Bookkeeping: Weekly Changes to Fund Positions Week 32

Week 32 Major Position Changes

Fund positions of 1.0% or greater can be found each week in the right margin of the blog, under the label cloud and recent comments areas; I highlight weekly the larger position changes.

Being a long only fund, via Marketocracy rules, the only hedges to the downside I have are cash or buying short ETFs. I cannot short individual equities.

To see historic weekly fund changes click here OR the label at the bottom of this entry entitled 'fund positions'.

Cash: 18.2% (vs XX.X% last week)
55 long bias: 61.7% (vs XX.X% last week)
6 short bias: 20.1% (vs XX.X% last week)

61 positions (vs 60 last week)
Additions: FCStone Group (FCSX)
Removals: N/A

Top 10 positions = 33.4% of fund (vs XX.X% last week)
34 of the 61 positions are at least 1% of the fund's overall holdings (55.8%)

Major changes and weekly thoughts
Please note last week I was not able to update positions during the weekend, hence the "XX" designations

Summary of the past week - volatile and crazy. Summary of the future week - more of the same. With government interventions, government arranged purchases of investment banks (coming next week?), the major investment banks reporting earnings (i.e. writedowns), and people calling for Fed funds to be cut anywhere from 50 basis points to 100 basis points (now that inflation is tamed!), it will be another volatile week. Bulls will point to the 4 opportunities last week for the S&P to break through the 1270 level, which it held each time. Bears will point out each time we test those levels, we create more probability it will eventually break. Right now, the daily (hourly) news flow trumps everything. I will have to say I am shocked the market was not down 400-500 pts (on the Dow) based on the Bear Stearns news, but again I believe this goes into the long held belief that the Fed is larger than life and can solve all our problems (or mitigate them) - this inherent trust will take a lot to break, so benefit of the doubt will constantly be given that the Fed can fix the boo boos. The problem with this thinking is when/if it becomes clear the problem is larger than the Fed can fix/solve - this gives us more potential for a devastating move down at once as confidence is lost - as opposed to letting the air out a bit at a time. Confidence is not something I can "measure" or watch daily... hence it creates yet another layer of uncertainty ... to go along with the 400 other things.

I remain very cautious and am willing to give up some lagging on the upside to stay relatively hedged against a major downturn. I have more than enough gains versus the indexes built up in 32 weeks; so I can lag for a while if the market once again begins its push up to la la land. If the credit markets seize up even 1/3rd as bad as some pundits are claiming could happen, we could have a drastic drop in equity markets. On the other hand is the threat of massive government intervention. In no clear terms, these are some of the most uncertain times the financial markets have ever faced so it is not a time to take outsized risks in my opinion. In times like this, I prefer to stay in high cash positions and let things start to make some more sense. When a case could be made for a 500-1000 point move either up OR down - it's not a time to be betting the house. This sort of hourly/daily volatility is going to simply push many either to the sidelines or out of the market entirely.

Below are the fund changes this week - the specific rationale for each of these major moves is explained in the weekly posts which can be accessed in the left margin under archives.

Some of the larger changes (chronologically) to the fund below:

1. Monday, as the market made it's first direct approach to the S&P 1270 level, I anticipated a potential bounce and bought a slew of names, effectively moving 10% of fund holdings from cash to long exposure. Post Fed actions pre-market Tuesday to begin allowing financial institutions to offload toxic mortgage debt for 28 days at a time, and ensuing 4-5% type of rally, I offloaded most of this exposure Wednesday.
2. I started a new beginner position in FCStone Group (FCSX), a commodities risk management company, after a 25% haircut - I added a bit more later in the week.
3. Wednesday, I tried to make the best of a bad situation and sold off half my Thornburg Mortgage (TMA) in the $3.10s, for a severe loss.
4. Thursday, I sold off the coal exposure I bought Monday for very slight gains - this was the main part of my Monday "trade" that did not work out well, so I wanted to get my coal exposure lower as it was >10% and the market had potential to fall further.
5. Friday, I cut the majority of my WuXi PharmaTech (WX) exposure after a large spike post earnings. I hope to buy back this exposure lower.
6. Same explanation as above for my transaction in LDK Solar (LDK)
7. I sold down some of my Powershares DB Agriculture Fund (DBA) throughout the week - while I think inflation is ramping I am a bit worried about these commodities also being sold off if we do have a more panic type of selling atmosphere.

Most of my transactions this week were simply allocation switches from cash to Ultrashorts, and vice versa as the market made massive 3% intraday moves, three times this week. I tried to lower my allocation of short exposure even further late in the day Friday pending a "Bear Stearns buyout" news premarket Monday, but those transactions don't seem to have worked in the Marketocracy.com account - so I have more short exposure going into Monday than I'd have liked. I was trying to get closer to a 15% allocation, rather than 20% since Kool Aid bulls will cheer the Bear Stearns "buyout" as great news, I am sure. And we can talk about another "bottom is in financials" moment (I believe the 17th since this mess started)