That was some wild ride in the market yesterday. The type of crazy up and down we have seen in the market this month has been getting crazier, the VIX closing at 29.02 notwithstanding, which I take as symptomatic of a bear market...along with lots of other things.I have disclosed some of the luck I have had over the last few months in the portfolio so it is right to disclose that the last couple of days I have lagged noticeably, due mostly (well I think mostly, anyway) to the pasting taken in the foreign markets plus dollar appreciation. Additionally the names I own that are higher beta (which includes a couple of foreign stocks) have also been pasted.
Obviously lagging for two days means nothing but it is a microcosm for longer periods of time. I say this a lot but it bears repeating that a normal money manager, and also individual investor, will have periods where they beat the market and periods where they lag. Lagging now and then, at a minimum, is part of the equation, it goes with the work.
I posted before about mentally preparing for a bear market, well you should mentally prepare to lag the market as well. I don't sweat lagging the market as I know it will happen now and then if not more. From where I sit if I can smooth out the ride when there is turmoil I will be quite pleased.
Hopefully I am conveying a lack of emotion after a couple of relatively poor days the same way I do after a couple of good days.
I took a little more action yesterday during the last hour (you know, the most important hour of the day) yesterday. I went back into the double short ETF with about 40 minutes to go at a price of $65 (I sold at the open on Tuesday at $71.35) and I also sold an industrial stock with a little more beta that quite a few, but not all, clients owned.
I will say I went back in quicker than I expected but I am convinced this is a bear market and I would rather be wrong in the direction of lagging a rally.
9 comments:
I think a site called Seeking Beta would be an interesting read, Roger! :)
Roger,
If we are in a Bear Market and we are currently in a Bear Market Rally, what criteria do you use to go double short (Technical, Portfolio Diversification, etc.).
From a Technical stand point, 1350 or 1450 on the S&P seem good double short portfolio insurance buying points.
Thanks,
CA
the purchase yesterday had no TA tied to it, at least i wasn't thinking along those lines. The 200 DMA is important to me (obviously we are a long way from there) but yesterday was a bout crazy market action and that I don't want to be unhedged below the 200 dma and I don't want to be unhedged in a bear market.
i may trade SDS again as we go and this may turn out to be wrong but i had to go with my intuition for good or for bad.
I do not think the double short makes sense for most people. I think they should keep it simple and simply increase cash levels if needed.
Which is not to say roger is wrong in making things more complex.
anon 8:59
so what you're saying is investor know thyself
I can buy into that.
Jumping in and out of the double short fund so quickly - do you feel like you are rolling the dice a little (speculating)? - or do you feel like you are "investing"?
Regarding the use of inverse ETF's as hedges, even though they got whipsawed this week, I was able
to even the ride a bit, and made some profit selling
TWM and SKF. Held SDS. So I think your use of these hedges is going to be something that gains popularity, Roger. And advisor friend of mine said that his group was beginning to use them more.
Just for interests sake, I heard an interview with a guy named Pring www.pring.com yesterday. He thinks we are going to bump up against S%P 1500
and that now is a good time to buy battered sectors even though he is only 40% in equities, 10% commodities, and 50% bonds. He said he thought that the bull market in commodities was nearly at its end. Well, that is the opposite of many other
respected talking heads out there. Sure makes decision making easier for us little fish.
I appreciate your attempt to use outriggers on the
canoe, and keep the emotions at a mimimum Rog.
Thanks,
Scoot
I doubt I could refute that it was a specualtion.
My answer would be in a way yes and in a way no.
Yes in that out and back in the next day like that is a speculation of some sort (you can quantify it for yourself if you need to).
No in that I have seen crazy panics before and fading them is right the vast majority of the time. I felt I saw an opportunity for clients and I took it. Further I have talked several times before about selling SDS into a market crash. while not a crash it was overdone.
Every so often I do "take what the market gives." I have done it before and will do it again, talking one or two of these a year if that.
Steve.
I think that the commodities that do poorly in a recession such as steel will do poorly, but the food commodities will do well.
As long as the Fed continues to lower the fund rate I will remain bullish on some commodities. But you have to be choosy. Gold should continue to do well as they print more fiat money to pay for the stimulous package and prices rise.
Oil even went up today in the middle of winter.
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