The Credit Crisis Financial Stocks Short Journal

Quote from ralph00:

Glad to see you listening to reason.:D
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Still long those ZQ Feb 2010, the spread now is 13.5bps so I'm thinking of taking profits. Then rolling over a few months down the curve. I'm not truly worried about whether the contracts have positive expectation(as you seem to be) I was worried about being right and get shaken out by the market in a fat tail scenario(Or worse, blowing up due excessive contracts)
Now if NFP prints positive due government hiring 300K people for some bs temporary job, I can ride out till the insanity clears
 
FRE is coming back to the levels at which I ADDED to my short position last year(then Paulson and Lockhart moved in sending them to 0.70c), this rally is getting to insanity levels, contrarian signals galore. CBOE reported the lowest relative equity put/call ever, percentage stocks over 200 MA at extremes
http://quantifiableedges.blogspot.com/2009/08/percent-of-stocks-above-their-200mas.html

Does that mean that the rally will stop?No, it means that if you are net long and make money a few months from now, you got LUCKY, its just that simple. Thats because history shows those situations dont bring returns on average
 
Couldn't you hedge your exposure to LIBOR by shorting front month euro$ contracts. I expect it will cost a few tics/month, but if the LIBOR/FF spread explodes again, you will be covered.
 
Quote from Daal:

Does that mean that the rally will stop?No, it means that if you are net long and make money a few months from now, you got LUCKY, its just that simple. Thats because history shows those situations dont bring returns on average [/B]
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I can see still lots of passionate bears. And, passionate heads do not make money - 95% of the time. Still only few passionate buyers. Bringing market down ... who will be buying on the way down then ? No buyers - no profits. So it pays to push market higher until passion to short is killed. And get some passionate buyers at the same time using usual channels to distribute info and check feedback. This logic now less predictable as % of bears converted already. But large down leg does not seem likely yet.
 
Quote from austrijec:

I can see still lots of passionate bears. And, passionate heads do not make money - 95% of the time. Still only few passionate buyers. Bringing market down ... who will be buying on the way down then ? No buyers - no profits. So it pays to push market higher until passion to short is killed. And get some passionate buyers at the same time using usual channels to distribute info and check feedback. This logic now less predictable as % of bears converted already. But large down leg does not seem likely yet.
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Remember CROX?This is the CROX stock market, we are headed to a massive earnings miss if a V shapped recovery does not occur. Thats why I'm insisting in staying bearish, 4% growth last happened in 2000(it didnt even happen in the boom of the 'liquidity' years 2003-2007), and 4% growth will be needed in 2010 to bring operating earnings to a level that people will like ES at 1020

If you knew a stock was headed to a big earnings miss wouldn't you short it?The next 12 months should have earnings misses left and right, yes the trend is up but the technicals I'm looking at are overbought, the fundamentals are bad, many contrarian signals, the rally is very old. So I will let the bulls take the last 5% when the party ends we should see those gap down days and everyone headed to the exit at the same time
 
Believe me, I really want to get bullish in risk assets and say all the bad things are over. Then I will just load up in commodities for years, I wont even have to think(except which call to buy, which ETF is better). If equities and the economy are in a sustainable bull run then the secular commodity boom should return, the old 15% a year unlevered ETF commodity returns would come back, add some leverage and it would be easy to make some good money. But I rather stick with reality
 
This is something the trendfollowers wont like but I wonder what is Johh W. Henry average return when he held a long position in a uptrend while stocks were massively above the 200MA.

He will claim he cant know when the trend will end and ignore any technical factor but I highly suspect he would be richer had him released long positions once stocks got there, by significantly tighten his trailling stop(or decreasing his position size). If he keeps the same stop/size he is essentially saying that the technical factor is meaningless and the same probabilies of a rise exist now as they did in April 09, which of course, is ridiculous. History shows the market struggles when stocks are ridiculously above the 200ma
Yes he could miss some possible run to 1150 but more often than not he would be right, isnt trading about having the odds in your favor?

This is why I dont like to trade blindly trendfollowing for position trading(for short time frames it would be more reasonable) , how can I ignore reality when its staring right in my face?
 
I do the following in my trendfollowing portfolio (across a couple dozen future markets). I look at the distance of price versus a number of moving averages and calculate the standard deviation of these differences: how "abnormally" far below/above the moving averages is this market?

Depending on distance, I gradually reduce position size. Full position when within "normal" distance to MAs. Smaller positions when "far" from MAs.

Not sure what exactly Henry or other trendfollowing funds are doing in detail but probably something very similar in logic. I take note though that Henry's monthly returns are magnitudes more volatile than e.g. MAN, Transtrend or Winton's.
 
Quote from makloda:

I do the following in my trendfollowing portfolio (across a couple dozen future markets). I look at the distance of price versus a number of moving averages and calculate the standard deviation of these differences: how "abnormally" far below/above the moving averages is this market?

Depending on distance, I gradually reduce position size. Full position when within "normal" distance to MAs. Smaller positions when "far" from MAs.

Not sure what exactly Henry or other trendfollowing funds are doing in detail but probably something very similar in logic. I take note though that Henry's monthly returns are magnitudes more volatile than e.g. MAN, Transtrend or Winton's.
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This method makes sense. One thing that I'be been considering is that could be helpful is to add significant contrarian indicators to the position sizing algorithm. If C BSC MER had done that, they would have decreased their exposure to US real estate every year, they would still caught the trend but when the music stopped they would have lost less money. Ospraie , Boone Pickens, Lucent shareholders, etc. Human nature seems to makes us do the opposite, the more we make money on something then more risk we want to take there
 
Looks like Hugh Hendry is long short sterling(UK equivalent to eurodollars) calls for Aug 2011. He says he is getting 10-1 if the BOE doesnt move, Aug 2011, seems unlikely they wont have done at least one hike but at 10-1 heck, its worth a bet(At one or two hikes maybe the calls still pay off something). I will try to get a free quote in these calls tomorrow without having to pay 40EUR to IB, probably will risk a bit of money there
 
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