Credit deflation and the reflation cycle to come (part 2)

[MvR]

11 hours ago, Harley said:

Anyone using the Dragon portfolio and how did you go about implementing it as a UK retail investor?

Funnily enough I've just been looking into this as I've got to the point I could consolidate various accounts into one and make use of portfolio margin rules to sell futures and index options. 

The plan, which may well change, is to use something like this as the core holding of a options selling account. The idea is to make better use of the cash that otherwise sits there as margin collateral.  

The stocks, bonds and gold portions are easy enough. I can't buy the ETFs directly due to KIDD nonsense, but I can sell an in-the-money put(s) just before expiry and have the ETF put to you that way instead.  Or I might create the deltas that are equivalent to the stock position with some short vol structure ( e.g. Jade lizards, short put spreads etc).

The trend following commodities could be CFDs or spread bets, or commodity futures. For a long term low maintenance portfolio you could time the trend with a simple 50/200 MA crossover or something similar.  There's also a timing model called "Duel Momentum" which appears to be another good way to time things.

The tricky one is the long vol obviously. In my case I'm looking into ways of constructing  something with 30-90 DTE SPX options, along the lines of this..

Or, given I trade so actively anyway, I may do something a bit more manually timed with VIX.. maybe naked puts funding long VIX call spreads?  The trick of course is to minimise hedging costs or ideally take in small profits from the hedge in case we don't get a crash/vol spike.

When I figure something out, share it here.

BTW I learned of a great site for back testing portfolio allocations/timing models etc. The free service is pretty good on it's own.  https://www.portfoliovisualizer.com

 

[Craig]

4 hours ago, Lightscribe said:

Looks like it could be another leg down today. Nikkei over 1% down today and futures are slightly down too so far.

BTC is leading the way shitting the bed. I’m shored up in PAXG and GBP while I wait to see how today unfolds.

Got my PAXG in a Nexo account, currently earning 8%.

[Lightscribe]

36 minutes ago, Craig said:

Got my PAXG in a Nexo account, currently earning 8%.

I find it a good pair, when BTC looks like it’s going on another downwards leg instead of GBP. Also it’s handy to set high sell orders and immediately hit them before the price reverts to make the most of any whale big buy spikes. $3k up this morning before I got out of bed, if only I could do that everyday. 

[christh]

13 hours ago, DurhamBorn said:

Yamana looks really cheap to me and iv been buying.It also owns a huge gold/copper deposit about to be developed.12 billion of copper minimum in that project and a good few million oz of gold.

It sold one of its mines far too early,but that did clear debts.

Harmony also has a huge copper project ,but it looks a long way from being built.

Hi DB, you buying Yamana on the Toronto exchange? I see there's AUY.L on a CDI in London but seems super thinly traded. Cheers.

[DurhamBorn]

1 hour ago, christh said:

Hi DB, you buying Yamana on the Toronto exchange? I see there's AUY.L on a CDI in London but seems super thinly traded. Cheers.

I buy the CAD version yes.

[DoINeedOne]

BERLIN (Reuters) - Work to complete the subsea Nord Stream 2 gas pipeline can go ahead in German waters, Germany’s federal maritime regulator BSH said on Monday.

Two environmental groups had in January filed complaints with BSH against a move to expand the period during which construction work could theoretically take place, effectively preventing further work on the pipeline.

[Underwhelmed]

New post by S Kaplan after months, still reading & digesting it

https://truecontrarian-sjk.blogspot.com/2021/05/dont-panic-time-to-sell-is-before-crash.html

[23rdian]

7 hours ago, MrXxxx said:

Don't know, the options available to our US cousins is always greater. I think the advantage with this ETF was that a) you were covering both sides of the equation, and b) its longer duration.

EDIT: Some more info here

https://www.google.com/amp/s/www.barrons.com/amp/articles/4-etfs-for-investors-nervous-about-inflation-51621027024

[JMD]

15 hours ago, Harley said:

Anyone using the Dragon portfolio and how did you go about implementing it as a UK retail investor?

Harley, the Dragon Portfolio is i admit beyond my skill set, but i did do some research on it early last year as it intrigued me. I remember that Patrick Ceresna (macro voices) produced some videos for the 'commodity trending' component, US focused so perhaps not what your after, and unfortunately I don't have any links to the videos but probably still available on the macro voices site.

[Lightscribe]

https://www.reuters.com/world/us/households-including-most-us-children-get-monthly-stimulus-payment-2021-05-17/
 

“A poverty-fighting measure included in the COVID-19 relief bill passed this year will deliver monthly payments to households including 88% of children in the United States, starting in July, Biden administration officials said on Monday.

The Democratic-backed American Rescue Plan, signed into law by President Joe Biden in March as a response to the coronavirus pandemic, expanded a tax credit available to most parents.

Those people will get up to $3,000 per child, or $3,600 for each child under the age of 6, in 2021, subject to income restrictions. The benefit will reach 39 million households, many automatically and by direct deposit every month, starting on July 15.

It is one of several measures the administration says could lift more than 5 million children out of poverty, half of the total number of U.S. youngsters in that situation.”

[JMD]

5 hours ago, MvR said:

Funnily enough I've just been looking into this as I've got to the point I could consolidate various accounts into one and make use of portfolio margin rules to sell futures and index options. 

The plan, which may well change, is to use something like this as the core holding of a options selling account. The idea is to make better use of the cash that otherwise sits there as margin collateral.  

The stocks, bonds and gold portions are easy enough. I can't buy the ETFs directly due to KIDD nonsense, but I can sell an in-the-money put(s) just before expiry and have the ETF put to you that way instead.  Or I might create the deltas that are equivalent to the stock position with some short vol structure ( e.g. Jade lizards, short put spreads etc).

The trend following commodities could be CFDs or spread bets, or commodity futures. For a long term low maintenance portfolio you could time the trend with a simple 50/200 MA crossover or something similar.  There's also a timing model called "Duel Momentum" which appears to be another good way to time things.

The tricky one is the long vol obviously. In my case I'm looking into ways of constructing  something with 30-90 DTE SPX options, along the lines of this..

Or, given I trade so actively anyway, I may do something a bit more manually timed with VIX.. maybe naked puts funding long VIX call spreads?  The trick of course is to minimise hedging costs or ideally take in small profits from the hedge in case we don't get a crash/vol spike.

When I figure something out, share it here.

BTW I learned of a great site for back testing portfolio allocations/timing models etc. The free service is pretty good on it's own.  https://www.portfoliovisualizer.com

 

Hi MvR, i've just responded to Harley, but the Dragon Portfolio posts have prompted me to take a proper look back at my notes. Found the below - maybe not that helpful to you or Harley, i.e. from your above post i think you are already planning this approach? But anyway just my very basic scribbles from last year gleamed from podcasts, and posting just in case you may want to research more detail of what Mike Green and/or Horizon are currently up to. (Btw, despite still intending to dip my toe in at some point, i haven't as yet done anything in regards options trading. Just mentioning as you might recall i visited your options trading thread some time back, but in the interim i decided to get my pension portfolio sorted first).

Dragon Portfolio 'active long vol.' trading component...                      Mike Green/long vol. - may use straddles, directional trade in markets where try to make money in both directions.                                  Horizon Kinetics/long vol. - may replace their fixed income with: buying stocks with 'collars' - meaning sell a call and buy a put option. The stock is therefore hedged within a narrow collar. Collect the dividends, and if the stock goes up, you get the maximum return.

[janch]

3 hours ago, Underwhelmed said:

New post by S Kaplan after months, still reading & digesting it

https://truecontrarian-sjk.blogspot.com/2021/05/dont-panic-time-to-sell-is-before-crash.html

Thanks for posting.

He says to sell US tech and has shorted some but he is long TLT and also GEO.  I was curious as this is a new one on me.   Geo Group Inc is a real estate investment trust which invests in private prisons and mental health facilities in US, Australia, Soth Africa and UK according to google. 

Maybe he is betting on "the Covid" and the imminent crash putting many people in either  prison or giving them mental health problems (I suppose it's not funny really)

[DoINeedOne]

Vantage Towers aims to generate revenues of around the €1 billion mark in the current financial year, a modest increase on its pro forma turnover in full-year 2021.

The mobile towers business, spun of out Vodafone last year and listed in Frankfurt in March, reported group revenue of €545 million for the last financial year. However, the figure does not include a full-year’s performance for many of the assets it picked up during the 12 months to the end of March; on a pro forma basis its top line came in at €966 million, slightly up on the €945 million it posted the previous year.

For the current financial year it expects to generate €995 million-€1.01 billion in revenues. It forecasts stable adjusted EBITDAaL – its 2021 figure was €524 million, up 2.1% – and recurring free cash flow of €390 million-€400 million, compared with €384 million last year.

“I am pleased that we have fully delivered on our FY21 operational and financial targets, and we remain focused on commercialising our business and delivering our medium-term targets,” said Vivek Badrinath, chief executive of Vantage Towers, in a statement accompanying the results.

Key among the firm’s medium-terms targets is its aim to increase its tenancy ratio – or the number of retail operators using its sites – to greater than 1.5x. As of the end of March it had a ratio of 1.4x, up from 1.37x at the end of Q3.

Growing that tenancy ratio will be vital to increasing turnover. Of the company’s reported revenues of €545 million, just €58 million came from customers other than Vodafone. The firm added around 1,800 new tenancies in the last financial year, of which a significant 1,300 were from non-Vodafone customers. It grew its footprint of macro sites to 45,700 across its eight consolidated European markets by fiscal year-end, an increase of around 2,300, while the figured reached 82,200 when its UK and Italian joint ventures, Cornerstone and INWIT respectively, were factored in.

Speaking of INWIT, the Italian towers business Vodafone shares with TIM last week presented its first-quarter numbers and like Vantage Towers reported massive growth due to the merger. On an organic basis though, its Q1 revenues grew 3.4% while its EBITDAaL margin was up 8.3% to 65%. It built out 30 new sites in Q1 and raised its tenancy ratio to 1.92x.

“The business plan objectives and 2021 guidance are confirmed,” said INWIT CEO Giovanni Ferigo. “During the year growth will accelerate with the gradual contribution of new hostings, the creation of new sites and the development of new services.”

There was a similar message from Vantage Towers.

“We are working to grow our revenues and deliver our efficiency programmes to provide attractive returns for our shareholders and make a significant contribution to better connectivity and the sustainable digitisation of Europe,” Badrinath said.

Those returns to shareholders are looking healthy, as you would expect from an infrastructure business. As it has noted previously, Vantage is paying out a dividend of 60% of recurring free cash flow to shareholders, which equates to a payout of around €280 million.

Much of that figure will go to Vodafone this year, which still owns 81.1% of Vantage Towers; Vodafone is due to report its full-year numbers tomorrow, incidentally.

There was nothing from Vantage Towers about its future shareholder structure, but with so much M&A action in the towers space in recent months and big guns talking openly about the possibility of joint ventures, the status quo is unlikely to remain indefinitely.

 

Completely forgot Vantage Towers listed in march

[Hancock]

4 hours ago, Underwhelmed said:

New post by S Kaplan after months, still reading & digesting it

https://truecontrarian-sjk.blogspot.com/2021/05/dont-panic-time-to-sell-is-before-crash.html

Could this not be as they've made an absolute killing in the last 12 months, and are merely profit taking.

Insiders of companies which would benefit from rising inflation, such as non-precious-metals commodity producers, industrials, and the shares of major global exporters, have experienced their highest insider selling in decades

So he is not expecting a BK, but am extended drop down.

The bottom line: increasing negative divergences are pointing the way lower for U.S. equity indices in both the intermediate (3 to 6 months) and longer term (2 to 3 years) with periodic sharp upward spikes that are typical in all severe bear markets.

[23rdian]

8 hours ago, Craig said:

Got my PAXG in a Nexo account, currently earning 8%.

Can you trust these type of things you think? I know nothing is perfect but how are they's able to make the return on it? Do they use what you deposit to trade?

 

[DurhamBorn]

Dollar index getting really close to breaking below 90 now hopefully it can get through soon and head to 87

[Craig]

56 minutes ago, 23rdian said:

Can you trust these type of things you think? I know nothing is perfect but how are they's able to make the return on it? Do they use what you deposit to trade?

 

Nexo seem to have pretty decent protections in place, but absolutely can't see them offering these rates indefinitely. 

[MrXxxx]

2 hours ago, janch said:

Maybe he is betting on "the Covid" and the imminent crash putting many people in either  prison or giving them mental health problems (I suppose it's not funny really

Yep, the populus in the mental hospitals and the politicians (hopefully) in the prisons where they belong! :-)

[geordie_lurch]

Micheal 'the big short' Burry has taken a massive position against Tesla and more importantly for us is backing up his calls for massive inflation as Zerohedge says...

"But perhaps what is most remarkable, along with Burry's huge Tesla bearish bet, is his aggressive positioning for a surge in inflation (as a reminder, it was Burry back in February warned that Weimar hyperinflation is coming), which he is trading as follows:

• PUT on the TLT 20+ Year TSY bond ETF, equivalent to some 1.266MM shares or $171.5 million
• CALL on the TBT 20+ Year Treasury Ultrashort ETF, equivalent to 2.536MM shares or $55.1 million
• CALL on the TTT 20+ Year Treasury Ultrashort ETF, equivalent to 100K shares or $4.6 million
• CALL on the 3x levered TMV 20Y Treasury Bear ETF, equivalent to 38,400 shares or $3.1 million
• Outright long in the TBT 20Y Treasury Ultrashort ETF, amounting to 300,000 shares or $6.5 Million.

To summarize: Burry sees lots of downside in Tesla,  upside in Alphabet and Facebook, and is betting on a surge in Treasury yields."

https://www.zerohedge.com/markets/michael-burry-reveals-massive-tesla-short-huge-inflationary-bet

[planit]

I would love to know exactly his average buy-in and strike price to those TSLA puts. If he did them in the first qtr (I think that was the filing and they weren't there in the previous one) they are looking very shrewd at the moment.

 

Other comment is the 3x bear ETF is a widowmaker but his position looks more like "I need a bit of fun, I will do something a bit crazy as I'm bored". 'Only' $3.1m, TSLA position $530m!

 

He has some serious kahunas.

[MvR]

Just tried opening a new silver position in my IG spread betting account, and the market's closed.  Same for one of the physical ETFs you can trade via their spread betting platform, though SLV is still available.

Very odd..  Anyone else seeing this on their platform or other silver instruments?

[Loki]

Silver above $28

[Castlevania]

21 minutes ago, MvR said:

Just tried opening a new silver position in my IG spread betting account, and the market's closed.  Same for one of the physical ETFs you can trade via their spread betting platform, though SLV is still available.

Very odd..  Anyone else seeing this on their platform or other silver instruments?

Their silver contract operates off London hours

[MvR]

6 minutes ago, Castlevania said:

Their silver contract operates off London hours

It shouldn't do, and didn't last week ( or even last night ). It normally seems to follow the Comex futures in terms of price and trading hours, as their gold contract does.  I regularly trade it in the evenings.

It's not like the market's particularly volatile, and the margin requirement hasn't changed, so I'm wondering if it's just a technical issue, or they've messed up their own hedging and position, or maybe there's something stranger going on..

[Castlevania]

Harmony and the Argentine farming Ponzi scheme are both up over 10%!!!