The TSLA Market / Economy

[anon38180840]

@spidercrab

I get it. I think you’re really unlikely to beat the market on a risk-adjusted basis, but I also understand that analyzing and investing in individual stocks can be very interesting and if you do underperform the market, it’s likely not to be by too much. So godspeed and I hope you keep posting your decisions here because I find it interesting to watch.

Thanks, I’ll continue posting them. The last one was UMC at $8.02.

So my portfolio now has five categories, I guess.

1. Investments based on macro predictions, societal predictions, etc.
   MRNA at something like $67-69
   BNTX at $305 (eek, but I still like it long-term)

These would both fit value plays now, I think, although I don’t have the spreadsheet in front of me.

2. Value investments in my Roth IRA and Sep IRA
   (I’ve already posted all of these so I won’t go find all the price points at the moment, but pre-Feb 2022 is KT, and the rest is since then: IBA, PSEC, UMC, X, APT, ATHM, FB, EDU, PKX, QIWI)

3. Merger arb plays
   ATVI

4. Low risk moves in my HSA
   Currently that’s mainly IBA as a merger arb play and a tiny bit of ATVI for the same reason. I currently need the HSA to be somewhat liquid, so I’m not necessarily weighing these investments against the S&P alone. If I beat cash and lose to the S&P here, that’s fine. The key is I’m trying to have very limited downside and still get a return.

5. Cash/GLD in the IRA’s

I think if I could have one back, other than the obvious (QIWI), it would be FB. It qualified as value, but my likelihood of having edge on something that big and closely followed is a lot lower, and I also entered at the top end of the range I’d consider instead of the bottom. It still seems like taking FB at a cheaper price than the broader markets were offering can’t be too bad.

@spidercrab

(And occasionally tease, like when you were convinced that QIWI held a bunch of US dollars.)

I was disappointed in the result of that lol… There’s still some interesting stuff going on, which I’ll get to before whining a bit… I’m still pretty tilted over the way that all went down with it being frozen. Like I decided the night before to sell it pre-market. My old brokerage had 4a-8a premarket, Schwab has 7a-9:25a. I woke up at 6:55am to put the trade in, only to see that it had been frozen at 6:43am. I could have exited at $5.67 a share! I was only down 21.8% at that point! Soooo close.

Anyway, while I still can’t trade it and Schwab is currently marking it to $0, it’s trading at the equivalent of $4.72 on the MOEX. There was a shareholder vote to allow QIWI to buyback shares from the ADR shareholders, which I assume will pass… but will NASDAQ and American brokerages allow it? Keep in mind they are headquartered in Cyprus, so a case can be made that we would not be selling to Russians. Will they offer us the current price on the MOEX or will they screw us?

I’m still hopeful that I will get something back out of it, and either way I hedged it off with commodities trades that made back something like 75% of the loss even if it goes to zero.

@spidercrab

My magic beans comment was specifically about options, and what it sounded like you were looking for. Here’s how I interpreted your goal:

• Buy puts to serve as portfolio insurance against significant losses.
• Instead of buying puts on the market, which would likely be expensive, instead buy puts on individual stocks that are perceived as having a lower probability of significant declines. Those would be less expensive.

Yeah that’s my goal.

@spidercrab

The magic beans comment was because these two are more or less conflicting goals. If you end up buying these cheaper puts, you’ll be buying puts on stocks that, in all likelihood, won’t experience major declines even if the market does. So when the market does experience the big crash, your puts won’t fully protect you from the overall market fall. But maybe I’m misunderstanding your goal.

That’s of course a very valid take and concern. Very! My thinking is basically that my portfolio is less likely to experience a huge decline too, though. So if I’m correct about that, and I am okay with the risk of say a 75% market fall and a 25% fall in my portfolio (hey, I’m underweight equities and I will pounce in the broader market anyway if it drops that much, and my value stuff will still be doing better, so overall it would be a great outcome for me), then I really just need to insure against value stocks being dragged down with everything in a panic-driven selloff. In that case, I would expect the stuff perceived as teflon to also crash. Maybe not quite as far, but I don’t need it to, if the puts are cheap enough.

@spidercrab

Or I’m just aggressively disagreeing with your assumption that out of the money put options for blue chips are incredibly cheap relative to their actual likelihood of paying out.

This is very possible, and I will admit probably very likely to be the case. That’s what I’m going to try to evaluate on Sunday/Monday. But if that’s the case, then I just won’t do it and I’ll remain more conservative in my overall allocation into equities.

@spidercrab

And of course, I’ll repeat the thing that I often say, which is any strategy that you’re tempted to do with options can almost always be replicated more cheaply with just the stock. (It’s useful to understand the notion of synthetic calls and puts.) And in this case, I’m confident that’s true. If you want to protect your portfolio against the risk of a major drop, just hold a larger cash allocation instead of buying puts.

Yeah that’s what I’m currently doing, holding more in cash. I’d be lying if I didn’t admit that part of my desire to go long/short has to do with the sort of hindsight FOMO of watching a bunch of companies that I thought were extremely overvalued lose 60-80% without making any money off of being right about that, and not wanting to have something like that happen again.

Like even though I’m positioned to do way better than the market if it happens, if the market drops like 70% and I drop 50% with it, I’m going to feel like a moron for seeing that risk coming and not hedging it off somehow.

[grue]

Just curious have you maxed the i-bond?

[anon38180840]

@grue

Just curious have you maxed the i-bond?

Yes, I maxed it for 2021 and 2022 back-to-back like 12/30 and 1/1. That’s not in my IRA obviously. I plan to max it again on 1/1/23 as long as the rates are still high.

[anon38180840]

One of the cool things about i-bonds is once you’ve held them for like 15 months they’re pretty liquid, like yeah there’s a penalty for selling, but you’re still doing way better than you would have done with any more liquid option. So once that point comes, I’ll basically have the first $20K + interest liquid, which makes buying another one way easier.

Seems like in current conditions it’s an optimal place for an emergency fund for the average person, or for 6-12 months of living expenses for a poker pro.

[suzzer99]

I think there’s something to be said for being the smartest of the stupids - like Trump. Hillary could spend a $billion on focus groups and still not tweet (not even talking about human charisma) stuff 1/100th as effectively as Trump seems to just effortlessly roll out. Because he’s one of the stupids. He knows what triggers them because it triggers him. He doesn’t need a focus group.

Another analogy. When my friend from college - who was kind of a midwestern goofball and never really seemed to show any kind of genius humor, got a job writing for the Reba show, I was blown away. But then I went to a taping of the show and realized Harvard Lampoon types wouldn’t be as effective on that show. They’re too far removed from the intended audience.

I could see a casual investor who’s a step ahead of other casual investors, in some limited circumstances, having in a better pulse on what the market is going to do than a billionaire hedge fund guy employing a bunch of multimillionaire quants.

But only in certain circumstances where casual investors are overreacting in one direction or the other. Only broad strokes like betting the market is going to move one way and zigging while everyone else is still zagging (but only a step ahead, not 10 steps ahead). Never in micro-analysis/TA/whatever type situations.

[mosdef]

Great question. Much of the hedge fund leverage has unwound and is not being replaced because with interest rates higher the borrow-to-invest strategy is not as appealing.

I wouldn’t say that there is any optimism about this. Investment managers are terrified of inflation. Inflationary, low growth economic regimes give them no good options.

[bbb7979]

There is a measurement called beta which indicates how correlated a stock’s movement is to the broader market. So if the question is really about which stocks might go up or not decline when the broader market declines you can scroll through a list of stocks with negative or very low beta and pick the company you like the best.

If you’re just asking all the guys on this thread who are proponents of indexing to pick their favorite stock for the next period of time I don’t know why you would do that. Most likely none of us are reading 10ks or doing any other type of research through which we could make a confident recommendation.

[mukdukaluk]

I assume I bonds are just for US citizens so I’d need to find some smurf/relative to invest in them?

[bobman0330]

@anon38180840

@bobman0330

The math behind crypto is pretty fascinating, but this is probably not true. There’s no benefit to using a distributed, trustless network to track something like ticketing when there’s already a central, trusted entity (the venue or the venue’s agent) who could do it instead.

They can get a royalty on every single resale. Right now they could sell you a ticket for $100, you could re-sell it for $1,000, and depending on the platform that you use they get none of that. If they go to NFTs, they can charge whatever fee they want on every resale. Plus they can basically eliminate fake tickets from the marketplace.

Finally getting back to this, but there’s nothing that a blockchain can do that a database cannot, other than operate in an environment where no one can be trusted. But if there’s a party that everyone already trusts (like the venue that’s going to be honoring the ticket), then the Ethereum network or whoever is just an incredibly expensive, less powerful database. Take whatever protocol you have for ticket sales, and replace every interaction with the Ethereum network with an interaction with a server owned by the event venue. The resulting protocol will do the same thing, just faster and more reliably.

[anon29622970]

You can even set it up with the venue so that the artist and venue each get a cut of every resale transaction. This is one of the bear cases I’ve made for crypto and NFTs in the discord too. They are bringing some new ideas to the table, but none of them actually require crypto or a blockchain to make happen. And you could just do the same thing while transacting in dollars instead.

[olink]

@anon38180840

But so far my history is that I can beat the market and by a somewhat significant margin so far.

Obligatory lol sample size. Seriously, over how many trades is this? How many donks have you seen that ran hot for that many hands?

[ParlaySlow]

Just to chime in again that “beating the market” isn’t the benchmark. It is generating alpha aka superior risk adjusted returns. I can buy the s&p on leverage and beat the market a substantial % of the time.

[anon38180840]

@mosdef

Great question. Much of the hedge fund leverage has unwound and is not being replaced because with interest rates higher the borrow-to-invest strategy is not as appealing.

I wouldn’t say that there is any optimism about this. Investment managers are terrified of inflation. Inflationary, low growth economic regimes give them no good options.

OK cool, thanks. Yeah I didn’t expect them to be optimistic/happy about it, I was just wondering if they had reduced the risk of the leverage causing a massive crash that they seemed terrified of before.

[anon38180840]

@bbb7979

If you’re just asking all the guys on this thread who are proponents of indexing to pick their favorite stock for the next period of time I don’t know why you would do that.

Well I was asking what the guys here think the market thinks is the best/safest blue chip, basically. The reason is I want cheap puts, so I want sentiment to be that the stocks in question are very unlikely to go down. This was step 1 of my research, gathering suggestions on stocks that will have very high market sentiment. Step 2 is to check out their balance sheets and 10Ks and the cost to buy puts. Step 3 is deciding if that price makes sense for my needs.

[anon38180840]

@olink

Obligatory lol sample size. Seriously, over how many trades is this? How many donks have you seen that ran hot for that many hands?

Like 50 trades over four years or so. Most of them are buy and hold for a while, so it’s going to take me a while to get a large sample size.

@ParlaySlow

Just to chime in again that “beating the market” isn’t the benchmark. It is generating alpha aka superior risk adjusted returns. I can buy the s&p on leverage and beat the market a substantial % of the time.

Yeah I’m not using leverage, though. Is there a resource where I can plug in my portfolio and see my risk-adjusted returns? My thought would be this would be nearly impossible to accurately calculate.

[ParlaySlow]

No, but there are two points I can make here.

1. Small cap value stocks have higher expected returns because they are exposed to additional risk factors that the market compensates for by discounting their earnings and assets more than companies that are larger and growth oriented.

2. Holding only a handful of stocks exposes you to uncompensated idiosyncratic risk.

[olink]

@anon38180840

Like 50 trades over four years or so.

How many times have you seen a total idiot poker player ahead after 50 hands?

I’m not questioning your ability to win here, just your confidence in it.

[anon38180840]

On #2 I’m currently holding 14 stocks. They’re reasonably well diversified by sector and country.

I believe Buffett actually advises using as few as two or three if you can find really good ones, and Graham was advocating for more like 15-30 if possible.

One of the trade offs for being less diversified and being in small caps is that I theoretically have less exposure to panic sell-offs.

But at the end of the day I think the main difference is that I don’t agree on #1 in that I think some of them are discounted way too much. When I see a company with a decade of good earnings growth and a pile of cash and a book value near the price it’s trading at, that doesn’t strike me as more risky than bigger companies.

[anon38180840]

@olink

How many times have you seen a total idiot poker player ahead after 50 hands?

All the time, of course. But if we’re making that analogy, then it should be 50 VPIPed hands right? I’ve researched and passed on several hundred stocks. It doesn’t change your original point, just moves me a little farther along in the process of getting to a significant sample.

@olink

I’m not questioning your ability to win here, just your confidence in it.

I mean I’ve said over and over that it’s very possible, if not likely, that I can’t beat the market. I don’t think I’m super over confident. But like there’s a difference between watching someone VPIP 50 hands in a row and play their hands horribly and be ahead, and watching someone VPIP 50 hands over 8 hours and show a thought process and some skills and be ahead, right?

Maybe I fall somewhere in between those two examples, there are people here who think my process is silly of course, but I think some of this can be somewhat simple.

There are also external events that can raise or lower my confidence. For example, while he obviously has a shit ton more information available to him and likely some inside info, it felt good to hear that Warren Buffett was personally making the same merger arb play I’ve been making at approximately the same time I made it. If Buffett went out the other day and said, “We had X shares in ATVI but we sold them because we think there’s a high risk this deal doesn’t go through,” I’d have been like “Oh shit, maybe I fucked up, maybe I better bail on that play and not do any merger arb anymore.”

The same concept applies to poker in trying to draw conclusions before hitting a big sample.

[iron81]

Should be fine, a lot of foreigners hold US Treasury bonds.

Edit: not true