Global Macro Trading Journal

[Daal]

https://cointelegraph.com/news/bitc...-taken-2-of-gold-market-cap-new-data-suggests

This is a interesting take on the BTC market cap

"Using realized cap, which calculates market cap in a different, more precise manner, the real “theft” from gold actually stands at 2%, says Ki.

Unlike market cap, the metric measures the price at which each bitcoin last moved, and excludes coins on centralized custodial exchanges, thus excluding speculative movements. The total is also kept lower by long-lost BTC, which will have last moved at likely far lower prices than today’s."

I dont agree with deducting BTC from centralized custodial exchanges but I do agree with removing long-lost BTC
https://decrypt.co/37171/lost-bitcoin-3-7-million-bitcoin-are-probably-gone-forever

So the market cap is actually likely 20% less than the displayed numbers out there

 

[Daal]

This is from a Grayscale PDF presentation to accredited investors I downloaded

I bet a lot of managers will continue to be persuaded by this and add a few percent to their portfolios. The 2/20 structure also encourages risk taking, especially when it comes with limited risk and exponential payoffs. I say BTC $80K+ by June

 

[Daal]

I have priced a lot of Ethereum competitors that are worth more than $1B vs ETH to see how they are doing. The charts all look terrible, except for DOT (Polkadot) and ADA (Cardano). And DOT has been doing better than ADA long-term. I'm long DOT already and ADA is on watch if it keeps climbing (versus ETH, not vs the USD).

The idea is that IF one of these coins is going to kill Ethereum (which I doubt but they might) I want to be there for that.
I think that's a better plan than buying a basket of them, or trying to understand them one by one. They are not easy to understand, it takes weeks of work and you only truly understand when you code in them. I dont have time to learn how to code in 5-6 different blockchains. So I will use the market as a guide. If they are going to break ETH, their charts vs ETH will start to look better and better, that's the time I will be there buying
But other than DOT and ADA, the others all look awful

 

[Daal]

Gold backed cryptocurrencies, a pretty neat idea. This is a custodial solution which is subject to government influence but so is GLD. But with crypto, at least is a lot easier to move and deal that currency. I'm looking forward to the day where I will be able to close my financial brokerage accounts and own all my assets in crypto wallets with strong security and backups. I will no longer receive notices from my broker about this or that law that now says that I will have to change the jurisdiction of my company within 30 days or I will be liquidated of all my assets. My assets will no longer be vulnerable to the security policies of the broker, instead I can choose my own. I will be able to move in and out of the assets 24/7 through Uniswap. Plus many more advantages. Pax Gold effectively is creating a 24/7 liquid gold market, this is remarkable. I will be studying the possibility of switching my GLD position to Pax Gold in the coming weeks

Meanwhile, dumbass Peter Schiff (owner of Euro Pacific Bank, which I have an account at) wants me to invest in his 'gold backed' account at the cost of 2.5% load up fee for some gold in Singapore that I can never redeem. If this silly man were to realize the potential of crypto HE would have done what Pax Gold did years ago. Instead he will be scrambling in a few years when he finally realizes he missed the boat

Crypto gives the ultimate freedom!

 

[Daal]

If this Pax Gold idea works out, and I dont see why it wouldn't, then the world could have Tokenized US Treasuries, Microsoft Shares, German bunds, etc etc. If that is done as a custodial solution subject to the whims of regulators, its not ideal but its already an improvement to the system. Its going to add 24/7 liquidity to a lot of things, the ramifications of that I dont know what they will be but it will be significant.
But I'm sure, non-custodial solutions will be worked out as well I'm sure. Either way it seems to me that Ethereum will be a big winner of all of this

 

[Daal]

One reason not to own Pax Gold vs GLD is the Ether fees everytime I want to sell some/rebalance. These fees an add up and they are uncertain, unlike broker commissions. But if ETH2 delivers that will be out of the window. It will be super cheap to move ETH tokens and ETH itself around. I really think that if ETH2 works out, ETH will be over $10K, maybe even over $20K as people see that the financial system will start a long-term trend of moving assets into it

 

[Daal]

This crypto revolution is really amazing. So much has happened since 2017. Now pretty much anyone concerned about their banking system can have funds deposited in a Swiss Bank through an Swiss audited ERC-20 Ethereum token
https://www.bitcoinsuisse.com/stablecoins#:~:text=The CryptoFranc (XCHF) is a,Ltd on a monthly basis.

And then they 'wire' this funds to other people through the internet super easily. There are some issues with regards to fees but they are being worked on. At this point the question is, what cant be tokenized?

 

[Daal]

FTX offers people the chance to buy SPY, GLD, TSLA, Google, BABA and a number of other stocks through TOKENS
https://ftx.com/trade/TSLA/USD
https://ftx.com/markets/stocks

Its still early, so they dont allow US citizens to own this or for people to move these tokens. But regulations will evolve. At some point they will allow people to move these tokens. And once that pandora box is opened it will not be able to be closed back. Traditional brokerage is about to be massively disrupted, crypto is the free market force on steroids. I'm looking forward to the day I will own my portfolio outside a brokerage and bank, while at the same time, learning as much as I can about computer security to make sure I cut of all the tail risks associated with hacking

 

[Daal]

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

I said that in 2017. Hempton is now hurting big time. December was his worst month ever and January has been even worst in terms of short squeezes, he is probably down much further
https://www.dropbox.com/sh/nsg66b7pc45phtc/AAB1wKbYqGLAo12A2FiFSyE7a/Bronte Capital Q4 2020.pdf?dl=0

That's what is so bad about the long-short stock strategy. Either you keep the short book small (like 10-20%) or:
-You do like Einhorn and short 80% in concentrated positions, and blow up when your timing is off or you are just wrong (you can also blow up when a mega squeeze show up, like GME or Volkswagen)
-You do like Hempton and short 50% with tiny positions in 100 companies. But that is still idiotic because when melt-ups happen you lose all of your equity. In the case of Hempton he is just bleeding slowly, he isn't as bad as Einhorn, but he is still uninvestable. He might very well close up shop this year

I dont see why what happened in January (in terms of the short squeezes) cant continue for the entire year. But if you tell that to Einhorn or Hempton they will say 'we dont try to time the market', well, thats exactly what you are doing, its implicit in the strategy. People like Einhorn and Hempton lack imagination, they dont see why this enviroment cant continue for 1-3 years. As a result, they take these massive tail risks, which are not even tail risks any longer, its a baseline risk at this point. Its no wonder he doesnt get Bitcoin, people that lack imagination, are competitive and love to be contrarians, usually dont get it

 

[Daal]

Over the last 4 years I have done a lot of short selling in my day/swing trading (I'm looking to move away from that but thats for another post).

One of the things that I've learned is that the results of someone who does a lot of short selling aren't just the "accumulated profits" that trader/investor has. If you only look historically, you will miss out the 'black swan' factor. When a huge short squeeze occurs and the person is forced to get out either because of risk management, margin calls, broker buyins, portfolio rebalancing (as the short position becomes larger as % of the portfolio) or any other reason. So whatever the results that guy has, you got to discount by some amount in order to take into account that the guy took that tail risk but was fortunate enough not to get taken to the cleaners. As a day trader, that risk is severly decreased because you can always bail out of the short as the squeeze starts. But when you carry positions overnight (like the long-short funds do) that risk just increases massively

This makes me conclude that the vast majority of long-short funds results are overstated EVEN if they say 'we short small'.A 1% position can lead to a big loss, even if it doesnt break you. This is specially a concern if the fund has a focus in small and mid cap stocks, where those squeezes occur far more frequently. But even the bigger caps sometimes will take the shorts to the cleaners. Thats pretty much what happened to Einhorn on Volkswagen. But I'm thinking specifically of guys like Hempton who get involved in small and mid cap shorts, his results are almost certainly overstated given that it appears that he havent had a huge squeeze yet. I believe he got squeezed pretty hard this year on BTU (before bk), I'm not sure what his response was but if it was to just hang on tight to the short and 'let the fundamentals work out', then his results are even more overstated. I've seen a lot of shorts blow up over the years by thinking like that. While they might not blow up with 1% shorts, they will still post a huge loss at some point in the future

I wrote this in Dec 2016. I feel vindicated. As a daytrader and swing, short selling was a significant part of my strategy. As a result, I learned very quickly, the upsides and downsides of that strategy. Its like living 10-20 years in just 2-3, because you see so many situations, so many trades, so many squeezes, gains, bks, etc.
Hempton is probably down 15-20% at this point and if the retail army continues for a few months, it might be his end.
Now more than ever I believe that the short selling strategy (in the context of long-term portfolio construction) has to have hard limits like 10-20% and only the best ideas should go in. And there NEEDS to be timing of those shorts, you cant just short based on fundamentals and hope you wont get squeezed. You cant play shorts like Warren Buffett plays longs, the assymetrical risk changes the whole game. If you are going to short on fundamentals without the timing, buy puts. That way you dont really care if the stock goes to the moon, you are protected. But Hempton has a superiority complex, and lacks imagination