June 2012 Trading Thread

[Biesterfield]

Najdorf - Isn't the whole point though that it is very hard to pinpoint the exact odds of that wager due to its nature, so saying that you are getting a bad deal price-wise is just an opinion. It's not like there is a Black-Scholes for comparison on this.

On another note, you'll have to keep me updated on the poker. I wish I could go but forking out 1k plus flight and lodging isn't exactly enticing for someone on a b-school student's budget.

[Xaston]

You're not getting out of my posts what I'm trying to get across. I'm not saying the difference in 80 bps and 1-1.8 bp isn't huge.

What I'm trying to say is that (I think) the differences in the world/information that are relevant to the odds of the HKD staying pegged where it is for the next X period of time are not things that you or Bill or anyone can track with enough precision to realistically to be able to tell whether we are in a world where the odds are 1 in 1000 as opposed to one where the odds are 3 in 1000.

To be more specific initially this started with you saying the true odds were under 1% (which is at odds with what Ackman thinks they are). I personally have no opinion of what the odds are.

If you ask a ton of people as smart and in the business as you and Bill how many times out of 10000 iterations of the year 2013 the HKD will stay pegged where it is, we can both agree there will be a huge spectrum of answers right?

What math or history are you pointing to that validates your number above everyone elses? What can possibly happen in the real world that will show us whose number is best? Unless someone says it will stay pegged 10000 out of 10000 times and then it doesn't stay pegged, we won't actually be able to say anything of substance about how accurate peoples guesses were.

Frankly I think there's a good chance you're more right than Bill. After how well he did with MBIA it's quite likely he is overestimating the odds of rare events that he can get these large payoffs for. And the fact that he is betting on it and really confident means he is probably going to ignore counter information more than you, who just passively disagrees with his position instead of actively.

[NajdorfDefense]

Originally Posted by Biesterfield

Najdorf - Isn't the whole point though that it is very hard to pinpoint the exact odds of that wager due to its nature, so saying that you are getting a bad deal price-wise is just an opinion..

You and Xaston seem to think that all opinions are equal in the case. They are not. Phil Ivey's opinion on a given poker hand counts for more than mine. Bill Belicheat's opinion on the right defense to call counts more than mine.

Bill Ackman has zero fx experience. All he has is an opinion -- he has zero information that is not widely know to the market.

Let's try a different example: German CDS were 85 until recently, now they are ~1% for 5 year CDS on their sovereign debt [offer side obvs, not mid].

do you think the odds of them defaulting this year on Republic of Germany sovereign debt [not EFSF or ECB] are more or less or equal than 0.80%?

Do you think that seasoned professionals can distinguish in this case the difference between odds of 90 bps, and, say 6-10 bps in this case?

What you guys are saying is that, yes, there are experts who know more than us, but, no, we amateurs get to decide when that is true on a case-by-case basis....and when we compare opinions with Phil Ivey and Magnus Carlsen and Dom DeLillo and Pat Metheny about their craft our opinions count just as much as theirs *and moreso* in certain specific cases.

Pro tip - what do you think the markup DB is charging Ackman is on a long-dated, highly structured, OTC option, with a binary outcome where they are massively short vol and gamma? Is Ackman's salesperson perhaps charging a markup on top of the bid-offer spread? [99.999% of the time, the salesperson gets none of the inside credit, that all goes to the trader.]

Do you think it's 1-2 bps on ~80bp, 5-10bp, 10-12? 15-20? More?

Hint: On vanilla long-dated IR swaps it's gonna be at least 5 bps.

Pro tip2: How did Ackman do on General Golf? Did he blow up his first fund? Borders? How much was he charging investors for his $2bn single-stock fund bet on Target? How much did they make? Is he a guy who is quite comfortable with printing major zeroes from time to time?

How would you compare his level of expertise in activist investing vs that of FX speculation? Is Phil Ivey as good a basketball player or chess player or craps bettor as he is at poker?

[tastychicken2]

Ok bought "One Up On Wall Street" ty.

[tastychicken2]

Originally Posted by NajdorfDefense

Bill Ackman has zero fx experience. All he has is an opinion -- he has zero information that is not widely know to the market.

How would you compare his level of expertise in activist investing vs that of FX speculation? Is Phil Ivey as good a basketball player or chess player or craps bettor as he is at poker?

I'm gonna let you finish, but Tilson is one of the best followers of all time.

[Biesterfield]

Originally Posted by NajdorfDefense

You and Xaston seem to think that all opinions are equal in the case. They are not. Phil Ivey's opinion on a given poker hand counts for more than mine. Bill Belicheat's opinion on the right defense to call counts more than mine.

Fair enough, and fwiw I of course agree that experts opinions should count for more. My point was that when you say things like this:

Originally Posted by NajdorfDefense

At 80 instead of 40 bps, Bill is getting his face ripped off. I assume you understand it's bad to get a 120-1 payout on something where the odds are 250-1 against

and this:

Originally Posted by NajdorfDefense

Some options are worth 5 bps, some are worth 40, and some are worth 90 bps.

imo you are implying that Bill is objectively wrong, when imo you can never be 100% objectively right or wrong ex-ante in the market unless you are doing arbitrage trades or something.

[DOOM@ALL_CAPS]

Originally Posted by Biesterfield

imo you are implying that Bill is objectively wrong, when imo you can never be 100% objectively right or wrong ex-ante in the market unless you are doing arbitrage trades or something.

Of course you can be.

Imo, this is analogous to saying you can be right or wrong in poker until you see your opponents' cards

[Xaston]

Originally Posted by NajdorfDefense

You and Xaston seem to think that all opinions are equal in the case.

Yea you nailed it

[Biesterfield]

Originally Posted by DOOM@ALL_CAPS

Of course you can be.

Imo, this is analogous to saying you can be right or wrong in poker until you see your opponents' cards

Disagree because poker is a game of known, fixed odds so you can say something like calling with a 9 out flush draw when getting 5-1 is clearly +EV in the long run. My point is that in the market most of the time you never truly know the probabilities and distributions beforehand (just your opinions of them) unless you are doing like fixed income arb. So when you say that Bill is wrong, you are saying that he is subjectively wrong, not objectively wrong.

[Justine Bieber]

anyone here think AGNC is a good play or any mREIT's for that matter? trading above 200 day moving avg up ~15% ytd and have a juicy dividend of ~15ish %

Also, is there a standard p/e ratio for this industry? id imagine it would always be on the lower side since they are pretty heavily leveraged.

[savant111]

Mclellen Oscillator is showing we are overbought. It's had some predictive value the month or so I've been following it.

[savant111]

Originally Posted by tastychicken2

anyone have a book/blog/writing that they would recommend for investing in public growth stocks?

i feel like i've been looked at them the wrong way and haven't been able to capture on opportunities as a result.

I'd encourage learning to read charts. Time your growth stock trading better and your results will improve.

[JBmadera]

watching /CLQ2 for a long here, just above .41, looking for a re-test of HOD at .72

[DOOM@ALL_CAPS]

Originally Posted by Biesterfield

Disagree because poker is a game of known, fixed odds so you can say something like calling with a 9 out flush draw when getting 5-1 is clearly +EV in the long run. My point is that in the market most of the time you never truly know the probabilities and distributions beforehand (just your opinions of them) unless you are doing like fixed income arb. So when you say that Bill is wrong, you are saying that he is subjectively wrong, not objectively wrong.

You only know the fixed odds after your opponent shows his cards. You make your decisions based upon expected ranges of cards .

[Biesterfield]

And that proves my point even more. Anyways I am done arguing this because it is a stupid discussion.