PSH annual report "While PSH’s discount to NAV has remained relatively narrow during most of 2015 and early 2016 – typically less than 5% – in recent weeks, the discount has widened substantially and has averaged about 13% since March 1, 2016. I suspect that this is largely due to fear about the rapid decline in Valeant’s stock price. At the current discount to NAV of about 12%, an investor is paying almost nothing for our investment in Valeant. As a result, investors who own or purchase PSH at current levels are creating the underlying portfolio at a substantial discount to NAV, which itself we believe is a substantial discount to the intrinsic value of the companies we own. Furthermore, in light of the high-water-mark feature of the Fund, investors will pay no incentive fees until NAV increases by 68%, and exceeds $26.37 per share." I increased my stake by 33% there. You get a free shot at the upside of VRX with little or no downside
Its only on twitter and in the world of the media that VRX has a 100% chance bk along with Bill Ackman and every stock he owns. In the real world, its a matter of probabilities. If the bull VRX scenario plays out, the payoff will be multiples of its price. It if doesn't, then it goes to $0 but I see it as good bet at this point. With that discount, then its just a nobrainer
In fact, I should probably have bought more (I didn't max out my suggested 20% allocation). I'm around 15% at this point
Hello Daal First of all, great thread. Really enjoyed reading it. I could though say that I was a bit disappointed when you switched from Macro to Day because I was really enjoying your insights and the general discussion on the subject. Now, at the beginning of the thread you said you were creating a website with info on how you learned to do macro analysis and was looking forward to it but I guess you decided not to do it. Also you talked about 70+ sites you used to check out macro news and other. I am really into learning more about macro and would appreciate it very much if you could give me any points on what to read and which sites to check. The thing is that I understand the theory of macroeconomics but I have not found a place where I can learn more about the following: **I want to understand how the variables affect/are affected by fundamentals (is there a site or book that clearly gives a picture of how different stuff across the globe are interconnected (eg Australia relies heavily on exports to China and other such connections between countries)?) and how you trade after you have made your analysis (eg which asset class to use and with what to hedge and so on)** Thank you and wish you all the best. Pacers P.S. Hope you start writing more frequently on your thread.
Hi, thanks for the feedback. I did ended up making the site http://macrospeculations.blogspot.com.br/ I haven't updated in years and I probably wouldn't stand behind some of the analsys I put in there. I learned a lot over the years and back then I was still developing some of my ideas and how to think about markets You can notice that I was bearish in stocks in 2009/2010, that was the biggest mistake I made in my investing career. But I learned a lot from it. That kind of lesson helped me not miss the brazilian stock bottom this year I can share with you the list of bookmarks I go through most days to catch up with markets and news. The thing is, frankly I don't think macroeconomic theory necessarily is what makes a good macro trader. I put some good thought into this after reading the Colm O'shea interview on Hedge Fund Market Wizards. He talks about how he will jump into a trade even if he doesn't necessarily believe the theory behind it (his example was long risk assets in 2009 based on the idea that China was going to lead the world out of a depression). The guy with the theoretical bias will miss stuff like this but the guy who is NOT loyal to his macroeconomic theory and is willing to fade them when the risk/reward makes sense will do quite well because he will catch some trend changes and some significant surprises A good macro trader will capture some significant moves even if his theory might not back him. If you have a view/theory on why something ought to move, its even better because it gives you conviction but the thing is, a lot of the time, all that knowledge doesn't necessarily means good forecasts. We all know how often models and economists miss forecasts. The important things are finding good risk/reward situations (and sizing the bets correctly), the ones that can make you good money and not lose anything (maybe make some ) while you wait for them. At the right risk reward ratio I'd bet on any crazy economic theory over another, even if I love the guy who created the latter economic theory I'm in the camp that a dalio risk parity porfolio type approach is a good idea to do while you wait for the good trades where you can risk more capital and produce a good return. A lot of the macro funds struggled over the last few years because there wasn't a lot of dislocation over the past few years (like there was in 2007-2009). A risk parity+ocassional macro seems a more resilient approach than just to try to make bets based on economic theory For reading recommendations I'd suggest that Colm O'shea interview along with Jim Leitner on both Inside the House of Money and The Invisible Hands
For example, I believe people who are followers of the Austrian School of Economics tends to be too afraid of high inflation and hyperinflation in the US. I believe that the theory they use to base that belief is not correct but if you give me 300-1 that over the next 10 years the US will have 10%+ inflation two years in a row, heck, I'm an austrian too. I don't care about my old theory, the bet is just too good to pass up
Thanks for your detailed reply. Yes please share your bookmarks if possible either through PM or here. I suppose you are talking about the *all weather portfolio* right? So that approach plus a *george soros* approach of going in hard when you have great conviction of a macro trade. I had actually gotten down to the same logic myself so glad to hear that there is someone with more experience than me that thinks this approach sounds good. Regarding mathematics, what do you find most useful for position sizing and risk management? I remember reading that you found Kelly useless after a while so is there a mathematical approach you follow to estimate RR etc? Is the interview somewhere online or do I have to buy the books?
Also what are the most important ''indicators'' on a macro approach? I remember you talking alot about NGDP. Which would you say are the most important ones to help you look into a country's economy?
For position sizing, I like the Schwager/Hite 1% rule. You can by more scientific about and come up with more mathematically sound % numbers but for most people that is enough. However if they are not solid proven profitable traders, then they should be risking a lot less than 1%. For risk management, I like taleb's book Antifragile, its not focused on finance but the thinking can be applied there I don't think there is an interview somewhere, you would have to buy the books
Yes, I'm a fan of NGDP. This is mostly due to beliefs I have about the macroeconomy, such as -corporate profits (and at some point, stock prices) tend to follow NGDP -NGDP is a better indicator of monetary policy than interest rates (japan had low interest rates in the 90's but that was not an indicator of loose monetary policy but actually tight policy by an BOJ that wasn't doing what it needed to produce inflation, same thing with the US in the early 30's). High interest rates (like in the US in the 70's or Brazil right now) doesn't mean that money is tight, its actualy an indicator that money is loose. IR are not good indicators of monetary policy, NGDP tends to tell you a better story. NGDP expectations is probably an even better indicator but that is not a real number and it has to be guessed off market prices, etc. You can learn more about this on Scott Sumner blog, the money illusion Now, that said. All that theory doesn't mean the trader will be able to make good forecasts or make good trades. I also pay attention to the current account (for emerging markets), expected central bank policy (and whether I disagree with that), real interest rates,etc.