Friday, August 6, 2010

Bookkeeping: Short Some TNA as a Hedge Plus Worthless Prediction of the Week

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Every so often I like to get all "Doug Kass-like" and make a prediction.  I spy a little gap in the S&P 500 chart from Monday morning's gap up; it is in the upper 1106 level.

I do solemnly predict that next Tuesday post 2:15 PM the 4 year old toddlers that make up the market will whine in unison when 'easy money' is not immediately handed out and the selloff that ensues will fill that gap.

If this prediction does not happen, this post never happened.

However, I feel naked without some shorts on so as a hedge I am throwing some short TNA on the barbeque, about a 4% allocation.  This is both to benefit if my prediction is correct and because I don't like having zilch on the short side of the ledger. (note: in the real world I'd just go long TZA)



I would like to see a break of 1114, and push down to close to 1103 to at least shake up the bulls a bit from their now "bullet proof" status (backstopped by their belief in all things Bernanke)  You can still make a bull case as long as 1100 holds and the market bounces.

While the market has become all one large correlation I am wondering if there will ever be a separation between companies that rely on American consumers (which you want to short) and companies that are in America but rely on Asians (which you want to be long).  If so large(r) caps should outperform and small(er) caps should underperform - I am generalizing of course, there are exceptions.  But from 40,000 point of view companies which are smaller tend to be more domestically oriented.  This would be far too logical for a market that now runs on 1st grade logic ("risk on mommy!" "waaah! Uncle Ben did not give me what I wanted!"), but I'd love to see it.

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