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Chris DeMuth Jr.
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"It's not given to human beings to have such talent that they can just know everything about everything all the time. But it is given to human beings who work hard at it - who look and sift the world for a misplaced bet - that they can occasionally find one." - Charlie Munger I look... More
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  • What Is The Largest Position That I Have Ever Taken? 14 comments
    Dec 19, 2013 10:34 AM | about stocks: FXY

    This was not necessarily the best investment opportunity that I have ever seen, but it was one of the highest priced and, at the same time, had very low volatility such that it was cheap to buy long-dated puts. The investment was buying puts on the Japanese Yen. One route was via Guggenheim CurrencyShares Japanese (NYSEARCA:FXY). Here are the investment idea's early results:

    (click to enlarge)

    We are in a global currency debasement competition and Japan remains my candidate for the "winner".

    (click to enlarge)

    Stocks: FXY
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Comments (14)
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  • jlb
    , contributor
    Comments (39) | Send Message
     
    Mr DeMuth,

     

    You seem to be a smart analytical investor and an even better writer. Your musings and relevant web aggregations are always interesting.
    That is why I'm a keen follower.
    But, flaunting your great investments, like in this post, is a bad idea.
    I say this not because I'm so smart or wise (I'm not), but only because I'm so old.
    19 Dec 2013, 12:16 PM Reply Like
  • Chris DeMuth Jr.
    , contributor
    Comments (4041) | Send Message
     
    Author’s reply » I guess that I don't really know which investments that allows me to mention and which that does not. Our ideas have every type of performance before we get involved -- some terrific and some terrible -- then we get involved, then we write up our ideas and experience. I guess I get stuck on the word "flaunting". This is a blog explicitly about mispricings and opportunities which I try to exploit for profit. So I guess it goes without saying that neither the outcomes nor the discussion seems to me like "flaunting"; it just seems to be the outcomes.
    19 Dec 2013, 12:42 PM Reply Like
  • aretailguy
    , contributor
    Comments (1019) | Send Message
     
    Chris, I enjoy and learn from all of your posts, especially recently deployed ideas!
    19 Dec 2013, 01:43 PM Reply Like
  • TimeOnTarget
    , contributor
    Comments (2175) | Send Message
     
    @Chris

     

    With all due respect to jlb, I just want to watch what you do an learn. I wouldn't want to learn from a crappy teacher, so I am not put off in the slightest by the amazing returns you seem to pull off. In fact, I look at you showing the best ones as a really good thing. Best and unusual and different tricks / new ways to analyze -- all those things are good.

     

    I personally have no interest in reading about 12% returns on Walmart. That kind of stuff I can figure out for myself.
    20 Dec 2013, 01:45 PM Reply Like
  • arbtrader
    , contributor
    Comments (170) | Send Message
     
    Chris, can you tell me why you initiated the position in Oct? Was it the election (or pending, don't recall) of the new PM?

     

    I'm familiar with the arguments for more weakness (Mauldin, Bass, Common Sense) but do you have a price target or just enough time in the calls to let 'er ride before exiting?

     

    Finally, at the money, out of the money, or spread?

     

    Curious, because some LEAPs are expiring this Jan in the % of my portfolio where I park a couple LT 'bets'. Making a list, checking it twice, etc.

     

    BTW Merry Christmas. AT.
    19 Dec 2013, 12:21 PM Reply Like
  • Chris DeMuth Jr.
    , contributor
    Comments (4041) | Send Message
     
    Author’s reply » We had long been contemplating the way out of their likely inability to pay back the money that they borrowed in JGBs - default or debasement. We don't know and were covered for either eventuality but took seriously enough their apparent political intent to choose debasement. We don't see a likely third option given the size of the debt, the demographics, and the culture.
    19 Dec 2013, 12:38 PM Reply Like
  • Clint Edgington
    , contributor
    Comments (202) | Send Message
     
    HI Chris-may I ask what % of the portfolio you committed to your "largest position"? How do you think through position sizing of options? I struggle with this thought as their is some inherent leverage in them...
    19 Dec 2013, 01:21 PM Reply Like
  • Chris DeMuth Jr.
    , contributor
    Comments (4041) | Send Message
     
    Author’s reply » This is perhaps a silly point... just looking back over the nominal dollar value. So two answers: serious answer is that we typically risk approximately three percent of original invested capital on any single risk but we use the Kelly formula for sizing. Less serious answer: the inherent leverage was really all that I was referring to -- the nominal amount of Yen was many many times my capital.
    19 Dec 2013, 01:26 PM Reply Like
  • Chris DeMuth Jr.
    , contributor
    Comments (4041) | Send Message
     
    Author’s reply » But the risk was annually spending 50 bps or so of capital.
    19 Dec 2013, 01:27 PM Reply Like
  • Clint Edgington
    , contributor
    Comments (202) | Send Message
     
    Gotcha, so you purchased puts (and planned to somewhat maintain that exposure until the idea played out a bit) at about .5% of the portfolio, which obviously controlled a much higher nominal amount of Yen. That makes sense and answers my question, thanks!
    19 Dec 2013, 01:37 PM Reply Like
  • jlb
    , contributor
    Comments (39) | Send Message
     
    Cognitive dissonance resolved.
    19 Dec 2013, 01:47 PM Reply Like
  • arbtrader
    , contributor
    Comments (170) | Send Message
     
    Chris, this is a good idea for an article along the lines of GCVRZ or Special Sit posts asking reader feedback.

     

    ask-what is your largest position size, why, how did you size it (it was all the $ I had!?), stock options, bonds, etc. How did you find it? How did it turn out?

     

    Consistently good investors can easily answer all those reasonable questions. Lucky ones cannot.

     

    FWIW, I also hate bragging and am highly superstitious about touting success lest it get snatched back by the trading gods....but talking about a trade that was successful and bragging are two different things. But I suspect you know that....

     

    AT.
    19 Dec 2013, 02:14 PM Reply Like
  • arbtrader
    , contributor
    Comments (170) | Send Message
     
    Also, your worst trade ever and what did you learn from it....?

     

    Mine happens to be a stock I doubled my money quickly with and then sold.

     

    Shortly thereafter, it went up oh, 50x within 2 years or so.

     

    Worst...trade...ever.
    19 Dec 2013, 02:16 PM Reply Like
  • Tactical Technician
    , contributor
    Comments (106) | Send Message
     
    My worst trade ever was buying PIR at something like 30 cents and selling it for around 55 cents, back in 2009. I thought I was the best trader in the world. Today, PIR closed at 21.79 but has been somewhat higher this year.
    19 Dec 2013, 05:52 PM Reply Like
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