frommi

Nobody knows if this is a bear market rally or not because nobody can know the future. You can argue all day long and will still not know the prices in the future. So its all about probability and risk/return. Assuming that a) the chances are 50/50 b) that a bear market rally will not exceed the ATH c) that a bear market rally will bring lower prices than the current low. Going short or flat you risk 6% (from 2000 to the ATH) while getting 10% or more upside (if the S&P500 moves below 1800). Thats a good trade. Everything else is just noise.

Margin expansion here was driven by fixed cost and increasing revenues, as long as the number of companies on the marketplace doesn`t shrink i don`t see margins compress. That can happen in a 2008 style market, so i sized it accordingly. (Its a 3.5% position for me) Dilution was pretty low, for me it looks like these guys are very shareholder friendly. Yes regulation is a threat, thats the unknown for me here. There are some writeups on Seeking Alpha and VIC, you can look them up.

Bought more OTCM and hedged my portfolio again. Will stay long short now until september or october. Will see how the waves unfold further, but i have that nagging feeling that in 2016 a zero return will not be that bad.

How are you valuing OTCM and what's your IV estimate? What's your growth/discount assumptions? I think fair value is around ev/ebitda 12. At the current multiple i don't need growth to make a reasonable return. Including the special dividend it has a 7% yield on a monopoly like business and p/fcf is around 10 with a cash rich company that has grown by >20% in the past years. Never seen something that cheap and good before. Maybe i just miss something important. :)

I like the system, its typical quant stuff. This is a value screen (P/FCF<10) with a quality check (dividend+growth) and momentum. And the author added a timing strategy on top. (If forward eps goes down switch to bonds). The only part that i don`t like is the timing part, because this looks like curve fitted to 2000-2002 and 2008. And i wouldn`t use momentum with dividend stocks, i doubt that that really adds a lot of performance. But the author probably tested this a lot before publishing. In the end the system doesn`t matter, you have to have the eggs to stick to it through thick and thin. This is nearly impossible for 90% of humans especially if you haven`t developed and tested the system yourself.

OTCM,NOV,ETP

In the all weather approach Dalio`s fund is basically long everything, bonds, stocks, commodities based on past risk (volatility) so that every asset class is weighted on risk parity. Its similar to a permanent portfolio asset allocation (25% gold, 25% stocks, 25% long term bonds and 25% cash). Its simply based on the fact that in our current monetary system the monetary base is increased nearly every year and this lifts all asset prices in the long run. Ni-co isn`t it smarter to just bet on a rising dollar, instead of betting on the possible secondary effects like lower interest rates or falling stock prices? At least in 2015 you had plenty of time to be prepared for the fall in stock prices, because you already knew the dollar has risen in April/May, so the fall of stock prices in the summer was like shooting fish in a barrel. But this year and especially next quarter we get earnings that are not depressed by the currency, at least if the dollar doesn`t rise dramatically next month. So its possible that the bull resumes now and kicks the bears around until they give up before we start the real crash. Lower interest rates in january were the result of fear not the result of deflation, at least when you believe the last CPI data from friday.

I change my mind every two days, so just ignore my picks. I am clearly not smart enough to pick a concentrated list of stocks that perform well 1-2 years out. But funnily my 60 picks outperform the market.

Yes you are right, negative rates are not the solution, but maybe giving money directly to people will solve it. The swiss are voting on this in the summer (http://www.thelocal.ch/20160127/swiss-to-vote-on-guaranteed-income-for-all), when this gets approved than thats probably the channel to throw money of the helicopter. If enough countries do it, you can be sure that inflation picks up sometime down the road. I was always under the impression that current government policy (austerity) is the real problem, because they don`t see the problem in the first place. Maybe it comes too late to save the banks, who knows.

To me, this principle sounds like a choice only politicians and ideologues are able to make-up as a guideline. Shouldn't it be obvious that investors will quit giving their money to (hugely fragile) European banks when they know that taxpayers will step in only after investors will be wiped-out? Anticipating that, a prudent bond- or shareholder will cash out long before his bank seems to be even close to the brink, thereby driving down the bank's equity and debt prices, in this way closing capital markets for this bank and, in the end, causing a rat-race to the bottom at which the bank will have to be bailed-out by taxpayers. This seems to be inevitable. Sorry but why should taxpayers be liable for the downside, when all the upside goes to greedy bankers and investors? A well managed bank doesn`t need to issue equity. And if the taxpayers money is used to resuce the system, than all the upside from that move should go to the taxpayer, too. Makes shorting troubled banks easier, but maybe they will just forbid that when shtf.

http://www.amazon.com/Invest-Fed-Maximizing-Portfolio-Performance/dp/0071834400 I´ve read this book some time ago, but because of the current FED policy i reread the book. Its a book for the quants under the investors, similar to Deep Value. Only that here the authors backtest several sector rotation strategies according to the current FED policy. They divide the market cycle into 3 different stages, Expansive, Indeterminate and Restrictive. For example under Expansive monetary policy Smallcap Value, Autos and Industrials perform very well while under Restrictive policy Materials, Energy, Commodities, Utilities and Consumer Goods perform well. Thats probably the reason why many recently see bad performance from stocks like GM or FCAU and good performance in stocks like XOM since december. So maybe there is some truth in their model that can help to increase performance.

There is a bubble in fear!

The Deutsche Bank has a lot of index swap ETF`s, has someone a clue if these can become worthless in case of a bankruptcy?

This may be a profound thought. 1) Surely the battle to beat the market involves both the investors and the 500 stocks selected by employees of S&P. Most of the discussion has been about how the investors LOST the battle, while it could be that at least in the past decade, the few guys at S&P did a great job by removing losers and adding winners. They surely have picked APPL, GOOG, FB, AMZN, etc out of their own initiative. 2) By the same token, perhaps those guys at S&P in the decade prior made horrible mistakes by including stocks such as Enron. The value guys outperformed because they were able to commit less such errors. 3) S&P 500 clearly has the benefit of diversification. In the past decade our world increasingly moved to a knowledge based economy which is more prone to winner-take-all. Value investors generally fail to embrace the infamous FANG, partly because they own only 20-30 stocks, which does not allow them to cast a wide net in order to catch the very few winners. But S&P can try to be inclusive. Maybe in the future a concentrated portfolio will have its limitation. There is a study from Jeremy Siegel that shows that until 2006 the original 500 companies of the index in 1957 have outperformed the index, so i think its the wrong conclusion that they did a good job. You could have done better buying 500 stocks and leaving them alone. And you would have done even better if you equal weighted them at the start and left them alone. A possible reason is that when they finally added a stock it was when it was overvalued, and maybe i am wrong but i think they just add the biggest marketcap companies in the US, so its not really active management. My lesson from this is that concentration like it is preached all over the value investing community is the real reason why people underperform for long stretches of time. Maybe i am a bit harsh but in my view concentration adds a big variance to returns that is mainly good for one group of people, and that is hedgefund managers. They participate fully in the upside returns but only marginally in the downside, so because of their compensation structure they are incentivized to concentrate. Especially the ones that have a Buffet like compensation fee. Someone on 2+20 will probably diversify more, but the 2% ensures that all possible outperformance goes to the manager. But since most of us probably are not running hedgefunds, is it really wise to concentrate and miss the stock that makes all the difference?

Interesting fact: Even though this was a list of 108 companies, the list has outperformed the market by more than 5% over the last 5 weeks. So it looks like even with this amount of companies, diversification doesn`t mean the returns will be similar to the index. The companies with the highest yields outperformed by ~6% up to now.

Thought about that a bit deeper and came to the conclusion that closing the hedges with a small gain is a good idea. :) But what i originally meant with my posting was stupid short term trades in stocks like the one i did with NFLX, that was really a stupid idea. I will still trade short futures against my portfolio, thats were all my gains came from the last two years. But that is always with a predetermined setup and stop. Even though i prefer to do it only in the summer, because the probabilities for success are much higher there i will do it from time to time in the winter, too. Just to be safe, i hate losing money like the plague.

I recently read that this leaves the most important factor out and that is supply. This is not an argument against healthcare, but without supply you know nothing about the attractiveness of a sector. Look at oil, demand is growing since decades, but does it mean oil prices will go up?

Haha thanks for the kind reminder

May I ask why you see another 10% down based on today's news? My view is you don't get a real liquidity event without a financial crisis - and if that happens, it might be European. Its not the news that gave me that insight but the uptrend violation in the Russel2k and now in the S&P500, too. That doesn`t normally happen in a broad based recovery from a low. We have that liquidity crisis already, the oil producing countries are dumping their foreign assets. Thats probably the reason why oil and stocks are so correlated right now.

Against my rules i started to hedge with Russel2k and S&P500 futures. I am afraid that we take another 10% dive and i think the probabilities for that have increased a lot today. But i stay flexible going forward. Looks a bit like 2016 is going to be a replay of 2008, only that the ugly stuff happens in energy & materials instead of financials.

CL CHD BDX

Thats what holds me back of investing in the index now, tech and healthcare make up 35% of the S&P500 at the current point. That is a similar dislocation like in 2000, so going forward its probably easier to beat the market simply by not investing in these two sectors.

Maybe because it stimulates the mind and you learn more every day. Pure index investing is to boring for me to work as an investment strategy. And being a multi millionaire only in retirement is a bit late, life is short. :)

Looks like deflation is now a mainstreet thesis. I really doubt that the majority will be right on macro calls, so maybe its time to switch. When you look at inflation ex energy it doesn`t look that bad, so when oil prices normalize its possible that inflation picks up again.

Sometimes i really question whether what he talks is what he does. I mean he speaks about investing in industries without rapid change and then invests a lot of his money into cyclical car companies where every 2 years a new carmodel has to be created and competition is intense? That makes no sense to me, but who am i to question him? And i think he is wrong on Netflix, because they indeed become a very valuable content company going forward, financed with overvalued stock and float like Amazon. But that of course doesn`t make the stock a good buy right now, or at least its very hard to figure out if it does. But these bubble valuations in the NSDQ are probably worth looking at, maybe its a good idea to use QQQ as a hedge going forward over the summer.