Sunday, February 1, 2009

Bookkeeping: Weekly Changes to Fund Positions Year 2, Week 26

Year 2, Week 26 Major Position Changes

To see historic weekly fund changes click here OR the label at the bottom of this entry entitled 'fund positions'.

Cash: 68.2% (vs 76.3% last week)
24 long bias: 15.3% (vs 15.6% last week)
13 short bias: 16.5% (vs 8.1% last week)

37 positions (vs 34 last week)


Weekly thoughts
First, a quick bookkeeping issue - I made an error this week when I said I was only 10% invested. It appears on the page "cash" is net of short positions. Meaning short positions are added back to your "cash" ... i.e. I show some $916K worth of cash (making me think I was somehow less than 10% invested) - but that is because my short exposure ($121K) is being netted against my long. Anyhow I figured it out now, it is misleading on the web link but I'll have it accurate on these weekly summaries. (even more confusing some of my "long" positions are actually "short" since they are Ultrashort ETFs)

Just a quick update because pressed for time. I don't like what happened last week; I wrote in last week's update that if I had a very short term horizon (1-3 days) I'd be pressing towards the most beaten down sectors (financials/commodities) since they had fallen so far from their mean; especially the financial complex. That was the correct call, in spades (although we did not benefit much since we have little in that area of the market). Of course the CNBC news alert about "bad bank" helped the cause. But, what this did in my opinion is work off an "oversold" condition in the most beaten down areas. So this very easily could now allow for a setup where the entire market can fall as one. It would of been hard a week ago to ask some of these sectors (esp. financial) to fall even further in a straight line... now they were given a reprieve. Further, the "generals" for the most part remain stalled - on the big up day Wednesday, many of them just sat around and were up 1-2% --- nothing impressive.

As we look at the S&P 500 this is not a good situation either - this looks like an index that is just rolling over.

The bulls best hope is for (a) S&P 820 to hold or (b) S&P 800 to hold like it did two weeks ago or (c) the market lemmings to run this market up on "government interference" or "CNBC news alerts". It's going to be very tough to guage the market because it feels like we have a government sniper ready to push the next "miracle" to "save the economy/housing/financial system". I don't know why the rats keep going for this cheese - there is no miracle coming from the government - even these "4% mortgage loans for everyone!" or "generations of taxpayers get socked with bad loans". But humans are a hopeful lot and they keep reacting to "the higher power" that will save us from reality.

I don't know exactly why S&P 800 was such a strong support level other than it's a "big round number" (notice the Dow closed just at 8000 as well on Friday) - just human psychology. What traders are doing now is "playing the range" - they are conditioned to buy at the low end, sell at the high end - and keep doing it, until it no longer works. So once it does not work at S&P 800 you will have these traders leave en masse, triggering a serious selloff. Again, we are focused on the technicals so much because the fundamentals are so putrid - both economically and company wise. Hey, look at that Macy's (M) is going to let go another round of workers... what did we lose last week? 125K+ workers? Somewhere around there.

Bulls keep grasping for straws - they have been using the wrong playbook the past 15 months (recession of early 90s and early 00s) and still seem to be in denial about an epic consumer led recession. They want to buy "6 months" ahead of a recovery... a recovery that is never there when we actually get "there" 6 months later. Eventually they WILL be right guessing things will turn around 6 months. But will they have any money left? Not if they are investing based on what they are spewing in the punditry-sphere.

So what's on deck this week? The last week of "big company" earnings reports and lo and behold we're already back to our monthly jobs report this Friday. What will be funny is if its "better than expected" the bulls will say "see, not so bad!". Just because the government spews out an inaccurate report, we are then to ignore all the horrendous data points we are hearing each and every week about job losses in the real economy. And let me remind you again, you only hear about the mass layoffs - all the 18 people there, 24 people there in small business America never makes a headline. But if the government says its not as bad as "reality" - then we'll listen to the Fairy Godmother rather than facts. I have no idea what the report will say Friday, and the only raeson we have to care is because the lemmings in the market will move the market based on this number. Watch for the "backwards revisions" as well, the pattern has been to say "oops the number we gave you a month or two ago - well just add another 100-150K more losses to it"

For the fund we are nicely hedged now, with high cash. I only have 1 major (>2%) long position - Sequenom (SQNM) based on the dip that happened last week when I was able to pick up some cheaper shares. My game plan is to take some of this cash horde & get more aggressively short against indexes and sectors if we break S&P 800... the retest of S&P 750 does await us. Unfortunately I am not that confidant that this will be our ultimate bottom. The market is very much "not cheap" based on how bad 2009 earnings will be once we reach Dec 31, 2009. Last, the Generals have yet to be shot - watch the generals both large (McDonald's, Exxon) and small (what we own). When they begin to get hammered for a 4-6 day period I'll be more interested in getting heavier on the long side.

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