Login

Timing & trends

Brexit and Trump and Free Options

Share on Facebook Tweet on Twitter

Posted by Michael Ashton - E-piphany

on Wednesday, 09 November 2016 09:33

As the evening developed, and it began to dawn on Americans - and the world - that Donald Trump might actually win, markets plunged. The S&P was down 100 points before midnight; the dollar index was off 2%. Gold rose about $70; 10-year yields rose 15bps. Nothing about that was surprising. Lots of people predicted that if Trump somehow won, markets would gyrate and move in something close to this way. If Clinton won, the 'status quo' election would mean much calmer markets.

So, we got the upset. Despite the hyperbole, it was hardly a "stunning" upset.[1] Going into yesterday, the "No Toss Ups" maps had Trump down about 8 electoral votes. Polls in all of the "battleground" states were within 1-2 points, many with Trump in the lead. Yes, the "road to victory" was narrow, requiring Trump to win Florida, Ohio, North Carolina, and a few other hotly-contested battlegrounds, but no step along that road was a long shot (and it wasn't like winning 6 coin flips, because these are correlated events). Trump's victory odds were probably 20%-25% at worst: long odds, but not ridiculous odds. (And I believe the following wind to Trump from the timing of Obamacare letters was underappreciated; I wrote about this effect on October 27th).

And yet, stock markets in the two days prior to the election rose aggressively, pricing in a near-certainty of a Clinton victory. Again, recall that pundits thought that a Clinton victory would see little market reaction, but a violent reaction could obtain if Trump won. Markets, in other words, were offering tremendous odds on an event that was unlikely, but within the realm of possibility. The market was offering nearly-free options. The same thing happened with Brexit: although the vote was close to a coin-flip, the market was offering massive odds on the less-likely event. Here is an important point as well - in both cases, the error bars had to be much wider than normal, because there were dynamics that were not fully understood. Therefore, the "out of the money" outcome was not nearly as far out of the money as it seemed. And yet, the market paid you handsomely to be short markets (or less long) before the Brexit vote. The market paid you handsomely to be short markets (or less long) before yesterday's election results were reported. And, patting myself on the back, I said so.

42987

This is not a political blog, but an investing blog. And my point here about investing is simple: any competent investor cannot afford to ignore free, or nearly-free, options. Whatever you thought the outcome of the Presidential election was likely to be, it was an investing imperative to lighten up longs (at least) going into the results. If the status-quo happened, you would not have lost much, but if the status quo was upset, you would have gained much. As I've been writing recently about inflation breakevens (which was also a hard-to-lose trade, though less dramatic), the tail risks were really underpriced. Investing, like poker, is not about winning every hand. It is about betting correctly when the hand is played.

At this hour, stock markets are bouncing and bond markets are selling off. These next moves are the difficult ones, of course, because now we all have the same information. I suspect stocks will recover some, at least temporarily, because investors will price a Federal Reserve that is less likely to tighten and the knee-jerk response is to buy stocks in that circumstance. But it is interesting that at the moment, while stocks remain lower the bond market gains have completely reversed and are turning into a rout. 10-year inflation breakevens are wider by about 9-10bps, which is a huge move. But there will be lots of gyrations from here. The easy trade was the first one.



Banner

Timing & trends

"Nothing Good Can Come of This Election"--and That's Good

Share on Facebook Tweet on Twitter

Posted by Of Two Minds

on Friday, 04 November 2016 07:32

car-off-cliffWe the citizens and voters have to stop being enablers of systemic corruption.

The overwhelming consensus of the punditry across the political spectrum is that "Nothing Good Can Come of This Election"--and that's a very good thing.The handwringing goes like this: The country is deeply divided by schisms that cannot be bridged, every institution from the two parties to the mainstream media to the Department of Justice has been tarnished by cover-ups, collusion or worse; whomever wins the election will enter the presidency without a mandate, and so on.

Why is "nothing good can come of this" good? Because ridding the nation of its political corruption will require hitting bottom......continue reading HERE

 

....also:

Tyler Bolhorn: Trading a Correction



Banner

Timing & trends

Tyler Bolhorn: Trading a Correction

Share on Facebook Tweet on Twitter

Posted by Tyler Bollhorn - StockScores Newsletter

on Tuesday, 01 November 2016 10:15

perspectives header weekly

perspectives commentary

In This Week's Issue:

  • Three Stocks that meet the Strategy of the Week
  • Upcoming Free Webinar - Stockscores Strategy Overview
  • Stockscores' Market Minutes Video -Trading Should Not Be Scary
  • Stockscores Trader Training - Trading a Correction
  • Stock Features of the Week - These Go Up When the Market Goes Down

Upcoming Free Webinar
Stockscores Strategy Overview
Saturday Nov 5 - 9:00 AM PT, 12:00 PM ET
Click here to register for this free webinar
Description
Stockscores founder Tyler Bollhorn will provide an overview of the Investor and Active Trader strategies. Who they are right for, how much time they take to apply and the basic process behind each.

Stockscores Market Minutes Video - Trading Should Not Be Scary
This week's Market Minutes video looks at how to avoid fear when trading. That plus the market analysis and my trade of the week. Click Here to Watch
To get instant updates when I upload a new video, subscribe to the Stockscores YouTube Channel

Trader Training - Trading a Correction
There are some signs that the market may enter in to another correction here, not a certainty but certainly a good probability. Here is a list of things to keep in mind when the market is correcting:

1. Stocks Can Go Down To Zero - I often hear investors tell me that they bought a stock because it had fallen so far already, it just had to bounce back. After all, stocks can not go down forever. Yes, that is true, stocks can only go down to zero and then they stop, but a stock that does go to zero is eternally gone. Do not buy something because it appears to be on sale, you should only buy something if it is more likely to go up than down.

2. Never Average Down - averaging down is the practice of buying more of a stock you are losing on as the price falls. Investment advisors sometimes refer to this as dollar cost averaging, but basically, it is all about buying more of a stock that has proven your original decision wrong. If you were betting on a horse that was in last place half way down the back straight of the Kentucky Derby, would you go back to the wager window and add more to your bet if you were able to? Of course not! Buying more when you are wrong is no different, so just wait until the market proves you right and average up.



Read more...

Banner

Timing & trends

Zeroing in on the State of the Markets Now

Share on Facebook Tweet on Twitter

Posted by Michael Campbell & Victor Adair

on Monday, 31 October 2016 18:12

Victor Adair took profits on short Gold positions for gains of ~$90. He's neutral on gold and remains USD bullish, with yet another reason to be bearish CAD. Our trading accounts have been short US Notes and Bonds for the past several weeks as interest rates have been rising. The stock market looks toppy and much much more. 

....related: Tyler Bolhorn on the Markets Today

trader

 



Banner

Timing & trends

The 3 Top Articles Of The Week

Share on Facebook Tweet on Twitter

Posted by Money Talks Editor

on Saturday, 29 October 2016 07:45

martinarmstrong1. The Worlds Top Forecaster, Reputation 2nd to None On The Markets & The US Electlon

  by Martin Armstrong

Martin Armstrong on the moves he expects in the Stock, Bond, Gold and Currency markets. Martins model's US election forecast, and when the nearby move up will begin from the current 5000 year interest rate lows. 

...read more HERE

2. Shelter BEFORE the storm

   by Andrew Ruhland

In 2008, many investors were either caught unaware of the systemic risks, or chose to ignore warnings of a major market crash. The financial pain from that (passive or active) decision to do nothing was profound; pain burns deep emotional scars that can be difficult to reverse. The theme of this article is simple: don’t make the same mistake again.

.....continue reading HERE


3. Hot Properties: Government Blows Up Canada's Hottest Industry

   by Michael Campbell & Ozzie Jurock

This is what happens when government doesn't understand markets as sales numbers for Vancouver to October 21st has condo's down 53% & single family homes down 77%! Thank you foreign buyers tax and Canada's Mortgage rule changes. Where to from here for Canada's strongest industry?

.....read more HERE



Banner

<< Start < Prev 1 2 3 4 5 6 7 8 9 10 Next > End >> Page 10 of 386

Free Subscription Service - sign up today!

Exclusive content sent directly to your Inbox

  • What Mike's Reading

    His top research pick

  • Numbers You Should Know

    Weekly astonishing statistics

  • Quote of the Week

    Wisdom from the World

  • Top 5 Articles

    Most Popular postings

Learn more...



Michael Campbell Robert Zurrer
Tyler Bollhorn Eric Coffin Jack Crooks Patrick Ceresna
Ozzie Jurock Mark Leibovit Greg Weldon Ryan Irvine