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
2 comments:
Mark - maybe I don't understand the limitations of moving money into/out of ETFs for a 7-figure portfollio, but why a hard sell rather than a trailing stop? And do you have some technical indicator that leaads you to this sell decision, or is the decision the result of your prior experiences? thanks for any answer.
hrs,
#1 I am wrong often so don't take what I say as gospel
#2 On Marketocracy.com you can only do limit buy or sell orders, not trailing stops
#3 I am not a huge fan of trailing stops myself - they are big invitations for market makers to swoop down and take me out of my shares and then resume the stock in the same direction
#4 I do believe from the feedback readers read too much into every move in terms of specificity to each position. i.e. if I sell down something I am suddenly a bear on that 1 thing. I take a holistic approach to a 60 position portfolio. In this position I have a huge gain - can I squeeze more blood out of the turnip? Probably. But I'll let someone else take that risk/reward. I was buying in the $90s/$100s and I've been letting go in the $120s-$140s. I'll always take the middle of the move - I'll let someone else try to nail the bottom and the top. I am just not that excellent of a trader to hit every bottom and top. Last, again I am holistic - I am looking at where the easier money could be made and/or how I want to move the portfolio for the next 2-8 weeks. Right now financials have had a horrific 6 weeks, so the easy trade has been made - I've been gradually pulling away as things have been getting worse. Risk/reward turns against you. Just yesterday someone asked why did I not buy Gafisa versus buying some other names like Mastercard and Research in Motion. I bought the latter 2 - why? Do I like them more? Not really. I have very little of those other 2 positions awaiting a pullback - while I have a meaningful stake already in Gafisa. So I believe readers take things a bit literal and suddenly think I am calling a bottom in Mastercard or Research in Motion or its a great time to buy. Not really - I had a 0.1% to 0.3% stake in those names and want to begin rebuilding positions. So I began yesterday. While I already have a sizeable position in others in similar chart formations or that I like as much fundamentally.
So I am looking at a very big picture strategy. While I think readers might focus on each position as if I am implying something specific to that position. Perhaps SKF tags another 30% gain from here. I don't know. I got "my win" in this trade and its time for someone else to take the risk/reward. I am looking for the next play now that people are trashing or ignoring like they were SKF 6-8 weeks ago. Then I'll sell that in a month or two and I'll probably sell too early, but I still "got the middle of the trade".
Some would say this is poor trading and I don't maximize my wins. I understand that. It works for me; I urge everyone to find a system that works for them. My system would probably fail for most people - but it's done ok for me.
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