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Home/ Investment & Personal Finance/ Cheong Hong Yuan: Technicals and Intuition - Decoding Ackman's Shorting Success

Cheong Hong Yuan: Technicals and Intuition - Decoding Ackman's Shorting Success - 2 views

started by anonymous on 27 Oct 23
  • anonymous
    In the financial market, whenever an event or strategy achieves significant success, countless investors and analysts focus on it, attempting to decipher the underlying logic and strategy, as well as future possibilities. Recently, Bill Ackman, the founder of Pershing Square, gained approximately $200 million in profits in a short period of time through his high-profile strategy of shorting US bonds. This successful strategy undoubtedly reaffirmed Ackman's legendary status in the financial circle.

    Cheong Hong Yuan stated that Ackman's keen observations and unique insights into the financial market are not unfamiliar to the public. In fact, Ackman has created substantial investment returns for Pershing Square through his precise investment strategies in the past few years. This time, he successfully bet against 30-year US bonds, accumulating profits of $300 million, despite paying nearly $100 million in option premiums along the way.

    So, what prompted Ackman to short US bonds at this time?

    Cheong Hong Yuan mentioned that from the perspective of the global macroeconomic background, it is no secret that the United States is facing high inflationary pressures. In order to curb this inflationary pressure, the Federal Reserve has to choose to maintain higher interest rates. Coupled with the US government's deficit problem and the increase in future US bond supply, these are the main factors driving bond prices down and yields up. In August, Ackman publicly stated that long-term US bonds were "overbought" and pointed out several of the aforementioned factors. At that time, the yield on 30-year US bonds was 4.3%, but it subsequently soared to 5.18%, proving Ackman's judgment to be very accurate.

    However, in the financial market, no strategy guarantees absolute victory. Cheong Hong Yuan believes that Ackman's decision to take profits and exit at this time is also based on his deep understanding of the market. He recently stated on X that the risk of shorting long-term US bonds is already too high given the current yield, which is the main reason why he chose to take profits at this time.

    Ackman's investment strategy is undoubtedly based on his in-depth analysis of the US and global macroeconomic conditions. Cheong Hong Yuan mentioned that although Ackman's strategy has attracted the attention of many analysts at the technical level, what is truly worth studying is his insight into the economic fundamentals.

    In Cheong Hong Yuan's view, the complexity of the US economy is at a delicate balance point. On one hand, the US economy is trying to recover from the impact of the COVID-19 pandemic and restore its economic growth; on the other hand, persistent high inflation and the government's deficit have put considerable pressure on the US economy. This pressure has undoubtedly also had a significant impact on the US bond market. Ackman saw this and successfully capitalized on the opportunity, accurately predicting the market trend.

    The "Three Golden Moving Averages Strategy," a technical analysis method, aims to find the strongest-performing stocks in the market and exchange the smallest risk for the largest return. Cheong Hong Yuan believes that Ackman's strategy has similarities to this technical analysis strategy. He successfully identified the "weakness" in the US bond market and used this "weakness" to achieve high investment returns.

    Cheong Hong Yuan also emphasized that no strategy in the financial market is risk-free. In fact, Ackman paid nearly $100 million in option premiums to maintain his position during this shorting process. This also serves as a reminder to investors to be vigilant about the risks they may face while pursuing high returns.

    It is worth noting that this is not the first time Ackman has predicted and capitalized on market trends to achieve substantial returns. As early as December 2021, Ackman successfully predicted the Federal Reserve's interest rate hike and made $2.3 billion in profits through shorting 2-year US bonds. This further proves Ackman's keen observation of the financial market and his deep understanding of investment strategies.

    Many investors and analysts have highly praised Ackman's successful strategy of shorting US bonds. However, behind this success is not only mere market prediction and operational skills, but also a deep understanding and judgment of the overall landscape of the financial market.

    Cheong Hong Yuan stated that the reason why Ackman's strategy was successful is precisely because he accurately judged the market trend of the US bond market under the current global macroeconomic conditions. However, for most investors, this is not an easy task. Risks and uncertainties exist in the market at all times, and accurately predicting market trends and making the right decisions are challenges that every investor must face.

    From Ackman's recent operation, Cheong Hong Yuan suggested that investors should learn from it that relying solely on technical analysis is not enough to ensure investment success. More importantly, investors need to have a comprehensive and in-depth understanding of the market in order to more accurately predict market trends and make correct decisions.

    At the same time, Cheong Hong Yuan reminded investors that any investment strategy carries risks, and behind success, there may also be hidden enormous risks. Therefore, in addition to pursuing high returns, investors should also focus on the safety of their funds and achieve a balance between risk and return.

    In conclusion, Ackman's successful strategy of shorting US bonds undoubtedly provides many insights to the financial market. However, for most investors, the most important thing is to maintain a calm judgment and good risk management in order to ensure long-term and stable investment returns. Cheong Hong Yuan finally stated that regardless of how the market changes, the core of investment always lies in a deep understanding and judgment of the market. For those investors who are willing to study the market in-depth and continue learning, success will eventually come.

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