I'm scared.

[FerdinandAlx]

What you're experiencing is a shift within the perceived pendulum of inflation and deflation. The markets are clearly anticipating an ECB rate hike tomorrow and they expect the money supply to tighten somewhat. The result is that market emphasis is shifting towards deflationary pressure stemming from economic recession.

The result can be clearly seen in the way raw materials markets behaved this week - crude oil being the exception. If the ECB raises rates tomorrow you can expect further pull back in commodities - oil included. Treasury markets will strengthen somewhat as emphasis slightly shifts from inflation to deflation.

You'll likely experience some more drawdown in the coming weeks. Don't worry though, your longer term scenario of global stagflation is sound. Central banks are fearful that they may tighten the money supply too much. The industry they represent derives very little benefit from scarce money.

 

[nonlinear5]

Quote from wutangfinancial:

Generally, I churn out daily returns of +.5-1% regardless of market direction

0.75% daily return compounds into about 552% annual return. I seriously doubt that it's possible to do it consistently at all.

 

[wutangfinancial]

^yeah, but I'm more worried about a sell off in EEM as a whole. Even if commodities rise, EEM producer p/e multiples could seriously contract...

Japan and Australia might be safe havens.

 

[wutangfinancial]

Quote from nonlinear5:

0.75% daily return compounds into about 552% annual return. I seriously doubt that it's possible to do it consistently at all.

I said generally. Obviously, those slight neg. days seriously affect the geometric mean.

 

[ProfitTakgFool]

It sounds as though your longs are not rising and your shorts are not falling if I understand you correctly. If that is the case then I'd say we are closer to a bottom than ever because the strongest stocks are commodity related companies and the weakest are just about everthing else. So your weak stocks are firming up and your strong stocks are beginning to break? This assumes are are long momentum stocks and not value stocks, and short weak stocks, not expensive stocks. Can you provide a bit more information on how you put on your neutral positions?

Quote from wutangfinancial:

^I hold between 30-40 positions, long and short included. However, this was not a case of idiosyncratic risk acting up. All of my long EEM positions were down MORE than my shorts, which were still down, just not nearly as much. I've never seen a spread of this magnitude. Generally, I churn out daily returns of +.5-1% regardless of market direction, thus resulting in a super smooth equity curve. A day like today makes me look bad.

There was a kind of reverse in momentum, across all my longs and shorts. There's been overall deceleration in the drop of my shorts, and a serious break in the upward momentum of my longs. I ignore changes that result from idiosyncratic risk, i.e. one company missing earnings, etc. so as not to over trade. But there's clearly a fundamental shift here not resulting from general market noise.

I believe we may be in a real transition phase in terms of global macro conditions, as the market always looks ahead. If exporters are hurting, and the companies that import raw materials are hurting, there's a different theme taking hold-the only thing that could explain a decrease in the share price of both is the return back to positive real interest rates.

 

[ProfitTakgFool]

The biggest mistake investors and traders make is they try to time the market. No one can do it.

Quote from wutangfinancial:


I DO NOT believe in market timing. At all. I never, ever go to cash...I have too much humility in this regard.

 

[FerdinandAlx]

Quote from wutangfinancial:

^yeah, but I'm more worried about a sell off in EEM as a whole. Even if commodities rise, EEM producer p/e multiples could seriously contract...

Japan and Australia might be safe havens.

By EEM I assume you mean emerging markets. Buy OTM puts on the Bovespa to reduce the risk of a sell off in emerging markets as well as to reduce risk of a market shift away from your global stagflation scenario.

 

[dtrader98]

speaking of which, anyone have any type of data or plots for correlation of multiple markets over past few years to present to post?

TIA

( I explained how to do a basic version of this somewhere back in the TA threads, but don't have time to run the numbers right now).

 

[kubilai]

Hmm, I'm always watching out for my strategy to die a fiery death too. We may well be on the cusp of a big change. How often do you get a drawdown like this?

 

[Spectre2007]

Quote from dtrader98:

speaking of which, anyone have any type of data or plots for correlation of multiple markets over past few years to present to post?

TIA

( I explained how to do a basic version of this somewhere back in the TA threads, but don't have time to run the numbers right now).

some commodity firms track correlation matrices...