Longer
December 2nd, 2008 by 
reality
Well the Canadian dollar not only didn’t get significantly better, it got worse. This is a drag on my numbers, but I’m keeping the baby, Faith. I added to my longs, but I hedged somewhat with QID. Risk is still high. The credit markets are still in turmoil – the iTraxx Europe Crossover is around 940! – so it is no time to go crazy on the long side. The storm has not passed, we’re perhaps in the eye.
| Measure | November | YTD | Inception |
|---|---|---|---|
| Absolute Performance | 2.7% | 51.9% | 36.1% |
| Relative Performance | 13.6% | 232.9% | 243% |
Relative performance is based on Fidelity Magellan, FMAGX. Inception refers to reporting on the blog, and is based on the close of 2005.
11/30 portfolio.
| Asset class | % Allocated | Comment |
|---|---|---|
| Energy | 25.3 | AAV, ERF, PGH,SU,ECA |
| Financials | 2.1 | BNS |
| Market Timing – Bear | 2.7 | QID |
| Market Timing – Bull | 0 | |
| Metals & Mining | 5.6 | GDX,TCK |
| Real Estate | 0 | |
| Tech | 0 | |
| Fixed Income | 29.7 | Canadian T-bills, some money market |
| Cash | 34.5 | And that means cash, essentially all FDIC-insured, not money market. |
Posted in * Portfolio changes, Asset Classes, Commodities, Energy, Fixed Income, International, Metals & Mining, Strategy & Scenarios | 
2 Comments »
December 2nd, 2008 at 8:39 pm
Reality,
Please be careful with the 2x inverse ETF. They have slippage and it can be brutal in times of high volatility. The whipsaws can cause you not to make money even if the market moves in your favor. The worst ones are SKF, SRS, and FXP because they have been the most volatile. QID and SDS are somewhat better but they still “slip” against the benchmark. The 1x shorts seem to exhibit no slippage that I can see (SH).
I also need to do some homework on the oils. My concern right now are (a) buy the lowest cost commodity providers (b) low debt and cash rich (c) reserves (d) EROEI. I am particularly concerned with SU.
I am sure you have done your homework but just in case you missed something….
Thanks for sharing your thoughts. Very much appreciate it.
December 3rd, 2008 at 4:56 am
“Slippage” – technically called beta creep – is inherent in leveraged index tracking funds. The reason is simple arithmetic. Let’s say a 2x ETF is $10 with the index at 100. The next day, the index goes up 10%, so the ETF must go up 20%. Index is 110, ETF $12. Then the next day, the index drops back to 100, losing 9.09%. The fund therefore drops 18.18%,to $9.82. Oops. The fund has accurately done its job, but even though the index is unchanged after two days, the ETF has lost 1.8% in the process.