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fuzzhead1506's Achievements


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  1. Calls/call spreads on the VIX. :P Joking aside, I’d bet most people do quite well going long VXX while the term structure of VIX futures is in backwardation. If the nature of the trade isn’t your style, precious metals and a good short duration bond manager would also prolly be a good bet. People like to laugh at Einhorn for his lousy performance the last 5-7 years, but he is a well hedged value manager with (IMHO) a string of bad luck and one bad call - shorting the “bubble basket”. Even if I think he is wrong on several of those stocks, he is bound to capture most of the downside volatility without the same carrying cost as a straight short on the S&P.
  2. At the risk of sounding like a fear monger, I am gonna bump this one since my ear to the ground is signalling weird stuff in macro signals (albeit with no real new insights). There was a post on Philisophical Economics a few years back that more or less said: use a filter for the 10 month MA to reduce false positives in the signal. I found a lot of value in the approach and felt that I should find some good signals to take advantage of it. The writer mentions a few different data points to consider and my favorites were industrial production growth, housing starts, and unemployment trend. I also like the data point RECPROUSM156N which comes from St Louis Fed... Last quarter, the 10 year - 3 month yield curve inverted for the first time since the recession. This signal tends to be VERY early so take it with a grain of salt. Industrial Production growth slowed last quarter... it isn't negative yet, but something to watch. Housing Starts slowed last quarter, growth is negative YOY, and is trending lower. One signal that seems to have a lot of false positives is the Advance Retail and Food Services Sales change YOY. This is currently slightly positive, but showed a slight dip negative in 12/2018. Another signal the writer mentions is real personal income growth which is also only at 2.3% YOY which is a bit below the 3% break-point mentioned as a possible filter. Unemployment rate trend is nowhere near to heading higher which is indeed different than the above mentioned signals so... when the numbers are in the ~3.8 range, extreme caution should be warranted. Zooming out on the SPX we see a nearly perfect double top at the beginning of the month. As a final measure, the indicator I above mentioned that I like which last updated on 5/1 for March: RECPROUSM156N is showing a higher number than has been shown since 2013. The last time it was higher than that was coming out of the recession. The tough part about using this one as a confirming indicator is that it is just an amalgamation model of the others already mentioned. All this being said, just yesterday WEB said something along the lines of: stocks are cheap if interest rates stay at these levels, and, to the point I agree. Perhaps best to stay long for a bit longer?? Like I said, I offer no insights over the next person...just hearing and relaying what the tea leaves are telling me! :P Also, I have no idea when the bottom will be so it is probably best to hedge somehow here or in the near future instead of selling to buy at a later date.
  3. ok... so i was thinking about taking a flyer on ZM, but we are now looking at 45x sales... I was able to make sense of the valuation at $35/share but this is absurd! People are expecting the company to get to $7.5B in revenue and 40% margins (by year 10, if they experience the same dilution as CRM, did over the last decade) in order for this to make sense. Considering they are profitable, maybe that is bearish on the dilution... but wow! Edit: math mistake...
  4. How do other people think about exit multiples? I have a pretty good rule of thumb that is particularly helpful for doing DCF on companies and believe it to be fair. It is based on three beliefs I have about stocks: valuation is based on ROIC, interest rates, and holding period. So as a rule of thumb, if interest rates at the end of my holding period are estimated to be 4% and a company’s operating marigins - through the cycle - are estimated to be 16%, then the EV/Revenues multiple at exit should be 4 (16%/4%). If you don’t hold the same beliefs as me, then the method fails to be useful to you. This method helps tremendously for valuing big time growth stocks and give a better idea of how you might be looking at a value trap.
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