OG derivatives trader. AMA on the market

Was trying to have a civil discussion on one of Cami’s (usually great) threads.  It seems to have turned into a hate fest.  

 

I have 25+ years of market experience as a trader, always with my own money at stake.  I’m not a money manager or a. Stock broker, I’m the guy who they call especially when the market is in turmoil and they need a price. There are several people like me on this forum and I hope they join in as well.

 

Yeah the markets rough. But it’s not the end of the world.  (If it is we have bigger problems). 

Ask anything you want, I won’t give specific trades but I will talk markets, how they work, what I’m looking for, and what I’m telling my family who are in the same boat as many of you. 

 

Lets be civil with each other.  When the chips are down brothers (and sisters) come together.

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I'd like to hear more about the problem you described with Treasurys.

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What are your lifetime returns adjusted for CAGR?

Thank you for posting. I moved to cash with my financial advisor February 26th once the market was already down, but with a feeling it would get much worse. When should I think about jumping back in?

37 years old working with about 200k. 
 

Thanks!

It sucks. Such bad timing for me. I'm supposed to get some of my exes 401k that was valued around 130k months ago... When they cut the check it won't be anywhere near that. The universe hates me.

Do you think the biggest threat to stocks overall is a collapse of the derivatives market?  Without doing much research I've always read it could potentially bring down everything like a house of cards.

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ive got 8k left to invest in my roth for 2019/2020. i plan to put all of it in. should i keep doing 1 or 2k per week, or should I be more aggressive depending on the number? 

I am just using a vanguard target retirement 2035 fund. 

LOL, I have been waiting two years for a correction in order to add to positions.

 

Stache - I'd like to hear more about the problem you described with Treasurys.

The problem with treasury’s is that yield keep going up (and prices down).  That’s opposite of what should be happening.  There should be a flight to safety with yields dropping and price rising.  


This means people are selling treasures. Why? That’s the problem.  It’s also correlated with the rising dollar.  


There is a massive world wide dollar shortage, primarily as a result of qe infinity that our fed undertook starting in 2008.  Dollars are the grease that keeps the engine running.  Usually dollars flow out of the US through international trade.  That has been enough the past 18 months or so, and it’s definitely not enough today with trade effectively stopped. 


Treasuries come into play because they are the premier financial collateral world wide.  If you want to borrow money, putting up treasuries gets you the cheapest rate. If you sell treasuries to the fed (which is basically what qe encourages) you get dollars. 


So simply, there is such a shortage of dollars that institutions are willing to sell their best collateral.  This a problem.  I don’t know if the swap lines that were announced yesterday will cover the problem (for now).  No one has a great grasp on just how big this is, other than it’s huge. My gut says no.  


And there are lots of potential problems for ordinary Americans with the fed opening up what are effectively lines of credit to every other nation.


 

"And there are lots of potential problems for ordinary Americans with the fed opening up what are effectively lines of credit to every other nation."

-------------------

How does that translate into problems for the ordinary citizen.

TzTinkle - What are your lifetime returns adjusted for CAGR?

Never calculated that.  


 


But its really good.  Started with nothing in 93 but the letter of credit from a wealthy backer. Been partner in a few private firms.  In 2007/8 I was partner with 50 employees.  29 of them made over a million dollars both years.


now I have a private shop with 5 other traders. We only trade our own money and 1 other persons. 


Not bragging, but I’m good.  

Dmaxxin -

Thank you for posting. I moved to cash with my financial advisor February 26th once the market was already down, but with a feeling it would get much worse. When should I think about jumping back in?


37 years old working with about 200k. 
 


Thanks!

I said in the other thread I’m going to start accumulating long term trades when the sp500 is at 2300.  


Can it go lower, sure, but market mechanics say that is an area where dealers should have to start buying.  IE start booking profits.  If theselling slows there that’s the beginning of my entry

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Soup and Beer -

Do you think the biggest threat to stocks overall is a collapse of the derivatives market?  Without doing much research I've always read it could potentially bring down everything like a house of cards.

Not currently. The biggest threat is the worldwide dollar shortage

ufc98newb -

ive got 8k left to invest in my roth for 2019/2020. i plan to put all of it in. should i keep doing 1 or 2k per week, or should I be more aggressive depending on the number? 


I am just using a vanguard target retirement 2035 fund. 

For the average investor the best strategy is dollar cost averaging.  But if you have the cash now, I’d invest all of it into stocks that have good value.  The market is going to be wild for a bit, so I’d look to buy a little bit on every big down move and not panic if there’s big up moves (thinking I missed it)

e. kaye -

LOL, I have been waiting two years for a correction in order to add to positions.


 

Congrats.  Your patience paid off!

ltlurker - 
Stache - I'd like to hear more about the problem you described with Treasurys.

The problem with treasury’s is that yield keep going up (and prices down).  That’s opposite of what should be happening.  There should be a flight to safety with yields dropping and price rising.  


This means people are selling treasures. Why? That’s the problem.  It’s also correlated with the rising dollar.  


There is a massive world wide dollar shortage, primarily as a result of qe infinity that our fed undertook starting in 2008.  Dollars are the grease that keeps the engine running.  Usually dollars flow out of the US through international trade.  That has been enough the past 18 months or so, and it’s definitely not enough today with trade effectively stopped. 


Treasuries come into play because they are the premier financial collateral world wide.  If you want to borrow money, putting up treasuries gets you the cheapest rate. If you sell treasuries to the fed (which is basically what qe encourages) you get dollars. 


So simply, there is such a shortage of dollars that institutions are willing to sell their best collateral.  This a problem.  I don’t know if the swap lines that were announced yesterday will cover the problem (for now).  No one has a great grasp on just how big this is, other than it’s huge. My gut says no.  


And there are lots of potential problems for ordinary Americans with the fed opening up what are effectively lines of credit to every other nation.


 


Gotcha thanks. How long do you think before we see any banks or hedge funds go bust? There must be some in trouble by now.

IMHO, the problem with Treasuries goes back to O8 and the start of QE and artifically low rates.

As the economy grew, rates should have gone up, but they barely did.

The yield curve stayed very flat despite the economy growing for the last 12 years.

THis is not normal.

On top of this dollars are scarce which makes no sense.  If they are then rates should be much higher, but are not. 

It is all crazy and dangerous.   Now we have a problem and very little room to work with easing rates.

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Soup and Beer -

"And there are lots of potential problems for ordinary Americans with the fed opening up what are effectively lines of credit to every other nation."


-------------------


How does that translate into problems for the ordinary citizen.

Our money becomes worthless.


 


il not saying this will happen, but currencies fail. And it’s always because there’s too much of it.  The qe regime has exacerbated the problem and here’s why.  When currency leaves our borders, the feds actions have no consequences for that money.  International finance has seen a large transfer of US dollars that have not brought any value (goods and services) back.  


The fed has always believed and stated that the increasing of our money supply to battle the financial crisis was temporary and that they could pull the money they created back.  But that’s not been the case.  


No one really understands why the current dollar funding crisis is happening.  No one, not even the fed. Throwing money(hundreds of billions) at a problem we don’t understand may not be the solution. And one possible outcome is we out too much out there. 


 


But thats another topic

ltlurker - 
Stache - I'd like to hear more about the problem you described with Treasurys.

The problem with treasury’s is that yield keep going up (and prices down).  That’s opposite of what should be happening.  There should be a flight to safety with yields dropping and price rising.  

This means people are selling treasures. Why? That’s the problem.  It’s also correlated with the rising dollar.  

There is a massive world wide dollar shortage, primarily as a result of qe infinity that our fed undertook starting in 2008.  Dollars are the grease that keeps the engine running.  Usually dollars flow out of the US through international trade.  That has been enough the past 18 months or so, and it’s definitely not enough today with trade effectively stopped. 

Treasuries come into play because they are the premier financial collateral world wide.  If you want to borrow money, putting up treasuries gets you the cheapest rate. If you sell treasuries to the fed (which is basically what qe encourages) you get dollars. 

So simply, there is such a shortage of dollars that institutions are willing to sell their best collateral.  This a problem.  I don’t know if the swap lines that were announced yesterday will cover the problem (for now).  No one has a great grasp on just how big this is, other than it’s huge. My gut says no.  

And there are lots of potential problems for ordinary Americans with the fed opening up what are effectively lines of credit to every other nation.

 



Treasuries have been rallying up until the past few days. We're 50bps of all time low yields which is about 1 day's vol in this market!

What do you trade?

Were you ever a market marker?

What type were the firms you were a partner in, sounds like hedge funds?

"I’m the guy who they call especially when the market is in turmoil and they need a price", what does this mean? The guys 'they' call when there's turmoil and they need a price are the big banks who can warehouse serious risk.

 

ltlurker - 
Soup and Beer -

Do you think the biggest threat to stocks overall is a collapse of the derivatives market?  Without doing much research I've always read it could potentially bring down everything like a house of cards.

Not currently. The biggest threat is the worldwide dollar shortage


I'm 99.6% in cash now.  Switched the majority of my funds over a month ago.   Outside of the obvious benefit of being out of the stock market, does that affect me either way?