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The markets priced in a Clinton win, and now that isn't happening. What we're seeing is uncertainty and volatility getting priced into the market, not any referendum on Trump. We'll see what happens in a week.
Similarly with Trump we have no idea what might happen if he does win. He could end up starting WW3, or call for the end of US Democracy and install himself as dictator (and now we know 50% of the country is stupid enough to go along with that).... or he might just end up a do-nothing president bounced out after 4 years. For that matter maybe he's crazy like a fox and fed the Rs bullshit so they'd get behind him, then turn around and push for a hugely progressive agenda. You never know what Trump might do.
So yes, I predict a short-term crash, a recovery, but after that all bets are off. We're also due for a recession at some point. In fact Trump could be a blessing in disguise as he presides over a recession, bungles the response, and gets him and the rest of the Rs tossed out in 2018 or 2020.
I'm torn about the whole thing because I will personally benefit from Republican control. I've finally made it into the tax bracket where their constant tax breaks for the rich personally benefit me. Long-term their rich-get-richer strategy will lead to anemic growth.
Whoever said "may you live in interesting times" as a curse was right.
this kind of superiority isolationism leads to the problem. it lead to brexit and to the election of many right-wing politicians in european countries.
when a large mass of people is isolated and unrepresented, they will strike.
I'll give you long odds against.
One thing is for certain: we just flushed our last hope of averting a global climate catastrophe down Donald Trump's gold-plated toilet.
Take away lesson: markets are complex...
If you think the markets will recover just buy an index following ETF. If you want high leverage, find an index following ETF that trades in very high volumes (e.g. -- voo) and buy options deriving from it.
A large difference will mean a SWAP arbitrage opportunity.
So no, there is no loan shark. You are getting a privilege (margin liquidity) and it has some real risks (default on the base loan, and the loan shark kissing his money good bye)
The problem with options and futures is that they tend to be thinly traded and so you lose on the spread. The net result is the same: unless you guess right with odds better than chance, your net alpha will be negative.
Not really. Depends on what you are looking for. Remember, on a leveraged trade you can 1. lose all of your capital and 2. be forced out of your position.
If you are using options, you are guaranteed to lose if you are not right. But you don't lose more than that. It's like a "bet".
> So you have to be able to guess right >50% of the time just to break even
I see this line dropped a lot on trading forums. No, you don't need to guess right most of the times. The outcome is not binary and fixed. You can guess wrong 10 positions and lose $500 on each, and then guess right one position and make $20k on it.
> The problem with options and futures is that they tend to be thinly traded and so you lose on the spread.
Spread works out both ways. If you are the taker, you pay. If you are not in a hurry, then you can be a maker and actually make the difference. So you win on spread.
BTW, your blog is down.
https://thehftguy.wordpress.com/2016/11/01/docker-in-product...
I would sell around 32 delta out of the money put on SPY. You have around a 68% chance to make a profit. This is a naked position so you need to understand that it has undefined risk.
You could cover yourself by buying a further out the money put. My investment philosophy pretty much coincides with the tastytrade.com guys.
If you want to learn more, I would checkout dough.com and do the free course on there.
I dumped a bunch of cash into the market right after the Brexit vote. Wasn't planned, the timing just worked out. Not bad getting a 3-4% return in the matter of a couple weeks.
Will that happen this time? Not sure! But the market probably did over react.
I asked them what they thought would happen if Trump was elected and they said that because of his unpredictability, the markets would likely take a huge hit. They went further, and said that when they spoke with leaders in politics and business in other countries around the world, those leaders indicated their biggest fears were if Trump won and they would have to reevaluate their strategies with the US.
Interesting times.
China is struggling with massive amounts of bad debt and a sharp downturn in trade could set China down the path of a deflationary depression. The end result may be beneficial if China is able to rebalance its economy but no economy that has grown debt as fast as China has recently has ever been able to do it without massive deflationary disruption (including the US).
Generally the world seems to move toward greater integration and trade and then step back in a two steps forward one step back pattern. Trade is generally collapsing globally and this may be another shot across the bow.
This has the definite possibility of trying to catch a falling knife.
The world is literally starving for high quality assets with yield right now. Ten year bonds in Japan have zero yield and a lot of bonds are trading with negative yield. If China were to convert all those bonds into cash in a fire sale there would be investors literally lining up to purchase them.
Then all that China has done is traded one form of USD debt (bonds) for another form (cash). To get out of the USD it would need to exchange that for something else of value. What? Bonds denominated in Euro? Ten?
How do you think the ECB or JCB would react if their currencies started to soar relative to the USD as a result? Do you think Germany would sit idly by as their manufacturing was decimated due to the strong currency? Would Japan?
So what if instead they went on a shopping spree and bought US produced goods. Would the US be aghast as demand soared and factories were expanded and wages rise and imports from China sank?
There are certainly people that would get hurt in that scenario. Retirees would be crushed; retail would be crushed; real estate would be crushed; US government spending would be crushed; Wall Street banks would be crushed; US advertising would be crushed.
But at the same time farmers would soar; manufacturing would soar; oil producers would soar; miners would soar;
Look at the US electoral map and see if how many Trump states would be on the wrong side of that outcome.
> But at the same time farmers would soar; manufacturing would soar; oil producers would soar; miners would soar;
Interestingly, the industries you are suggesting would crash employ most of the people in all states and the ones you suggest would soar are not large employers (with the exception of oil/mining that might come back online).
Oil and mining actually might get wrecked as well if the US/China relationship gets worse as Chinese demand is so important to those industries globally. Its hard to tell what the equilibrium point in those markets would look like.
[0]: http://www.marketwatch.com/story/how-the-stock-market-tends-...
The loss of our reserve status and the gradual divestiture of USD assets by foreign central banks would have the impact (if gradual) of raising long term borrowing costs, lowering asset prices and increasing wage pressures. Those effects would be uneven across the economy and benefit some people at the expense of others. Generally helping the factory working I Ohio and hurting those who own highly leveraged assets (like US stocks).
Most of the benefits of the USD simply accrue because of the size of the US economy which tends to make it less volatile and less prone to "runs" on the currency. Even if the world were to panic about the direction of the US political system there simply isn't anything else big enoug to run to that would seriously tank the dollar. The same cannot be said for the political developments in a counrty the size of Venezuela.
These benefits are independent of the reserve status and accrue to the Euro just as much as the USD.
edit: and let me clarify, because you misunderstand me. The size of the US economy is one thing, but the stability of an ally's political system and leadership is another. The UK and the US have taken hits that will play out over a long term and are not easily reversible, at a time when the alliance has serious challenges and very capable adversaries.
(Half kidding, I know they say to never time the market and such).
700 point is nothing to worry about.
[1]: http://www.cmegroup.com/trading/equity-index/faq-sp-500-pric...
https://ca.finance.yahoo.com/echarts?s=%5EGSPC#symbol=%5EGSP...
A 4% swing on the S&P 500 is clearly a lot.
This is the sneakiest way yet to bring politics to HN.
But this absurd fetishism over drops has to stop. Look at the last year. People who baulk at these kind clearly haven't been watching the markets over the past few years. This stuff happens.
Nobody posts about the jumps. And they add up. Well, here's a drop and it's left everyone in the black over 12 months.
Long term if it tanks it tanks and then we can post about it. Markets are computerised now and big swings are common.
Edit: last comment as I've hit the hacker news "you're submitting too fast on a banking thread" thing. Directed to the child comment (not pejorative):
Last one according to the guy above was 2011. We have elections every 4 years and the banks crash the system now and again.
5 years back it was nearly half this. I fail to understand how a 5% dip is shocking, except for people feeling the sky is falling because Trump got in and want to scrawl supporting evidence.
What was life like for all the HN downvoters when it was 1200?
I'll agree short term number fetishism is a problem but this implies the markets were priced incorrectly and not in a good way.
Edgy.