Business As Usual Forever
September 2nd, 2008 by 
reality
It was the best of times, it was the worst of times. The commodity markets collapsed. The stock market paid little attention, either way. I suppose it is so divorced from reality at this point that intrusion from fundamentals is unwelcome and ignored. My longs at the beginning of the month cost me a little money, I bailed at the wrong time, but mostly the Canadian dollar faded along with the commodity markets, so I’m down a bit. Resolutely back to the short side.
| Measure | August | YTD | Inception |
|---|---|---|---|
| Absolute Performance | (3.86)% | 5.47% | (4.17)% |
| Relative Performance | (3.17)% | 30.6% | (10.82)% |
Relative performance is based on Fidelity Magellan, FMAGX. Inception refers to reporting on the blog, and is based on the close of 2005.
8/31 portfolio.
| Asset class | % Allocated | Comment |
|---|---|---|
| Energy | 0 | |
| Absolute Return Funds | 0 | |
| Market Timing - Bear | 17.1 | Inverse funds and put options equiv. to 150-200% short (basis total equity). |
| Market Timing - Bull | 0 | |
| Metals & Mining | 0 | |
| Real Estate | 0 | |
| Tech | 0 | |
| Fixed Income | 56.2 | Mostly T-bills, and a small long bond position. About half of this is in Canadian T-bills. Still in WHOSX. |
| Cash | 26.7 | And that means cash, essentially all FDIC-insured, not money market. |
Posted in * Portfolio changes, Asset Classes, Strategy & Scenarios | 
September 3rd, 2008 at 4:32 am
May I ask
- do You use subscription services for market timing?
- do You use have a formal algorithm for speculative positions sizing?
September 3rd, 2008 at 6:44 am
No and no. I do use Decision Point for charts and indicators.
September 3rd, 2008 at 9:36 am
I always subscribe to one or another timing service. At present - Sentimentrader.com
Now I’m thinking about better allocation rules for options buying, based on Kelly criterion. It seems not so difficult to craft a decent strategy, if only timing gives a ~60% winning chances (my recent results were better).
September 3rd, 2008 at 9:44 am
Actually, I just took up their free trial offer. But I’m not using it, just watching. In any event, I believe there is a dislocation of some kind coming, I don’t know when. Until that is past, or there is reason to believe that it will not come, I am not trusting any “black box” or other systems based on backtesting.
September 3rd, 2008 at 12:52 pm
Sentimentrader is quite useful for me to recognize entry points for puts buying. Tradeable oversold conditions happens one-two times a month. Reading of Jasons’ daily views takes no more, than 10 minutes.
Speaking about Kelly criterion,
http://en.wikipedia.org/wiki/Kelly_criterion
it’s trivial position sizing formula, with two simple inputs - probability of winning and likely size of winning trade. I was surprised to realize I’m betting too small and conservative. It seems, You, Reality, are betting even more conservative, so I decided to comment on this.
September 3rd, 2008 at 1:18 pm
That takes me back, to signal theory in university. Your point is well taken, but there is also: http://en.wikipedia.org/wiki/Gambler’s_ruin