Correlation and causation are hard to unpick here... but I agree they happen together. If prices are rising people want more money, but give people more money, then prices are likely to rise. As I have been trying to say, the delta here is politics...
Interesting take. You should mentioned it to John Hempton :)
I find shorting macro way harder than fraud. I cannot predict where interest rate will be in three months time or where currency exchange will be. I can understand if a business model is profitable or not though.
Shorting fraud can be controlled by tight risk management: only few bps for each short and having many of them. You should allow any short position to triple on you. Also pair your short position with long equity indexes to cancel out any central bank liquidity pumps.
You can make money and survive in this way but it's hard living. And having a department reaserching fraud can be very costly. So, I dont do it. Never.
I quite like the John Hempton methodology... there will just be times like 2020, when the short book will be just a huge problem. But I am pretty sure like most managers, he would have made most of his money on the long side.
If I am right about the shift from pro-capital to pro-labour - short selling could be entering a golden age....
This is helpful, especially because it's practical. Thank you! Question about the carry: you wrote, "The heyday of short selling was from 2000 through to 2008, when the S&P dividend yield 2% on average, and the average carry was 4%. From 2008 onwards, the S&P dividend yield has again fallen back to 2%, while the carry proceeds has been zero. Short-biased funds over this period were basically liquidated."
The carry should basically be a competitive short-term (money market) rate, yes? ... so should increase in current regime ... Does the dividend yield have any influence (dividend gets rebated)? Thank you!
Russell, what do you think about the following from the resolution foundation correlating household costs / inflation to labor disputes? https://www.resolutionfoundation.org/comment/lengthening-picket-lines-and-the-great-british-bin-fire/
Correlation and causation are hard to unpick here... but I agree they happen together. If prices are rising people want more money, but give people more money, then prices are likely to rise. As I have been trying to say, the delta here is politics...
Absolutely loving your content Russell, would you be open to allowing us to share it with our 60k+ audience as well?
a - thank you for asking - a lot of people just repost without asking for permission.
b - if its a free post - please go ahead - I just ask you say the source is me.
c - please just share the preview part of the paid posts.
Cheers,
Russell
Fantastic! Thanks Russell
If you want to share paid posts - drop me a line, and I can do a pared down version if you like...
Interesting take. You should mentioned it to John Hempton :)
I find shorting macro way harder than fraud. I cannot predict where interest rate will be in three months time or where currency exchange will be. I can understand if a business model is profitable or not though.
Shorting fraud can be controlled by tight risk management: only few bps for each short and having many of them. You should allow any short position to triple on you. Also pair your short position with long equity indexes to cancel out any central bank liquidity pumps.
You can make money and survive in this way but it's hard living. And having a department reaserching fraud can be very costly. So, I dont do it. Never.
I quite like the John Hempton methodology... there will just be times like 2020, when the short book will be just a huge problem. But I am pretty sure like most managers, he would have made most of his money on the long side.
If I am right about the shift from pro-capital to pro-labour - short selling could be entering a golden age....
This is helpful, especially because it's practical. Thank you! Question about the carry: you wrote, "The heyday of short selling was from 2000 through to 2008, when the S&P dividend yield 2% on average, and the average carry was 4%. From 2008 onwards, the S&P dividend yield has again fallen back to 2%, while the carry proceeds has been zero. Short-biased funds over this period were basically liquidated."
The carry should basically be a competitive short-term (money market) rate, yes? ... so should increase in current regime ... Does the dividend yield have any influence (dividend gets rebated)? Thank you!
Yes you have to pay dividend to ultimate share holder... so its a cost.
Really great insight into Short Selling dynamics.