Bookkeeping: Weekly Changes to Fund Positions Week 49

Week 49 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: 0.0% (vs 3.2% last week)
58 long bias: 89.2% (vs 86.5% last week)
9 short bias: 10.8% (vs 10.3% last week)

67 positions (vs 69 last week)
Additions: N/A
Removals: Arch Coal (ACI), Intuitive Surgical (ISRG)

Top 10 positions = 34.6% of fund (vs 28.2% last week)
43 of the 67 positions are at least 1% of the fund's overall holdings (64%)

Major changes and weekly thoughts
As I type the S&P 500 is up a decent 11 points on the government's Sunday evening socialism... err, intervention... err, propping.... err, assistance... err, nudge. We've had 6 weeks straight down, we are overdue for at least some bounce, no? Who knows. The crosswinds of earnings now create even more propensity for random acts of stockness. What we want to see to become Kool Aid toting bulls is a move back north of S&P 1275, and the market rewarding stocks with moves up on "bad news". You know, action similar to April-May 2008 or September-October 2007. I don't think any rally we have will be extremely long in duration, but that move in April-May surprised me in it's consistent action so we'll see how it goes. We could bounce all the way to S&P 1330 without even hitting a major resistance level so there is upside awaiting, when the day ever comes that the bear goes to hibernate. I do believe we're going to stuck for a few years in this sideways to down, interspersed with some vicious counter rallies - so if I am correct, get used to this sort of action. Hopefully I am incorrect on this one.

I continue to enjoy the names we own, and cognizant that the market could continue to be weak but on each breather the market takes from it's relentless move down, our type of stocks are the ones popping the strongest. Always a good sign. At 89% long exposure this is the farthest we've been "unhedged" since week 24, which was mid to late January. Since then, the only similar positioning was week 33, at 84% long, which was mid to late March. Those were good times to be bullish but I took profits quite quickly in the ensuing weeks in both instances, thinking the market would quickly sell off. This time around I am going to give it a few more weeks if/when we do rebound. I also want to start bringing down my turnover rate a bit here since in the real world, transaction costs will count. This remains a very difficult market that is handing "buy and holders" their heads.

Last on the agenda - key economic reports on inflation - the somewhat accurate Producer Price Index Tuesday and the "we've made adjustments over the past 20 years so it's always underreported by a huge degree" Consumer Price Index Wednesday. Instead of relying on fantasy we use the more simple (not full of adjustments) import report which has nearly doubled from 11%ish to 20%ish in just over half a year. Scary stuff. But CPI and PPI is the market gospel so the lemmings will act herky jerky as they always do. Always amusing when people are paying 15-20% more in every day life but if the government reports 4.1% they cheer as if their real life experiences suddenly disappeared. Ah, the wonders of Kool Aid.

The larger weekly changes (chronologically) to the fund below:

1. I did a bunch of transactions Monday but the transaction engine in Marketocracy.com failed for the first time since we started this exercise, so they were all moot. Except for cutting back James River Coal (JRCC) on it's spike Monday, I repeated them all Tuesday with mostly "less than optimum" results compared to if I they had executed Monday. These moves included cutting back iPath DJ Livestock ETN (COW) since I wanted more cash to buy potential dips in other names, cutting some solar and (oops) Cleveland Cliffs (CLF), and cutting some fertilizer and the "strongest" tech, which I reversed later in the week.
2. Tuesday we had the enormous late day rally which was led by the worst of breed, housing/retail/financials. I only added some DR Horton (DHI) of those sectors and added 2 Chinese stocks which had shown some relative strength of late - WuXi PharmaTech (WX) and Perfect World (PWRD). I have been watching the Chinese stocks of late hold up relatively well so we might have some rotation going on there as well after months of pounding into the ether.
3. Wednesday, as mentioned above I reversed the fertilizer trade, and in fact added - these prices are frankly ridiculous for the type of earnings growth we are going to see (yes even after their huge runs) later this year and into 2009. I'll give up 10% downside for what I see as far greater upside, even if that means some rocky times if they sell off in the near term.
4. I closed Arch Coal (ACI), to focus more on the metallurgical coal names for now. I like this name (all names in the sector in fact), and in the long run as the grid turns more to coal and natural gas as our transportation system potentially turns more to electric cars and the like, the thermal coal might indeed be the standouts but that's quite a bit away. I redistributed most of the proceeds back into the other 4 coal names we own to keep the sector allocation consistent. This paid off in spades by Friday.
5. Thursday, I closed Intuitive Surgical (ISRG) on it's mini spike - I am willing to reacquire this name on a breakdown or push through resistance on the chart. But there are too many golden opportunities (fire sale prices) elsewhere and without the benefit of new investor money coming in, I have to raise cash though liquidations since our money is now either deployed on the long or short side.
6. Friday, as mentioned above, we added back to some tech exposure we sold earlier in the week as the names held up far better than I was anticipating (I was hoping for selloffs so I could buy at cheaper prices). I do believe much of tech is going to disappoint investors as "not so immune to the economic cycle" as many believe - but still believe there are some winners to be found but one must be highly selective. I also believe more upside might be found in other areas so hence we don't have any sort of overweight in this group.
7. We closed the week out by adding to the Perfect World (PWRD) stake again - this is a name that is showing very good relative strength and if/when the market shows signs of putting together a string of good days, we'll liquidate some short exposure to raise cash and put it into charts like this.

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