jmorace
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Latest Comments19 Comments
Are Liquidations Profitable? Capital Crossing Preferred vs. HealthShares
waddaya tink u tradn' here...... MO??? 'bout 2000 shares traded friday.
good luck chum!
Fundamental Valuation: How Low Could We Go?
Aslo of note is that the credit markets are pricing in severe economic weakness. There is a mismatch between what they are saying to us, with some AAA corporates trading 600-700 basis points over treasuries.
To me that is already saying 550 - 600 is pretty certain. It takes time for a giant whale the global equity markets to get to their trough valuations during this adjustment. perhaps another year or two of downward action to do so.
just my thoughts,
jmorace
Julian Robertson: Some Buying, but Bearish on the Economy
Decades of Negative Returns: A Long-Term Look at the Dow
I remember in Jesse Livermoore's book about the 20s run up and subsequent crash, it ain't over until the big boys puke. We need to see panic selling from Calpers and Goldman and Citadel and Harvard. Not there yet.
Jmorace
Relax Basel II's Bank Capital Adequacy Requirements
Although, many small/mid regional/domestic banks have very high loan quality standards and these folks can still get credit now (I think....) So, maybe it wouldn't help, but it can't hurt.
JMorace
Fear Creates Unexpected Bargain in CD Market
Inflation, Deflation and the U.S.-China Relationship
Bailout Datapoint of the Day, AIG Edition
JMorace
A Look at a Market That Punishes Risk
But in terms of the junk bonds, with closed end funds trading at a 20% discount to NAV and yields of 15ish %, it seems that it might be worth scaling into a few of these dogs that everyone is throwing out. Same might be said for closed end, investment grade, muni bond funds with 6.5-7 tax free payouts.
I'm thinking here that even if these things collapse another 10 or 15 percent, if you scale in, and you're collecting the coupon as you go, you have a pretty good chance of beating 3month t-bills in a year. Of course, if you belive the world is coming to an end, well, then t-bills are probablly the best choice.
Tactical Asset Allocation, Part I
Tactical Asset Allocation, Part I
Another interesting and informative piece.
Regarding the internet etf, IHH, I notice that there was an odd downward move in the price of the index on one day in May. There was barely a corresponding volume blip or even the typical explosion in volatility one typically sees after a movement of this size. Of course, arbs sometimes come in to exploit the premiums or discounts on these etfs, but then you see the volume spikes and volatility. There are 14 stocks in the index and I looked at the price action of the top 10 of them on that day. There was no corresponding price move in any of them. Perhaps the etf was either restructured, reorganized or split.
In any case, there are odd changes in securities prices because of cap distributions and reorganization, spin outs and what not. I’m wondering how qpp deals with these odd events to ensure robust and accurate data in the program?
Thank you,
JMorace
The Broken State of Corporate Bonds
Risk Management and Concentrated Positions
It appears so many of these investment firms were not really using the tools available for modern portfolio management. Of course, the two that seem to be standing out for using them correctly are Pimco and GoldmanSachs. Gs is forever talking about value at risk and pimco seems to have a strong investment thesis for what's going on.
Be that as it may, I've been following your articles and theory for some time now. You've really been right on and laser like in your articles. Congrats.
What would be helpful to me at this point, as an individual investor, is some insight into a few basics. Perhaps you could point me in the right direction to find some information on them. For instance, how is it best to enter into and adjust a modeled portfolio? Does one leg into this? Or just jump in 100 percent? Perhaps average in over the course of 3 months or something else? Also, what are the options in terms of rebalancing the portfolio allocations? Once a year? Every quarter? How does this work?
Finally, some insight into the tax consequences of Tips held in taxable accounts would be great.
Thanks again for the great work,
jmorace
Morgan Stanley: Exploding the Short-Seller Myth
I bet a cds market is thin and illiquid. Much easier to push around than a stock market. So, what happens when a Credit default swap rate blows out? Does it create forced hedging sell volume in the stocks?
If you're a market maker in london and somebody comes in and buys a hundred million bucks of cds's from you, it seems one of the ways to hedge this position would be to short a hundred million dollars of the stock, buying puts, selling calls, or outright shorting.
If the premium paid for the cds's seemed particularly high at the time you wrote them, then it would be very easy to aggressively sell the underlying collateral. After all, in a corporate wrap up, the bond holder is paid in full before the equity holders get a dime.
So, could this have something to do with the unusual option volume and share trading volume happening to these stocks on these grand falls we have seen? Could it be one of the causes? The CDS buyer, of course, is planning on attacking the stock from the short side, but it seems like the cds seller MUST ALSO ATTACK to hedge his exposure.
Is this right? Anybody?
Jmorace
The Nature of Risk
To pick an individual equity implies a process of selection -- so even if everyone's selection process is different, some reasoning has occurred involving fundamental, technical, random or combination of reasoning schemes. But hand in hand with that selection has to be a system of rules as to how to mange these individual selections.
I see it breaking down into two areas: First, a change in the investment reasoning and second a robust system of cash management. So, if an individual equity is selected for a fundamental (or technical or combination of) reason(s), and one of those reason changes, the equity should be sold. (Note this is completely different than liquidating an asset class.)
In terms of cash management, it’s interesting to note that if a stock declines 50% it takes a 100% gain on it to get you back to zero, which is pretty hard (if not impossible) to do. So the stock should be sold well before it gets this damaged. If s/he has a coherent system of selling (and buying) rules in place, the individual equity holder will not have to confront this ugly situation. Which also precludes having a total loss (for the former owner, since they've already sold), even if the stock goes bankrupt.
That said, I do think running the stocks through the qpp program can be a useful screen to use in addition to other selection rules.
best,
JMorace