Third Time’s The Charm?
December 1st, 2007 by 
reality
Well the portfolio looked much better a few days ago. Then the market retraced a month’s decline in four days. Hopefully the next time down will break support and we’ll get to the serious decline I’m looking for. Having said that, the Fed has made it clear it intends to pump and if that means jamming the stock market, then that’s just too bad, bears. I know Marty Zweig says, “Don’t fight the Fed”. But the Fed is wrong here. I’m using options, I can stand some pain in the knowledge my drawdown is limited and I am patient. I’ve realigned my portfolio to reduce the number of indices I’m using, but also added more far-out-of-the-money positions that will answer well if there is a substantial decline. I was driving around today and I thought, I’m reacting to this Paulson nonsense and the constant stream of Fed babble on the wrong level. What’s the real message here? It is panic. These guys are running around like chickens with their heads cut off, no semblance of staff work, planning or strategy. So I think things are much worse than we, the great unwashed, are being told. And this increases the probability of something blowing up in their faces.
| Measure | November | YTD |
|---|---|---|
| Absolute Performance | -0.7% | (1.53)% |
| Relative Performance | 1.08% | (17.49)% |
Relative performance is based on Fidelity Magellan, FMAGX.
11/30 portfolio.
| Asset class | % Allocated | Comment |
|---|---|---|
| Energy | 0 | |
| Absolute Return Funds | 0 | |
| Market Timing - Bear | 17.74 | Inverse funds and put options equiv. to 200% short (basis total equity). Overall, counting the sector-specific shorts, I’m about 300% short. |
| Market Timing - Bull | 0 | |
| Metals & Mining | 0 | |
| Real Estate | 7.01 | Put options on S&P Financials ETF (XLF), Real Estate ETF (IYR) |
| Tech | 1.79 | Put options Semiconductors ETF (SMH) |
| Fixed Income | 67.94 | Mostly T-bills, 2-year bonds, and a small long bond position. Also some WHOSX (Treasury-only fund). About half of this is in Canadian T-bills. |
| Cash | 5.52 |
I confess: I’ve never actually seen a chicken running around with its head cut off. But after seeing Hank Paulson, I think I know what it must be like.
Posted in * Portfolio changes, Asset Classes, Strategy & Scenarios, The Fed | 
December 2nd, 2007 at 9:03 am
Mike the headless chicken lived for eighteen months without his head. I wonder how long The Powers That Be can last?
http://www.miketheheadlesschicken.org/story.html
December 2nd, 2007 at 10:19 am
That is truly terrifying!
December 3rd, 2007 at 9:13 am
Ah, we have to go through the monthly numbers. There are days I love it and think I am a freakin’ genius. And there are days and I just wondered wny the heck didn;t I take the profit…. I am beginning to think that I am smart enought omake enough money in the bear market to only see it evaporate in a counter-rally! As of your date, I am up 4.86%. I was up 50% about 10 days ago. Yikes. They have this syaing, “You never go broke taking a profit” and people believed that taking profits was too realy. Well, I can certainly go broke or crazy by not taking profits!
Yucan guess that I am far more leveraged than you - but then living dangerously is something I hate to do, but still do anyway…. Only 3:1 leveraged now…. And poring over the graphs everyday to see how far ocunter-rallies go up. In 2000-2003, they normally go up 10% after a 15% fall, and after big falls of 25-25%, there wold be counter-trend rallies of about 25%.
Needless to say, careless over-leveraged bears get run over by Mack Trucks all too often….
I am still hanging in there….
December 3rd, 2007 at 7:23 pm
The odd thing is that everything financial seems to have suffered a heart attack and just sits there quivering. I can’t get traction with any of my investments :(.
The Fed keeps pouring go juice on the markets and stomps down commodities which is keeping things in an uneasy equilibrium.
But I doubt that the doldrums can last much longer and then all hell will break loose (in a random direction even)…