Oh brother. I've seen a lot of that crap on ET, too, so I can forgive you for being cynical, but honest to goodness I'm just looking for a discussion on the topic I originally posted: What areas do you consider to be the best value right now in terms of reward/risk given the thesis the market will take another leg down due to Covid-19 over the next several months?
Honestly, I made a case for shorting Biotech/Pharma ETFs bc they shot up way too much when the scope of COVIT emerged. Made a thread about it. I posted in another COVIT Thread that I think WIX.com and SquareSpace should get a good boost from businesses who have to go online or die during the Lockdown. You can go down the value chain, I went Long Paypal+Visa as well since ppl paying less with cash atm (cash is way more common in Europe than in the US).
Ok I'll bite. There's a significant section of credit that hasn't been backstopped by the Fed. Said credit has rallied quite a bit since March lows. If there's another leg down these should go hard. HYG, SRLN, PFF. There's also non agency RMBS but you have to be careful there. These are likely to be backstopped. Also, good luck trying to short these as retail. Your thesis is actually rather simple. Find crap(credit/equities) that has rallied off March lows that isn't being backstopped by the Fed and isn't likely to be, that is highly leveraged with debt. SPG, smaller oil/gas producers. You want an analog, look at offshore oil drillers since 2016. Find the current analog.
I like the Idea! Since the FED said they would even consider buying Equities and even got the go ahead from the Directors, how would you choose that Debt? Also isn't it possible to buy Options on CDS on High Yield Bonds? Should pay more than Shorting ETFs
It would take another major selloff for the FED to step in and buy equities outright. Which means the shorts would have paid off. The FED isn't buying high yield/junk currently so the biggest issuers there would be the targets if shorting the equity.
thanks for the insights. I am considering becoming data scientists so I really love your approach to this. Can I ask 1 more question? Does your model rely on economic data or market data or both combined?
Well FED just backstopped everything. If you are still looking for downside R:R plays, I'd be looking at sectors that aren't going to recover fast from this crisis and look for the most heavily indebted companies.