Value Meets Macro

[Graham Osborn]

If you're like me, you may be having trouble making money as a long-only stock picker in the current market environment.  So let's think outside the box and look at our picks within a larger context.  At the macro level, our model will be the Quantum Fund as described in Alchemy of Finance (stocks, index futures, short-term and long-term bonds, commodities, currencies).  For the equity component, our model will be value investing with a margin of safety (long or short).  Good luck!

[jawn619]

just be patient

[feynmanresearch]

just be patient

+1

[Graham Osborn]

Hi jawn619,

 

I know the default view is that (limiting ourselves to US for the moment) US GDP should continue to grow at historic rates and the average stock should reflect this.  Buffett has a great writeup on pension funds in "Essays" where he essentially reduces this view to an assumption of infinite growth for the US economy.  Yet even historically this has not been the case.  Although the last 25 years may leave the impression that pre-80s multiples no longer apply to "modern" markets, a closer inspection indicates that regulators have staved off a repeat of the 70s and 30s several times since the early 80s.  2008-9 was one of the few periods over the past 25 years where Schiller PE dipped below its historic average:

 

https://en.wikipedia.org/wiki/Price%E2%80%93earnings_ratio#/media/File:S_and_P_500_pe_ratio_to_mid2012.png

 

So I guess my response is if you're willing to buy an index fund today and wait 15-25 years, and the US is somehow able repay its creditors and shrink its balance sheet without more austerity, then yes, it should be reasonable to assume the value of your holdings will be greater.  But if you're talking shorter durations of time (the durations over which most of us hold our stocks, including young Warren), the future is far less certain IMO.

 

Sincerely,

Graham

[Graham Osborn]

Can anyone explain to me (perhaps by accessing the earlier letter) how Burry knew this?  I'd like to apply similar logic to the present situation.  Currently I have been estimating marginal production cost excluding Saudi Arabia at 45-55/ bbl but I worry I am missing things in my calculation..

 

Within the first quarter’s letter, I expressed my sentiment that “very high oil prices were not only possible but probable.” I defined “very high oil prices” as being in excess of $50 per barrel. I believe now as I did then that there is a reasonable fundamental basis for these higher oil prices. Speculators are being widely blamed for these higher prices, but I would say that to the extent fundamentals-be-damned speculators are involved, they are

in for the luckiest ride of their lives… Since earlier this year, the Funds have held long equity and distressed debt investments, both domestically and abroad, that should benefit significantly from these higher oil prices.

- Scion 3Q 2004 Letter to Investors

 

I have written before of my similar belief that many of our financial institutions are simply becoming too big to save without consequence. Moreover, as they raced to become too big to fail, many grew at rates that outstripped internal accounting and audit controls as well as regulator resources.

- Scion 3Q 2004 Letter to Investors

[Graham Osborn]

For anyone interested, I strongly recommend the Soros lecture series at Central European University:

 

https://www.google.com/webhp?sourceid=chrome-instant&ion=1&espv=2&ie=UTF-8#q=youtube%20soros%20lecture%20series

 

IMO the last few lectures contain much commentary more relevant today than at the time.

[Viking]

A very simple strategy that has worked for me for many, many years is to buy best in class companies when they are out of favor. Every year different companies and/or sectors sell off. If you take a medium term view (12-36 months) you can make some very good purchases. Three years ago Apple went on sale. Google went on sale. Amazon went on sale. US financials have been on sale for years and just now look like they may finally be getting some love.

 

I have no idea where stocks are going to be Monday or next month.

 

However, I do know that there is a very good chance that a company I understand reasonably well that is a leader in its field will go on sale in the next 30-60 days. One good decision each month or two and perhaps two or three really good decisions each year is all it takes to achieve very good returns.

[Viking]

Two recent examples of good decisions (for me) was staying away from oil (last year) and also staying away from leveraged pharma (recently). I did make some small purchases and ended up taking some small losses. But I quickly understood I was gambling and not investing. The small losses were tuition and worth every penny. Bottom line is I was deviating from my circle of competence. Sometimes it's what you avoid that makes you money.

 

This is not to say that money can't be made in oil or leveraged pharma. Those industries are just not a good fit for me emotionally or my investment style.

[rb]

Graham,

 

I'm gonna echo the sentiment of everyone here. The best way to make money is be a long term holder of companies you understand and buy when the stock is cheap. Some years you'll make more money, some years you'll make less, some years you'll loose money. That's just how the market works.

 

But just leave macro alone or it'll be an expensive learning opportunity. A few reasons.

1. Macroeconomics seems easy but it's really hard.

2. I don't know what your formal training is but from your comments about austerity and US government repaying his debts I can tell you don't know a lot about macro.

3. You probably won't have access to the instruments required to bet on macro events.

 

Stick to long term and stay in your circle of competence and you'll be fine.

[Graham Osborn]

FWIW, here's my current portfolio:

 

Symbol Description Acct Type Qty Last Price Mkt Value Chg $|% Total Chg $ Total G/L $

IEHC I E H CORP Margin 4,286 6.30 27,001.80 0.00% 0.00 -3,485.80

MKRS MIKROS SYSTEMS CORP - NEW Margin 142,857 0.117 16,714.269 -2.50% -428.571 -3,385.71

AET JAN 20 2017 55.00 P PUT -AETNA U S HEALTHCA JAN 55 01202017 Margin 11 1.25 1,375.00 0.00% 0.00 -20.79

AGN JAN 20 2017 130.00 P PUT -ALLERGAN PLC (IREL JAN 130 01202017 Margin 18 0.90 1,620.00 0.00% 0.00 +60.48

AGN JAN 20 2017 150.00 P PUT -ALLERGAN PLC (IREL JAN 150 01202017 Margin 12 1.90 2,280.00 0.00% 0.00 +180.00

AMZN JAN 20 2017 300.00 P PUT -AMAZON COM INC JAN 300 01202017 Margin 2 4.55 910.00 +1.11% +10.00 -469.50

AZO JAN 20 2017 500.00 P PUT -AUTOZONE INC JAN 500 01202017 Margin 2 8.50 1,700.00 0.00% 0.00 -209.50

CAR JAN 20 2017 20.00 P PUT -AVIS BUDGET GROUP JAN 20 01202017 Margin 11 3.20 3,520.00 0.00% 0.00 +2,453.00

CVS JAN 20 2017 45.00 P PUT -CVS HEALTH CORP JAN 45 01202017 Margin 34 0.51 1,734.00 0.00% 0.00 -49.64

ETP JUN 17 2016 13.00 P PUT -ENERGY TRANSFER PA JUN 13 06172016 Margin 21 0.69 1,449.00 0.00% 0.00 -33.18

F JAN 20 2017 4.75 P PUT -FORD MTR CO JAN 4.7501202017 Margin 136 0.07 952.00 0.00% 0.00 -584.80

GS JAN 20 2017 80.00 P PUT -GOLDMAN SACHS GROU JAN 80 01202017 Margin 11 1.15 1,265.00 0.00% 0.00 -273.79

MCK JAN 20 2017 100.00 P PUT -MCKESSON INC JAN 100 01202017 Margin 9 1.60 1,440.00 0.00% 0.00 -18.27

MDT JAN 20 2017 45.00 P PUT -MEDTRONIC INC JAN 45 01202017 Margin 17 1.05 1,785.00 0.00% 0.00 +323.00

MDT JAN 20 2017 32.50 P PUT -MEDTRONIC INC JAN 32.50001202017 Margin 30 0.52 1,560.00 0.00% 0.00 -254.40

Total Market Value: +$65,306.069Total Market Change ($|%): -0.64%Portfolio G/L ($|%): -$5,768.9047

 

Trading & Cash Balances

Buying Power: Marginable Investments $54,317.73

Buying Power: Non-Marginable Investments $16,295.32

Cash Available for Withdrawal Without Margin Loan* $16,287.87

Total Cash Balance $73,552.55

Positions

Stocks, Mutual Funds, CDs & Bonds Market Value $43,716.07

Options Market Value $21,590.00

Total Positions Market Value $65,306.07

Scottrade Brokerage Account Total

Total Brokerage Account Value (Positions + Cash Balances) $138,858.62

 

My short assets outnumber my longs by about 10x.

 

I don't think you need access to special asset classes to invest from a macro point of view, it just helps.  For me having equity and futures accounts is probably enough (right now I'm speculating on commodities through stocks anyway and haven't needed the futures).  For me being a macro investor just means you take a view of the global economic machine and then select bets that plug into that view.  In another time (shortly before Fed stimulus began) having access to a wider selection of foreign stocks and bonds would have been helpful.  But now the bulk of foreign currencies are weakening against the dollar and these bets make far less sense.

 

I hope people will use this thread as a forum to post (among other things) what they are actually longing/ shorting and what their historic returns have been.  It doesn't do anyone any good for some stranger to show up and start speaking in platitudes without any historic performance data.  My return for 2015 was about 12-13% (unaudited) and derived primarily from the oil patch whereas I lost money on pretty much everything else (mostly short positions).

 

Btw, after a long slide it looks like oil may being showing the start of some technical support.  I abandoned my fundamental views on the oil macroenvironment some months ago (apart from the view that a bear market in stocks globally will prompt a migration to physical assets, as has historically been the case) and am trading the sector purely on technicals (apart from the fact that the stocks I trade on the underlying - Brent - have lots of cash, minimal debt, and a good track record of building tangible book value for shareholders).

 

Good luck,

Graham

[Guest Grey512]

Some quick questions. Looking to learn.

 

1. Are you a current/former professional options/derivatives trader? Just wondering why so many options..

2. What tools do you use to track the implied vol of a put before you buy?

3. If you're looking for some specific % short exposure to hedge out the market risk, why do you use a multitude of individual shorts instead of shorting something like SPY, QQQ, XBI, IWM? The latter would be easier to track and maybe incur lower transaction costs.

 

On the topic of your question: I have nothing against having a bunch of stocks I like long and a bunch that I dislike short, and on occasion expression some sort of macro view by doing an odd FX trade or short-selling some sector or geography ETF or something.. But full global macro? Dunno... The problem is that this requires a somewhat different skill-set. Your diet (i.e. the things you should read, the talks / conferences you attend, the data-points you look for) change. You focus on the Economist instead of Barron's. You're excited about some info release like the ISM instead of thumbing through Value Line or the Greenblatt screen etc. And you become increasingly short-term. I guess it just comes down to personality. I do fool around with macro every now and then but then usually come to a realization that the easiest way to do this for me is just to vary my gross & net exposure and 'time' the environment that way, as inexpensively as possible in terms of cost of carry, overnight financing & general commission costs. And even doing that takes time - again, you start demanding more of your time by reading a bunch of stuff you wouldn't otherwise, flipping through statistics releases etc. So, becoming a 'full-on' macro person is a bit of a pain in the butt unless you're naturally wired that way. At least that's how I am finding it.

[Graham Osborn]

Hi Grey, 1. no I try to avoid options whenever possible. The problem I've run into is I am really a terrible technical trader on the short side and I hate constantly losing money on my stop losses.  They say you should never short anything technically but a bear market and I have found that to be true.  Over a longer time period though I think I can speak more confidently on the prevailing trend and that was what induced me to take the long-dated put positions.  I also like the idea of getting paid for volatility/ levered beta.  I have no professional investing experience, which given we are at the end of a credit cycle may be a good thing.

 

2. I don't use option valuation tools.  Part of this is I don't fully trust the model and partly it is because my intuition for future volatility isn't really that easy to extrapolate from past price action.  What I like to do more is pick a price target based on my fundamental/ macro view then look at the 6-month puts to see what sort of premium should constitute a bargain at the 12-month (with increased forward volatility providing the margin of safety).

 

3. I started out using this as a hedge but now it is the big idea of portfolio (as well as hedging my nanocaps :)).  If you look at an index such as IBB the option market is not efficient.  I can get much better prices on CELG than IBB for ex although CELG has more downside as a rollup growth story IMO.  So I hone my macro bet by cherry picking.  In time these inefficiencies will be ironed out I expect.

 

The diet for GM is very different I agree, and I would argue more productive right now.  Value investors are working way too hard to justify buys IMO.  The oracle has succumbed to dementia which isn't helping.  Soros meanwhile is ancient but sharp as ever.  So yes although I consider myself a value investor I am paying more attention to sovereign debt and capital flows.  But ever the fundamentalist I can't resist digging that extra layer to suck the most juice out of my macro bets.  At the end of the day I'd love to be wrong on the macro and still make money.  That at least some of the sectors I've picked will be in an outright bear market by years end I feel on confident of.  But if I am only minority right I will probably come out around breakeven which, given the alternative risks, is probably not so bad.

[Guest Grey512]

Quick thought: you familiar with Mark Hart / Corriente (and his disciple, Adam Rodman @ Segra)? There are some good interviews on the web about these guys. They, like John Burbank at Passport, can probably be described as value macro investors. Latch on to a big macro theme or trend, and then express via equities. Really smart guys that I have been trying to learn from. Burbank especially is quite open about how he thinks through things and how that translates into positioning.

 

 

[Graham Osborn]

Added a few more today:

 

Symbol Description Acct Type Qty Last Price Mkt Value Chg $|% Total Chg $ Total G/L $

IEHC I E H CORP Margin 4,286 6.30 27,001.80 0.00% 0.00 -3,485.80

MKRS MIKROS SYSTEMS CORP - NEW Margin 142,857 0.117 16,714.269 0.00% 0.00 -3,385.71

AET JAN 20 2017 55.00 P PUT -AETNA U S HEALTHCA JAN 55 01202017 Margin 11 1.25 1,375.00 0.00% 0.00 -20.79

AGN JAN 20 2017 130.00 P PUT -ALLERGAN PLC (IREL JAN 130 01202017 Margin 18 0.90 1,620.00 0.00% 0.00 +60.48

AGN JAN 20 2017 150.00 P PUT -ALLERGAN PLC (IREL JAN 150 01202017 Margin 12 1.90 2,280.00 0.00% 0.00 +180.00

AMZN JAN 20 2017 300.00 P PUT -AMAZON COM INC JAN 300 01202017 Margin 2 4.80 960.00 +5.49% +50.00 -419.50

AZO JAN 20 2017 500.00 P PUT -AUTOZONE INC JAN 500 01202017 Margin 2 8.50 1,700.00 0.00% 0.00 -209.50

CAR JAN 20 2017 20.00 P PUT -AVIS BUDGET GROUP JAN 20 01202017 Margin 11 3.20 3,520.00 0.00% 0.00 +2,453.00

CELG JAN 20 2017 50.00 P PUT -CELGENE CORP JAN 50 01202017 Margin 10 1.52 1,520.00 +9.35% +130.00 -19.50

CVS JAN 20 2017 45.00 P PUT -CVS HEALTH CORP JAN 45 01202017 Margin 34 0.51 1,734.00 0.00% 0.00 -49.64

ETP JUN 17 2016 13.00 P PUT -ENERGY TRANSFER PA JUN 13 06172016 Margin 21 0.69 1,449.00 0.00% 0.00 -33.18

F JAN 20 2017 4.75 P PUT -FORD MTR CO JAN 4.7501202017 Margin 136 0.08 1,088.00 +14.29% +136.00 -448.80

GS JAN 20 2017 80.00 P PUT -GOLDMAN SACHS GROU JAN 80 01202017 Margin 11 1.02 1,122.00 -11.30% -143.00 -416.79

MCK JAN 20 2017 100.00 P PUT -MCKESSON INC JAN 100 01202017 Margin 9 1.60 1,440.00 0.00% 0.00 -18.27

MDT JAN 20 2017 45.00 P PUT -MEDTRONIC INC JAN 45 01202017 Margin 17 1.05 1,785.00 0.00% 0.00 +323.00

MDT JAN 20 2017 32.50 P PUT -MEDTRONIC INC JAN 32.50001202017 Margin 30 0.52 1,560.00 0.00% 0.00 -254.40

SBGI JAN 20 2017 13.00 P PUT -SINCLAIR BROADCAST JAN 13 01202017 Margin 25 0.60 1,500.00 0.00% 0.00 -38.25

 

[Graham Osborn]

Quick thought: you familiar with Mark Hart / Corriente (and his disciple, Adam Rodman @ Segra)? There are some good interviews on the web about these guys. They, like John Burbank at Passport, can probably be described as value macro investors. Latch on to a big macro theme or trend, and then express via equities. Really smart guys that I have been trying to learn from. Burbank especially is quite open about how he thinks through things and how that translates into positioning.

 

His outlook is pretty vintage Soros.  Looks like he is pretty deep in the China trade and has been a while.  I'm staying away.. whichever direction the stampede goes I am liable to get trampled.

[Graham Osborn]

Does anyone here know a way to bet against sovereign bonds other than ETFs?  The CDS hurdle is killing me.

[Graham Osborn]

Quick thought: you familiar with Mark Hart / Corriente (and his disciple, Adam Rodman @ Segra)? There are some good interviews on the web about these guys. They, like John Burbank at Passport, can probably be described as value macro investors. Latch on to a big macro theme or trend, and then express via equities. Really smart guys that I have been trying to learn from. Burbank especially is quite open about how he thinks through things and how that translates into positioning.

 

Another to have a peek at is John Burbank with Passport Capital.  A similar catastrophist mindset.  I am just digging in but I generally like his style and he was prescient on Brent last year (unlike me):

 

http://www.insidermonkey.com/hedge-fund/passport+capital/48/

 

The only thing I can't stomach is longing VIPS.  The flash-sale model, bear attacks, positive Beneish and pink investor pitch were pretty glaring.  I tried to counter the contrarians and ultimately joined them :)

 

[Graham Osborn]

The man who broke the Bank of England is as sharp as ever, and still raking it in:

 

https://m.youtube.com/watch?v=bCGJkr0qbLI

 

 

[winjitsu]

Does anyone here know a way to bet against sovereign bonds other than ETFs?  The CDS hurdle is killing me.

 

 

Look at CFDs as a possibility ... I used to use Oanda but definitely look around at different brokers for more options to bet on rates etc:

 

http://www.oanda.com/forex-trading/markets/cfd-trading

 

[Graham Osborn]

Well, I about doubled my outstanding "hedges" if they can still be called such at this point (I didn't spend much time watching the Super Bowl this weekend :)) given the underlying is about 20x my long assets at this point.  The pricing on some of these (e.g. SBUX) is a total disconnect from what I see in index options - it's as if you have this one group of macro guys who buy puts on the broad indices and are more and more predominantly short US equities while you have this other camp of predominantly stock pickers who are still bullish/ loading up and they are the customer for the individual stock puts.  I may be totally wrong on that but looking at the pricing on some of the consumer defensives that's what it kinda seems like.  Anyway, here's my portfolio at the end of my buying spree today:

 

Symbol Description Acct Type Qty Last Price Mkt Value Chg $|% Total Chg $ Total G/L $

IEHC I E H CORP Margin 4,286 6.10 26,144.60 0.00% 0.00 -4,343.00

MKRS MIKROS SYSTEMS CORP - NEW Margin 142,857 0.098 13,999.986 +8.89% +1,142.856 -6,099.99

AET JAN 20 2017 55.00 P PUT -AETNA U S HEALTHCA JAN 55 01202017 Margin 11 1.25 1,375.00 0.00% 0.00 -20.79

AGN JAN 20 2017 130.00 P PUT -ALLERGAN PLC (IREL JAN 130 01202017 Margin 18 1.20 2,160.00 0.00% 0.00 +600.48

AGN JAN 20 2017 150.00 P PUT -ALLERGAN PLC (IREL JAN 150 01202017 Margin 12 1.90 2,280.00 0.00% 0.00 +180.00

AMZN JAN 20 2017 300.00 P PUT -AMAZON COM INC JAN 300 01202017 Margin 4 12.00 4,800.00 +27.12% +1,024.00 +1,227.00

ABC JAN 20 2017 50.00 P PUT -AMERISOURCEBERGEN JAN 50 01202017 Margin 15 1.00 1,500.00 +100.00% +750.00 -25.80

AZO JAN 20 2017 500.00 P PUT -AUTOZONE INC JAN 500 01202017 Margin 2 9.30 1,860.00 0.00% 0.00 -49.50

CAR JAN 20 2017 20.00 P PUT -AVIS BUDGET GROUP JAN 20 01202017 Margin 11 2.80 3,080.00 0.00% 0.00 +2,013.00

BMY JAN 20 2017 30.00 P PUT -BRISTOL-MYERS SQUI JAN 30 01202017 Margin 27 0.68 1,836.00 -5.56% -108.00 -40.77

CELG JAN 20 2017 50.00 P PUT -CELGENE CORP JAN 50 01202017 Margin 10 1.70 1,700.00 0.00% 0.00 +160.50

CERN JAN 20 2017 35.00 P PUT -CERNER CORP JAN 35 01202017 Margin 20 0.97 1,940.00 -10.19% -220.00 -32.00

CVS JAN 20 2017 45.00 P PUT -CVS HEALTH CORP JAN 45 01202017 Margin 34 0.51 1,734.00 0.00% 0.00 -49.64

ETP JUN 17 2016 13.00 P PUT -ENERGY TRANSFER PA JUN 13 06172016 Margin 21 0.69 1,449.00 0.00% 0.00 -33.18

EXR SEP 16 2016 60.00 P PUT -EXTRA SPACE STORAG SEP 60 09162016 Margin 6 2.20 1,320.00 0.00% 0.00 -14.52

F JAN 20 2017 4.75 P PUT -FORD MTR CO JAN 4.7501202017 Margin 286 0.10 2,860.00 +25.00% +572.00 -669.24

GS JAN 20 2017 75.00 P PUT -GOLDMAN SACHS GROU JAN 75 01202017 Margin 12 1.75 2,100.00 +34.62% +540.00 +242.04

GS JAN 20 2017 80.00 P PUT -GOLDMAN SACHS GROU JAN 80 01202017 Margin 11 1.40 1,540.00 0.00% 0.00 +1.21

KR JAN 20 2017 30.00 P PUT -KROGER CO JAN 30 01202017 Margin 8 1.81 1,448.00 +34.07% +368.00 -17.04

MA JAN 20 2017 50.00 P PUT -MASTERCARD CL A JAN 50 01202017 Margin 11 1.34 1,474.00 +15.52% +198.00 -20.79

MCK JAN 20 2017 100.00 P PUT -MCKESSON INC JAN 100 01202017 Margin 16 2.50 4,000.00 +56.25% +1,440.00 +776.00

MDT JAN 20 2017 45.00 P PUT -MEDTRONIC INC JAN 45 01202017 Margin 17 1.05 1,785.00 0.00% 0.00 +323.00

MDT JAN 20 2017 32.50 P PUT -MEDTRONIC INC JAN 32.50001202017 Margin 30 0.52 1,560.00 0.00% 0.00 -254.40

MS JAN 20 2017 13.00 P PUT -MORGAN STANLEY JAN 13 01202017 Margin 25 0.61 1,525.00 +48.78% +500.00 +36.75

CRM JAN 20 2017 30.00 P PUT -SALESFORCE.COM JAN 30 01202017 Margin 11 1.42 1,562.00 +23.48% +297.00 -20.79

SBGI JAN 20 2017 13.00 P PUT -SINCLAIR BROADCAST JAN 13 01202017 Margin 25 0.60 1,500.00 0.00% 0.00 -38.25

SBUX JAN 20 2017 40.00 P PUT -STARBUCKS CORP JAN 40 01202017 Margin 7 2.11 1,477.00 +22.67% +273.00 -15.75

Total Market Value: +$90,009.586Total Market Change ($|%): +8.14%Portfolio G/L ($|%): -$6,185.4777

 

Cash Balance

Brokerage Cash Balance $0.00

Brokerage Margin Balance $48,436.26

Brokerage Short Stock Reserve $0.00

Total Cash Balance $48,436.26

Cash Available for Withdrawal

Cash Available Without Margin Loan $19,024.57

Cash Available Including a Margin Loan $44,422.00

Restricted Funds* $0.00

Recent Brokerage Deposits on Hold** $0.00

Buying Power

Funds Applied to Open Buy Orders -$4,025.00

Buying Power: Marginable Securities $114,752.00

Buying Power: Non-Marginable Securities $44,422.00

Short Stock Detail

Short Stock Reserve $0.00

Short Stocks Market Value $0.00

Today's Credit/ Debit for Shorted Stocks $0.00

Positions Market Value

Stocks, Mutual Funds, CDs & Bonds not held on Margin $0.00

Stocks, Mutual Funds, CDs & Bonds held on Margin $40,144.59

Short Stocks Market Value $0.00

Total Stocks, Mutual Funds, CDs, Bonds & Short Stocks Market Value $40,144.59

Options Market Value $49,865.00

Total Account Value Yesterday Today

Positions Market Value $67,735.82 $90,009.59

Cash Balance $70,480.51 $48,436.26

Total Brokerage Account Value $138,216.33 $138,445.85

 

Good luck,

Graham

[Graham Osborn]

Brent testing a ???nascent support level.  Anyone planning to play Russian roulette tomorrow :) ?  I for one am still looking for support levels similar to what we saw last January, but will the secular view that a bearish trend is at least probable until the flight from financial assets is more mature.  That said, Brent is awful awful low right now and the possibility for a shock of undetermined origin can't be underestimated either.

 

I get the sense that as the consumer defensives crack this sector is going to start looking awful sexy to opportunity funds.

[Graham Osborn]

So here's a riddle for all you chart monkeys.  The question is when to buy oil/ oil plays secularly (as opposed to the short term primarily technical trading.  I've been plotting Brent vs the SSE and there is a clear acceleration/ deacceleration correlation (i.e. futures anticipate credit expansion in China/ emergings and spike the price).  No surprises there.  I saw a white paper looking at Brent vs the S&P but I find this one works much better.  So the interesting part is to the close of a "Brent Cycle" (which seems to run around 15 years but has embedded waves) with a credit collapse in China.  Once Chinese equities get 1 SD below the historic average PE the probability of an anticipatory rally in Brent rises significantly:

 

https://www.google.com/search?q=pe+of+shanghai+composite&rlz=1C9BKJA_enUS633US633&hl=en-US&prmd=nvsi&source=lnms&tbm=isch&sa=X&ved=0ahUKEwi0kPKrwu3KAhVKlYMKHdKgA8gQ_AUICigE#imgrc=bDTD7VKAjcFxmM%3A

 

So to play this secularly I would wait longer in the China hard landing until support around that level is realized.

[Graham Osborn]

Today I exited my remaining longs (after a nanocap drubbing) and expanded my short positions.  I am now exclusively short:

 

Symbol Description Acct Type Qty Last Price Mkt Value Chg $|% Total Chg $ Total G/L $

AET JAN 20 2017 55.00 P PUT -AETNA U S HEALTHCA JAN 55 01202017 Margin 11 1.25 1,375.00 0.00% 0.00 -20.79

AGN JAN 20 2017 130.00 P PUT -ALLERGAN PLC (IREL JAN 130 01202017 Margin 18 1.20 2,160.00 0.00% 0.00 +600.48

AGN JAN 20 2017 150.00 P PUT -ALLERGAN PLC (IREL JAN 150 01202017 Margin 12 1.90 2,280.00 0.00% 0.00 +180.00

AMZN JAN 20 2017 300.00 P PUT -AMAZON COM INC JAN 300 01202017 Margin 4 7.90 3,160.00 -15.05% -560.00 -413.00

ABC JAN 20 2017 50.00 P PUT -AMERISOURCEBERGEN JAN 50 01202017 Margin 15 1.00 1,500.00 0.00% 0.00 -25.80

ASH JAN 20 2017 55.00 P PUT -ASHLAND ORDINARY JAN 55 01202017 Margin 20 1.00 2,000.00 -20.00% -500.00 -32.00

AZO JAN 20 2017 500.00 P PUT -AUTOZONE INC JAN 500 01202017 Margin 2 10.50 2,100.00 -11.76% -280.00 +190.50

CAR JAN 20 2017 20.00 P PUT -AVIS BUDGET GROUP JAN 20 01202017 Margin 11 3.18 3,498.00 0.00% 0.00 +2,431.00

BMY JAN 20 2017 30.00 P PUT -BRISTOL-MYERS SQUI JAN 30 01202017 Margin 27 0.78 2,106.00 +11.43% +216.00 +229.23

CBG SEP 16 2016 15.00 P PUT -CB RICHARD ELLIS G SEP 15 09162016 Margin 30 0.50 1,500.00 0.00% 0.00 -44.70

CELG JAN 20 2017 50.00 P PUT -CELGENE CORP JAN 50 01202017 Margin 10 1.58 1,580.00 0.00% 0.00 +40.50

CERN JAN 20 2017 35.00 P PUT -CERNER CORP JAN 35 01202017 Margin 20 0.97 1,940.00 0.00% 0.00 -32.00

CVS JAN 20 2017 45.00 P PUT -CVS HEALTH CORP JAN 45 01202017 Margin 34 0.51 1,734.00 0.00% 0.00 -49.64

ETP JUN 17 2016 13.00 P PUT -ENERGY TRANSFER PA JUN 13 06172016 Margin 21 0.69 1,449.00 0.00% 0.00 -33.18

EXR SEP 16 2016 60.00 P PUT -EXTRA SPACE STORAG SEP 60 09162016 Margin 6 1.70 1,020.00 -22.73% -300.00 -314.52

F JAN 20 2017 4.75 P PUT -FORD MTR CO JAN 4.7501202017 Margin 286 0.10 2,860.00 0.00% 0.00 -672.10

GGP JAN 20 2017 15.00 P PUT -GENERAL GROWTH PPT JAN 15 01202017 Margin 30 0.59 1,770.00 +31.11% +420.00 -44.40

GS JAN 20 2017 75.00 P PUT -GOLDMAN SACHS GROU JAN 75 01202017 Margin 12 2.02 2,424.00 0.00% 0.00 +566.04

GS JAN 20 2017 80.00 P PUT -GOLDMAN SACHS GROU JAN 80 01202017 Margin 11 2.80 3,080.00 0.00% 0.00 +1,541.21

GRA JAN 20 2017 40.00 P PUT -GRACE W R & CO DEL JAN 40 01202017 Margin 10 1.14 1,140.00 0.00% 0.00 -19.50

KR JAN 20 2017 30.00 P PUT -KROGER CO JAN 30 01202017 Margin 8 1.36 1,088.00 -6.21% -72.00 -377.04

LB JAN 20 2017 40.50 P PUT -L BRANDS INC COM JAN 40.5001202017 Margin 21 0.95 1,995.00 +35.71% +525.00 -33.18

MA JAN 20 2017 50.00 P PUT -MASTERCARD CL A JAN 50 01202017 Margin 11 1.53 1,683.00 0.00% 0.00 +188.21

MCK JAN 20 2017 100.00 P PUT -MCKESSON INC JAN 100 01202017 Margin 16 2.50 4,000.00 0.00% 0.00 +776.00

MDT JAN 20 2017 45.00 P PUT -MEDTRONIC INC JAN 45 01202017 Margin 17 1.05 1,785.00 0.00% 0.00 +323.00

MDT JAN 20 2017 32.50 P PUT -MEDTRONIC INC JAN 32.50001202017 Margin 30 0.65 1,950.00 0.00% 0.00 +135.60

MS JAN 20 2017 13.00 P PUT -MORGAN STANLEY JAN 13 01202017 Margin 25 0.57 1,425.00 -18.57% -325.00 -63.25

PCLN JAN 20 2017 500.00 P PUT -PRICELINE GROUP IN JAN 500 01202017 Margin 2 8.00 1,600.00 -25.23% -540.00 -149.50

CRM JAN 20 2017 30.00 P PUT -SALESFORCE.COM JAN 30 01202017 Margin 11 0.95 1,045.00 -15.93% -198.00 -537.79

SBGI JAN 20 2017 13.00 P PUT -SINCLAIR BROADCAST JAN 13 01202017 Margin 25 0.60 1,500.00 0.00% 0.00 -38.25

SBUX JAN 20 2017 40.00 P PUT -STARBUCKS CORP JAN 40 01202017 Margin 7 1.45 1,015.00 -9.37% -105.00 -477.75

TSO JAN 20 2017 35.00 P PUT -TESORO PETROLEUM C JAN 35 01202017 Margin 9 1.64 1,476.00 0.00% 0.00 -18.27

 

Cash Balance

Brokerage Cash Balance $0.00

Brokerage Margin Balance $74,335.51

Brokerage Short Stock Reserve $0.00

Total Cash Balance $74,335.51

Cash Available for Withdrawal

Cash Available Without Margin Loan $25,563.96

Cash Available Including a Margin Loan $74,349.00

Restricted Funds* $0.00

Recent Brokerage Deposits on Hold** $0.00

Buying Power

Funds Applied to Open Buy Orders $0.00

Buying Power: Marginable Securities $174,596.00

Buying Power: Non-Marginable Securities $74,349.00

Short Stock Detail

Short Stock Reserve $0.00

Short Stocks Market Value $0.00

Today's Credit/ Debit for Shorted Stocks $0.00

Positions Market Value

Stocks, Mutual Funds, CDs & Bonds not held on Margin $0.00

Stocks, Mutual Funds, CDs & Bonds held on Margin $0.00

Short Stocks Market Value $0.00

Total Stocks, Mutual Funds, CDs, Bonds & Short Stocks Market Value $0.00

Options Market Value $61,238.00

Total Account Value Yesterday Today

Positions Market Value $97,939.68 $61,238.00

Cash Balance $37,386.46 $74,335.51

Total Brokerage Account Value $135,326.14 $135,573.51

 

I am off about 7% since Oct 1 2015 owing primarily to the losses I booked on my nanocap positions as well as some losses on outright short positions late last year.  The losses have been offset somewhat by gains in some of the above long-dated puts.  Of the nanocaps I will say: in seeking to emulate Warren, I subjugated my liquidity requirement in a mature bull market.  This is a good example of a situation where I feel the value and macro signals are fundamentally at odds - although others would just say I was stupid to invest in a company with 4M market cap for a time horizon of <10 years.  I think we're both saying the same thing :) Needless to say I will not be trying on any more <50M MC positions until I feel valuations have comfortably collapsed, whenever that may be.