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long bond, short stock, short oil, long gold, short dollar, buy gun


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#1 greenie

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Posted 04 January 2007 - 12:14 AM

repeat after me..... long bond, short stock, short oil, long gold, short dollar, buy gun long bond, short stock, short oil, long gold, short dollar, buy gun long bond, short stock, short oil, long gold, short dollar, buy gun :D :D :D
It is not the doing that is difficult, but the knowing


It's the illiquidity, stupid !

#2 dcengr

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Posted 04 January 2007 - 12:33 AM

I've come to the conclusion that the posts on this board are 99% taunting and bravado, and 1% analysis or meat.. I'm just wasting my time posting analysis here aren't I?
Qui custodiet ipsos custodes?

#3 A-ha

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Posted 04 January 2007 - 12:55 AM

long bond, short stock, short oil, long gold, short dollar, buy gun long bond, short stock, short oil, long gold, short dollar, buy gun

#4 greenie

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Posted 04 January 2007 - 01:08 AM

I've come to the conclusion that the posts on this board are 99% taunting and bravado, and 1% analysis or meat..

I'm just wasting my time posting analysis here aren't I?



I have explained my secular trend arguments several times in this board. What is the point of saying the same thing again and again? So, I cut and paste from my August post. Only change I see is that earlier I was less sure about oil, but now I think oil reached at least a cyclical top. This is based on the sentiment picture from the VC land, my fellow researchers hyped up on alternate fuel, coming out of oil-peak nuts, etc.. I am not sure about the secular direction - possibly 1998 was the bottom.





The method I follow is top down. I start with the assumption that every asset class swings between being over-owned and under-owned over a long time period (>10 years). Those are the secular extremes. For every asset class, I try to determine the secular extremes based on price movement and sentiment. Now, if an asset class went through a secular extreme two years back, I assume that over next X years (X depends on the time-period of the asset) it will go down until it reaches the other end. There will be cyclical bounces in between.

Next I bring in the fundamentals, because over a time-period of >10 years, fundamentals are important. In this part, I make a lot of reading. Internet is full of predictions of to-da-moon runs, crashes, goldbugging and so on, but when one uses the filter of asset class swing, only a small subset of the stories remain meaningful. Next I use the interrelation between the asset classes to cut down the number of meaningful fundamental themes. What emerges at the end is a coherent theme of expectation of the future.

For example, US stocks reached secular bottom in 1982 and secular peak in 2000. Popular interest in stocks was at extremes at those two points. I was not here in 1982 to know about the 1982 extreme, but 2000 extreme was something I vividly remember. I do not have time to detail the specifics on why I chose 2000 to be the secular peak for overall US stocks (barring smaller sectors such as small and microcaps). However, the reasonable assumption is that from 2000-2018 (roughly) US stocks will be in downturns.

Among other asset classes, few examples:

i) bonds reached bottom in 1982, but there was no manic peak yet.
ii) gold reached secular peak in 1979, and bottom in 1999-2000 (central bank gold sales, underinvestment in the industry),
iii) US housing reached a secular peak recently (again based on popular sentiment and parabolic price rise),
iv) oil reached secular peak in 1979. Not sure whether 1997-8 was a bottom ($10/gallon oil).
v) US dollar reached a secular peak in 2001.
vi) consumer debt reached a secular peak recently (closely related with housing).

When I go through the future expectation of secular trends, the best fundamental theme that puts them together for the current context is that there will be debt-deflation over next 10-12 years, when stocks, housing, dollar will suffer and bonds, gold will win. How can gold rise in deflation? The best explanation I find is that gold is anti-dollar and so gold ownership of foreign central banks will rise. They will replace dollar as the reserve currency (edit '07. NO DOLLAR COLLAPSE, just replaced from reserve). In any case, you can see that the secular trend is the truth and the fundamental story comes second. It is better, if both are consistent or otherwise I take no position in the sector. For example, I am very unsure about oil at this point. Deflation theme tells me that oil price will go down. Also, recent emergence of oil-nuts ('peak oil experts') in the media also suggests the same. Maybe oil did not reach its secular bottom in 1997. I choose to stay away from the sector.

Once the secular trend is determined, then I work my way down to find the smaller cycles. The bigger secular context and the fundamental theme that emerged from it helps me cut weed. This work is still evolving and I will elaborate on it later.


It is not the doing that is difficult, but the knowing


It's the illiquidity, stupid !

#5 jawndissedi

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Posted 04 January 2007 - 09:00 AM

short stock - yes short real estate - I'm working on it long gold - nope, can't shoot gold short oil - I'm in philosophical agreement short dollar - nope, not interested in trading against CBs long bond - nope, not yet, but maybe soon buy gun - every time I hear the words "credit default swaps," I reach for my pistol
Da nile is more than a river in Egypt.