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Trade ideas by our world beating analyst

Each week, when he’s not sunning himself in one of is two mansions in the French Rivera and Puente Del Este in Uruguay taking a well deserved rest with his many millions of dollars obtained legitimately through great investment decisions, legendary analyst Tim ‘Maccy” MacDoodle reveals his great trading strategies to us. Apparently he prefers to be referred to as a trader though, not an analyst. We apologise to anyone we offended through this terminology.

A better sub prime hedge


So you’ve got exposure to sub prime. Join the gang. So you’ve been hedging with the ABX, the index of sub prime bonds. So has everybody else. As a result the index is down to stupid levels. The problem is it’s no longer worth hedging with. Sub prime could go down further and it could just stay where it is and still be way out of line with fundamentals. And there’s always the chance of a come back in the ABX whilst basic subprime still worsens. Then you are in a bad way, you’re position loses money, you’re hedge loses money. This is known as the LTCM syndrome.

            So all week I have been thinking about sub prime hedges. You’ve got to think laterally to solve these problems. An old mentor of mine once said ‘think laterally’. He wasn’t a very expressive man, mainly because he only had a vocabulary of 200 words. Came from being on a trading desk for too long. Great trader though. In truth I ‘ve often wondered whether his small vocabulary wasn’t the cause of this great trading skill, but that is for another time perhaps.

            Now sub prime. What will happen if it gets worse. More houses will go into foreclosure. What happens when houses go into foreclosure, well people get chucked out, and the houses remain empty for long stretches. What happens then? Rats invade. If sub prime gets worse in the future we will have a rat epidemic. Who benefits from this epidemic, besides the rats of course? Exterminators. Buy Rentokil. It’s an old one, but it’s a good one.

Trade ideas – Short Oil

Sometimes you have to use the intangibles in trade selection. I’m as big a believer in fundamental research as anyone, especially if someone else is doing it. Understanding exactly what it is you’re getting yourself into is, well, fundamental to the investment process. But sometimes you need to think tangentially, outside the box if you will. By looking at things from a different angle, considering non-standard data and techniques you can reveal investment opportunities others miss.

So my recommendation this week is to short oil. My reasoning is outside the box, every box. The basis is that so many people think oil will go up. Surely so many people cannot be right, we’re not a clever species. If so many brilliantly educated people could correctly predict the price of oil, they’d be able to do other amazing things and the world wouldn’t be in the mess it’s in today. Now you might think that this is standard contrarian investment technique but with oil it is so much more than that. Contrarians invest differently from other investors, a strategy that I am not a huge supporter of. But with oil you get a much wider set of commentators than just the investment world. Everyone is interested, scientists, politicians, beekeepers. And that’s what really makes my argument. The majority of investment analysts could conceivable be right, but the majority of people? And so many clever people? This recommendation is gold plated.

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