I also decreased a bit of my VRX exposure due the lack of Ackman re-buying (from the partial stake he sold in December). I got 1% there as well (plus some 2019 OTM calls). I will readd and go bigger if the right news comes out but as it stands I will keep my risk small
I asked PSH IR today why they did not rebuy VRX after the tax loss selling late last year and the answer was "We have chosen not to rebalance the funds at this time. Should we choose to, there will be a filing." To me that is a very weird answer, which warrants further caution. So I sold the rest of my shares and exchanged for $30 2019 Jan calls (with 1/5 of the proceeds). I keep some convexity while cutting down risk
Yellen and her mouthpieces confirmed a rate hike for the next meeting. I will take all profits soon, will still leave some 3-4bps on the table of profits but its hard to tell what the new Effective Fed Funds will be. A good guess is that average (now) of 0.66% + 25bps, but I have seen the Fed funds market go weird in the past. There so many excess reserves and the GSEs distorting this market that I don't want to be greedy. After all, they will target a range of 0.75-1%, they don't promise a particular number
SNAP is worth about $22B now. FB is worth almost $400B. Will SNAP be worth anywhere near what FB is? Probably not and I will probably be stopped out of my trade at $23 (with a tiny little loss) but if I'm wrong and the continued US bull market leads to a more speculative mood, this could easily double or triple on that valuation difference alone. So this is a nice way to play the bull market in optimism with tiny risk. I get so annoyned with these wall street types who love to say 'this is CRAZY, its irrational, im skeptical of the whole thing'. If they kept track of their missed gains the same way a short sell shows up on their P&L they would quickly find that they missed several times their networth. Simply because they are idiots who think they can predict the chance of small events and the impact of those small events (the payoff). In unbounded investments (like stocks), its often the pessimist that has no margin for error
A lot of really wealthy people seem to understand this in some level (conscious or uncouncious) because either they got wealthy that way (Silicon Valley folks, business people that did well, real estate investors who catched a big bull run in their markets) or they know people that got wealthy that way. Even Munger only understood this fully when he met 'a lot of idiots that were really rich' (or something to that effect), that's when he realized that paying a fair price for an amazing business (holding it forever and never having to pay any capital gains tax) was superior to the 'cigar butt' approach of buying something cheap and selling when it was no longer cheap. Its the power of unbounded gains. Key is to have an appropriate position sizing when 'investing' in convex bets. Some of them might have a high chance of loss (options, troubled business), some of them have a high chance of sucess but produce a huge loss when they fail (good business that runs into trouble). If one sizes according to their risk/pain tolerance, they can avoid problems when dealing with the strategy
Good stuff about inflation if u are interested. Second of all, I would like to thank you about your independent thinking and writings. They have helped me to think and see things differently when it comes to my own gamebook.
Thank you. My ideas might seem unusual sometimes but that is because I try to write when I got something different/new to say. I dont want to be repeating common ideas taught in books and blogs because I dont think it would add much value
Its an interesting point he makes on inflation during peacetime vs wartime but at the same time, my backtests and data from the US/UK show that the move from the gold standard to a fiat standard changed the game big time. It sticks out how much gold became valuable as a portfolio diversifier when countries moved to a fiat standard. So perhaps when Shilling looks at so much data (from late 1700s to today) he could be lead to a conclusion that is not applicable now due too much data from a gold standard world
As a matter of fact, Shilling's own data show the inflationary power of a fiat regime. During wartime (when countries usually went off gold and adopted a fiat regime) inflation was almost 6% a year. Right now, there is a fiat but no war (so no big fiscal demands by the government). 6% is too much to expect but Greenspan talks about in his book that the typical fiat inflation rate tends to be around 4% (and the historical CPI rate is around there). Something like 2-4% seems the right expectation, so I'm not sure why Shilling is still sticking to his deflationary thesis