Author Topic: Definitely In A Bubble  (Read 4103 times)

Gregmal

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Re: Definitely In A Bubble
« Reply #20 on: November 03, 2019, 06:48:28 AM »
You guys just need to by deep out of the money index puts. I think itís probably a good idea at the right time. The economy is slowing down, manufacturing even in the US is already in a contraction and yet stocks are at record level, seemingly unconcerned about this and the political risk.

Or perhaps buy some gold as a cash alternative in case central banks go even more bonkers than they do already.

What is your take on deep OTM index puts vs deep OTM individual security puts. I won't mention names, because that could redirect the focus to specific company talk, but wouldn't it perhaps make a better setup to cherry pick the most endangered of species? We can all use our(relatively speaking) more sophisticated investing insights to basketize(I might have just made up a new word) the same general hedge trade, no? An index will never go to 0, but select securities can. I've been doing the OTM put stuff now for the past few months with pretty decent success(not to lose sight of the fact that you and others Ive noticed have been doing the same but with the index and VIX), so Im just trying to see where the greatest risk/reward setup is. Would a subjectively selected Warren basket outperform the broader index which would also include names that benefit, IE healthcare?


cherzeca

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Re: Definitely In A Bubble
« Reply #21 on: November 03, 2019, 07:21:46 AM »
@greg

I've been thinking about this as well, and I might be getting too smart by half, but if you think warren through, then almost every industry will get trashed, but a commodity like oil should surge (no fracking, which she might executive order on day one).  so where I am now would be index puts and long oil future.

as to another post, the question as to when.  now is too early.  I think the market will tell you when warren fear has escalated to the right time...of course, she has to get nominated first, and she has plenty of time to screw the pooch.

one indicator I will be watching is public reaction to impeachment, which I assume will happen in house and acquittal in senate.  if Clinton is any guide, this will boomerang and trump will benefit.  if so, then I just go back to sleep on my longs and forget all this warren freak out

Gregmal

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Re: Definitely In A Bubble
« Reply #22 on: November 03, 2019, 07:32:29 AM »
@greg

I've been thinking about this as well, and I might be getting too smart by half, but if you think warren through, then almost every industry will get trashed, but a commodity like oil should surge (no fracking, which she might executive order on day one).  so where I am now would be index puts and long oil future.

as to another post, the question as to when.  now is too early.  I think the market will tell you when warren fear has escalated to the right time...of course, she has to get nominated first, and she has plenty of time to screw the pooch.

one indicator I will be watching is public reaction to impeachment, which I assume will happen in house and acquittal in senate.  if Clinton is any guide, this will boomerang and trump will benefit.  if so, then I just go back to sleep on my longs and forget all this warren freak out

Agreed, I just started a thread to discuss the market prep for a Warren win. I agree on oil, but think many of the E&P's still suffer quite a bit. IN fact, somewhere in there I am sure there is a tremendous pair trade shorting some type of fracker/E&P and going long something a little more casual, maybe KMI or something.

I think the house voting this week quelled any fears of impeachment. Politics aside, you need a big number of Senate support, if you cant even get a vote in the House, its not happening.

cherzeca

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Re: Definitely In A Bubble
« Reply #23 on: November 03, 2019, 08:12:46 AM »
warren reminds me of McGovern. I suppose my reaction to her is akin to a progressive's reaction to Reagan.  I will take this over to your new thread, tho the blog piece you started with did contain a discussion of warren, which I thought was too mild for my raw sensibilities.

Spekulatius

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Re: Definitely In A Bubble
« Reply #24 on: November 03, 2019, 10:12:32 AM »
You guys just need to by deep out of the money index puts. I think it’s probably a good idea at the right time. The economy is slowing down, manufacturing even in the US is already in a contraction and yet stocks are at record level, seemingly unconcerned about this and the political risk.

Or perhaps buy some gold as a cash alternative in case central banks go even more bonkers than they do already.

What is your take on deep OTM index puts vs deep OTM individual security puts. I won't mention names, because that could redirect the focus to specific company talk, but wouldn't it perhaps make a better setup to cherry pick the most endangered of species? We can all use our(relatively speaking) more sophisticated investing insights to basketize(I might have just made up a new word) the same general hedge trade, no? An index will never go to 0, but select securities can. I've been doing the OTM put stuff now for the past few months with pretty decent success(not to lose sight of the fact that you and others Ive noticed have been doing the same but with the index and VIX), so Im just trying to see where the greatest risk/reward setup is. Would a subjectively selected Warren basket outperform the broader index which would also include names that benefit, IE healthcare?

I prefer Index puts to be on market movements (both up and down ) for two  of reasons

1) index outs are cheaper and more liquid
2) in a sharp downturn, everything tends to get correlated and so the cheaper puts give you more bang for the buck and allow for better trading
« Last Edit: November 03, 2019, 10:31:58 AM by Spekulatius »
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RuleNumberOne

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Re: Definitely In A Bubble
« Reply #25 on: November 03, 2019, 10:24:10 AM »
Brooklyn Investor (BI) contradicts himself.

BI says market is not in a bubble. Yet Buffett has piled up $128 billion in cash.

Then BI says Berkshire beats the market over the long term - he/she says it does 1.5 times as well as the stock market.

So which is it BI? Buffett piled up $128 billion because the market is not in a bubble or because Buffett beats the market over the long term?

Gregmal

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Re: Definitely In A Bubble
« Reply #26 on: November 03, 2019, 10:29:06 AM »
Brooklyn Investor (BI) contradicts himself.

BI says market is not in a bubble. Yet Buffett has piled up $128 billion in cash.

Then BI says Berkshire beats the market over the long term - he/she says it does 1.5 times as well as the stock market.

So which is it BI? Buffett piled up $128 billion because the market is not in a bubble or because Buffett beats the market over the long term?

I think thereís been more than enough evidence presented to conclude that perhaps Buffett has lost it. Which is independent of the market being in a bubble or not in a bubble.

wabuffo

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Re: Definitely In A Bubble
« Reply #27 on: November 03, 2019, 10:47:27 AM »
Buffett piled up $128 billion because the market is not in a bubble

or maybe the cash and short-term bills is nothing unusual when placed in proper context. 

One needs to equate the cash as a percent of shareholders' equity in order to judge its size.  In fact, there are times when BRK has had a greater percentage of its net worth in cash and s-t-bills.  The cash is nominally bigger because the balance sheet is bigger.   The actual amount tells you nothing about any positioning or market stance because it is not unusual at all.

wabuffo
« Last Edit: November 03, 2019, 10:49:07 AM by wabuffo »

scorpioncapital

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Re: Definitely In A Bubble
« Reply #28 on: November 03, 2019, 10:48:27 AM »
It is not prudent to assume the correctness of his claims. There are many types of bubbles. If interest rate on bonds goes to 10% in an accident waiting to happen, 128 billion at 10% is a mighty good return. Those companies operating with debt will be paying 10%...those tech companies with 50x earnings will be worth 10x. Berkshire is 60/30 investments to cash. That's prudent. As Buffett said once, ANYTHING can happen in markets. I mean ANYTHING. He even said in an interview the markets could shut down. So who is being imprudent and gambler saying markets don't 'seem high'?


Castanza

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Re: Definitely In A Bubble
« Reply #29 on: November 03, 2019, 10:53:45 AM »
Buffett piled up $128 billion because the market is not in a bubble

or maybe the cash and short-term bills is nothing unusual when placed in proper context. 

One needs to equate the cash as a percent of shareholders' equity in order to judge its size.  In fact, there are times when BRK has had a greater percentage of its net worth in cash and s-t-bills.  The cash is nominally bigger because the balance sheet is bigger.   The actual amount tells you nothing about any positioning or market stance because it is not unusual at all.

wabuffo

Thanks for that simple yet insightful perspective.