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Tim Ayles
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We strive to build highly disciplined, sensible client portfolios. Portfolios that are focused on investing in businesses with solid free cash flows and solid dividend payouts. We buy businesses, not stocks. Tim is a Registered Investment Advisor.
My company:
Napa Wealth Management, Incorporated
  • Getting Net Short  2 comments
    Sep 23, 2009 10:58 AM

    After being market neutral since 9100 on the Dow (longs offset by shorts), we are now peeling off our long exposure even more in order to make our client book net short stocks and long the bond market.

    I wrote in Aug that it was time to be a cautious investor.

    Now is the time to be a bit more aggressive by getting short the indices.

    Disclosure: Clients are long PSQ and SH and which offset many longs

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  • philzuco
    , contributor
    Comments (11) | Send Message
    Just a question Tim -- just how much client money have you lost with your senseless long UUP position? It bewilders me that you get paid to manage other people's money.


    You're missing a big piece of the puzzle with your senseless theory on the dollar: THE CARRY TRADE. Inflation or deflation in the US right now is only one determinant of currency value.


    You're overlooking 2 other massive components:


    1) the US economy will offer low interest rates for the foreseeable future (ie, low-yielding currency -- you've got emerging markets offering 3-8% yields)
    2) economic growth in the US will underperform that of many countries around the world (take Brazil, for instance, with expected GDP growth of 4% next year)


    Also, there's a limit to how much government stimulus the US can continue to dish out given just how near the limit the country is in terms of debt. At some point, debt markets will either demand much higher yields or just say no (it's happened before: think Mexico in 1994).


    On the other hand, emerging economies with low debt/GDP ratios (think Brazil and China, in particular) have plenty of juice to continue implementing countercyclical policies should economic conditions continue soft into the medium run.


    Hence, if investors can obtain better yield and better economic growth abroad, why would they deploy their cash in US Treasuries or the US dollar?


    The bid under the dollar over the years has come, by and large, from abroad due to a "perception of low risk and stability" in America and robust economic growth. That perception has changed in the last year. The US is now seen as a slow-moving behemoth, loaded with debt (its safe haven status is under seige).


    Foreign purchasing power from hedge funds, pension funds and sovereign governments will continue to move towards investing in economies with better yield and better economic growth prospects, the result is the CONTINUED WEAKNESS OF THE DOLLAR VIS-À-VIS THE REST OF THE WORLD (ESPECIALLY EMERGING MARKETS).
    24 Sep 2009, 10:08 AM Reply Like
  • Tim Ayles
    , contributor
    Comments (1206) | Send Message
    Author’s reply » Well, to answer your question, we haven't lost a dime in UUP. Actually - we are up just under 1%. Here is where we bought:


    Bought 13200 Shares of UUP at $22.66 Per Share for Approximately $299,112.00
    Bought 10500 Shares of UUP at $22.66 Per Share for Approximately $237,930.00


    So your senseless personal attack shows you aren't up for discussion, just one who has assumed has figured everything out.


    Maybe if you took a look at the article I included in the article, you would see that your comment "At some point, debt markets will either demand much higher yields or just say no" is pure conjecture at this point - not fact. How long have you been saying this and how much money have you lost shorting bonds? The bloomberg article clearly shows that foreigners aren't drifting to your side of the argument, and in fact, are moving to my side. They are stepping up their resolve of buying our debt.


    I do believe the dollar will continue to go lower as I stated. I just don't think it is an overnight event as you must. Our clients are doing just fine. We have made a ton of money this year. We called the bottom and said the market would ramp to 9000. People thought we were crazy then. We nailed quite a few calls this year. Take a look for yourself on page 2:




    I reiterate - I am certain you will be painfully surprised at the coming rally in the USD.
    24 Sep 2009, 01:40 PM Reply Like
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