Thursday, September 18, 2014

Wednesday, September 17, 2014

9/17/14 Miner Losses/Minor Losses

I stopped out of miners with a minor loss.

(a) The importance of using stops:

(b) Why am I trading miners to begin with?   Miners are a volatile sector.  When I nail a pitch, it's usually good for outsized rewards.  The other reason is my penchant for buying out-of-favor sectors.  Note that silver has now given up all of its parabolic rise since 2010:

The past two weeks includes the longest stretch of misfires in recent memory.  Taking losses immediately has saved my ---, but it's been emotionally draining.  Not sure what form the 'cure' will take, but obviously continuing to bet on miners won't be a good idea.  I recall continuing to bet the pass line at the tables about two years ago, only to be wiped out by a relentless string of sevens.  That experience was worth its weight in gold.

Friday, September 12, 2014

9/12/14 Change in the weather!

Midday update:

(a) US indexes off an average of -0.6%.
(b) EEM -1%.  EWZ (Brazil) now -4%.
(c) DBC (Commodities) -0.5%.
(d) GDX (Miners) -1.8%.
(e) TLT (Long Bond) -1%.

The only green on my screen?  UGAZ (+1%), which I'm taking off here @ 13.90.  And HDGE, currently +1%.

No place to hide!  I recently considered a position in inflation-protected bonds, but even TIP is down -0.4% right now (that doesn't work for me).

Note that Brazil has given up 5 months of gains in one week!  Prices take the elevator down, and that kind of plunge can happen to any asset class.  I don't mind taking hits, as long as they're small.  We're all responsible for our portfolios regardless of the funds or assets we've chosen.  Today's action isn't necessarily reason to bail, but all major corrections begin with distribution.  The financial media is full of quotes telling investors not to worry about today's selloff.  That worries me.

Cash + HDGE by end of day.

Monday, September 8, 2014

9/8/14 Howl> Running Out The Clock

I see the best traders of my generation destroyed by hubris, starving hysterical naked.

That's a 'send up' of the opening line to Ginsberg's 'Howl,' of course.  The truth is that fund managers generate fees managing other people's money, regardless of fund performance.  Investors in those funds are the only ones at risk of ending up starving hysterical naked.

The Hussman Strategic Growth Fund (HSFGX) trails all peers, yet still manages $1 billion in assets.  It essentially charges investors 1.14% for wealth destruction!  Prior to investing in ATACX last winter, I spoke with CIO Ed Dempsey about their trading strategy.  ATACX had racked up a +6% gain in January (by rotating into bonds), and I was interested in learning how they planned to preserve that gain.  He wasn't interested in rotating into cash ('Cash has no volatility, and we can't make money if there's no volatility').  When I pointed out that ATACX would also avoid losing money with cash, he brushed it off.  I opted out of the fund in March.  Fund managers aren't paid to hold cash!  They're paid to take risk.  It's dangerous to be following strategists like Hussman and Dempsey.  They're smart guys, but unlike us they're not playing with their own money.  That's a salient point.

I spent a great deal of time this weekend going over my game plan.  Play to win?  As John Mayall used to say when fans kept requesting the same old stuff, 'That's all way in the past.'  My portfolio is in the final stretch of the fourth quarter, and it's now prudent to cut back on risk.  I'm happy with 5% a year.  What's the point in running up the score?  I should be running out the clock.  Avoiding a turnover (worse, a financial concussion) is the goal.

I'll be researching fixed-income strategies over the next few weeks.

Saturday, September 6, 2014

9/6/14 One Step Up

Few songwriters weave a story in four minutes as well as Springsteen.  One step up and two steps back.  Sometimes the market dance unfolds against me.  It's OK.  Usually it means I've gotten lazy and need to toughen up or sharpen my focus.

My take this morning?  I probably need to make a 'U.'  Exit the Rydex shorts Monday morning and head north on miners/commodities.  If I could 'undo' last week's trades I would.  To be fair, I didn't have then the signals I have now.

There are times when I trade the big picture, and hold positions for longer stretches.  Lately I've been trading every twist and turn.  I take steps to minimize losses, of course, but the goal is to maximize gains.  I don't play not to lose.  I play to win.  Back on the field in 48 hours!

Tuesday, September 2, 2014

9/214 The WindUp

(a) RYWBX closed down -0.66%.  On top of the -0.59% decline last Friday, total 2-day loss on the position is -1.25%.
(b) RYMBX closed down -1.92%.  Net loss (against Friday's +0.62% gain) over 2 days is -1.3%.
(c) I left out RSX earlier, which was stopped out around 24 for a -2% loss.
(d) Total 2-day portfolio performance is -0.4%.  My benchmark recently has been ATACX, down -1.57% today or -0.9% over 2 days.

Not all losses are equal.  My perspective on today's devastation in the commodities sector?  It's a windup.  The market is preparing to deliver (or not) the next fat pitch.  A significant rally, more often than not, is preceded by a step backward.  Similarly, significant gains are often preceded by minor losses.

Thursday, August 28, 2014

8/28/14 Cross Currents

Mornings like this are where it gets ‘tricky.’

(a)    I plan to close RYWYX (Rydex 2x Inverse Emerging Markets) at the 1030 est window.  Based on current bids for EEM, the position would close with a +2.4% gain.
(b)   On the other hand, the long bond continues to climb.  TLT +0.5% pre-market.
(c)    I ‘should have’ held RYTPX (Rydex 2x Inverse SPX) overnight (now looking at a +0.7% move based on early pricing for SDS), but I closed yesterday partly as a hedge against being ‘wrong’ on RYWYX.  Since SPX closed flat, and EEM closed up +0.51%, I decided shorting emerging markets was the higher-odds play.
(d)   The $USD continues to climb.  Normally this places pressure on gold/commodities in general.  Early indications show gold +10.  Why?
(e)   Russian troops have ‘reportedly’ entered East Ukraine.  That's the 'news,' anyway.
(f)     RSX (Russia) trading down -3% pre-market.  I think a buying opp sets up today.

Potential setups today: RSX (Russia), EEM/RYWVX (ie, making a quick ‘U’ on my emerging markets short), GDX/RYPMX (miners on an intraday pullback), RYWBX (Rydex 2x Weakening Dollar), FXE (a bet on a reversal in the Euro), and RYMBX (Rydex Commodities, which will benefit from a decline in the $USD).