First Quarter Over
April 1st, 2008 by 
reality
Every time I go travelling I lose money. I don’t know if it is coincidence or just that I’m not paying attention. But it seems consistent. I know the answer, don’t do that. Well, not so easy, what’s it all about, anyway? Bottom line is, I got too enthusiastic on the short side and was duly punished. A learning experience. The problem is, I’m too afraid of missing a crash so I leave my shorts in place too long. So I’m now using OTM puts to be “crash catchers” and that frees me to take the rich ones off the table. Assuming there are any, that is. After a few days like today that’ll be moot.
| Measure | Feb/Mar | YTD | Inception |
|---|---|---|---|
| Absolute Performance | (3.8)% | 22.7% | 13.6% |
| Relative Performance | 0.8% | 42.3% | 2.3% |
Relative performance is based on Fidelity Magellan, FMAGX. Inception refers to reporting on the blog, and is based on the close of 2005.
3/31 portfolio.
| Asset class | % Allocated | Comment |
|---|---|---|
| Energy | 0 | |
| Absolute Return Funds | 0 | |
| Market Timing - Bear | 22.03 | Inverse funds and put options equiv. to 150-200% short (basis total equity). But there’s lots of gamma. I did add some more bear funds, notably SRS. |
| Market Timing - Bull | 0 | |
| Metals & Mining | 0 | |
| Real Estate | 0 | |
| Tech | 0 | |
| Fixed Income | 72.63 | Mostly T-bills, and a small long bond position. About half of this is in Canadian T-bills. Moved back into WHOSX, although kept the HSTRX. Switched into BEGBX rather than FXA. |
| Cash | 5.34 | And that means cash, mostly FDIC-insured, not money market. |
Posted in * Portfolio changes, Asset Classes, Strategy & Scenarios | 
April 2nd, 2008 at 3:57 am
I too became a shorting bear after 2000/2001 and didn’t want to miss the next big down.
After many stressful years (it was very difficult to make making shorting between 2003 and 2007), I’ve come to realize that 9 out of 10 market participants want the market to go up. And recently, the government has started gambling with taxpayer $ to ensure the market goes up.
These are the reasons why statistically and objectively, there are more up days than down days, ups are longer and less steep. Downs are steeper and shorter in duration. So basically, I was waiting for the rare and short events.
I’ve evolved to swing trading….making money not on the prospect of 1 big down event, but as the ups turn to downs an downs turn to ups. So, rather trying to anticipate a black swan, wait until it occurs, then use all of your cash to buy call options. I’ve realized I can’t anticipate when a black swan will appear (the ying), but I can recognize one after it appears and profit from the yang. Much less stressful.
The market is already off its highs. The chances of a big, unexpected, steep drop from here are remote. “Great Depression” has appeared in the newspapers and all over the net the past 3 months. If it does indeed happen, there will be a significant bounce as the govt steps in with even more taxpayer money. Spending other people’s money requires no risk.
April 2nd, 2008 at 5:17 am
You guys all beat me. I short with puts and required to hold for 30 days. My portfolio was down 15% in yesterday’s melt-up and down about 25% YTD. I was up 350% last year, so easy come, easy go. Never speculate with money you can’t lose.