or 3 years from now but I will keep my eye in the US index from time to time. When this starts to go I will sell most of my dollars and buy Chinese Yuans, euros, maybe JPY AUD, etc
 
Daal said:
Here is another reason why I'm skeptical of US stocks. The US deficit is going to be 30% after the Pelosi bill (assuming they cut it from the current price tag of $3T, if not it will be higher). And then its going to stay high for YEARS to come. Who is going to pay that bill? It cant be individuals, they have had a disproportionate smaller share of the economic pie of the previous decades and unemployment will be huge, it must be corporations which had RECORD profitability going into this. Those corporate tax cuts will be rolled back and new taxes will be implemented, or some version of the such. The IRS will crack down hard on those offshore schemes that AAPL and other companies use. There is no other way. Its either that or the Fed will foot the bill, which would lead to hyperinflation. There will be inflation and monetization but they cant foot the entire bill, its just too much money. So the people thinking that after the recovery corporate america will be back to its record profitability will be mistaken in my view, they will foot the bill for the recovery. Specially if Biden wins, but even if Trump wins it might happen

Meanwhile China debt to GDP ratio is 50%, the deficit is forecasted to be 5%. They have much more leeway for a continuation of a debt bubble. I much rather own KWEB vs QQQ. And I dont even like China, in terms of politics. I think they are run by assholes and douchebags, but I have to face the facts. They are actually doing great in terms of policy, both in the corona response as well in the fiscal and monetary department. Meanwhile Trump and Pelosi are out of their minds. I'm sure China will face setbacks, maybe even a banking crisis, but I think that will be a buy (like 2009 was in the US) but the US empire looks to be peaking and I dont want to own this train wreck on the way down

In fact, a trade to watch is a US dollar reversal for a long-term short. There is a nice short-squeeze right now but at some point, the numbers will matter and the USD will be a big short. I dont know when, it could be tomorrow or 3 years from now but I will keep my eye in the US index from time to time. When this starts to go I will sell most of my dollars and buy Chinese Yuans, euros, maybe JPY AUD, etc
More...

With respect, all this strikes me as getting too far ahead of reality.

A debt crisis and USD collapse has been predicted for years - it hasn't happened and the USD shows no signs of weakness, quite the opposite. Right now, U.S. tech stocks are leading the charge higher and will almost certainly continue to do so for several more years.

The problem with China isn't policy minutae, it's that China is a techno-totalitarian dictatorship under God-Emperor Xi. The country's reputation and repressive character is worsening, not improving; tensions between China and other countries, as well as domestically within China, will only rise going forward. Ask the Australian beef producers how their China bets played out. As the Fed pumps more and more cash into portfolios in the USA, Japan, and Europe, is that cash going to get deployed into Chinese stocks (lagging performance, huge political and reputational risk, no compelling story) or shoveled back into the same USA-centric momo sectors and plays which have been consistently printing money for years?

IMHO - your thesis may well be proven right eventually, but you're going against trends that will take years to halt and reverse - plenty of time to re-position once you see things actually playing out as predicted.
 
Specterx said:
With respect, all this strikes me as getting too far ahead of reality.

A debt crisis and USD collapse has been predicted for years - it hasn't happened and the USD shows no signs of weakness, quite the opposite. Right now, U.S. tech stocks are leading the charge higher and will almost certainly continue to do so for several more years.

The problem with China isn't policy minutae, it's that China is a techno-totalitarian dictatorship under God-Emperor Xi. The country's reputation and repressive character is worsening, not improving; tensions between China and other countries, as well as domestically within China, will only rise going forward. Ask the Australian beef producers how their China bets played out. As the Fed pumps more and more cash into portfolios in the USA, Japan, and Europe, is that cash going to get deployed into Chinese stocks (lagging performance, huge political and reputational risk, no compelling story) or shoveled back into the same USA-centric momo sectors and plays which have been consistently printing money for years?

IMHO - your thesis may well be proven right eventually, but you're going against trends that will take years to halt and reverse - plenty of time to re-position once you see things actually playing out as predicted.
More...
Thing is, trends can't be looked in a vaccum. They need to be reassed whenever there is a catalyst. And this catalyst is gigantic, the largest we will see in our lifetimes. And I just dont see how there will be a resumption of the stable disequilibrium 'buy the dip, TINA' market. Even if it does, growth will be terrible and taxes will be up hurting after-tax EPS, so % returns will be smaller than in the 2009-2020 period. That in the best case, we could easily see a lost decade in US stocks in pessimistic scenarios. Especially for one pays top dollar in terms of valuations

Yeah, China stocks dont have the benefit of Fed flows as much but they dont need, they actually have decent fundamentals in a country that is much less vulnerable

The US has so much risk it just doesnt make sense. Its like Druckenmiller says, the risk reward is just not there. Get the SPX at 2200 and I start to buy (selectively) again. But at SPX 2800 its time to take chips off the table. Plus even if by some miracle, US stocks are up 30% in the next 18 months, I bet China will be up as well, maybe not as much but they carry much less risk imo
 
@Daal I'm not saying you are wrong outright, but your timing might be off.

I'm with @Specterx on this. What you might not be discounting is a NASDAQ blowoff top like 1999 early '00. Then you will get your depression after SPX 5k(SPX > - 50%).
 
You must log in or register to reply here.
Back
Top