Author Topic: Deflation hedges  (Read 141892 times)

Xerxes

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Re: Deflation hedges
« Reply #420 on: March 13, 2020, 05:20:01 AM »
As a side note given Prem nose for bearishness (notwithstanding his 180 degree in 2017), it would be hard to imagine him not taking advantage of what the virus could mean for equities heading into late February.

I am myself am too lazy and slow to buy put options on obvious things like airlines or related industries, but I hope he could squeeze a bit of juice through shorts and puts to add to BK


petec

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Re: Deflation hedges
« Reply #421 on: March 13, 2020, 06:50:48 AM »
As a side note given Prem nose for bearishness (notwithstanding his 180 degree in 2017), it would be hard to imagine him not taking advantage of what the virus could mean for equities heading into late February.

I am myself am too lazy and slow to buy put options on obvious things like airlines or related industries, but I hope he could squeeze a bit of juice through shorts and puts to add to BK

There is little space to add to equities, but you might be right that there is space to do a few options. I would guess they are more likely tp go long than short though, at this point.
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wisdom

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Re: Deflation hedges
« Reply #422 on: March 13, 2020, 10:37:02 AM »
They like debt with warrants. You can play both sides that way.

petec

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Re: Deflation hedges
« Reply #423 on: March 13, 2020, 11:00:24 AM »
They like debt with warrants. You can play both sides that way.

Yes, but thatís more something they issue than something that might represent a good opportunity because of a sell off.
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omagh

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Re: Deflation hedges
« Reply #424 on: March 16, 2020, 09:55:24 AM »
Dalio with his thoughts.  To be clear, he is talking his book, so a grain of salt is required.
https://www.linkedin.com/pulse/implications-hitting-hard-0-interest-rate-floor-ray-dalio/?published=t
Long-term interest rates hitting the hard 0% floor means that virtually all asset classes go down because the positive effects of interest rates falling wonít exist (at least not much). Hitting this 0% floor also means that virtually all the reserve country central banksí interest rate stimulation tools (including cutting rates and yield curve guidance) wonít work. The printing of money and buying of debt assets that central banks are now allowed to buy almost certainly wonít work much (because bonds canít be pushed much higher and they are also less likely to be sold to buy other assets of entities that are in financial trouble). Further, with this hard 0% interest rate floor, real interest rates will likely rise because there will be disinflation or deflation resulting from lower oil and other commodity prices, economic weakness, and more credit problems. If that plays out in the typical way, rising credit spreads will raise debt service payments to weaker credits at the same time as credit lending shrinks, which will intensify the credit tightening, deflationary pressures, and negative growth forces. God help those countries that have these things and a rising currency, too.

TwoCitiesCapital

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Re: Deflation hedges
« Reply #425 on: March 16, 2020, 10:25:54 AM »
Dalio with his thoughts.  To be clear, he is talking his book, so a grain of salt is required.
https://www.linkedin.com/pulse/implications-hitting-hard-0-interest-rate-floor-ray-dalio/?published=t
Long-term interest rates hitting the hard 0% floor means that virtually all asset classes go down because the positive effects of interest rates falling wonít exist (at least not much). Hitting this 0% floor also means that virtually all the reserve country central banksí interest rate stimulation tools (including cutting rates and yield curve guidance) wonít work. The printing of money and buying of debt assets that central banks are now allowed to buy almost certainly wonít work much (because bonds canít be pushed much higher and they are also less likely to be sold to buy other assets of entities that are in financial trouble). Further, with this hard 0% interest rate floor, real interest rates will likely rise because there will be disinflation or deflation resulting from lower oil and other commodity prices, economic weakness, and more credit problems. If that plays out in the typical way, rising credit spreads will raise debt service payments to weaker credits at the same time as credit lending shrinks, which will intensify the credit tightening, deflationary pressures, and negative growth forces. God help those countries that have these things and a rising currency, too.

Crazy that his book was down 20%....

mcliu

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Re: Deflation hedges
« Reply #426 on: March 16, 2020, 11:41:23 AM »
Wasn't he also saying "Cash is trash" like a week before everything blew up?

TwoCitiesCapital

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Re: Deflation hedges
« Reply #427 on: March 16, 2020, 11:45:27 AM »
Wasn't he also saying "Cash is trash" like a week before everything blew up?

Yea, but his comments like that are typically meant to be understood systematically.

He's already on record saying he believes the next decade will be a paradigm shift from disinflation/deflation to something more inflationary.

So when he says says cash is trash, he means holding an allocation to cash for the next 10-years will be a mistake. Not that holding cash for the next 10-weeks is to be understood that way.