Thursday, April 9, 2009

Bookkeeping: Euphoria Stampede

Quite amazing - I entered the week 4:1 long/short [Apr 5: Updated Position Sheet] and at worst was 2:1 long/short even at nadir, and still lost money this week. The magnitude of moves in these "quality" positions on the short side of the ledger is simply awe inspiring. So many short players; such a small door for all of us to rush out of at the same time - stampede! It reminds me very much of summer 2008 when the government instituted the short sale ban on financials and so many hedge funds were caught the wrong way - the short financial/long commodites trade blew up & reversed and the rest is history. Well until reality returned in September 08.

I took about 20-33% off in the following positions into euphoria today
  1. Quality Systems (QSII)
  2. First National Financial (FNF)
  3. Morgan Stanley (MS)
  4. Potash (POT)
  5. BHP Billiton (BHP)
  6. Smith & Wesson (SWHC)
  7. Blackstone (BX)
  8. O'Reilly Automotive (ORLY)
  9. Myriad Genetics (MYGN)
  10. Mastercard (MA)
I also dumped almost all my Lennar (LEN) as it hits resistance.

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
  1. Putting entire portfolio into Citigroup (C) at $1 thirty days ago. It is now $3 or 200% gain
  2. Putting entire portfolio into short Direxion 3x Financial Bear (FAZ) at $113 thirty days ago. It is now (below) $11 or 90% drop.
Magic 8 Ball failed to alert me of this "hedged" game plan.

Long all names mentioned in fund (ex C, FAZ); long First National Financial, Blackstone in personal account

Disclaimer: The opinions listed on this blog are for educational purpose only. You should do your own research before making any decisions.
This blog, its affiliates, partners or authors are not responsible or liable for any misstatements and/or losses you might sustain from the content provided.

Copyright @2012