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Abraxas

Abraxas
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  • Safe Havens In A Storm [View article]
    " 1. US Treasury bonds (long Treasuries if you want to be aggressive);
    2. Gold, but avoid gold stocks."

    I am sorry Mr. Hui but, unless you are thinking about a very short term trading period, this is some of the worse investment advice one can give at this moment. You are beyond late on both US Treasuries and gold and, should you get in right now, chances are you will get little upside and a whole lot of downside potential.

    This is typically what small retail clients end up doing: getting in very late at the top, or very close to the top, of the market (top for treasuries and gold), while the institutions are working to unload their positions, and losing a ton when the market turns.

    Most treasuries rates are already incredibly low (the ten year just made a new low today) and can't get lower much lower. In fact, all up to the ten year already show negative real rates. As for gold, where do you expect it to go before the bubble bursts? And where do you think it will end up once it does burst?

    You call these trades "safe havens"? I wonder, then, what you dare to call "risk"!
    Sep 6 11:49 AM | 1 Like Like |Link to Comment
  • Schwab Competes for More ETF Market Share [View article]
    I have been using Schwab's ETFs from inception and I believe that Schwab has been implementing the right strategy for their ETF growth. Besides the points you have already mentioned, they have chosen to make their individual ETF coverage wider and more representative of the markets than their competitors. That is very useful.

    The one missing and very important factor to make Schwab's ETFs truly successful is developing the options' markets for them. Without a liquid and functional option's market is very difficult to properly hedge while using their ETFs.
    Aug 6 05:23 PM | Likes Like |Link to Comment
  • Down nearly 5% earlier (and taking the rest of the world with them), Italian shares stage an epic turnaround, now flat for the day. Rumors of ECB bond purchases and Chinese buying make the rounds. The euro is -0.3% at $1.40 after falling below $1.385 earlier. Stoxx 50 -1%.  [View news story]
    Who cares about Italy? Well, Italy just happens to be Europe's largest bond market. So as a "friendly investor in EU sovereign debt" I am guessing you care.
    Jul 12 11:13 AM | 1 Like Like |Link to Comment
  • Should Long-Term Investors Buy or Sell This Market? [View article]
    Nice and sensible article, especially for the long, and I mean, very long term investor. It would be interesting to see the same graph two, three, five years out because, as the author suggested, stocks could easily continue to go up and, eventually, revert to the mean. That usually happens in a short but powerful burst; a la 2008. So one could be long and make money for eight years and see the market collapse then.

    A long term investor may choose to wait and do nothing. An active investor or a trader may choose to be long and actively monitor his/her portfolio and sell or short the market only when the weakness presents itself, hence making money on the way up and, possibly, making more on the way down. I am personally on that camp, but this is a personal choice.

    The only thing I would definitely do not recommend right now is being long treasuries, as Q2 is about to end and the Fed is likely to raise interest rates to contain inflation. Whoever happens to be long treasuries will certainly lose money. If anything one should be short treasuries.
    May 10 09:43 AM | 2 Likes Like |Link to Comment
  • Why Analysts Hate Putting Out Sell Ratings [View article]
    This is even more true regarding real life investment and trading. That is why most academics and economists are terrible traders: most of the time they are inflexible and caught up in their own theories (which, naturally, are always right), so they fail to accept changing scenarios, change their minds, and reverse course.

    In the end, they invariable break the first rule of investment, if you ask me: one should never be more invested in being right that in making money.
    Apr 27 09:57 AM | 1 Like Like |Link to Comment
  • Why Analysts Hate Putting Out Sell Ratings [View article]
    Good post, Felix.

    So much for the Efficient Market Theory.
    Apr 26 06:16 PM | 1 Like Like |Link to Comment
  • Investing in Today's Market: Disciplined or Delusional? [View article]
    Nice article, as always.

    "By the way, good for them if they can also turn the economic tables – pushing the market higher doesn’t really change anything except the price I have to pay."

    Actually, it may change everything, unless you are a firm believer in the Efficient Market Theory, that is. Perception is reality in the marketplace and the phrase beautifully demonstrates why most economists and analysts, unlike true traders, can't take advantage of the markets' real or perceived distortions.

    Operators change the dynamics and, hence, the reality of the markets by simply acting in them. This is true wether the economic factors merit, or not, the original action. Traders look at the end result and act in order to benefit from it regardless of what causes such result (that is for analysts and economists to study and endlessly argue about, but it doesn't make one any money) .
    Apr 6 05:20 PM | Likes Like |Link to Comment
  • U.S. Dollar No Longer a Safe Haven - Will 30 Year Bonds Be Next? [View article]
    Indeed, but if you take a look at the TBF, TBT and TMV's long term charts you will see that they are virtually identical, as one would expect of ETFs tracking the same underlaying instrument. Their overall performance show the expected differences due to leverage but the time decay is not as pronounced in the leveraged TBT and TMV as would be expected, so you are not paying a heavy price for the leverage, which will eventually give you a better return when rates increase.

    In that context, I think that TBT is still the better instrument as it would give you a better return than TBF (for the same investment) and a similar return than TMV but with lower risk and volatility.
    Apr 6 12:16 PM | Likes Like |Link to Comment
  • U.S. Dollar No Longer a Safe Haven - Will 30 Year Bonds Be Next? [View article]
    Would you care to expand or explain why?

    Here is my take:

    TBT is ten times more liquid than TMV with less volatility, which is better as a long term investment. Since we may have to wait a long time before interest rates are raised, TBT is the better instrument in this respect.

    TBT is 2 times leveraged while TMV is 3 times leveraged, so TMV is better for intraday trading if you can handle the volatility swings, but it decays faster if you hold it for longer periods of time.

    Lastly, TBT is 20+ year bonds while TMV is 30 year bonds.
    Mar 30 09:19 AM | 1 Like Like |Link to Comment
  • U.S. Dollar No Longer a Safe Haven - Will 30 Year Bonds Be Next? [View article]
    You talk about inflation and make a plausible case for it, but then fail to follow through with an investment which would truly enable you to benefit from such scenario.

    The easiest and most direct way to do so is by buying TBF and TBT, which are 'Short 20+ Year Treasury bond ETFs' and, hence, give you and inverse relation to bonds that make you a profit when inflation kicks in and rates are increased.

    I would recommend TBT, which is deeper (more liquid) and leveraged.

    Additionally, you should be short the dollar, so buy UDN.
    Mar 29 10:32 AM | Likes Like |Link to Comment
  • Panic Cycle (And Recovery) Ridiculously Foreshortened? [View article]
    I enjoyed your writing. Thank you.

    I had plenty of bids from which I got better prices than expected due to the gap down. At the same time my short positions paid off, although I watched the trailing stops get triggered through the day’s run up. Not a bad outcome overall, although, naturally, I face the delightful prospect of repeating the whole exercise today if I want added down protection.

    It is funny that you mention the flipping of EWJ. I had a sizable bid around 9.5 and ended up buying it at 9.33 at the open. I must confess that I was taken aback seeing EWJ go up all day. What it was intended to be a long-term investment turned into an intraday trade when I sold it at a solid 10, five minutes before the close of the after-hour session. In light of the alarming news coming out of Japan at that hour, I couldn’t resist the taking 7%. I am happy to wait to buy it back again at a lower price.

    Talk about market efficiency! I love the fact that so many economists believe in it. It enables me to make money from all those credulous people. Which was the right and efficient price: 9.33 or 10? It certainly could not have been both yesterday. Or could have?
    Mar 16 10:24 AM | 3 Likes Like |Link to Comment
  • Positioned as a Bull but Beginning to Feel Like a Bear [View article]
    "The S&P 500 gained 15.06%."

    Actually, Richard, the S&P 500 gained 12,78% in 2010.

    Balanced article nonetheless.
    Mar 9 04:10 PM | Likes Like |Link to Comment
  • Using ETFs to Profit From Rising Interest Rates [View article]
    Bruce,

    The European Central Bank will most likely raise interest rates soon, before the FED does. It would make sense to apply the same principle to profit from such a move right away.
    Any ideas on a shortable (long) European bond ETF?
    What about an inverse interest rate European bond equivalent to TBF or TBT?
    Mar 7 06:14 PM | Likes Like |Link to Comment
  • ProShares UltraShort 20+ Year Treasury ETF: Market Insurance From an Inferior Fund? [View article]
    Here there are two ETFs one can short in order to profit from the collapsing Municipal bond market: MUNI and ITM.
    Jan 21 02:27 PM | Likes Like |Link to Comment
  • ProShares UltraShort 20+ Year Treasury ETF: Market Insurance From an Inferior Fund? [View article]
    "I am absolutely not going to discuss the belief that treasuries shouldn't be in a portfolio. Having treasuries does NOT reduce risk-adjusted return. End of story."

    Fair enough, Erik. In my opinion you are wrong, but it is indeed your prerogative not to discuss it. Nevertheless, there are thousands of people who study financial theory, apply it like dogma and go on arrogantly only to become terrible traders and lose money. Real-life traders benefit from open mindedness, flexibility and adaptation. Without that, one can't make it in the long term.

    Anyway, don't take it from me. Since you like financial theory and portfolio management, which is good, maybe you have read David Swensen's Pioneering Portfolio Management. As CIO of Yale University, David successfully manages one of the world's largest endowments (over 20 billion). He is one of the few managers to be able to outperform the marketplace year after year and is in perfect position to demonstrate the real-life implications of portfolio management theory.

    Yale, naturally, has a vastly varied mix of assets within its portfolio. This, indeed, includes treasuries. Nevertheless, please see what David says about it, when discussing the historical evidence (page 56):

    "Treasury bills have provided a hedge against inflation, with returns that closely track price increases. The price of these attractive characteristics has been an extremely low real return. Thus, at least with twenty-twenty hindsight Treasury bills would not have been an appropriate investment for an institution investing to earn substantial after-inflation returns.”

    This is only one of the many real-life examples you can find from successful traders and investors. Again, you may choose to confidently say “End of story.” Sadly, that would only make you be wrong and lose money, albeit, assertively.
    Jan 21 01:20 PM | Likes Like |Link to Comment
COMMENTS STATS
281 Comments
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