Seeking Alpha

Abraxas

Abraxas
Send Message
View as an RSS Feed
View Abraxas' Comments BY TICKER:
Latest  |  Highest rated
  • Facebook (FB) slides 4.4% to $21.85 premarket following a Barron's cover story suggesting the shares could be deemed expensive even at $15. [View news story]
    "Ban short selling"... seriously? Short selling prevents bubbles and is a very healthy arbitrageur for the market place.

    If you think Facebook is worth a higher price, you buy it. If you think it has reached the right price, you sell it. And if you think it is overpriced, you (borrow the shares and) short it. That's how healthy markets are supposed to operate. There is absolutely nothing wrong with proper short selling.

    Short selling is only harmful when done illegally. That is, when the short sell proceeds without having previously secured the borrowed shares. Other than that, short selling is very healthy for the marketplace.
    Sep 24, 2012. 11:14 AM | 6 Likes Like |Link to Comment
  • Who's Afraid Of The Big, Bad QE? M2 Growth, Inflation And P/E Ratios [View article]
    Bard,

    Interesting post.

    Besides the TIPS, which you mention, should inflation lead to higher interest rates the most straight forward hedge is, naturally, shorting bonds. Equity retails investors can easily achieve this by shorting TLT (20+ Year Treasury Bond ETF) or, better yet, by going long the reverse ETF, TBT (UltraShort 20+ Year Treasury), which cancels the need for shorting.

    With interest rates still very close to their historical all-time lows, this trade provides a phenomenal risk-riward ratio and excellent hedge for the core equity portfolio.
    Sep 19, 2012. 05:39 PM | Likes Like |Link to Comment
  • Why QE3 Can't Work: Understanding The Liquidity Trap [View article]
    Joseph,

    Interestingly, in terms of the model and trades' duration, I seem to have a much longer strategy time-span and much shorter tactical one: My fund intends to be perpetual. As such, it is firmly focused on long-term results, capital preservation and sustainability. Added short-term profits may be achieved through the use of various tactical tools, as long as this does not present a risk to the long-term model. So, basically, my core portfolio is built to last for a very long time (hopefully perpetually) and should not be affected by short-term market swings, but I do tactically trade everyday, as well, in a variety of ways. I just have to make sure I know exactly when and why I am strategically investing or trading tactically.
    Sep 17, 2012. 07:11 AM | Likes Like |Link to Comment
  • Why QE3 Can't Work: Understanding The Liquidity Trap [View article]
    Joseph,

    I will take a look at the experiment. Thank you.

    I hope that you don't think that I have implied that you don't trade the 'right' way or that my trading is the better option. I haven't and nothing could be further from my own opinion. I am sure that our on trading models are best suited (or should be) to follow our own ideas, backgrounds and personalities. If we know ourselves well, develop solid models and strategies, and implement them in a very disciplined way we have a chance at being successful. This is true for very dissimilar or even opposing models and that's the beauty of it. There are many different ways of successfully trading the markets.

    Julian Robertson was a great stock picker, Stainhardt was good at block trading, Paul Tudor Jones is great at trend following and flexible strategies, Simmons and Shaw at pure rule based algo trading, and Louis Bacon, Soros and Drukenmiller at global macro. Their own trading styles perfectly match their belief sets and personalities and that's why their are comfortable and successful. If you switch them around and have them adopt each other's styles, they would, most probably, be quite mediocre or even really bad and unsuccessful.

    My experience tells me that the Efficient Market Theory is not correct and this is shared with almost all great Macro traders, which, by definition, profit from it. Since I truly enjoy trading everyday and the Macro strategies fit my belief set and personality I consciously choose them as the basis of my models. I am certain that you do the same and choose the strategies and models that fit your own set of beliefs and personality, even thought these are certainly different than mine. We can both be successful traders.
    Sep 17, 2012. 07:09 AM | 1 Like Like |Link to Comment
  • Why QE3 Can't Work: Understanding The Liquidity Trap [View article]
    Joseph,

    I enjoyed the Market Euphoria article, although, as you might imagine by now, I disagree with the basic premise.

    I suppose that we are all somewhat prisoners of our backgrounds and see things in light of our own ideas. Whichever prism we choose will color our judgement. If you believe that markets are efficient and that the random walk theory is correct you probably end up setting up algorithmic trades with mean reversion as the basic underpinning. Your article seems to be based on these beliefs.

    Fair enough, that's how I started my trading career myself. With time, tough, like most Global Macro traders, I have come to believe that markets are far from being efficient, that they often miss price securities for rather long periods of time, and most importantly, that the markets are far from an accurate portrayal of the economy. Or, perhaps, it was the other way around: upon realizing that markets are indeed inefficient I became a Global Macro trader who could profit from it.

    In my humble opinion, this is why most economist make terrible traders: they can't quite understand that perception and psychology move markets and that they do not necessarily reflect or follow the underlying economy the way they think they should. So the markets are labeled 'wrong,' or 'irrational.' They are not. The markets are separate and independent entities with a 'life' of their own and one trades the markets, not the economy.

    Which brings me back to Keynes maxim. He really didn't mean to say that the markets were indeed irrational from time to time but would eventually come to their senses and follow the economy. He meant to say that the markets are what they are, they are independent constructs, that they can't really be wrong -they simply are - and that it is the trader's mistake to assign the 'irrationality' tag to the markets and bet on it, as it is the trader's own set of subjective beliefs (even if based on perceived objective economic theories) that labels what is rational and irrational behavior in the first place.
    As I wrote before: One should never be more invested in being right than in making money. This is the economists' cardinal and fatal sin!
    Sep 16, 2012. 03:26 PM | 3 Likes Like |Link to Comment
  • Why QE3 Can't Work: Understanding The Liquidity Trap [View article]
    Joseph,

    You quoted Keynes regarding the liquidity trap. Nevertheless, you seem to have completely forgotten one of Keynes most famous maxims when you wrote:

    "There is no rational justification for stocks adding on to a 37% gain in a year."

    I personally believe that your are misreading the markets' reaction and their perceived lack of 'rational justification.' Nevertheless, even if you were to be correct, perhaps you would be well advised to remember Keynes this time, as well:

    “The market can stay irrational longer than you can stay solvent.”
    Sep 16, 2012. 02:12 PM | 1 Like Like |Link to Comment
  • Why QE3 Can't Work: Understanding The Liquidity Trap [View article]
    The FOMC decision presented one of the easiest and potentially most profitable trading opportunities in a long time. The FED had been telegraphing its decision for quite some time and Mercedez Ben (I like the moniker) practically spelled it out at Jackson Hole.

    Since my job is to be pragmatic and make money, instead of arguing economic theory with the FED, I loaded up to take advantage of the decision several different ways: buying near term SPY calls and closing the short legs of the Iron Condor hedges; buying emerging markets and Europe (a risk on trade, as a result of reverse fly to safety); buying materials, housing and homebuilders; and finally, shorting even more bonds through TBT.

    Why shorting bonds? Well the risks of deflation have now almost disappeared and the FED stimulus will push inflation somewhat higher and cause Treasury yields to rise (they have risen the last two times around right after the FED’s easing). Here, it also helps that PIMCO sold 50 billion worth of Treasuries in August. That should tell us something.

    So, it has been a couple of unusually easy and profitable days. My point is not to brag, I am perfectly aware that these were unusual circumstances and successfully trading and investing is quite difficult. My point is to show that one ought to be pragmatic and try to profit from the circumstances presented regardless of one’s own particular point of view on whether the FED actions are right or wrong. Argue all you want about the FED’s decision but even if you completely disagree with it, turn around, forget the argument, be pragmatic, and profit from it.

    In short, one should never forget this dictum: You should never be more invested in being right than in making money!
    Sep 16, 2012. 01:58 PM | 4 Likes Like |Link to Comment
  • Deflation risk? As Treasurys plummet (TLT -2.4%), inflation-protected bonds (TIP +0.5%) move in the opposite direction. Michael Gayed tracks the ratio of TIP to the 7-10 year Treasury ETF (IEF) as a way to gauge inflation expectations, and it's spiked higher of late, suggesting far higher inflation fears. [View news story]
    Take look at this:

    http://bit.ly/RSk1Ra
    Sep 14, 2012. 06:12 PM | Likes Like |Link to Comment
  • Deflation risk? As Treasurys plummet (TLT -2.4%), inflation-protected bonds (TIP +0.5%) move in the opposite direction. Michael Gayed tracks the ratio of TIP to the 7-10 year Treasury ETF (IEF) as a way to gauge inflation expectations, and it's spiked higher of late, suggesting far higher inflation fears. [View news story]
    http://bit.ly/RSk1Ra
    Sep 14, 2012. 06:11 PM | Likes Like |Link to Comment
  • The Fed Stimulates Inflation Expectations [View article]
    The FOMC decision presented one of the easiest and potentially most profitable trading opportunities in a long time. The FED had been telegraphic its decision for quite some time and Mercedez Ben (I like the moniker) practically spell it out at Jackson Hole.

    Since my job is to be pragmatic and make money, instead of arguing economic theory with the FED, I loaded up to take advantage of the decision several different ways: buying near term SPY calls and closing the short legs of the Iron Condor hedges; buying emerging markets and Europe (a risk on trade as a result of reverse fly to safety); buying materials, housing and homebuilders; and finally, shorting even more bonds through TBT.

    Why shorting bonds? Well, I agree with the author in that the risks of deflation have now almost disappeared and the FED stimulus will push inflation somewhat higher and cause Treasury yields to rise (they have risen the last two times around after the FED’s easing). Here, it also helps that PIMCO sold 50 billion worth of Treasuries in August. That should tell us something.

    So, it has been a couple of unusually easy and profitable days. My point is not to brag, I am perfectly aware that these were unusual circumstances and successfully trading and investing is quite difficult. My point is to show that one ought to be pragmatic and try to profit from the circumstances presented regardless of one’s own particular points of view of what should be economically right or wrong. Argue all you want about the FED’s decision but even if you completely disagree with it, turn around, forget the argument, be pragmatic, and profit from it.

    In short, one should never forget this dictum: You should never be more invested in being right than in making money!
    Sep 14, 2012. 04:37 PM | Likes Like |Link to Comment
  • Deflation risk? As Treasurys plummet (TLT -2.4%), inflation-protected bonds (TIP +0.5%) move in the opposite direction. Michael Gayed tracks the ratio of TIP to the 7-10 year Treasury ETF (IEF) as a way to gauge inflation expectations, and it's spiked higher of late, suggesting far higher inflation fears. [View news story]
    There was a deflation risk but such a risk has practically now almost disappeared. The FED stimulus will push inflation higher and cause Treasury yields to rise (they have risen the last two times around almost immediately after the FED’s easing).
    Sep 14, 2012. 04:31 PM | 1 Like Like |Link to Comment
  • Mercedes Ben [View article]
    The FOMC decision presented one of the easiest and potentially most profitable trading opportunities in a long time. The FED had been telegraphic its decision for quite some time and Mercedez Ben (I like the moniker) practically spell it out at Jackson Hole.

    Since my job is to be pragmatic and make money, instead of arguing economic theory with the FED, I loaded up to take advantage of the decision several different ways: buying near term SPY calls and closing the short legs of the Iron Condor hedges; buying emerging markets and Europe (a risk on trade as a result of reverse fly to safety); buying materials, housing and homebuilders; and finally, shorting even more bonds through TBT.

    Why shorting bonds? Well the risks of deflation have now almost disappeared and the FED stimulus will push inflation higher and cause Treasury yields to rise (they have risen the last two times around after the FED’s easing). Here, it also helps that PIMCO sold 50 billion worth of Treasuries in August. That should tell us something.

    So, it has been a couple of unusually easy and profitable days. My point is not to brag, I am perfectly aware that these were unusual circumstances and successfully trading and investing is quite difficult. My point is to show that one ought to be pragmatic and try to profit from the circumstances presented regardless of one’s own particular point of view of what FED actions are right or wrong. Argue all you want about the FED’s decision but even if you completely disagree with it, turn around, forget the argument, be pragmatic, and profit from it.

    In short, one should never forget this dictum: You should never be more invested in being right than in making money!
    Sep 14, 2012. 04:28 PM | 4 Likes Like |Link to Comment
  • The conventional wisdom amongst Street economists is Bernanke will not use his Jackson Hole speech to signal additional QE, reports Bloomberg. This doesn't mean no more easing, contends JPMorgan's Michael Feroli, it means Bernanke doesn't want Jackson Hole to become a policy change event, preferring that to be reserved for FOMC meetings. Too late for that Mr. Chairman. [View news story]
    "We could see some serious inflation and higher interest rates on the horizon."

    Fair enough. This may be the case regardless who wins. So, then you need to act accordingly and profit from your forecast (with which I, coincidentally, happen to agree). What to do? I suggest you short bonds. The easiest way is to but TBT. Good luck!
    Aug 27, 2012. 01:43 PM | 1 Like Like |Link to Comment
  • The conventional wisdom amongst Street economists is Bernanke will not use his Jackson Hole speech to signal additional QE, reports Bloomberg. This doesn't mean no more easing, contends JPMorgan's Michael Feroli, it means Bernanke doesn't want Jackson Hole to become a policy change event, preferring that to be reserved for FOMC meetings. Too late for that Mr. Chairman. [View news story]
    An investor's job is to make money by pragmatically assessing the situation and acting accordingly. Regardless of one's own personal political preferences, the truth is that, as of today, the most likely next president is Obama not Rommey. Hence, you owe it to yourself to act accordingly to profit from it until this fact changes. Frankly, from an investment point of view, everything else, including one's own biases, is utterly irrelevant.
    Aug 27, 2012. 12:41 PM | 2 Likes Like |Link to Comment
  • Why A QE3 Won't Be Good For Bonds [View article]
    Very good post. Thank you.
    I have been short bonds for what it seems like a long time now. Too long, perhaps, if you ask John Paulson. Unlike Paulson, I believe that, short of a complete economic meltdown, it is inevitable that interest rates move up higher. As you eloquently put it, the very policies that the FED implements to help the economy, if successful, will, directly or indirectly, help restore confidence and help economic growth, which will, in turn, stock inflation and push interest rates up. So, the question is not whether interest rates will go up. They will. The question is when and how much.
    Aug 24, 2012. 11:20 AM | Likes Like |Link to Comment
COMMENTS STATS
299 Comments
431 Likes