Bookkeeping: Lightening Up on Some Short Exposure

Looks like an ugly close - I am going to lighten up a bit on my short exposure here, since the reflex will be some sort of premarket rally in futures helped by the Invisible Hand, and a weekend full of Kool Aid drinking. Plus the G7 finance mavens are meeting, so I am sure they can come up with some socialistic program to stop free markets from working correctly. Ironically all these Europeans are going to be taking advice from Americans on how best to be a socialist... oh the irony of it all. Always some risk from the short side, with socialism running high in America.

We weathered this week very well, so I'm going to simply lock in some profits. One thing I am not reducing is the Ultrashort Basic Materials (SMN) because that's a hedge versus the commodity stocks I own (and continue to believe in) and as we've seen over and over - after they go out and shoot the stocks that deserve to be shot every 3-4 weeks when they realize the recovery won't be in "6 months" (the early cycle fare) they eventually find a reason to sell off commodity stocks shortly after. So I've cut them back even more today, and am sitting in cash awaiting to hear the excuse to sell off fertilizer, coal, iron ore, copper, etc 20-30%. It should be coming in the next week or two - my belief is the next reason to sell them will be "China is slowing from 12% GDP to 8% GDP" etc. But the reason doesn't really matter - they will find any reason and we'll get the panicked people on CNBC and doom and gloom articles about how it's a bubble. Starting to get so predictable it's tiring but this time I hope to be less exposed than I've been in the past. It looks like S&P 1310-1315 will be the next floor to test, but that doesn't mean it has to happen Monday. However, S&P level 1350 might be the new ceiling if we don't see a quick rebound early next week.

Long Ultrashort Basic Materials in fund and personal account