Thursday, June 26, 2008

Bookkeeping: Cutting Ultrashort Financial (SKF) to nearly 0

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I usually don't break out the Ultrashort moves since they are very frequent (probably 50%+) of trades as I hedge against this incredibly difficult market, but since this is significant I am going to break it out.... and be contrary again and say, I am cutting Ultrashort Financial (SKF) to nearly 0. (keeping 5 shares)

I know the financials are the bane of the market. But here we are approaching January 2008 and March 2008 highs in the chart. In fact if I didn't know better this looks like a chart for a coal stock since early May. ;) 55% gain since that time - it's been a good ride and a wonderful hedge - and this does not mean it cannot continue going up. I just think this is nearly played out for this "cycle" and/or risk/reward stops being in my favor. Just following previous correction playbooks - when SKF reversed on me in the past it caused a lot of dislocation (fancy word for losses) in our portfolio. By ignoring the serial bottom callers on TV since last summer re: "time to buy financials!" we've made this our 2nd biggest winner in the fund, now approaching +$40,000 in gains (akin to nearly 4% of our entire fund performance since last August)



For a short term trade only (I reserve up to about 10% of the fund for shorter term actions) I'm eying Ultra (long) Financial (UYG) - but not yet.

I've cut back Ultrashort Real Estate (SRS) to about a 0.6% stake as well.

I'm keeping the hedges in the parts of the market everyone loves...

[Mar 19: Alt A Mortgages Beginning to Break Down; Ultrashort Financial Not as Cool as it Used to Be]

Long Ultrashorts mentioned in fund; no personal position

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