I took about 20-33% off in the following positions into euphoria today
- Quality Systems (QSII)
- First National Financial (FNF)
- Morgan Stanley (MS)
- Potash (POT)
- BHP Billiton (BHP)
- Smith & Wesson (SWHC)
- Blackstone (BX)
- O'Reilly Automotive (ORLY)
- Myriad Genetics (MYGN)
- Mastercard (MA)
In almost all cases everything I had a >2% stake in, and has risen >10%+ over past two days I took some off. I am a willing buyer on any pullbacks in these names - all except LEN have a nice chart. Unfortunately all these gains were obliterated by short positions - which on multiple days went up 20-30%+ this week.
Another rough week, and the constant short squeezes make it impossible to use technical analysis on individual names right now. I figured out what is so different this time around - usually these huge moves by the "bad stocks" happen at the beginning of the rebound - days 1 thru 5. This is week 5... and we are still seeing enormous short squeezes. This tells me a lot of hedge funds had the same exact thought process I did: "well if that's all they could rebound this far into a bull move (best 4 week move since 1933) then they must be safe to re-short at this point"
Not so much.
We'll make it up at some point later in the year... there are going to be some exceptional short set ups because the farther these stocks go up in a moon shot, the less support in their charts when the invariable euphoria turns back to reality. But for now, it's simply handing money over to the market to be shorting. Anything.
Again, this market is not lending to a hedged style one bit ... we've given back about 4% the past 2 weeks as government reigns down on our shorts - still targeting S&P 870 as an ultimate upside target, and then we'll see where things stand. I am finding individual stock charts completely useless the past 2 weeks, so flying blind and now I remember what it felt like when I first started in the stock market buying stocks. Groping around in the dark is not a great strategy.
Alternative strategies I should of employed in past month
- Putting entire portfolio into Citigroup (C) at $1 thirty days ago. It is now $3 or 200% gain
- Putting entire portfolio into short Direxion 3x Financial Bear (FAZ) at $113 thirty days ago. It is now (below) $11 or 90% drop.
Long all names mentioned in fund (ex C, FAZ); long First National Financial, Blackstone in personal account
6 comments:
hilarious graphic, good to see you have maintained your sense of humor.
every day, i watch the action and just shake my head.
who i really feel sorry for is joe 6 pack - i heard him today at work, on the phone with his broker, buying everything under the sun.
true story.
and a good contrarian indicator IMO.
The fact that Joe 6 pack still has a human broker is the first indicator of future doom for poor Joe.
"Hi Joe. We have this excellent REIT secondary we can get you in.
What's that? No, the institution we placed the offering to won't be flipping it to you for a 30% 1 day gain. We would never do that to you Joe. Now how many shares can I sign you up for?"
call me crazy, or just stoopid, but i'm shorting this nonesense. Everytime we get one of these crazy stampedes I close my short positions, step on the sidelines and wait for the day to finish - there's no point trying to catch the falling knives. Then at the end of the day, I open up short positions, usually in the form of FAZ or SRS.
I hold those shorts briefly until there is a day of profitaking in which they go up, then I take my profits before the end of the day and wait on the sidelines. Not quite a hedge mentality there, but we are living in strange times...
I've noticed also that the "euphoric" days make themselves clear early on. This one was clear even before the day started, when looking at Asia and Europe... too bad I've gotten so used to taking the bearish position that the only thing I can be happy about is that I was out the short position door before everyone else.
Hey Mark, I wonder if you came accross the article by Jeremy Siegel in which he states that the "S&P’s calculations are inaccurate because, while the firm uses a market-weighted average to determine the index’s returns, it does not do the same when figuring the index’s aggregate earnings..."
He's saying that b/c of this inconsistency the P/E of each share of the S&P becomes more exaggerated (798 had a P/E of 53, in his way of calculating earnings it would be 11).
I'd be curious to know whether you read the article and what your position is on the S&P aggregate earnings calculation. Here's the link to the article: http://finance.yahoo.com/expert/article/futureinvest/153794
ScottG, Seigel's train of logic is shaky at best. The sum of the earnings is the sum of the earnings.
That said, he did stumble on a caveat to the rule, which is that one needs to adjust for large negative earnings contributions (say from the banks).
This is because bondholders begin to bear a large portion of the risk in companies with negative earnings. Thus PE ratio starts to lose value when some companies are losing money in enormous magnitudes.
For example, if two companies have market caps of $100M and $1, and have earnings of $10M and -$5M, then saying the combined earnings of this index are $5M is laughable. But market cap weighting is not the reason, it is because the second company is no longer relevant to PE calculations.
I have not explained the concepts eloquently, but hopefully that clarifies.
Scott
What you are doing is different from what I am doing. A competent individual trader should outperform a fund IMO. More nimble, no worries about affecting prices, can go to cash every day if they wish.
Again, I am trying to manage a model that I think can work with a couple hundred of million in assets and won't be going to cash every night like you would. I think all readers should keep that difference in mind. I am never closing out all my positions every night etc.
re: S&P earnings it is much like the economic figures. As long as we all wink and nod unemployment is indeed 8.5%. As long as we all wink and nod and don't believe handing out options to executives or believe counting investment gains as "income" is a just way to judge the health of a company - and a valid way to judge profits than that is the consensus.
So it really does not matter that we've veered from any academic or "old school" way to measure things. This is the way we do things now and as that is the consensus it really is immaterial to go back to other methods.
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