The thing about this hikes is that I don't think they will be 'real' hikes. I'm in the Dalio camp that the fed might go 25 or 50bps up but they will have to stop and potentially even cut in the future. The deleverging is still going on and new cycle of significant hiking will lead to a bear market in stocks. And we know how quickly the Fed comes to the rescue of a falling stock market. So I think Dalio is very much high that the Fed won't able to to hike much more than what is priced in the interest rate curve
Its really incredible how to the Fed, 'global conditions' has turned into pretty much what the S&P500 is doing. They don't care one bit about China/Brazil or Europe if stocks are not falling. If they do, then they are all over the issue
I sold 2/3 of my 10y bonds and switched to 4y bonds. Going to protect myself a bit from a bond rout in case people freak out. The fed futures position I plan to hold for a while, the speeches should sound more hawkish going forward. The big question is to whether I will hold through NFP next week, that little number is likely to determine the pricing of assets of everything on earth
Bonds getting smacked today. yet they held up quite well yesterday. weird as shit the action yesterday
Recent events has shred more light on is likely to happen to VRX. The company has walked away from Philidor (which means they did illegal things in all likelyhood). Philidor will be potentially target from lawsuits (specially given they they are tied to a very politically unpopular Valeant and also those illegal things made the front page of the WSJ many days in a row). That liability MIGHT flow through Valeant or it might not but 2 points of my initial thesis have been shown to be breached. At this point it all comes down to how strong was the entity built to shield them from liabilities (and whether those liabilities will be big enough to kill VRX or just hurt it badly). At this point its too dangerous for me to continue in the stock so I plan to sell my PSH into the likely Ackman pop today. Unless he comes out something that changes my view on the whole thing I also find myself wasting 1-2 hours a day researching VRX and reading all the articles. Its just not worth it for me to spend all this time
I still think a very resonable scenario is that the fines involved will not be huge, most of the time this type of stuff gets settled for smaller amounts and companies move on. But the extra risk combined with all the time I'm spending researching it makes me think, its better to put my capital into other stuff until I can have more conviction into this
I'm also concerned about this witch hunt that the company is going through. Healthcare costs grew faster than the CPI for a long-time. Now people are looking to witches to burn as a result of that. The state attorney generals and other folks are going to be really trying hard to find something wrong with VRX to try to hurt it. Its kinda like what Spitzer did with wall street in the early 2000's except VRX is the entire wall street and there is nobody else. So they will have to take the bulk of the impact coming from these power hungry attorneys. They might just treat VRX like a pinada so they can rise in their careers
On the other hand, any fine to VRX is likely only to come out after years of litigation (specially given that they need to lose twice, on the fraud charges and on the philidor structure liability being their liabilities). So what matters is how liquid and strong VRX looks to be in a few years to absorb that, not right now. If I sound confused, its because i am. seems to be a tough call this stock at this point. another reason to walk away barring any major surprise from ackman
But one thing is for use. Ackman should never have put 25%+ of his fund on a junk rated company that is levered 5-1. The whole 'volatility is not risk' idea is behind these sorts of mistakes. The company was rated junk and its bond had a significant spread over treasuries for a reason. The market thought it was risky. You can think the market is wrong and that is fine but you don't go nuts in the sizing because when the market is right and you are wrong, its going to hurt you badly. 25% in KO or PG, sure. In levered junk rated companies, no