Bookkeeping: Weekly Changes to Fund Positions Week 33

Week 33 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: 8.5% (vs 18.2% last week)
58 long bias: 84.4% (vs 61.7% last week)
6 short bias: 7.1% (vs 20.1% last week)

64 positions (vs 61 last week)
Additions: iShares Malaysia (EWM), iShares Singapore (EWS), Cabot Oil & Gas (COG), EOG Resources (EOG)
Removals: FCStone Group (FCX)

Top 10 positions = 36.2% of fund (vs 33.4% last week)
40 of the 64 positions are at least 1% of the fund's overall holdings (62.5%)

Major changes and weekly thoughts
Volatility continues to be the name of the game - multi hundred Dow days are now the norm as every sneeze, wheeze, or Federal Reserve action moves the markets violently one way or the other. It continues to be a difficult market for any but very short term oriented traders - buy and hold was dead and buried late last year and now we stomp on the grave. This was also a big reversal week, similar to the period in mid to late January where everything that was most severely punished for weeks on end, gets a huge dead cat bounce rebound, and everything that held through better than average was punished. We once again enter a period of "early cycle" rotation as the "in 6 months everything will be fine" crowd is back at it, this time with the full backing of the Federal Reserve to implicitly backstop any financial losses. This is about the 5th version of this move we've had since last summer. It is now becoming almost predictable at least in the rotation, if not the timing of this "swing in mood" and more urgent Fed actions. Each iteration brings new backstops, political pressure, and plugs to fix the leaky dam that is the credit system. Each intervention brings hope and cheer anew - and the ultimate iteration will be the direct purchase of mortgages, which is generating so much momentum the Fed and Bank of England already have to deny they are considering it. Each intervention has failed thus far. We'll see how this one goes - the herd is always "correct" in the near term and the herd has deemed this week to be the return of financials, retailers, and homebuilders. So if you were not overweight in those groups you were deemed a loser the past 4 days.

Technically, we still remain in sort of no man's land, although it is hard to trust the technicals after the very strange action on Monday when we broke support and should have broken down per every technical rule known - but magically never broke 1260. With the behind the scene interventions it is hard to really play by the old set of rules, since a new set is being created as we speak. But for what it's worth we head into resistance up there at S&P 1355 or so, and on the bottom we have S&P 1270 (apparently a false bottom per PPT rules) and/or 1260 on the bottom. So until further notice I assume we trade in this wide range but frankly we appear to not be allowed to go down past a certain point, so I guess we don't have to worry about downside anymore in this new era of government supported stock markets.



The fund had a poor week, with it's huge weighting in financials, homebuilders, and retailers (not). Basically everything that worked in the past did not work this week similar to that period in latter January 2008. If you believe in global growth stories, or commodities you were hit. If you believe in the consumer led, financial led, retail led domestic recovery you did well (if you had money left over from the carnage you endured the past 6-7 months). So it's a reversal week - the question is how long does it last. I spent the week, converting short exposure into long, and buying stuff that no one suddenly wanted, as I believe those trends did not end on a dime Sunday evening - even if the hedge fund computers believe so.

People continue to talk about the decoupling between emerging markets and developed markets, especially USA. I think the real story of decoupling later in the year will be the decoupling between US financial markets and US Main Street. I see the economy worsening but the stock market, supported by tax payer dollar backstops throughout the financial system, holding up far better. Along with the group think Kool Aid about the Q3 2008 "recovery" which will be fudged by the rebate checks. It is a sad state, but we are laying the groundwork. Socialize losses onto the backs of the common man and keep rewarding the ponzi scheme going on. NYC banks and multinationals win. Guy on the street (as long as it's not named Wall) loses. Should be an interesting dichotomy.

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. Despite all the ruckus Monday about the investment banks and the Bear Stearns $2 price, along with a triple bottom break that should of led to a severe drop off the market held against constant retests throughout the day of S&P 1260. It made no sense. But what has lately. I did make a large swath of buys in the morning, across multiple groups - that later in the week almost all took a hit since they did not include financials, homebuilders, or retail companies. Well I did buy 2 Indian banks, but since the Federal Reserve does not backstop Indian financial institutions, it doesn't count.
2. I restarted stakes in 2 emerging markets, that I held earlier in the fund, iShares Malaysia (EWM) and iShares Signapore (EWS). Both have corrected severely from where I bought them, and I want to continue to avoid the subprime nanny state US even though the hedge funds loved it this week.
3. I've been waiting for weakness in natural gas, and finally got some early this week so I began my first initial stake with Cabot Oil & Gas (COG), I added more later in the week.
4. Tuesday, we got another box of chocolates as it began to hit the Street that their precious investment banks now have our tax dollars behind them (without any of the nasty regulation the commercial banks must face to boot!), and another "best in 5 years" return in the markets (which was almost promptly all lost the next day, but almost all regained back Thursday). As the commodities began a selloff, I started rebuilding my gold/silver exposure (of course too early in retrospect but I guess I didn't realize 75 basis points cut was a "defense of the dollar"). I added more Wednesday morning as both names, Silver Wheaton (SLW) and Kinross Gold (KGC) fell to their 50 day moving averages - but it became clear by later that day, that this was more than a normal sell off and probably some hedge fund liquidations were going on behind the scenes. I now have my 5% stake in precious metals as a hedge so it's an appropriate level.
   
5. After FCStone Group (FCSX) was demolished to the tune of 50% down intraday (before some recovery) on fears Monday of anything within 6 degrees of financials being at risk (seems so long ago now doesn't it?), the stock rebounded on the "Federal Reserve will backstop any junk in the system" mantra and I chose to exit the position with a smaller loss - not liking this level of crazy volatility. I've barely held that position for a week but I did not sign up for 30-50% daily moves.
6. To raise some cash I sold down some of the strongest movers of the week: Mastercard (MA) on the VISA (V) mania, DR Horton (DHI) on the "houses will rebound in 6 months mania" (the same mania that has gripped this nation for 2 years now), and Schering-Plough (SGP) simply because it was not falling like a rock like most of the fund positions.
7. I had been waiting for some selloff in the fertilizer names and had downsized my exposure to as low as I was going to go - we finally started seeing some weakness so I began to layer in buying my 2 fertilizers with potash exposure; and said I'd buy more (in a larger layer) once the stocks hit my target levels, which they hit promptly the next morning.
8. I started my 2nd natural gas play in EOG Resources (EOG) - most of these names seem very similar to me, but EOG stood out in my "non technical" research with some exciting prospects so I was happy to get the name at some discount to where it has been; but would actually like to see a lower price to buy more.
9. Thursday morning as the commodities carnage continued, aside from the 2 fertilizer names I mentioned above, I created a large stake in a personal favorite Russian iron ore/steel/coal play Mechel (MTL) - again another name I was waiting quite a while for some sizeable pullback. Of course it could go lower, but I'd rather be buying here than when it was in the $130s or $140.
10. I also added to some iron ore, infrastructure, and natural gas, while selling off some of the stocks holding up relatively well to raise some cash.
11. I debated what to do with my hedge exposure on the short side - I am a bit confused as to where to place my bets when the downside happens. This was a week where most of the short exposure worked against me as well, since financials, real estate, and the like was a "happy place" to be again. I still believe we will have some more downside in the future in these groups but the risk now is being run over by the happy herd.
    

The above do not include the trades in my Ultrashorts which I am trading quite often as the market ebbs and flows.