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  • Martin Sosnoff

My Inner Game Of Investing

I am for better or worse mainly a contrary investor. Whenever I’m within the consensus I’d worry that I can’t possibly outperform the Averages. Today, I’m no more than 35% long equities, the cross I carry is a burden.

Whenever the market has a zippy day I trail. I do own Microsoft and Amazon but little else in tech. Heavy in energy with Occidental Petroleum and Enterprise Products Partners. On a zippy day for tech houses my oils can turn negative.

I don’t own GDP stocks like GM, GE, and Deere. For me, many tech houses are overpriced and under-analyzed. I dig Microsoft’s financial reporting as fairly complete, and understandable, so I own it. Likewise, Amazon, where I am happily overweighted, too.

Mid-sixties, after Boeing ramped up its 707 jet, airlines turned into growth stocks. Money brokers then financed my convertible debentures on 10% margin. I cashed in Eastern Airlines at $400, and Boeing, United Aircraft, and United Airlines convertibles all hit double par for me. I had enough capital to start my own money management firm and haven’t worked for anyone since I’m 30.

The stock options market early seventies embraced a coterie of market makers with minimal capital. Manny had graduated from OTC trading desks. They understood and could calculate volatility. Perhaps, not so precisely as the Black Scholes model that decades later, garnered a Nobel Prize in economics, but well enough to get by and not muff price quotes on puts and calls. I wasn’t smart enough to short NASDAQ at its peak, in 2000. The late Leon Levy, an old friend, shorted NASDAQ, and went long on the euro, one of the few simple but great spreads that rode the peak of the NASDAQ sombrero down to its right side’s wide brim. If you have to think about a great concept, even a short, for more than 15 minutes, it’s probably not a good idea.

My ‘73–’74 caper in the options market delivered comparable percentage gains to Leon’s, but on a much smaller scale. Leon logged nine-figure money. It took just one phone call to his Bear Stearns trader. I had to hondle with a bunch of Market dealers.

My number one trader at Solomon Brothers, Symphony Sid, sheparded, my options orders through the Chicago Board of Trade. The “Roids” stood for Polaroid and the “Cabuie” for the Chicago Options Exchange. Sid was Symphony Sid because of his running patter on trades, minute by minute. Can you imagine?

As for FRB policy initiatives today, I don’t see any tightening that will clamp down on the market’s price-earnings ratio. So I carry huge positions in 2 and 10-year Treasuries. Unwinding of the negative yield curve to 20 basis point feeds my inner voice and tells me to buy 10-year paper yielding over 5%.

Problem is I never carried a big bond portfolio, underleveraged in Treasuries, either long or short. Easier to carry overweighted positions in Amazon and Microsoft. Analysts have struck out on their earnings calls for most tech houses. This never changes.

If you believe the 10-year Treasury yield is headed for 7%, dig yourself a fox hole and jump in for the duration. The price-earnings ratio for the market could wilt to no more than 15 times earnings. This is another way of saying, biggest risk today is the confidence level for stock and bonds. Too much tension wherever you look.

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1 commentaire

07 nov. 2023

i remember

keep ‘em coming

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