As I wrote in our weekly summary, if this plays out as past corrective periods - as everything else sells off the commodities (I am using fertilizer, coal especially) will hold up.... and then (if we break that key support on the indexes) everything will be trashed... and then out of the blue yonder people will run (yet again) to the "early cycle" recovery stocks... even though the only cycle we are entering is a recessionary one. They will probably keep doing this every 6-8 weeks for the next 2 years until we actually do emerge from the "not a recession". So to help balance the fund I buy some of these junky names in financials and housing. I actually like (relatively speaking) the 2 investment banks I own, and the housing stocks are just a crap shoot - they all move together.
But I am going to begin small purchases here on this side of the portfolio - we'll know they are bottoming when the market is selling off and they reverse upward; so judging by today's action they are definitely not bottoming. So we'll continue to go incrementally - essentially these buys are made so that in that inevitable period when commodity stocks are taken to the woodshed and the "early cycle" stocks are the flavor of the week, we'll have something working in our favor (we always underperform those weeks)
This is not a large lot - all 4 positions together I only added about 1.25% allocation from cash, just spread it evenly into these names
- Goldman Sachs (GS)
- Morgan Stanley (MS)
- DR Horton (DHI)
- Lennar (LEN)
The homebuilders, especially, look really pathetic but that's what happens when the psychology changes from unicorns, mermaids and Kool Aid (i.e. "spring 2008 is going to show you housing is back!" <--- something we heard all fall and winter) to reality. Please note - these are not growth stories at this moment in the cycle, and I would not trust any of them in a room alone with your children. In fact by the time
Goldman Sachs got done with your child, his piggy bank would be stolen (they're just that damn efficient). But they are part of a barbell strategy of owning some "junk I don't believe in" so when "junk I don't believe in" rallies due to "thesis of recovery I don't believe in" happening, we have something working in our favor.
p.s. after the liquidation of the short exposure this AM, we are back up to 31% stake in US pesos. Again if the market is breaking down in the last 5 minutes or so of the day and the Invisible Hand does not come to the rescue I'll be moving some of that cash back to short exposure, reversing the sells from earlier today. But there is no reason to be aggressively long in this type of environment when economic reality is still far from discounted in stock prices.
Long all names mentioned in fund; no personal positions
13 comments:
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Starting to Buy Stuff I Don't Like
Goldman Sachs (GS)
Morgan Stanley (MS)
DR Horton (DHI)
Lennar (LEN)
**
Starting? I recall you bought in quite a while ago, with less than spectacular results. I dont understand your passion for dumpster diving... you seem to hate having a bad week when the market sells the good stuff, and buys the bad stuff... its OK, you dont have to be in the green every week, its the end of the year performance that matters...
Ok, bad English
Starting Today to buy stuff I don't like
Or Adding to stuff I don't like
et al.
I'm actually up on Goldman, and down just a bit on MS.
Down on the housing stocks so far, but they are getting trashed this past 2 weeks. They'll rebound.
What's wrong with being up every week?? hah
If you look at it from a portfolio management view, it does help to dampen volatility - yin and yang. When my main yin falls, at least a few of the yang are rising. When I start buying retailers not named Costco Walmart Big Lots etc than you can yell at me.
**If you look at it from a portfolio management view, it does help to dampen volatility**
The job is to max investment returns. If I wanted low volatility, I would hold US Treasuries.
Not convinced? Here is my fund:
http://www.marketocracy.com/cgi-bin/WebObjects/Portfolio.woa/ps/ManagerPublicPage/login=andreik
Here is yours:
http://www.marketocracy.com/cgi-bin/WebObjects/Portfolio.woa/ps/ManagerPublicPage/login=mark73
Me: 6months +15.7% Turnover: 72%
You: 6months +3.1% Turnover: 870%(!!)
I am not smarter or better trader, I just dont buy crap.
Is today's action enough of a capitulation to end the bear market rally? In my opinion, a close below 1370 would be enough to drop the market for the next few weeks.
But then again, I've been wrong quite a few times. Take it with a grain of salt.
We need to get you a mutual fund shax, you are destroying me!
Mike, if it closed below 1370 it would be bearish to me. 1325ish looks like the next pit stop.
What are your top 10 holdings? Just curious
I trade the Ultrashort exposure very heavily each day, I think its about 2/3rd of my "trading %"
One more thing about volatitily - I am not catering just to you. I am trying to cast a wide net - many less involved with the stock market types would freak out in say January and sell out so they'd prefer less volatility. I am trying to marry the two, or better put - the least correlation with the indexes.
**What are your top 10 holdings? Just curious**
In real life or marketocracy? They are fairly different coz of mutual fund regulations on Marketocracy.
In real life:
1. Crude Oil Dec'12 contracts
2. Natural Gas Jan'09 contracts
3. Live Cattle Dec'08 contracts
4. Copper Dec'09 contracts
5. Corn Dec'08 contracts
6. BHP
7. OXY
8. MOS
9. ESV
10. BTU
**many less involved with the stock market types would freak out in say January and sell out so they'd prefer less volatility.**
Such people typically dont have much to invest to begin with. And what little they have will quickly disappear. Survival of the fittest.
just curious how hard it is to open a commodity account - I see you work in a 'related business' so perhaps you have access through means not open to most of us.
also what are your marketocracy top 10? I would like to hold corn futures myself but stuck with DBA
shoot me an email if you prefer - thanks, I'm off for the day.
Mark I notice many of your trades are quite successful like the DUG pickup 2 weeks ago from 25 to 30 ..thats a nice 20% gain but if you only used say 2% of your cash then it only contributes 0.4% to your overall yearly return. If you put more cash into some of the well thought out "genius" moves then you can really make the $$ when you're right. I mean that was a great move and risky and bold and perfect timing but it only gave you 0.4% for the year, you deserve to be rewarded more for that great a trade.
I know you have held POT, MOS for a long long time in your fund and those are up like 100% since your inception, if those were more heavily weighted they would carry your portfolio to easy 30%+ returns. I noticed you're absolute relentless bullishness on ANR, and I noticed how you had about 1.5% stake I believe. I remember you sold some at 78 and I actually bought then when it was up 6 points that one day. And then there was another 10 points of upside to come.
I was wondering, what is your trading rationale for scaling out of stocks you feel are extremely bullish when they're up. I understand ideally you sell at the top in strength and buy back lower...but if you are like 99.9% certain the stock goes higher in the end, why risk selling and never re-entering when you can just hold and buy the pullbacks.
I was wondering what your thesis against just buying pullbacks is on your "top stocks" (as opposed to selling tops/strength AND buying pullbacks).
I have also created a fund on marketocracy by the way.
http://marketocracy.com/cgi-bin/WebObjects/Portfolio.woa/ps/FundPerformancePage/source=EgMgEaKiEiDkMkMdMaKiAbDc
I'm sure you'll outperform me by 5% or more annually but maybe one day I'll grow my capital to be as large as that of HOBO.
My largest holding is RIG now. I see yours was TSL.
Your scenario assumes just because one thinks (or is "very bullish") on a stock it will go up. There are no guarantees. There is nothing I am 99.9% certain on. I take nothing for granted; I can be wrong on each and every position, so when I get profits I harvest some of them.
If you followed a buy and hold strategy in 90%+ of stocks the past year, you'd be down or negative - that's yet another reason. Some stocks I've owned have been down in that time and I've either lost less or in fact made money by trading around a position.
In the end it's all about stock selection, no matter what methodology you use. If you don't have the right stocks its very hard to profit from any strategy. If you do have the right stocks, you can profit from various strategies.
You should see a case example of not why do overload a stock and just "sit in it" even if you are "99.9% sure" from Trina Solar. Anyone who sat and held it for the past year is basically down. And that would ruin a 1 year performance. Speaking of RIG, I held GlobalSantaFe for about 6 months with almost not a penny to show for it. So it really doesn't matter what I think; it matters what the markets think. Being 99.9% sure means nothing.
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