Investments Trade Log

[CS]

Q2 2020 was the greatest quarter ever in the history of the PP (25% each SPY/TLT/GLD/BIL). Dollar weakening against all assets.

After six years of meh, it is strange. And strangely guilt-inspiring to do well while the world burns.

[Mister Imperceptible]

The 50% allocation to BIL/TLT is being repressed and devalued so the guilt maybe undue. Either the currency, the bond market, or the equity market must be the release valve and the government and central bank is price-fixing the bond to encourage risk-taking in equity markets so the currency becomes the release valve. The benefit to bondholders of a price fix is that they can trade their bonds near the top without a capital loss in nominal terms but the trade off is now the increasingly negative real yield on the bond.

GLD is anti-correlated to SPY for much of the cycle but becomes correlated early during liquidation and aggressive reflation (or attempts at reflation), as it did 2008-2011. It is not that fundamentals mattered more than flow in the recent mid-cycle, but that the importance of flow is now obvious to everybody. Asset prices, correlation, and volatility are just a function of flow/liquidity at this point.

[Lemur]

Bought back into AMD at $78 a share after missing out on gains from $65-$78. I realized I was missing out when I was thinking "maybe it will go back to $65...maybe it will go back to $70...maybe $75 - CUT!! Just need to get back in.

This party isn't over. FOMO is going to push this thing much higher.

[Mister Imperceptible]

Perhaps Lemur should read pages 82 thru 84 of this thread and compare his thoughts and emotions now to that time and see if there is an analog signal.

[ertyu]

i envy you guys who have fomo. i don't get fomo, i puke my cash position.

[Lemur]

@MI

In hindsight, I was 'right' making those CALLS. Its just literally happened right before COVID tanked the market...no one could have predicted that.... It is just my timing was the worst in the world. Cue the guy who buys the market at the top.

I do however have great reasons to be long AMD. They just over-took INTEL in the chip war and still only own 9% of the market share. What messed me up here was trading away upside on a covered call....never would have thought a 20% jump would happen in a 3 week span but it did.

Lesson here is different - need to be careful around earnings.

@ertyu

If someone is throwing a wild party ought to just join in the fun and ride the upside. The art is leaving before the cops come.

[Lucky C]

no one could have predicted that

There was a window of almost one month between Wuhan lockdowns (followed by plenty of public info about how containment was failing) and the S&P 500 peak. You didn't need to be a US Senator in a classified January briefing to know that you should reduce equity exposure around early February.

[2Birds1Stone]

You didn't need to be a US Senator in a classified January briefing to know that you should reduce equity exposure around early February.

No, but for those of us that did sell in Feb, knowing when to buy back in was the other side of the battle......

[Lucky C]

The jury is still out on whether the end of March marked the start of a new bull market (meaning several years to go with the broad market making new highs, without another -20% or bigger drop). I have my doubts.

[Lemur]

@Lucky C

Maybe if I knew more about SARS viruses, I would have been more concerned in hindsight but I don't remember Ebola, Avian Bird Flu, or anything related in recent memory that would trigger a market meltdown.

"Be fearful when others are greedy and greedy when others are fearful" is up to a lot of interpretation depending upon what one considers fear or greed....It seems like the smart money is still fearful but the dumb money is getting greedy. But if dumb money pumps the market up another 20-30% , then the smart money will still miss out. Even Warren sold airlines at the bottom and missed a run-up.

[Mister Imperceptible]

Now that what everyone knew was a collapsing GDP figure has been officially reported, US market cap to GDP on Long Term Trends is now shown as above 170%:

https://www.longtermtrends.net/market-cap-to-gdp/

Guru Focus has yet to update their market cap to GDP chart.


Added more SPY puts.

[shemp]

USA market cap to GDP is based on USA GDP, but many big USA companies now get at least half their income from outside the USA. In particular, Apple, Amazon, Facebook, Google, Microsoft, etc. If you combine, for both market caps and GDP, all of USA + Canada + Australia + New Zealand + Europe, then show that ratio going back to 1950, chart would probably look quite different. I left off Japan because they had that crazy 1989 bubble that would distort things.

[Mister Imperceptible]

Pretty sure global GDP is collapsing, not just USA

[shemp]

I didn't realize chart was based on most recent GDP figures. So there's 2 factors at work: USA market cap rising faster than USA GDP trendline for many years pre-covid, and again rising rapidly post March 2020; drop in USA GDP post-covid. First factor could be explained by the point I made above (denominator should be global GDP, if multinational corporations dominate USA market cap).

My view is that second factor is transient, and most of world will soon get back to normal, but I could be wrong.

Third factor is that both USA and global GDP might soon start rising at much faster rate than pre-covid trendline, because of money printing, and USA market cap is anticipating this.

I still would like to see global market cap to global GDP chart, going back to at least 1995 (after great Japan bubble deflated), or maybe back to 1950 with and without Japan included.

[Seppia]

Third factor is that both USA and global GDP might soon start rising at much faster rate than pre-covid trendline, because of money printing, and USA market cap is anticipating this.

An interesting related read:

https://adventuresincapitalism.com/2020 ... -covid-19/

My feeling is in line with MI’s in general, I just can’t bring myself to act on it in terms of market timing.
I’m lucky I save a lot so I can simultaneously stay invested and build some dry powder.

[Mister Imperceptible]

The writer of the article is half right. If this is Project Zimbabwe then I do not want to be long the generals. I want to be long the miners and short the generals. I can lose on one leg of the pairs trade but not both, and I have expose to both right and left tails.

If the oligarchs can sneak by ATH stock prices with Great Depression level unemployment then the USA is truly a banana republic. But I have exposure to the left tail if there is even a brief dislocation in the generals. Notice how slow the government is to agree to a new stimulus package when its plebs-only. Now suddenly the deficit matters again. Hard to justify another Wall Street bailout at 170% market cap to GDP.

[2Birds1Stone]

Pretty sure global GDP is collapsing, not just USA

Looks like EU's contraction was 1/3 the USA's....if you believe the reported figures.

The problem I see, is while economic activity dropped drastically in many sectors, the smaller mom and pop shops suffered, while many of the Megacrorps flourished because that is where people parted with their dollars.....so most of the large cap stocks were neutral or even benefited from this (a la Costco/Walmart/Amazon etc).

[Seppia]

Looks like EU's contraction was 1/3 the USA's....if you believe the reported figures.

Usually the USA system crashes harder but restarts faster. Europe, with all the safety nets, usually is able to soften the blow of sudden crisis in exchange for lower long term growth/some inefficiency.

It's better to be in the USA during boom times, and in Europe in bad times.

Notice how slow the government is to agree to a new stimulus package when its plebs-only. Now suddenly the deficit matters again.

Sorry for the political tangent, but the Republican party has a history of caring about the deficit with... uh... erratic consistency. I'd say since 2008 give or take.

Spending to revive the economy after the GFC and with a D president --> ARE YOU CRAZY? WHAT ABOUT THE BUDGETS (see: Paul Ryan, fiscal conservative)
Massive deficit expoding tax cut after a 10 year economic expansion with a R president --> all cool!

and now the two completely incoherent attitudes in just a couple months

Hopefully the guys at the Lincoln Project succeed
/tangent

[George the original one]

Sorry for the political tangent, but the Republican party has a history of caring about the deficit with... uh... erratic consistency. I'd say since 2008 give or take.

Think you're off by a few decades

It's a talking point that always loses to reality, since at least the Reagan years. Under Trump, it's not even a talking point.

[shemp]

Corporate profit = Corporate investment + Corporate dividends – Household savings + Government deficit – Trade deficit

Kalecki/Levy profits equation is accounting identity, so true by definition. Recent increase in government deficit outweighs changes in other factors. Equation doesn't distinguish private from public corporations. My impression is profit damage to smaller private corporations will be worse than average, so larger public corporations will do better than average, again by accounting identity. So late 2020 and early 2021 public corporation profits should be huge. It's possible all those profits will be hoarded, so continued big government deficits will be needed to keep the system going.