Jeffrey McLarty - Latest Comments

Re: Solve for Implied Volatility in R

Epiphyte2 — Sun, 16 Oct 2011 22:53:59 -0000

You could use Newton's method. Your step would be the (C(sigma) - C) / vega, where C is the market price of the option, C(sigma) is the black-scholes price of the current guess, and vega(sigma) is the vega of the current guess.

Re: Real Gains in a Fiat Based World

McLarty — Fri, 15 Apr 2011 14:18:09 -0000

Oh, and yes, it is true that the ETF has fees, but they are marginal
compared to the fees charged by mutual funds. Mutual funds are a scam, and
poison for long-run retirement planning. ETFs, in my opinion, charge a fair
fee.

Eg. For me to put $100K to work, in the 60 stocks in the TSX S&P 60
composite, I'd have to place 60 buy orders, and then a new buy order every
time a dividend is received from some of the stocks. Even if you assume
that dividends are once annually, that's still 120 trades per year. No way,
could I execute 120 trades for less than $150, the fee which would be
charged annually by the ETF company on $100K. With smaller amounts, it's
even worse. Okay, if you have half a million, or a million dollar
portfolio, you're probably better off buying the 60 stocks yourself.

Re: Real Gains in a Fiat Based World

McLarty — Fri, 15 Apr 2011 14:13:19 -0000

Aasim, how you doing buddy? How have you been?

I'm using proprietary models to support entry and exit points of options on
the index. This generates cash, while my client holds the ETF, and collects
the dividends. The chart included in this post, is the result of me using
profits from the derivatives trading, to continually accumulate more XIU.
Another way of putting it, is I've outperformed the TSX by the amount
required to buy about 9% more of the TSX. Alternatively, it's an
approximation for how much I've outperformed the index, by using
derivatives.

Re: Real Gains in a Fiat Based World

Aasim — Fri, 15 Apr 2011 13:26:50 -0000

I don't get it. How can someone grow the S&P TSX/60 so fast? Is it just capital appreciation? I'm a novice investor (aka just stocks). This concept goes over my head. Doesn't the ETF have fees similar to a mutual fund that eat away gains?

Re: Long-run? Devaluation or Growth « Step Away From the Fiat

McLarty — Tue, 12 Apr 2011 11:18:43 -0000

Driving out industry, is a short-run consequence to higher energy
costs. This is going to happen, sooner, or later (either for man/government
made reasons, or due to less supply). The 486 metaphor, is a wild
card. Could prove true 5 years from now, could prove true 15 years from
now. But, need to point out, that the dollars that are buying higher priced
electricity, aren't being detroyed. They are just circulating. Someobody is
always on the other side of the trade. Since we are exporting that economic
benefit, it's likely something we have to do, to be able to have the
capacity in our grid, when we need it down the line.

Now...the input/fuel costs for solar, wind and hydro don't rise with
inflation like the other commodities. And, they aren't subject to supply
issues.

Compare the "effective tax of the subsidized", that I explained above, to
continually buying higher, and higher priced fuel solutions...both
would impact industry negatively. However, the countries that wait
until market forces, force their hand, will be worse off, to make the switch
at the last minute. I think ontario will have, less volatility of
unemployment, because of it.

Ok, of course, if you say we have spare Hydro capacity, and it can be
generated and transmitted cheaper than solar, wind, nuclear - sure, I'm all
ears, we should use that. But when has a government ever gotten "straight
As"?

Re: Long-run? Devaluation or Growth « Step Away From the Fiat

Thiago — Mon, 11 Apr 2011 21:42:33 -0000

Yeah I agree. Print to Infinity, Fed buyer of only resort, Rates rise... permanent demand destruction as the US moves to a less consumer based economy... Killing the US consumer may hurt commodities... but the dollar weakness and emerging markets will fill in the crack...

"Both of these, bode well for commodities, stocks, and real-estate in the long run, like they have for the last century. If North America could switch to a cheaper energy source, before market forces, force their hand, this would become a competitive advantage. That’s happening in Ontario, right now. That has me very excited, to see the competitive advantage being grown, right in my back-yard."

With this though I have some doubts... I think it is fairly ridiculous for Ontario to pay subsidies for energy, driving out industry through higher electricity prices than competitors... while we have one of the largest undeveloped large scale Hydro resources in the world which are among the cheapest sources of energy. When Solar and Wind make sense they will do so without subsidies... I see Ontario spending billions putting in technology that may be considered a 486 in a decade... not that it isn't good, but that money is coming at the cost of higher short term electricity prices to the real economy.... at a time when we export power....and our breaking all-time electrical exports.

...kind of sounds like the US subsidizing farmers... and then exporting corn, cattle and grain at a loss.

Re: Has there ever been… « Leveraged Theta

Lolani — Wed, 16 Feb 2011 21:37:10 -0000

Hyman's Feb11 letter
http://www.scribd.com/doc/4...
http://www.scribd.com/doc/4...

some comments on ZIRP ..... and our favorite subject: debt default

Re: Simple Software « Leveraged Theta

sheena — Fri, 07 Jan 2011 16:34:02 -0000

still waiting :)

Re: 30 to 1

McLarty — Mon, 06 Dec 2010 08:39:57 -0000

Your quote inspired me, almost litterally the EXACT day, to finally execute on one of the hundreds of ideas I come up with.

So, thank-you, for that.

Re: 30 to 1

James Altucher — Mon, 06 Dec 2010 08:23:45 -0000

Hey there, thanks for the link!

Re: Max Keiser, Eric Cantona, JP Morgan & Eurodollar Time Deposits « Leveraged Theta

McLarty — Fri, 19 Nov 2010 22:10:36 -0000

You'll need a futures trading account.

The contract I'm proposing using, is the one right here:

http://www.cmegroup.com/tra...

Notional value = $1M, symbol GE, but I'm beginning to think, this might not
have the impact I originally hypothesized in my post.

Re: Max Keiser, Eric Cantona, JP Morgan & Eurodollar Time Deposits « Leveraged Theta

Ggg — Fri, 19 Nov 2010 15:27:08 -0000

can you use etfs

Re: Max Keiser, Eric Cantona, JP Morgan & Eurodollar Time Deposits « Leveraged Theta

Ggg — Fri, 19 Nov 2010 15:22:23 -0000

What are the detaisl of this and how do you trade shorting dec 13th eurodollar? thanks.

Re: Deflationists, I think you lost the debate « Leveraged Theta

McLarty — Fri, 12 Nov 2010 09:20:54 -0000

Yah, I know there has been previous nominal highs, higher for some of these
commodities.

But, it's them moving all in tandem that is bothering me. I realize the
stuff going on in agriculture, but I'm betting the moves wouldn't be nearly
as bad, if the dollar wasn't also collapsing.

This stuff going on, will be putting pressure on housing prices in the short
term, I think.

Re: Deflationists, I think you lost the debate « Leveraged Theta

Thiago — Fri, 12 Nov 2010 00:15:35 -0000

Hey Jeff. Not arguing with the recent crazy pace of inflation (aka if the prices never fell / and inputs costs are going up then earnings are going to get hammered or retails prices are going to shoot up).

A few points though as futile and equally not as impressive:

Copper and Corn both had higher average prices in 2007-2008. And I believe in the mid 90's for copper or corn... forget which one, all in nominal terms.

As for Cotton, there is some fairly 6 sigma stuff going on with the supply side (major droughts in asia, and export limitation from India).

Despite that... the Corn and Copper thing does not bode well for industry and most meat prices in general. With cotton they are expecting some serious supply to come online fairly quickly and I would hope to see some demand destruction. Nothing solves high prices... like high prices... The US is going to make China rethink that US dollar peg.

Can't believe Harper is supporting QE2... the strong dollar is not particularly good for Ontario/Quebec... and really doesn't help the West all that much.

Re: Good News is Good News, Bad News is Good News « Leveraged Theta

McLarty — Mon, 08 Nov 2010 10:08:46 -0000

I wonder what other half comment replies have been lost in our discussions...

...sigh...crap...

Re: Good News is Good News, Bad News is Good News « Leveraged Theta

McLarty — Mon, 08 Nov 2010 10:07:49 -0000

Here's my original reply: salvaged from g-mail.

Bang on.

On that, I am looking at adding some single issue equity exposure,
against my short index positions.

Check out WDC. Only reason I looked at the stock, is because I'm
looking at getting some sort of Media Server...and I think they have
my winning vote, at a pretty good price.

A PE under 7, which looks like it's on its way to at least 10. They
got a ton of cash on hand, but using a market-cap-ex-cash PE is still
under 20.

Only downside, is likely short term, if they over-pay for some silly
acquisition.

Re: Good News is Good News, Bad News is Good News « Leveraged Theta

McLarty — Mon, 08 Nov 2010 10:06:01 -0000

WTF??? I replied using the e-mail feature, with a big long paragraph after "Bang on." about looking to put some risk on to hedge against my index shorts...

...I brought up WDC...and...blah...I guess it got erased or lost in the e-mail transmission to "discuss."

Re: Good News is Good News, Bad News is Good News « Leveraged Theta

McLarty — Sat, 06 Nov 2010 18:17:54 -0000

Bang on.

Re: Good News is Good News, Bad News is Good News « Leveraged Theta

Thiago — Sat, 06 Nov 2010 17:34:03 -0000

Based on the data... the result seem to be to buy stocks...Up Up Up and Away!

So by the FED just saying "we are going to buy X amount of Y"... Arbitrarily and without regard to fundamentals of that asset... Does that mean the the FED is stating that Capitalism and Value are out the window? They are literally saying "He don't bother valuing risk and fundamentals because we will just buy it anyways, you just need to guess how much I am going to buy and when... and then sell it to me (FED)"

Jaded Investor

Re: Come Join me Up Here « Leveraged Theta

Thiago — Sat, 06 Nov 2010 11:26:02 -0000

This is something that is really got me puzzled too. I know on the West Coast, Foreign buyers are bidding up prices and this is well documented and was featured on Bloomberg a couple of months ago. It is possible that the same thing is occurring in Toronto given the same level of immigrant diaspora and family back home.

Stuff like this is kind of disturbing http://realestatetalks.com/viewtopic.php?f=8&t=39580 and this article is very well documented with official stats from Stats Can. http://runningofthebulls.typepad.com/toros_running_of_the_bull/2010/03/the-canadian-housing-bubble.html

Several of my friends recently bought houses and the stuff they were telling me the banks encouraged was not good. One bought a house and had no downpayment, The bank opened a line of credit for them to draw on for their minimum downpayment for CMHC. Another who is way overleveraged was also granted a mortgage based on his variable rate, with 5% down. This is really not good news, and BoC reducing lending standards for first time buyers will end in flames. I simply cannot see how $200K in a town as shitty as brockville buys you crap, when there is very little employment in the city that pays well. It is supply and demand... Sellers will not take a loss on their property (and view improvements on the house as dollar for dollar investments) and pull the house off the market if they can't get their price... and buyers encouraged by all time low interest rates to take on duration risk they simply cannot afford. If Canada ever experiences a shock... watch out...

The thing I can't grasp my head around is...Commodities drive Dollar higher... Foreign inflows from Asia will rise putting a floor under luxury home prices (similar thing is happening in Brazil, RE is shooting through the roof). Dollar Crashs and foreign money pulls out and but Canadian businesses become more competitive... helping the middle class (this is offset by greater inflation taking away money from disposable incomes).

So outside of demographics, I can't think of a shock that would pop prices. The graphs definitely show some sort of stimulus in 2000 for RE prices vs incomes. That would have to be money flow out of equities into RE... I don't believe anyone in our generation believes in the stock market...

Also a good read http://runningofthebulls.ty...

Re: Come Join me Up Here « Leveraged Theta

McLarty — Fri, 05 Nov 2010 08:18:22 -0000

Sigh...okay....you're right...like always. :)

I was really hoping, I actually found the marginal RE buyers.

So why is RE hitting new highs, in Toronto?

YTD Average price of a single family home, is 9% higher than the 12
month average for 2009.

(2007 = $376K, 2008=$379K, 2009 = $395K, YTD = $431K).

I don't get it.

I'd really like to buy more Real-Estate, cause every other leveraged
investment model won't hold up through volatility. But I can't
rationally make a good bullish pitch for RE. Yet, it keeps going up.

Re: Come Join me Up Here « Leveraged Theta

Thiago — Fri, 05 Nov 2010 06:52:55 -0000

I was just looking at the correlation of temporary applicants to permanent residents actually let in, The numbers corresponding with 2005 -2008 do not show a 5% annualized increase but a decrease due to the recession. The 2005 - 262,241 2006 - 251,643 2007 - 236,754 2008 - 247,243.

And looking further into the data, the same period does not correspond with an increase in high quality affluent immigrants. The economic immigrants (aka educated unsponsored immigrants coming to canada for better opportunity) has remained flat for the last 12 years at 60K +/-2K. Family Sponsored / Refugees are not high quality immigrants, but immigrants that canada lets in to reunite families or for war reasons.

Again Jeff look at the link I sent. At the bottom it shows all the total immigration numbers since 1988 in chart and graph form. In 2004 we let in 262K.... Which is more than 2009. I don't think 3 years is enough to call a sustainable trend especially with no stated increase in the target policy. Not saying they may not let in more immigrants this year, but looking at the past 20 years data... we have always been in the same range and the target has not moved much (at all) since 1992.

Re: Halloween Came 4 Days Late to Wall-Street: America, how do you sleep at night? « Leveraged Theta

McLarty — Thu, 04 Nov 2010 23:08:53 -0000

Hey...so, did you buy that farm yet? Sounding more and more like a good idea...

Re: Halloween Came 4 Days Late to Wall-Street: America, how do you sleep at night? « Leveraged Theta

rossgreenspan — Thu, 04 Nov 2010 17:16:10 -0000

Living history. What happens this decade will shape the next five. The reserve currency carries the inflation of a bubble in emerging alternative everythings balanced against simultaneous pressures of a deflationary debt crash. It's video games for money until physical security trumps financial security.