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Michael Nau

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  • The Case For Shorting The American Economy [View article]
    Ben, on a tactical level, I do agree with your short call on regional banks in the short term, I think they are under-reserved and will take a collective earnings hit. You also mention some real clunkers like BAC and SHLD, which I see as broken business models. So I guess I agree with you there.

    But a long-term short seems pretty risky and expensive, even if by "expensive" that means overpaying for mining equities. A whole lot has to go really wrong for those sorts of bets to pay off. Good Luck!
    Mar 26 08:09 PM | Likes Like |Link to Comment
  • Bank Of America Is Going To $25 [View article]
    Yes, BAC paid back the loan to the government. But look at the 10-year price chart. If BAC collapses again, I'll take a big enough hit on other equity holdings because it is so important for the economy. So as I see it, by being long equities, I am already exposed to significant TBTF risk, no need to double down.
    Mar 26 08:01 PM | Likes Like |Link to Comment
  • Bank Of America Is Going To $25 [View article]
    Short: No
    Worried: Yes

    If BAC screws up again, as a taxpayer, I'll have to pay, so I think I'm exposed enough to TBTF risk. I'll use my IRA to diversify.
    Mar 26 04:57 PM | Likes Like |Link to Comment
  • Buy Now And Forever Hold Your Peace [View article]
    Interesting article, I agree with your conclusion, but I'm not sure how good a gauge the VIX for future volatility: it is usually higher than realized volatility, and itself changes a fair amount from day to day.

    While I'm holding for the long term, I wouldn't be too surprised if there was a big spike of volatility due to Europe or Middle East issues before too long. I'm just waiting for SVXY to go on sale.
    Mar 26 04:54 PM | Likes Like |Link to Comment
  • Three Free Lottery Tickets Attached To Stellar Balance Sheets [View article]
    Interesting idea, thanks for the article, very thought-provoking.

    Perhaps you could apply MPT to a portfolio of lottery ticket stocks: all three of these companies do seem to have very real, but also very idiosyncratic risks. Except for the two oil companies, their risks seem pretty uncorrelated, so the more lottery tickets, the lower the portfolio risk.
    Mar 26 03:53 PM | Likes Like |Link to Comment
  • Bank Of America Is Going To $25 [View article]
    BAC certainly looks cheap, but it was and still is run by the gang that couldn't shoot straight. I just don't trust them with my retirement savings.
    Mar 26 03:42 PM | 3 Likes Like |Link to Comment
  • Some people just enjoy pain. More than $520M has poured into leveraged-volatility ETPs (UVXY, TVIX) in Q1 even as their value continues to decline. The un-levered tracker of the VIX (VXX) has drawn in $620M. Bets on the leveraged products are bets on a crisis emerging ... quickly. "When bad things don't happen and you lose your premium," says a market maker, "most people don't complain." [View news story]
    Earlpearl, there's got to be a better way to do the end-of-the-world trade besides TVIX. Why not long-dated puts on stock indexes financed by selling short-dated calls? Or cash, which has a small chance of going down 50% in the next few months? Even gold, which I do not like at all, is a better long-term hedge than TVIX.
    Mar 26 03:35 PM | 1 Like Like |Link to Comment
  • The Case For Shorting The American Economy [View article]
    Interesting point, but a lot of those companies are American. Bullish for stocks in my opinion- foreigners own about 15% of the market right now, I think that will increase with time.
    Mar 26 03:29 PM | Likes Like |Link to Comment
  • The Case For Shorting The American Economy [View article]
    Ok, what will they buy then? They aren't all that interested in buying Yuan.
    Mar 26 02:53 PM | 1 Like Like |Link to Comment
  • What Is The Best Way To Hedge S&P 500 Exposure? [View article]
    Convoluted, agreed. VQT is very expensive because it is on the wrong side of time decay and SPLV is boring. This strategy really pays up for lower volatility returns.

    The best strategy I can think of that is relatively simple is getting on the other side of time decay: sell at-the-money cash-secured puts on SPY or whatever to enter positions. Once in a position, sell OTM calls until you are knocked out of the position. Rinse and Repeat. Even Vanguard will let you do this in IRAs.

    The advantage of this DIY strategy is that you lower snake-oil risk oozing from products like VQT
    Mar 26 02:49 PM | Likes Like |Link to Comment
  • The Case For Shorting The American Economy [View article]
    No reason for them to do that. We are still a big trading partner, they would experience significant losses, and, most importantly, we have lots of big guns.

    If you owe the bank $1,000, then you are in trouble. If you owe the bank $2 Trillion, the bank is in trouble.
    Mar 26 02:38 PM | 1 Like Like |Link to Comment
  • The Case For Shorting The American Economy [View article]
    Yeah, maybe in 2100 the Yuan will be the world's reserve currency, but that eventuality is beyond my investment time horizon.
    Mar 26 02:29 PM | Likes Like |Link to Comment
  • The Case For Shorting The American Economy [View article]
    Sure, it could happen to the dollar, and probably will eventually. But when? When the dollar replaced the pound, the U.S. economy was way, way, bigger, its military stronger, and its technology better than Britain's. There's nothing to replace the dollar with, and won't be for a long, long time. We'll see it coming, if it even happens in our lifetime. The Euro was the only possible contender, but we see how that worked out.
    Mar 26 01:50 PM | 1 Like Like |Link to Comment
  • The Case For Shorting The American Economy [View article]
    I mean real returns less than or equal to 0%. If I lent money to anyone on those terms, regardless of their credit, I'd think it was a raw deal. This is sort of like a shadow default without the Lehman-esque messiness.
    Mar 26 01:44 PM | Likes Like |Link to Comment
  • Break Up The Banks To Unlock Value [View article]
    A Newell and Chancer, I think the political winds are changing. With the recent JPM disclosures, there is a growing consensus that TBTF needs to be ended. What I find especially encouraging is that the current push in the senate is led by both conservative Republicans and liberal Democrats, each for their own reasons. If legislators across the aisle can agree on reforms, then they are much more likely pass and cause durable change.

    As for the SEC blocking shareholder breakup votes, I think this issue will need to be resolved in the court of public opinion, not legal technicalities. The bigger the fuss that shareholders make, the greater the pressure on public officials to do something. After all, common shareholders are an important group that has been hurt by the megabanks, but haven't organized themselves yet.
    Mar 26 01:41 PM | Likes Like |Link to Comment