Comments
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CLI work in the leveraged loans market and so far the selloff is orderly - though the bids are down sharply. There are buyers out there (notably CLO warehouses for loans). Not 100% sure about HY which I'm not directly involved with, but so far I haven't heard anything about funds not hitting bids and drawing lines of credit instead. A word of caution to those shorting credit: credit markets can tighten (i.e. go up) very quickly in the other direction. Don't count on your stops necessarily working IMO - i.e. you might get filled much higher than your stop. That's exactly because they're less liquid markets. I think if you have a short view, it is best expressed by puts, where you can control your downside. No offence to Julian and Raoul but because of the negative carry I think shorting credit is very dangerous, especially after it has already declined sharply; one needs to get his timing almost perfectly right. Also, I think although credit can certainly go lower, it seems that credit markets are already pricing a significant default spike, i.e. they're pricing a worse scenario than equity markets. So in my view, the downside is much higher in equities if your base case scenario is a sharp recession. Again, I'm not saying there is no further downside in credit markets. It can certainly get worse. But I'm struggling with the idea that shorting it is the best way to express a pessimistic view on the economy at this stage.
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NLJulien, do you have any concerns about any of the major banks in the US (i.e. JP Morgan, Bank of Am, Wells Fargo, etc.) potentially going under? I'm hearing rumblings recently of major problems lurking underneath and didn't know if you've heard anything too. Or do you think the Fed will supply whatever is needed to ensure there aren't any major failures? I know everyone thinks the US banks are well capitalized following 08/09 but that complacency is what concerns me. No one thinks it can happen again so no one is really looking... Thanks
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AWAnyone know what happens if the govt ban short selling over this weekend? ie we cant get out of shorts like PSY and HYG?
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JWThanks Julian. Clear thinking in muddy waters :-). I still have some US Bond positions open (short, medium and long, all combined in one fund). I was planning to keep it and pull through whatever comes our way. Would you advise to close this out a some point and if yes, when approximately?
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KGI've never touched FX market in my life, therefore I have to ask this question for educational purposes since these trades are coming. Basically since I don't have lots of money, just selling one currency against another won't provide enough reward. Hence, what are the typical ways to express one's thesis about EUR/USD in terms of options?
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RMRewatching over the weekend after Friday ramp up close, which Julian warned us about, got out of my shorts in the am thanks to that advice! Love these flash updates from both of you. Please do more after the next big govt action expected next week! Julian, I have become a big fan of both your 15ema/34wma daily cross and the 5/20/50 sma weekly cross, was worth the price of MI to me. They appear to be very well selected MA crosses! Was reviewing the last weeks market action and noticed that an excellent trigger to move towards cash was the VIX going above 26 and then 31 on a sustained basis (day after day, not just the typical quick spike). My question is from a historical perspective, is this sustained higher VIX a fairly reliable signal to begin to exit (or exit entirely if your a trader)? Raoul: ZROZ, TLT way off their peak highs. Should we reload? We got the pullback you warned us about..... Thanks gents. Stay safe out there...
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MWFantastic advice, including washing hands.
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ASA lot of people have mentioned in the comments that brokers aren't allowing (have nothing to borrow?) to short HYG. Is that why the moves to the downside in HYG have been subdued compared to S&P? Or, is the market still catching up on the risk that HYG faces?
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bbneither you nor raoul ever mention preferred stocks. or fixed to floats (fixed for a few years more and then float, X basis points above libor type thing). JPM, Citi, GM , GE, Goldman, WFC, BA Synovus, synchrony, keycorp, arch capital, pennymac all are paying 5-6%. your worried about HY credit, what about these?
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ATA complete contradiction to Raoul's post yesterday
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MPShort term View on dollar? Assuming stimulus from all central banks...yes i know long term down on inflation
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wjhttps://www.simplysafedividends.com/intelligent-income/posts/3-high-yield-dividend-stocks pretty good article. Personally I want to buy some Cruises. Its easy to figure out if people are booking. Just try to book yourself. If most cabins are sold there is your entry. Royal Caribbean Cruise took a hell of a Cliff dive!
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swThanks for the update and thoughts. However I'd be very cautious chasing for dividends (for example, in Energy complex) *unless* you have conviction that the company's cashflow after debt-servicing and sustaining capex can continue to be serviced and/or you have a view on a rebound in earnings. I'm sure in due course there will be a few gems out there with dazzling dividends that are sustainable, but just because a company is a strong credit (e.g., Exxon), doesn't mean they won't chop the dividend if the current revenue trend has the possibility of being the new-normal. In fact, the strong credits are quite likely to chop the dividend as soon as there's any risk that the credit rating may suffer.
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JASome brokers are already stopping sell trades on HYG.... long only. WTF!
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CSHow is the market going to be able to find a bottom without the coordinated fiscal/monetary response coming from Washington? It seems like Congress and the WH are slow playing this, talk of them going on recess starting Thursday afternoon. Do you think the markets will force them to actually miss that recess and get to work to get this stimulus through? This feels a bit like 2008 when markets forced the Congress to get legislation passed
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amCan anyone please answer what would happen if markets are shut during the expiriation date of an option?
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LHIn the present situation video updates is a great way to communicate. Keep them coming
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DDStrange thing - I can't play the video for some reason, keep getting the "MEDIA_ERR_SRC_NOT_SUPPORTED" (Session ID: 2020-03-11:2caf37278065924e219858c Player Element ID: _2y9bl1n47) error message. All the other videos loading and working fine
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MCFlash video update is so much better than writeup. More of this please!
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NLThanks Julian - any thoughts on shorting EMB here? Emerging market risk, dollar risk, liquidity risk?
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MCgreat educational video. Thanks
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SSLoving the video flash updates! Thanks guys!!
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JKThanks Julian ... What’s your current outlook on TLL ? Had it for some time, thanks to you/Julian. Dumped mine yesterday, saw some disconnect with S/P when it was also leaking while market dropped. So per your comments of what to look out for dumped it ..... TLT down 5% today ...
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AAThanks Julian. Great and timely update. So keep it simply. But you dont sound as bearish as Raoul. It seems you think a government bailout in whatever shape or form will save the day? Simple trade: short futures S&P, SPX put options, HYG put options to the tits :), and KBE? Do you concur? Do you think the downside is around 20%? Thanks mate! Really appreciate all this.
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BSThanks Julian. Love the video updates! Really feeling in the loop here. I appreciate the effort you guys have put in the last month as things have sped up.
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TBToo optimisitc on the OXY dividend call :) Seriously though thanks to you and Raoul for giving us these updates and keeping them timely. Video format works great!
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MGLove this new touch guys these videos are awesome. Although I will miss the pdfs since I print those out and journal them in my binder for notes.
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DHThe video delivery and timeliness are very much appreciated. Please keep them coming. Thank you.
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GPThanks Julian. I'd love to see a list of top 10 dividend stocks your team has on watch. Great idea.
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KAAppreciate the timeliness! Thanks.