5 ms·

ok, and yes there were a few traders and economists who did ("the big short" follows 3 of these traders' stories), but in order to trade you need to have a thes

ok, and yes there were a few traders and economists who did ("the big short" follows 3 of these traders' stories), but in order to trade you need to have a thesis for what and when to buy. there are tons of gloom and doom traders and economists (usually trying to sell "safe" or alternative assets) but i have yet to read any clear, compelling cases laying out what and when to buy when the first domino falls that will set off the next recession. i'd be interested to read anything you've found noteworthy

lazerpants 9y ago
The typical advice for the beginning of a market downturn is to buy bonds, which usually act as a safe haven from those fleeing stocks (perhaps untrue currently though). Alternatively, some propose purchasing blue chip dividend yielding stocks, as money moves from risky stocks to tried and true ones. During a recession/large market correction, you're looking to hold all cash and just buy stocks cheap after they drop all the way to their lowest point (think Ford or AIG in 2008). The problem with these strategies is that market events usually occur over sufficiently long time frames to obscure their size and direction. Looking back at 2007/2008, Lehman was the obvious "moment" but the market and economy didn't nose-dive instantly to their nadir on the collapse of Lehman Bros. It feels like there was a "moment", but it was only obvious in hindsight.
- roymurdock 9y ago
  I'm not talking about safe assets, I'm talking about what to buy now in advance of whatever crash is coming :) For example leading up to the 2007 crash the pros that saw weakness in the mortgage market created and bought "credit default swaps" allowing them to bet against mortgage-based securities
  - lazerpants 9y ago
    Ah, well if you could go back in time to last week, you could have made a fortune with put options on VIX ETFs before some of them failed. Volatility being at such a tremendous low is definitely unusual and the possibility of ETF failures was baked in. Maybe in a few years we'll see a movie about people with foresight making money off of that event.

lazerpants 9y ago

The typical advice for the beginning of a market downturn is to buy bonds, which usually act as a safe haven from those fleeing stocks (perhaps untrue currently though). Alternatively, some propose purchasing blue chip dividend yielding stocks, as money moves from risky stocks to tried and true ones. During a recession/large market correction, you're looking to hold all cash and just buy stocks cheap after they drop all the way to their lowest point (think Ford or AIG in 2008). The problem with these strategies is that market events usually occur over sufficiently long time frames to obscure their size and direction. Looking back at 2007/2008, Lehman was the obvious "moment" but the market and economy didn't nose-dive instantly to their nadir on the collapse of Lehman Bros. It feels like there was a "moment", but it was only obvious in hindsight.

roymurdock 9y ago
I'm not talking about safe assets, I'm talking about what to buy now in advance of whatever crash is coming :) For example leading up to the 2007 crash the pros that saw weakness in the mortgage market created and bought "credit default swaps" allowing them to bet against mortgage-based securities
- lazerpants 9y ago
  Ah, well if you could go back in time to last week, you could have made a fortune with put options on VIX ETFs before some of them failed. Volatility being at such a tremendous low is definitely unusual and the possibility of ETF failures was baked in. Maybe in a few years we'll see a movie about people with foresight making money off of that event.