Trade in Groups

Returning readers will be familiar with our continued negative outlooks for many of the market’s problem children – financials, REITs, and certain commodities. A short while ago, we posted about an aggressive series of trades on that thesis, and promised to track the progress of both the underlying positions as well as a specific options […]

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One of the buzzwords in the financial community in 2008 was “fat tail” – the outlier that breaks price returns from a normal distribution. Perhaps the most famous comment came from David Viniar, CFO of Goldman Sachs (ticker: GS), who said their models “were seeing things that were 25-standard deviation moves, several days in a […]

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The bearish outlook given yesterday was based off a combination of general economic data (fundamental) as well as a handful of indicators about market internals (technical). The underlying theme here is that the leaders into this crisis – namely, real estate and financials – have not yet hit a bottom (or at least need to re-test lows).
 
The […]

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This recent post on the TradeKing community site got me thinking about current sentiment among traders, and what implications (if any) it has for the markets going forward. Regular readers have seen bearish stances over the past several months on financials and energy, along with a focus on alternative strategies to earn profits when the […]

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One thing we have focused on heavily in the last month is presenting strategies used to create absolute returns – that is, manage risk and turn trading profits regardless of the general market’s direction. It’s a difficult market, and the days where simply owning a handful of hot tech or commodity stocks could result in […]

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In the previous article introducing commodities, one strategy that was mentioned was relative value trading using long positions paired with short positions. A benefit of this strategy is that having both long and short positions can help offset broader market moves; for a more detailed explanation see “Absolute Returns for Individual Investors: Long/Short”.
 
When the topic […]

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As the established order of the financial system underwent upheaval in 2008, the Federal Reserve responded by greatly expanding its balance sheet, ostensibly to provide liquidity to a number of strained markets. This means that, after holding Federal Reserve credit outstanding just under $900 billion for most of 2008, the Fed’s expansionary policies mean it […]

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Last time, we discussed how investors willing to analyze opportunities up and down a company’s capital structure open up numerous possibilities to generate absolute returns - in particular, through looking for undervalued embedded options in convertible securities. Reading the last article will be helpful to understanding this one, but an abridged summary is that convertible […]

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As was discussed last time, all too often investors handicap themselves by defaulting to the long-only equity investment strategy. While equity ownership is the best path to wealth in peaceful and stable capitalist societies, having a portfolio solely comprised of long stock positions is in reality minimal diversification; in cases where the broad markets suffer […]

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Looking through Morningstar mutual fund data the other day, I was struck by the fact that every single US stock fund in their 10,093 fund universe had posted a negative return year-to-date. While eight funds had posted “only” single-digit percent losses, not one fund had a positive return – think about that for a moment.
 
Whether […]

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