A gift. Thank me after you get rich.

Discussion in 'Economics' started by BrandNewTrader, Jul 30, 2006.

  1. Didn't I say "one of the most credible?" It would be foolish to say that he's the most credible, right? I did make a mental mistake and say he won the nobel prize, but I cleared that up. His credentials and track record speak for themselves - I don't need to defend him.

    As far as him calling the events since 2005. He was one of the first to begin predicting the oncoming recession based on what he calls The Three Bears (rising inflation, a hard-landing in the housing market, and dollar trouble due to the massive deficit) and has gone into detail as to what type of recession this is going to be and what types of shocks we should expect to see. The guy has accurately predicted quarterly GDP growth %'s to the TENTH (he admits it was by chance that he was dead on, but he is usually no farther off than by two-tenths of a %).

    It's not about the Fed NOT panicking, it's got to do with the fact that there's nothing the Fed can do at this point given the looming inflation and slowing growth. Raise rates to curb inflation? Or pause/lower to stimulate growth and soften the landing of the economy? Well, they HAVE to raise rates because they HAVE to curb inflation. The Fed is willing to risk a long and protracted recession to keep inflation under check.

    Roubini is on Bloomberg in a recent interview in which he makes his 100% certainty claim of the US recession. He is also saying it is going to be worse than alot of people think due to the deeply flawed structural and fundamental problems with the current global financial framework. You're free to listen to what he has to say and use the info as you see fit.

    I don't make this stuff up in my sleep, I just follow the smart money...
    #21     Jul 30, 2006
  2. If you are wrong, your OTM puts will expire worthless and "a significant %" of your net worth will be gone.

    Nitro is right. Your view of the macro landscape might be 100% correct, but people may choose to react in an "illogical" manner, pushing equity prices higher for a while. There are too many variables for anyone to believe with certainty that they will have both price and timing correct.
    #22     Jul 30, 2006
  3. I agree. no matter what, money management is most important. Only commit what you can afford to lose. You'll likely be wrong on your timing - thats murphy's law. And if you're buying OTM puts, turn it into a bear debit spread (selling further OTM puts) to reduce your financing costs. Look at the past tech bubble pop, and past oil embargoes etc. The SPX even in the worst of times only moves down so much per quarter. Don't let greed kill your account.
    #23     Jul 30, 2006
  4. hans37


    COOL may I suggest building your position so large as to have your next ET Id be brokenetrader next year.

    All you can lose is you premium right.

    You know what really sucks and scares me.? I too think we are in a bear market.

    having you concur REALLY bothers me
    #24     Jul 30, 2006
  5. Right, his resume isn't magical - he's human not a wizard. I'm not sure what you were expecting? The guy's worked at the IMF and was the Senior Economist on the White House Economic Council... doesn't that distinguish him from any other rank and file econ prof at least somewhat? How about the fact that he runs a Global Geopolitical and Economic Risk consultancy that lists some of the biggest financial institutions all over the world as his clients?

    He's not just a talking head. A talking head is someone on CNBC who feeds soundbites to the public and uses buzz words. Roubini is a highly pedigreed and internationally recognized economist who is on BLOOMBERG saying the recession is a 100% certainty.

    Obviously you're free to disagree, but you don't grasp the fact that I'M not the one making the assertion, Roubini is. If you think his claims are false or flawed, refute them!

    And what's this about surprise? There's no surprise. He was waiting to see the recent GDP report before making a hard call - but he's been making the calls since 2005 (as I've repeated). Last week he put the probability of a recession at 50%. After seeing the report he said it is now a certainty. Why don't you go and read why? I posted the link - you wouldn't be writing all this sht if you had read the report. You don't have to read his sht, but don't NOT read it and then ask me questions etc etc.

    As far as China goes - Roubini thinks China will react to the US slowdown rather than vice versa due to the nature of trade relationships between the two countries. It's basically that US imports lots of China goods, China exports lots of goods to US, gets lots and lots of dollars and puts those dollars in its reserves. China's reserves are approaching $1trillion (their us dollar reserves only) So, you cna imagine what happens when the US consumer finally passes out from a) housing decline b)rising interest rates c) high energy costs and stops spending their money - China's exports less, and add to the the declining dollar will hit the value of their reserves extra hard given their reserve size. On and on - but he addresses the China issue specifically and maintains that the us recession will be the catalyst for a global slowdown and not vice versa.

    Read his writings if you're interested
    #25     Jul 30, 2006
  6. Why will my OTM puts expire worthless? If the market goes down, don't they increase in value? Can't I then sell them at that market value? I don't plan on holding them to expiration, which is why I am buying Jun 07 or Dec 07 puts. Options are securities just like equity shares - and they don't have to be in-the-money for you to make money, I'm not sure I understand where you're coming from here... Do you?

    I don't have to get price and timing correct. Just direction and general time frame. I'm talking about buying Jun/Dec 07 puts on indices at an 80-85% strike. That's the strategy in a nutshell. Obviously I will be using "trading tactics" to time my entry points etc. When the market tanks in Q406/Q107 these puts will increase in value significantly and I will have the option of selling them, or riding the contracts out depending on the behavior of the market.

    I worked on an equity derivatives desk and am familiar with options - but thanks for looking out...
    #26     Jul 30, 2006
  7. lrito


    I think the US will get into a recession. Most of the data released last months show signs for an upcoming recession.

    Talking about the major stock markets, well, i think we will have a last rally these mont until mid August, most fueled by short covering. But i don´t believe in new highs, i mean higher highs relative to May. For example, the SPX made new high for the next years on 1326, for sure. I am thinking building a short positiong for long term but not now, as i said before, i expect a short term rally, and then... Puff.

    Bye, good trades.
    #27     Jul 30, 2006
  8. I've though about the debit spread may put that trade on, however I am actually growing more and more bearish as time goes on and I think I'd be elaving money on the table below the strike of my short put if I put on a spread. I may just stay long puts and POSSIBLY wait until the market begins to turn south and THEN sell my lower strike puts at a higher market value.

    Market be lose a quarter of its current value - I think 80-85% strikes are relatively safe. The sht starts hitting the fan by Q1 07 at the absolute latest - with that type of timeline I should be ok with jun/dec puts.

    Thanks for the advice. I do understand your messge about greed, etc. However - I'm a young guy and not very risk averse. I think this is a major event and I plan to capitalize on it. Besides, my risk is fairly limited given I am going long puts and I don't see any possibilities of a protracted market rally through 2007. This is why I'm comfortable making a big bet.

    My worst case scenario exit from trading is going back to grad school or getting another job and being middle class/upper middle class the rest of my life, working as a corporate slave. That's not a bad safety net, which is why I comfortable with risking the farm to make the type of money I would only see if I a) won a lottery, b) got signed by the yankees, or c) was a celebrity.

    This is a speculators dream come true. I think it's almost imperceptive NOT to put on a short play given the lack of steam in the economy or market for a lasting rally.
    #28     Jul 30, 2006
  9. c'mon BNT, u know i know u don't :p

    anyway, jokes aside, roubini's views are interesting, no question, but they are absolutely not unique, be aware of that... even my granma was saying that with rates going up, housing wld slow down, as far back as 2004!!! beats roubini, right?

    other thing is, the Fed is only one part of the equation... your correct that the Fed alone can only do so much... the rest is in the hands of... Gvt... yeah, pretty scary i know... will they kill the golden goose??? will Bill the trapper be proven right at last??? watch our next episode!
    #29     Jul 30, 2006
  10. And, if the market goes up ...
    #30     Jul 30, 2006