Author Topic: The Warren Basket  (Read 4062 times)

Gregmal

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The Warren Basket
« on: November 03, 2019, 07:27:20 AM »
I hope the headline is tame enough for all the sissy's, there were definitely more compelling title choices, such as "Basketizing the Basket Case" or "Trail of Tears for the Stock Market"...but I wanted to get a thread going, given the overwhelming amount of sentiment that Elizabeth Warren would be very bad for the equity markets, that focused on ideas that hedged and or capitalized on her rise to power. This is an investing website, so for those able to get past the politics I think it makes sense to throw around ways to soften the blow. As we all know(or should know) now is likely the time to prepare for this rather than waiting for the thread about "buying puts" a day or two after she is elected. For the record, I do not think Warren can beat Trump, but in the name of making money, do not think its wise to completely write this scenario off either, at least from a risk management perspective.

I'll start with a few that Ive got an eye on.

Shorting, or well placed puts on Credit Acceptance, CACC and World Acceptance, WRLD. These are names that have been somewhat controversial and attracted negative attention for supposedly taking advantage of the consumer. They are very prone to regulatory sensitivities.

Pelaton, PTON. One can only imagine what would happen to something already as flimsy and non proprietary as this. What happens when the pool of people willing to pay $2500-$5000 plus a monthly subscription fee for what is basically a NordicTrack with an iPad taped on and a Youtube feed gets cut do to the threat of higher taxes and compressed business resources?

I'm looking at the frackers as well, but Ive always kind of considered most of the E&P companies pieces of shit anyway. Maybe shorting an ETF or something there has merit.

Will add others in time depending on the unfolding of events. Curious to see how others are setting up(outside of 50% cash, bro)...


DTEJD1997

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Re: The Warren Basket
« Reply #1 on: November 03, 2019, 08:24:08 AM »
Hmmm, interesting topic of discussion.

I don't think Warren will get the nomination OR win the election.  She is going to have too much trouble with her Indian heritage and pregnancy firing.

HOWEVER, you never know!

Two stocks that might do well are EZPW and FCFS.  These are pawn shop operators.  They have large portions of their business in Texas and the South.  Warren is anti-oil, and oil will likely suffer.  Texas still has a big chunk of it's economy oil related...so a lot of people there would be out of work.  People who lose their jobs might be going to the pawn shop?

Gun manufacturers will probably suffer as attempts to revoke the 2nd amendment are made.

Obviously you will want to be short anything auto related.  You will also want to be short shipping & trucking as the economy contracts.

Those that say the President can only do so much are right in some sense...but I think they are absolutely WRONG in that they overlook 2nd and 3rd order effects.  The President sets the tone and direction.  If Warren is elected, what would her 2nd term look like?  What will her supporters be up to?  What will the overall mood & direction of the country be?  Short the Bill of Rights, long re-education camps?

cherzeca

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Re: The Warren Basket
« Reply #2 on: November 03, 2019, 08:28:49 AM »
well, I am normally 50% cash bro.

I think you have to consider her policies in the context of what she could do by executive order as POTUS.  I read a lot saying not to worry about a warren POTUS if senate remains R.  WRONG.  both Obama and trump have shown the next POTUS that much can be done by executive order, as Obama said, with his pen alone.

in this light, the most obvious thing to me that she could do by EO on day 1 is ban fracking (and drilling on federal lands etc).  this to my mind gives rise to a pairs trade, short E&Ps and long oil as a commodity. 

an index put makes sense, tho I think you are paying too much for time right now.  other thoughts welcome.

edit:  while I think an index put can be placed if the polls show a close race a few months before the election, I wouldn't do the oil pairs trade until Wednesday morning, as that would not be a hedge, like the index put, but rather a position trade that would really require verification that warren had become POTUS
« Last Edit: November 03, 2019, 08:39:39 AM by cherzeca »

bizaro86

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Re: The Warren Basket
« Reply #3 on: November 03, 2019, 08:32:17 AM »
Hmmm, interesting topic of discussion.

I don't think Warren will get the nomination OR win the election.  She is going to have too much trouble with her Indian heritage and pregnancy firing.

HOWEVER, you never know!

Two stocks that might do well are EZPW and FCFS.  These are pawn shop operators.  They have large portions of their business in Texas and the South.  Warren is anti-oil, and oil will likely suffer.  Texas still has a big chunk of it's economy oil related...so a lot of people there would be out of work.  People who lose their jobs might be going to the pawn shop?

Gun manufacturers will probably suffer as attempts to revoke the 2nd amendment are made.

Obviously you will want to be short anything auto related.  You will also want to be short shipping & trucking as the economy contracts.

Those that say the President can only do so much are right in some sense...but I think they are absolutely WRONG in that they overlook 2nd and 3rd order effects.  The President sets the tone and direction.  If Warren is elected, what would her 2nd term look like?  What will her supporters be up to?  What will the overall mood & direction of the country be?  Short the Bill of Rights, long re-education camps?

I think I gun manufacturers would be a bad short for your basket. If a staunchly pro gun control president is elected, the second order effect is that those who fear gun control will go out and buy a bunch of guns prior to any enactment. So there will be big profits in the short term that the market will react to.

thepupil

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Re: The Warren Basket
« Reply #4 on: November 03, 2019, 08:39:30 AM »
what I see as the two most straightforward warren hedges:

Long term oil/natural gas futures call options. I refuse to believe she could do it, but a fracking ban can only do one thing to prices. Alternatively call options on highly levered traditional production companies like CalRes or offshore drillers or canadian/Russian/wherever E&P. Potentially even something like BTU, fracking kills coal. Killing fracking prolongs coal.

XLV puts/risk reversals/put spreads. I like this in that iíd Be comfortable cheapening the cost by selling calls on a basket of US blue chip healthcare stocks. They donít seem to discount the disruption potential or seem undervalued /coiled springy,

Ultimately I just think warren is potentially terrible for US and global corporate earnings power, so broad based hedges may be the best solution.













Gregmal

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Re: The Warren Basket
« Reply #5 on: November 03, 2019, 08:47:12 AM »
I was reading somewhere that guns stocks/sales did far better under Obama than Trump for the reason mentioned by Bizaro. Gun sales can remain elevated in perpetuity if there is the constant threat of killing the second amendment. No one is running to the gun store with a Republican in office.

Somewhat half heartedly, I would think certain pot stocks could do well also as legalization is basically a blanket policy for all the dems. Maybe someone can create a 3 P's ETF. Pawn shops, pot stocks, and potato chips....

Personally, I'm inclined to look at short opportunities simply because, like with other stuff, you can also kind of be right without Warren getting elected. Things may just slow down on their own. Warren getting elected would just inject steroids to the main vein.

You'd also think NNN REITS would go ballistic. I dont want to do a complete reshuffle as Warren is a low probability event, and I think Im decently market natural already, but you can never be too prepared and if the cost is low to put on a few trades with optionality, why not?

Castanza

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Re: The Warren Basket
« Reply #6 on: November 03, 2019, 09:43:46 AM »
Wouldnít it be easier to start building a position in $GLD or some other gold etf if she gets the nomination? Not to mention going to more cash.


Cardboard

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Re: The Warren Basket
« Reply #7 on: November 03, 2019, 10:08:40 AM »
My view is that you have to respect what the stock market is telling you.

This woman is highly unattractive both mentally and physically. If you thought that Hillary was a warmonger then have a look at her facial expression. It is evil in person. Even big money Liberals asset managers are coming out against her which was not the case for Clinton. Then think about all the industries that will push against her along with their employees.

Already Colorado, New Mexico and Texas Democrats are pushing back on fracking ban idea. Then you have Ohio, Pennsylvania. 4 are key swing States.

North Carolina and Florida are home to BAC and many smaller banks along with multiple money management firms. Even New Jersey could be up for grab by Republicans with such anti-financials programs.

Guys like Zuckerburg are promising to fight for their company. What do you think that means? The entire big tech community is a target. So no money from them to push for her election and no praise.

So I would not go too crazy on puts and the like as the market has already decided that she has no chance. She is a dream for some of the havenot's, dreamers and eco-nuts but, American society as a whole is smarter than that. Heck I thought that Democrats were smarter than that and could find a suitable candidate.

Doesn't mean that buying some puts right now is a poor strategy as the VIX is close to 12 and indexes are at all time highs but, I would not buy them to hedge against her as the market is saying loudly: she is not happening.

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cameronfen

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Re: The Warren Basket
« Reply #8 on: November 03, 2019, 10:09:12 AM »
Again I think you people have warren darrangement syndrome.  Also like European derrangement syndrome.  Like I said before, worse case scenario we end up like Germany or France and apprently to you guys that future wasunbareable. You might really dislike those countries but the average citizen there believes their way of life (not just economy-wise) is significantly better than the United States, so its not like they are begging to live in our system of government and politics.  I'm not saying their system is better than ours, but it helps to be open minded to other points of view especially if they are as happy as you are with what they have.  Anyway, I think you'll probably regret hedging as much as you are saying.  Sure buying a little more international stocks would be good, but this idea that she's going to cause the downfall of the US system seems ridiculous. 

Spekulatius

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Re: The Warren Basket
« Reply #9 on: November 03, 2019, 10:25:55 AM »
Again I think you people have warren darrangement syndrome.  Also like European derrangement syndrome.  Like I said before, worse case scenario we end up like Germany or France and apprently to you guys that future wasunbareable. You might really dislike those countries but the average citizen there believes their way of life (not just economy-wise) is significantly better than the United States, so its not like they are begging to live in our system of government and politics.  I'm not saying their system is better than ours, but it helps to be open minded to other points of view especially if they are as happy as you are with what they have.  Anyway, I think you'll probably regret hedging as much as you are saying.  Sure buying a little more international stocks would be good, but this idea that she's going to cause the downfall of the US system seems ridiculous.

I agree with respect to Europe. It would certainly be helpful to actually have lived and worked or at least travelled there before coming to a conclusion. The mean (statistically)  Joe in Germany is better of than the mean Joe in the US, thatís for sure. The averages are heavily tilted by the top 5% and those are better of in the US, than Germany or France, I give you that.
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