Updated Position Sheet

Cash: 83.5% (v 64.8% last week)
Long: 7.8% (v 12.7%)
Short: 8.7% (v 22.5%)   [please consider most of this is currently long US dollar positions, which we're using as a hedge i.e. short]

This data is updated weekly and can be found on 'Performance/Portfolio' menu tab on the website. As always the total gain/loss (both dollars and percentages) only apply to the open portion of the position; it is does not apply to portions of the position sold earlier.

[click to enlarge]

LONG (2 photo files)

SHORT

OPTIONS

Job Loss Rates Across Post WW2 Recessions [Chart]

I've posted this chart sometime in 2009 but trying to find old data within some 6000 historical posts is proving to be increasingly difficult!  However, with the newest data provided Friday - even with the caveat that the government's data is subject to being understated - we clearly see that "Houston, we have a problem."  So rather than arguing with people about 25K jobs here, or 50K jobs there - this type of graphical representation shows just how distressed the labor market in America is.  At this point in the (cough) recovery we should be creating 300-400K jobs a month, not debating whether the government is understating the data at -20K versus -100K.  This is like arguing if the deck chairs are arranged nicely enough, as we just hit that North Atlantic iceburg...

[click to enlarge]

Source: Economix, NYT

At this point, in nearly every recession post WWII, except the one that began in 2001, we had fully recovered all jobs lost.  Now we are celebrating "flat lining" at a level of massive job deficit.  While the 2001-2003 job destruction took a long time to recover from, the job losses were a shadow of the current implosion.  This graph dovetails nicely with my prediction in 2008 that as we begin to talk up "the recovery", the pundits will once again underestimate how big the issue is due to the structural problems in the country. [Dec 15, 2008: The Economic "Recovery"]  So many jobs were based on bubbles, while others (in large swathes) continue to be shed as cheaper labor does it overseas.  PIMCO now calls this the new normal... I did not have a cool name for it in 2008, but I described it:

We are right sizing industry after industry to what consumption SHOULD be, not what it WAS. What will that post super credit bubble world look like? What would a world of 1997 or 2002 level credit look like? Where do you think state, local, and federal taxes will be in 2 years? 5 years? 10? to pay for all we are promising? Is anyone paying attention to the structural global changes that are happening under the surface that are (mostly) unstoppable?

That said, just because this is a punishing era for American labor, does not mean capital (and thus stocks) cannot enjoy profits and the stock market can benefit.  [Jan 12, 2010: Jim Cramer is Right]  But let us stop the nonsense about Main Street = Wall Street.  The flattening of the globe, means continued global wage / labor arbitrage - especially among the middle and working class.  It's the era of capital, not labor.  For Americans to compensate, deflationatiornay measures need to be allowed to happen in the country, to put costs back in line with incomes.  [Aug 18, 2009: Bloomberg Opinion - Deflation Theory is Lemon We've Been Sold]  Instead both the federal government and Federal Reserve are doing everything in their power, and layering countless more debt on our children to increase costs (prices).  Which is part of the reason we got here in the first place (massive credit expansion i.e. debt - was needed to keep up with the growing costs caused by "beneficial" inflation, as income increases for the middle class began to falter over a decade ago).  Indeed, inflation is the most regressive of all 'taxes'.  Eventually the market will overwhelm these not so "invisible hands", but in the meantime they continue to do incredible damage - all under misguided economic precepts that have become consensus.  The idea that layering on more debt for future generations so as to regressively tax the lower tranches of society today... and that's a good thing... as economic gospel is beyond me, but I'm in a tiny minority.

So we'll continue down the path of more paper printing prosperity [May 19, 2009: Paper Printing Prosperity Defined], holding our hands out to government to pay us [Jun 5, 2009: 1 in 6 Dollars of Income Now Via Government; Highest Since 1929] [Jul 30, 2009: Cash for Clunkers a Bit Hit, Government Asks "What Can we Buy You Next?"] because the costs of goods is not allowed to self correct to the new normal of wage pressures in Cramerica.  [Sep 4, 2009: Job Seekers Across America Willing to Take Substantial Pay Cuts] While focusing most of our job creation in all areas of government and pseudo government, (healthcare, education) because unlike private business - government can add costs that it does not need to pay for anytime soon with its unlimited debt creation.  Until one day we look in the mirror and see Greece.  (technically we are already there!)

Viva la jobless recovery of the ages. [Aug 14, 2009: No New Normal Say Some Economists, Prosperity Without Jobs?]    Since we are almost out of private workers to get rid of to maintain a functioning economy (still need our Walmarts, bars, and lawyers), and stimulus after stimulus is being issues yearly to protect those in the public (pseudo or otherwise) sector - more hemorrhaging of jobs seems almost inconceivable.   But at this point in the business cycle we should not even be having these sort of discussions... we should be asking if the US economy is going to create 300 or 400K jobs this month?  And I don't mean census workers, or fake jobs created in the birth / death model (only to be revised away a year or more later).

Economic recovery?  Tracking quite nicely to my predictions in Dec 2008.

Horror Show

I have been looking at a bunch of stocks either sitting at the very bottom of the portfolio with 0.1% allocations, or old holdings I am interested in getting back into - and the charts read like a series of Stephen King novels.  Certainly these are going to dead cat bounce sooner or later but there is no intermediate term good vibes to be found.  I am amazed so much damage has been done and the S&P 500 is only down about 8% from peak; many of these stocks are down by a third or more in 2-3 weeks.  I am struggling to put together a list of "want to buys" when chart after chart looks like this:

As for the S&P 500, I didn't really think 1046 would be in play today with the sanguine opening but as I type this we suddenly dropped a few points and now are at -1% on the session.  1052s and falling fast. How quickly the tide has turned for a market that was impervious to any weakness.

If the 200 day moving average is reached this afternoon I'll probably sell the majority of the puts (this time I went with SPY 106) I bought this morning, as outlined at the end of the previous post.  The position size was not as large as what we were holding for the selloff yesterday, but I simply wanted to get some of the exposure we moved out of ahead of the "news event" of the labor reports.   I threw some sheckles shorting BGU (3x big cap levered ETF) this morning as well.  I do expect a bounce off the 200 day when and if.  I am struggling to figure out what aside from index plays to use for any such bounces - for reasons outlined in paragraph 1.

For your moment of Zen, Senator Dodd says biparisan financial reform is at an impasse.... oh joy.  When I read about our leadership I sometimes wonder why the S&P is not below 300.  Since Dodd is "retiring" I can only wonder what financial firm he will be landing at in 2011... when we find out, we'll know which oligarch was most responsible for creating the 'impasse'.

EDIT 1:42 PM - well that did not take long.  1146 (edit: 1046) is here. Let's see what sort of bounce happens here.

EDIT 2:15 PM - sold 3/4th of SPY 106 puts bought this morning, for very nice profit around 40%ish (for about 4 hrs of work) as S&P bounces back to S&P 1048 range.  Trying to avoid greed and avarice to finish off a tremendous week.  I will reconsider buying if the 200 day moving average breaks but going into a weekend, I might just sit on hands.  So at this point we have fractional positions in SPY 108, 107, 106 puts - each reduced about 75% from original size.  The remaining 25% is the "house's money". The SPY 108 and 107 puts are up 100%ish from the purchase point.  By taking profits into the close both yesterday and right now, we've been able to profit from intraday waterfall type selloffs, locking in majority of our gains WITHIN the day, which means we had little overnight risk.  I'm comfortable letting the rest ride for now and watching. When the bounce comes (and it will) I won't need to catch much of it, since we had such a huge past few days. 

If there is a late day bounce I'll probably cut these positions even further. 

EDIT 2:30 PM - covered the BGU (3x large cap bullish) ETF that I shorted this morning, 3%ish gain but it was with 7% of the portfolio.  Will re-introduce to the portfolio next week if the 200 day breaks.  Done with it for the day.

EDIT 3:10 PM - cut the remaining 25% in all 3 puts by another 2/3rds, before CNBC goes to 8 hours straight of excited coverage about how this bounce off the 200 day moving average ahead of "Magical Mondays" (97% of the time a rally) means the bottom is in and all is well in the world.  Greece? Smeesh! I will use the dollar exposure as most of my downside hedge from here.  I'll rebuy puts next week probably after the 2% rally on Magical Monday.  We are back in a "white noise" area as we reach for S&P 1060, can easily go 15-20 points in either direction - no feel for the next 10 points.

It truly amazes me how trillions of valuation from day to day, hour to hour, are based on squiggly lines on a chart.  Talk about a textbook bounce off support.

EDIT 4:00 PM - and that boys and girls is why it is NEVER wrong to take at least part of your profits when they are available.  Surely there will be times you leave some on the table (almost EVERY time in fact) but profits can be fleeting.  Look at the title of this post in fact, written around 1:30 PM.  Haha.  The SPY 106 puts I sold around 2:15 PM I made 40% on, they peaked over 50% and by end of the day they went negative.  Looking forward to drool coming off the lips of CNBC hosts and the Fast Money crew tonight as we hear "fantastic" "unbelievable" "that's a reversal - buy buy buy!" and "the bulls are back in town".  Buy copper! oil! China! Heck, buy Greek stocks! Yeehaw.

A fun week! Let's keep this volatility going, so many profitable opportunities each day.

Bookkeeping: Selling 1/3rd UUP March 23rd Calls

We bought a batch of Powershares DB US Dollar Bullish ETF (UUP) Calls one week ago.  [Jan 29, 2010: Bookkeeping - Long US Dollar with ETF and Calls]  Due to volume issues with Investopedia (which tracks my trades) it is difficult (nearly impossible) to trade lower volume instruments, so I had to buy the March 23 Calls, when in a real world environment I said I'd buy the March 24 Calls.  (The 23's had much more volume last week) Obviously both have run up in that time, after taking a hit Monday and Tuesday.  As I wrote last Friday:

 

Currency is generally "slow money" not "fast money" but I love the technicals on the dollar here.


I am going to go, for the second time in the past few months, long the dollar - this time via both UUP ETF and UUP Calls. I am putting 3% into the ETF, and 4% into the calls - we will use March 23's (UUPCW) - in the real world I'd most likely be using March 24's (UUPCY) as they will provide much more upside as a % gain, but the volume in the 23's is much higher so it's easier for me to move in and out of, in the simulator I use to track my moves (which does not work well in lower volume instruments). The 23's are trading in the low .50s while the 24s are around 14 cents.

I now have a 36%ish gain in a week on the calls, so I am going to trade around a core position (I plan on remaining a dollar bull until the chart tells me not to be) by taking 1/3rd off the table.  I will buy that 1/3rd back on any material pullback as we saw Monday/Tuesday of this week.  There is no technical reason to sell here - the chart looks splendid. 

But here is the risk to bears.  The IMF (or Germany, but I believe it will be the IMF) is going to swoop in to save Greece one of these weekends.  At which points, the "markets" which love moral hazard, will react much like when the US said you can no longer short US banks, and in fact we are not going to let any other major US bank fail - the taxpayer be damned.   I expect when this event happens in Europe for speculators to rejoice and we could gap up 3%+ on any Monday.  There is no way to game that as an investor - the type of things we have to adjust for have nothing to do with investing - it is just how it will go down one of these weekends in my opinion.  Could be this weekend or 6 months from now.

So under that thinking, the "risk trade" (moral hazard trade) would go back on - the dollar crushed, Euro surge - blah blah blah.  Hence I am going to take profits along the way and I am never unhappy with 35%ish gains in a week.  These are on the March 23 Calls.  For comparison purposes the March 24 Calls I would have used in the "real world" could of been bought at 14 cents last Friday, and now trade at 20 x 23 (very wide spread) which would of been a 42% gain on the bid and higher if you could sell them at 21 or 22 cents.  Indeed that would of been the better play over the March 23rds as I predicted, and each 0.1% the dollar rallies from here the 24s will do even better than the 23s...

But we're working with what we can do in this environment; the March 23s are much more liquid. I am selling 450 of 1400 contracts (about 30% technically) bought last week at 53 cents a contract for 72 cents.

I am curious what "magical Mondays" (market up 17 of the past 19 Mondays) will bring to us next week. For now I have added back some of the puts I sold into the close yesterday, let's see if we can get one more nice selloff to end the week. (still targeting S&P 1045)  If not, we'll liquidate and go into the weekend swimming in cash.

Long UUP ETF and calls in fund; no personal position

Bookkeeping: Limit Buy Order for Wyndam Worldwide (WYN) Finally Hits

Talk about relative strength; all through these past few weeks of selling Wyndham Worldwide (WYN) refused to either revisit its 50 day moving average nor fill a gap a sliver below that moving average.  It took a selloff of yesterday's magnitude to simply push it back down to the moving average - but as I stated in another post - my limit order did not hit since I was waiting for the gap to fill.  The gap was finally "filled" today, and my limit purchase order around $20.60 executed.  This replaces the stock we sold on January 21st at $22.60.  That was like pulling teeth.

Since the market is so iffy I am going to keep a tight leash, and place a stop loss at $19.75 which is below the intraday low of mid December 2009.  In a sideways or upward trending market I'd give it more leeway.  If you are a believer in relative strength like I am, this performance should bode well when the market regains its feet.  This is the last stock in our portfolio to resist falling below the 50 day moving average.

And with that we are back to 1 material long position ;)

Long Wyndham Worldwide in fund; no personal position

Sovereign Risk Chart - Where Would the US Fit in, on Europe's Scale? Also, Bill Gross Chimes In

A very nice chart via FT Alphaville - that cross references fiscal deficit as % of GDP versus total debt divided by GDP for the European nations.  As we often have discussed the P(ortugal)I(reland)I(taly)G(reece),S(pain) - it is nice to see how they stack up, in graphical format.

[click to enlarge]

What I decided to also show above was where the USA would stand if it were a European country - I used a range because if I just used a "dot" someone could come in and criticize the precise placement.  The reality is we are now running a fiscal deficit of 11-13% of GDP, with no end in sight in the near term... and EXCLUDING liabilities of Medicare, Social Security, and now Fannie and Freddie which the taxpayer has unlimited losses on for the next 3 years - we are at about a 80% debt to GDP ratio.  And with the recent increase in the debt ceiling which will take us through the end of 2010, we are on pace to reach 100% by this time next year.  (GDP is a bit over $14 Trillion in the US)

So what does the chart tell us?  The US is a disaster and aside from Greece, we are worse than all the "PIIGS" we are hand wringing about.  I think this is very important for Americans to understand...

Now you may ask - why do people flee into the US dollar and its bonds when we are a complete mess?  The same reason the UK is not under fire by the market (yet).  The ability to kick the can, throw its people under a bus, lower their standard of living, and effectively steal their money.  It's called a printing press - a central bank who is happy to print new fiat money to pay for debts.  

This is what has the member states of the European Union in trouble - they do not have their own "in country" printing press anymore.  So they face actual hard decisions.  America, Britain, and Japan (which would be WAY to the far right of the European states at 200% debt to GDP) are happy to go the backdoor route - rather than deal with the issues at hand they are happy to print money. [Jan 13, 2010: Kyle Bass of Haman Capital - Japan Defaults on Debt or Devalues in 3-4 Years; US in 10-12]  Which is why the value of your dollar, over the long run, has been crushed.  And effectively is the basis of inflation.

As investors, here is the other problem.  This is not a 1 week issue, or 1 month, or 1 year.  These are issues that will be hanging over us constantly.  We've been discussing them (specific to the US) since 2007 inception.  We've been discussing the European issues since mid 2009.  Many months it did not matter one iota - but as we like to say "it matters only when it matters".  Now it matters.  Maybe after the IMF comes in to rescue Greece the market will surge 5% overnight and we'll cheer! Problem solved!  Then what?  Then another decade of more sovereign debt issues - one country after another.  A massive headwind.

Bill Gross weighed in on this issue yesterday on CNBC ... he pretty much sums it up; please see 7 minute video below.  It's so very important to understand this, and how the awful decisions of our leadership - in cahoots with our Federal Reserve is helping to erode the American living standard in a very stealth manner.   We are Greece - but with money trees.

(email readers will need to come to site to view)

Trend No Longer Bulls Friend

When listening to most investors talk about the market, the thing that strikes me is how hard it is for people to change their directional bias.  We are raised to buy stocks, and therefore have a bias upward.  Each dip is greeted with "when should I buy?".  We are told over the long run stocks go up.  In the long run we are all dead however.

I would argue that right now, one must adjust their thinking 180 degrees.  Most of the time, including the past 11 months, the only question is what dip do I buy?  Now the question is what surge do I sell into?   For 11 months if you dared to be short it had to be quick, and precise or you got your teeth kicked in.  There were down days, and even a few corrections within the uptrend.  But now you have to think if you want to be long it has to be quick and precise.  There will be rallies along the way - but just as you had to take advantage of the few down days to cover shorts, now you have to take advantage of the up days to sell long exposure.  At least until the market changes its overall trend.

We are going to see oversold bounces along the way, and due to our natural bias everyone will constantly ask "was that the bottom?" "should I be buying here?"  But these bounces, which could be profitable for the extremely nimble are now akin to the drops we saw in the market the previous 11 months.  Only the agile need apply.

This is not a chart you'd want to show to small children or family pets.  The S&P 500 can rally a good 30 points from here and still be screaming "get the heck out of Dodge". 

Just remember Monday and Tuesday of this week if that bias inflicts you - yes there was a very short term opportunity to buy stocks but all it was, was oversold stocks bouncing into resistance. If you were not quick, you were dead - and aside from daytraders that sort of trading does not apply to the majority of the populace...


Nothing goes in a straight line and we now have a very obvious target of the 200 day moving average (S&P 1046) as an eventual goal.  That doesn't mean the S&P can not pop upward first.  But make no mistake, the easy bullish trend finally appears to be broken, at least using the (daily) technicals.  Those who rely on weekly measures still might be holding out hope; but I expect some of that hope was extinguished yesterday...

My strategy will be to pick at some stocks along the way here on the long side (but not yet) - many names in my watch list are now down 30%+ in just a few weeks.  I'll give them a whirl closer to the 200 day moving average on the S&P 500 and try to make a few sheckles, but with tight stop losses.  If this is a garden variety 10% correction we are about 3/4 of the way through.  If it's 20% type of correction we are 1/3rd of the way through.  But even a 10% correction will mean breaking through the very important 200 day moving average on the S&P 500...

Confusing Jobs Report

As always, the monthly jobs "report" is in fact 2 reports; on first glance it's a confusing batch of data.

The unemployment rate in the past has been falling in the more commonly cited survey due to massive numbers of people dropping out of the workforce in the less followed survey.  Remember, in America if you are not "actively seeking work" for 4 weeks you disappear.  This has been helping to surpress the unemployment RATE for the past 18+ months as people seem to be giving up... i.e. as job losses continue, the unemployment rate has been falling the past few months.  Will have to look to see if this is the reason for the drop of 0.3% in the unemployment rate (9.7% from 10.0%) or if there are other factors.

The "825,000" newly unemployed estimate via annual benchmark revision figure [Feb 3, 2010: US to "Find" Extra 825,000 Unemployed this Friday after Birth/Death Model Revised] seems to be a much higher 1.2 million on first glance but will have to investigate that one further as well... the quote was 7.2M unemployed was revised up to 8.4M.  If true, that is horrible - that's about 18ish full NFL stadiums of new jobless the government just found under a rock.

The workweek picked up a tad from 33.2 hours to 33.3 hours

Temporary worked added another 50Kish - what we won't know until a few years from now is if the new American workforce is turning into "disposable" - i.e. much more skewed to temporary workers, OR if this is the traditional early cycle surge you see in job growth, where temp workers are hired before full time.

Wages went up, I believe 0.3% which is in the higher range of the past 2+ years.

Other than those 3 items there is nothing in the report we can trust as we see by the massive annual benchmark revisions (over 800K last year and what looks to be 1.2? million this year)  How can we spend any time analyzing figures that are anywhere from 70 to 100K a month wrong?

So we won't.

From the market perespective which at this time is all that matters - a large drop in premarket seems like it will turn to a modest +/- to flattish open.  Works for me; I just prefer not to see huge moves up or down in premarket.  My gut tells me market players are as confused as I am by the data that seems wacky.

Pledge Update February 2010

February 2010 pledge update below; as mentioned in previous posts we are on track for a summer 2010 launch.  .

The last month was down from the previous few, but still a solid $430,000 of pledges; this takes the total amount to 101% of the initial goal of $7M.  The "fund is funded" - at least virtually, will need to wait until the real thing this summer for the real iteration. (need to change the website name now?)  The total number of investors is now about 220.  I will continue with my normal conservative projection of a $300-350K monthly run rate of pledges go forward for the next 4-5 months, which will take us to our goal for funds necessary by next summer.  From here, hopefully a buffer of pledges can be built in case some proportion of people will not follow through.

If you are a person potentially interested and new(er) to the website, here are the pertinent posts to become familiar with the specifics.

1. The overall goal and why I'm aiming for $7 approx million [Jan 7, 2008: Reader "Pledges" Toward Mutual Fund Launch]
2. Frequently Asked Questions [May 26, 2008: Frequently Asked Questions] Very important to read
3. Why I need your state [May 23, 2008: Investment Pledges by State] Keep in mind a state's eligibility can be turned "on" overnight once we're up and running
4. Most recent updates (this November)  [Nov 4, 2009: General Updates]
5. Our story in Barron's [A New Kind of Fund Manager]

Let me copy the same caveats for pledges as always:

1. Assume a pledge amount that is firm based on a fund opening in summer 2010.
   
2. Assume at any point in 2010 the market may be down 30% from here
3. Make your pledge based on liquid assets that are not currently in some high octane mutual fund that loses 40% when the market falls 30%, nor gains 50% when the market gains 40%. That money is not something that can be counted on in a volatile market.
4. Please have whatever monies are pledged to the fund, in money market or equivalent by April 2010 so it is not at risk in the market.
   

Format for fund pledge: first name, last initial, pledged amount, and state you live in. To be clear, you are not sending me money that I'm going to hold until launch when you 'pledge' - you are simply making a verbal commitment: "when you are up and running, I have $X amount ready to invest". You can attach a comment to this post or as most people do, send me an email (my email address is found on the upper right of the blog) with the above information. I'd prefer an email if possible.

Name	Amount	State/Country
Brian	5,000	???
Heather	10,000	???
Bob B	50,000	AR
Ed S	5,000	AZ
Alan N	15,000	AZ
Armour B	50,000	AZ
Dharminder M	100,000	AZ
Pat L	10,000	AZ
Ron G	10,000	AZ
Werner C	10,000	AZ
Art H	50,000	CA
Benjamin W	5,000	CA
Dave K	100,000	CA
Greg B	25,000	CA
Kurt C	10,000	CA
Ron W	10,000	CA
Tom L	25,000	CA
Ted C	5,000	CA
Brian L	50,000	CA
Rich P	30,000	CA
Shannon V	5,000	CA
Sunil K	10,000	CA
Anatoly S	10,000	CA
Wesley W	20,000	CA
Burt B	10,000	CA
John L	5,000	CA
Alven Y	5,000	CA
Piyush M	5,000	CA
Paresh P	5,000	CA
Dinesh K	5,000	CA
Naresh P	5,000	CA
Jay S*	5,000	CA
Shang C	50,000	CA
Henry C	3,000	CA
Charles Y	100,000	CA
George	5,000	CA
Ross T	5,000	CA
James H	5,000	CA
Dana K	25,000	CA
Walt C	30,000	CA
Charles L	20,000	CA
Greg W	20,000	CA
Raj	10,000	CA
Judy M	20,000	CA
Dave H	20,000	CA
Akash A	6,000	CA
Adam S	5,000	CA
F.A.	50,000	CA
Brian C	25,000	CA
Mark R	10,000	CA
Steven L	25,000	CA
Diane H	100,000	CA
Giancarlo S	2,500	CA
Scott W	50,000	CA
Henry C	8,500	CA
Jason N	30,000	CA
Marvin L	10,000	CA
Mike C	10,000	CA
Adam B	50,000	CO
Alecia C	75,000	CO
Seth	3,000	CO
Dieter	5,000	CO
Mike H	15,000	CT
Michelle T (Bob)	20,000	CT
Mark B*	25,000	D.C.
Elaine C	20,000	D.C.
Tom E	5,000	DE
Vic C	10,000	FL
Wes T	10,000	FL
Ron S*	100,000	FL (sailing)
Olivier N	10,000	FL
Bob H	3,500	FL
Chris I	20,000	FL
Dave C	25,000	FL
Kevin D	5,000	FL
Patrick L	100,000	FL
Sandy S	150,000	GA
Andrew L	5,000	GA
Mark L	2,500	IA
Jeff M	20,000	IA
Ian J	5,000	ID
Jay S	10,000	IL
Mike P	500,000	IL
Vivek G	75,000	IL
Ben	10,000	IN
Matt L	5,000	IN
Jake R	50,000	KS
Bill H	5,000	MA
Bruce W	2,500	MA
John B	20,000	MA
Don D	50,000	MA
MB	20,000	MD
Raeann	10,000	MD
Mark	60,000	MI
Ralph B	50,000	MI
May L	30,000	MI
Rich S	5,000	MI
Y.O.	15,000	MI
Scott L	7,500	MN
Tom S	20,000	MN
James W	5,000	MN
Marshall H	5,000	MO
Wolfgang S	7,500	MO
Nathan J	10,000	MO
George L	10,000	NC
Brian C	5,000	NC
Colleen P	5,000	NC
Paul F	5,000	NC
Adam B	10,000	NJ
David B	50,000	NJ
Frank G	500,000	NJ
Henric B	25,000	NJ
Ryan T	7,500	NJ
B Shah	2,500	NJ
Rama R	4,000	NJ
Richard H	100,000	NJ
Vijay K	75,000	NJ
Howard A	5,000	NJ
Jordan L	2,500	NJ
Andy/Diana H	12,000	NJ
Jack L	10,000	NJ
Josh R	5,000	NJ
Lisa W	50,000	NJ
Tony D	15,000	NJ
Andrew	100,000	NV
Arun K	25,000	NV
Tom S	25,000	NV
Gary M	10,000	NY
Rob T	20,000	NY
Igor O*	500,000	NY
Chris Y	10,000	NY
Tim C	20,000	NY
Atul R	5,000	NY
Rob #2	6,000	NY
Marc E	7,500	NY
Bob M	100,000	NY
Felipe V	5,000	NY
Lester B	100,000	NY
Matt Z	5,000	NY
Tariq	5,000	NY
Adam M	10,000	OH
Justin K	30,000	OH
Robert S	2,500	OH
Dan W	5,000	OH
Dilip K	5,000	OK
Blake V	100,000	OK
Ryan	3,000	OK
Michael G	2,500	OR
Joe V	50,000	OR
Bill G	10,000	PA
Jatinder M	10,000	PA
V.K.K.	20,000	PA
Bruce R	100,000	PA
Joe C	10,000	PA
Nathan S	3,000	PA
Robert T	75,000	RI
Heidi H	25,000	RI
Doris S*	100,000	SC
Steve	100,000	SD
Dave S	20,000	TN
Matt S	10,000	TN
Pankaj S	5,000	TN
Lukas V	5,000	TN
Joe P	10,000	TX
Doug M	40,000	TX
H.S.	2,500	TX
Ian*	50,000	TX
"Phong"	10,000	TX
Jason D	5,000	TX
AZ	10,000	TX
Glenn J	5,000	TX
Samba V	20,000	TX
Coby S	50,000	TX
Alex T	10,000	TX
Shane V	25,000	TX
Greg R	20,000	TX
Brian J	5,000	TX
C Dilber	5,000	TX
Scott V	30,000	UT
Chair	20,000	VA
Lisa	5,000	VA
Zhong L	10,000	VA
Madhu I	50,000	VA
Brian D	50,000	VA
Jake D	37,500	VA
Matt G	10,000	VA
Paul Z	10,000	VA
Robert W	5,000	VA
Kevin L*	125,000	VT
Ron	20,000	VT
Linda A	15,000	WA
Scott R	100,000	WA
Mike H	2,500	WA
Eric S	50,000	WA
Cathy K	20,000	WA
"Himalayas"	20,000	WA
Tyler	10,000	WA
Danny N	10,000	WA
Jason E	5,000	WI
Gary S	10,000	WI
Jason	10,000	WV
Paul	100,000	Z-Austria
Stan T	10,000	Z-Canada
Steve L	10,000	Z-Canada
Brian M	5,000	Z-Canada
Stockspeter	7,500	Z-Canada
Anurag V	20,000	Z-Germany
Ken	250,000	Z-Hong Kong
Kumar K	25,000	Z-India
Barry R	10,000	Z-Ireland
Antoine F	10,000	Z-Luxembourg
Nick E	30,000	Z-New Zealand
Adrian C	75,000	Z-Romania/EU
S.E.H.	12,500	Z-Singapore
Junyuan	2,500	Z-Singapore
Tomaz K	20,000	Z-Slovenia
Ward P	2,500	Z-Sweden
Anil	25,000	Z-Switzerland
KP	5,000	Z-UK
Howard L	10,000	Z-UK
David X	5,000	Z-UK
Nestor T	25,000	Z-Uruguay
Harsh N	5,000	Z-UAE
Total	$7,067,000
Goal	$7,000,000
% of Goal	101.0%
To Go	($67,000)

Wow, 3% Loss - It's Feeling All 2008 Again

Fun fun fun, til your (sugar) daddy takes your Quantitative Easing away.

I will be selling 75%s of both puts into the close since it's such a bad close.  That does not mean I think the market will open up first thing tomorrow; I simply cannot turn away such gains in less than 7-8 hrs.  These SPY puts will be up 50%+ unless the market reverses in the last 3 minutes ;)

I don't look at the Dow Jones much at all, I admit it - since its such a narrow index (30 stocks) but the 10,000 mark means a lot psychologically.  I still remember the "New Year's" type hats CNBC broke out when we first crossed over in 1999.

Bookkeeping: Stop Loss Triggers on Assured Guaranty (AGO)

And then there were none.  While I still have about 7% long exposure remaining, this stop loss that just hit in Assured Guaranty (AGO) has taken out of our last material long position.  This also means only 1 stock we own is above the 50 day moving average (WYN) - I've been waiting for a gap to fill on that one; incredibly strong stock- looks like limit buy order missed by 10 cents or so today on that one.  So we have a bunch of 0.6%, 0.4% type of exposures and will miss out on most any counter trend rallies back to the upside, since we are pretty much naked in terms of equities.

The stop loss in AGO was for 60% of the position at $21.56.  AGO looks well on it's way to filling a "gap" in the chart under $21 now that support broke. I find it ironic that probably the most controversial (for fundamental reasons) stock I owned was the last holdout out of all our major positions.

I suppose when people ask how do you know when to be skewed to an overweight long or short - the answer is quite easy much of the time.  The market will take care of it; in the past 3 weeks we've been stopped out of some 20 positions... week by week, one by one.  Much of it 2-3 weeks ago.  In the end the stock market is a market of stocks... simple as that.  Even if I wanted to go against myself, and start buying stocks - with my strategy of buying strength and good charts, I don't have many candidates to choose from anymore.  Betting against this market now (going long) means being happy to catch falling knives... which from experience is a painful experience 90% of the time. The other 10% can be a very profitable adventure but 10% odds are not my thing.

Long Assured Guaranty in fund; no personal position

Same Game Plan as Last Friday Ahead of the Labor Report

I expect tomorrow's labor reports to create the normal "gap up" or "gap down" as happens most months, when we act as if all the world changes based on an extra +/-25,000 people the government tells us are unemployed. (which they will revise down within the following year anyhow).  I have the same disdain for that headline knee jerk reaction as I do with how people treat earnings reports... it's over the top, but that's our Ritalin addicted society.  I still think the intermediate term is down but in case the lemmings find joy & solace in government data, I don't want to give up some nice profits.  That said my gut tells me whatever the number and initial reaction tomorrow AM - we still are going to be selling off in the days to come.  Not only do the indexes now look terrible technically I have 1 stock out of 25 in my portfolio that is above the 50 day average.  My watch lists are full of broken down stocks as well, so the individual equities tell a far more dire story than I am seeing in the indexes.

This morning I put about 11% of the portfolio from cash into SPY (S&P 500 ETF) puts.  I didn't short any of the levered ETFs because we are so heavily in cash and there is no reason to go hog wild to hedge the portfolio.  These puts are now up around 40%; just as last Friday when we did a similar play, I'll consider locking in 1/3rd to 1/2 (by selling) if we get a nice woosh down or the S&P 500 breaks back closer to 1080 on some sort of strange late day rally.  Obviously the preferred outcome would be some waterfall selloff into the close to maximize profts.  I still don't see panic out there but there is a lot of carnage in individual equities - red across my watch lists..

We have now made up the losses from Monday's premarket surge which took away the 1/2 of our puts that we ended up not selling last Friday.  (ironically if I had held those puts through the pain of the 2 day rally Monday and Tuesday they would be very profitable today - oh well, if only I could see the future).  Portfolio value at all time highs.  I really don't want to sell much of this until the S&P 500 hits the 200 day down near 1045, but it's prudent to take off the table large gains which come so quickly.  At least some of them - so by 4 pm we will.

S&P 1070 is being protected at all costs, as we assumed it would be.  Let's see what the final 30 minutes bring, very rare to see any sort of late day reversals either up or down anymore.

Greece's Biggest Union Sets Strike; Tax Collectors Stage 48 Hour Walkout

Hmmm... it looks like the Greek's austerity measures will be facing a massive fight.  Not surprising action - even locally in Detroit's school system where literacy rates among high school students approaches that of any fine 3rd world country, (pay for performance!) the teachers union won't budge an inch on any givebacks.  So a system which is a failure and a money losing one at that continues.  I assume the US taxpayer will foot the bill for this one via "stimulus!" err, I'm sorry "job creation plans!"

I expect the same across this country or any other, as turf once gained won't be relinqueshed.  It's a whole different world than the private sector.  The taxpayer, or federal government via new borrowings can just find more money to 'fix it'.  (just don't call it 'stimulus' - doesn't poll well anymore; we're using "job creation plans" from here on out)  Until the world market's say "no" such as in Greece.  But even then, the fight goes on.   This mindset is so entrenched even the tax collectors in Greece are walking off the job...

• Greece’s biggest union approved the second mass strike this month and tax collectors began a 48-hour walkout, showing that Prime Minister George Papandreou’s parliamentary majority may not be enough to implement his plan to cut the European Union’s largest deficit.
• GSEE, which represents about 2 million workers in the private sector, voted at a meeting in Athens today to walk out Feb. 24. The main public-employee union plans a Feb. 10 strike to protest spending cuts as Papandreou steps up budget cuts to persuade investors Greece won’t need a bailout.
• The tax collectors struck to protest cuts in bonuses to the public sector.
• Also striking for 48 hours are customs workers and Finance Ministry employees, who blocked entry to the economy and finance ministries in central Athens today, the state-run Athens News Agency reported.  (you know you are screwed when people inside the finance ministry, responsible for the new "austerity" are striking - hahaha)

Now of course the difference between much of western Europe and the US is the unions in the private sector have mostly been dismantled domestically.  But they are thriving in our public sector.  [Jan 24, 2010: For the First Time, More Union Workers Work in Government versus Private Sector]  Thus, when push eventually comes to shove in the US - it won't be the "people" v the "government" (government is the people ironically) as it is in Greece.  It will be the private sector vs the public sector employee - a theme we've been proposing for the past few years - we're just early.  And by the time we get to that point in the States, the private worker - enjoying another 5-10 years of "dog eat dog capitalism corporate socialism" - as opposed to the protections workers receive in European socialism, is going to be in a quite foul mood.   Something to look forward to!

• “It is still the beginning,” Stathis Anestis, the GSEE spokesman, said on the telephone today. The slogan for the strike is “people come first, markets and profit second,” he said. Anestis reiterated the union’s view that Papandreou’s government “succumbed” to the markets.
• Greece’s plan to narrow the budget gap won European Commission backing yesterday after the government announced more measures to reduce the shortfall. Papandreou promised to increase fuel taxes and raise the retirement age, while retreating on a promise to raise wages faster than inflation, a pledge that helped him win elections in October.
• Papandreou, 57, has appealed twice this week for Greeks to accept “painful” measures, saying the country can’t afford strikes and blockades. The previous government of Kostas Karamanlis was plagued by labor protests after he tried to tighten pension rules and raise taxes to shore up the government’s finances.

I wonder where the Greeks think money from "government" comes from?  (psssst...your fellow citizen.  Pass it on.)  I assume they think they have money trees like we grow in the US.  It's a shame that these trees only grow here....the soil is so fertile in the D.C. area you almost trip over the saplings.  It is good to be the chosen people....we play by our own rules.

• “Greece and the rest of the fiscally challenged periphery is still in for a bumpy ride, not least because the social and political opposition to austerity programs of this kind is likely to build from here,” said Russell Jones, head of global fixed-income strategy at RBC Capital Markets in London.  

[genus Magnolia Greenanke shown above, related to genus Juniperus Bernankespan; this variety grows like a weed in D.C.]

S&P 1070 Arrives - with Bells Off

We have now effectively retraced to lows seen last Friday, intraday.  A tad bit lower in fact.  I suppose the bull case is this can be a potential "double bottom" from which the "wicked awesome" employment report will launch a rally.

I am having none of that, although I'd expect bulls to defend this S&P 1070 level and an intraday bounce of some type should ensue.  Let's see how their efforts work out.   Quite a nice reminder of how quickly upside moves can be erased.  Monday and Tuesday were just blasted into the ether in a matter of 2.5 hours.

If / when this level breaks, another 25 "easy" S&P points lay below before any real support.

Bookkeeping: Stopped Out of 60% of DragonWave (DRWI) & EnerNOC (ENOC)

Make that 2 material long positions...

DragonWave (DRWI) joined the "breakdown" party and my stop loss in the mid $10.90s hit; reducing our exposure by 60%.  All the same comments as I made for Atheros in the previous entry apply here. 

EDIT 10:35:  Make that 1 material long position as EnerNOC (ENOC) stop loss also hit this morning.  2/3rds taken away just under $31.  Almost identical chart to Atheros...

Long DragonWave, EnerNOC in fund; no personal position

Bookkeeping: Cutting Atheros Communications (ATHR) by 66%

Yesterday, I mentioned we only had 4 material long positions.  We can make that 3.  And by the end of the day it might be less, pending if some stop losses hit. 

Through no fault of it's own, just a ratty stock market, Atheros Communications (ATHR) finally seems to be taking its required hit. It has now broken below the intraday lows it reached during the heavy selling last Thursday, Friday - which tells us it is time to pare back.  I am selling 2/3rds in the $31.80s and taking some moderate losses.  We'll shuffle that money into the cash account and twiddle fingers in the meantime.

I'll be interested in a return to exposure if Atheros jumps back over the squiggly blue line or (could it really happen?) falls to the squiggly green line.

Long Atheros Communications in fund; no personal position

Conditions Remain for Textbook Rollover in Market

While the moves have been spikey and much faster than I anticipated both up and down, conditions remain in place for a textbook rollover.  After the initial move down, our cursory oversold bounce did happen - generally these last 2-3 sessions.  The S&P basically bounced 2.5% in 2 sessions but much of the move was in very concentrated periods of time even within those 48 hours.  Yesterday was a stall out day, where the market was unable to make a new intraday high versus the previous day.  Today we have a dramatic selloff to start the morning, once more in a very concentrated period of time.

While the vicious nature of the moves in such short amount of times is hard to wrap one's arms around; the larger roadmap makes a lot more sense to me than much of what happened in 2009.  I recognize this pattern a lot more - since it was the one that used to work in mid 90s to 2007.  That said, watching the market move up and down so quickly - with seemingly no memory of the previous 24 hours - does tend to shake you out of some convictions.  The oversold rally tacking on so much of a % gain in just 2 sessions, certainly shook us out of short exposure - which now is a regretful action.

As we wrote in the weekly summary, you could make attempts on the long side as there was surely a bounce coming but you have to be oh so quick and only the most nimble should bother.  Very difficult for a "fund" to do - but I suppose an individual trader you try to roar in and out but you really had to come into the week long to really benefit.  That has played out perfectly.

We are approaching oversold - but that doesn't mean a dark day or two (or three) cannot lie ahead before a snap back bounce. The "oversold bounce" can happen Monday, Tuesday, Wednesday who knows. Just don't get excited about it, and be drawn in by the "Fast Money" crowd would will proclaim wonderful times are here again. In old school technical analysis, this bounce will set up some excellent short selling opportunities.


Expect commodities and foreign stocks - especially of the Chinese kind - to lead the oversold bounce... but it's only for the quick and nimble to play; others risk losing fingers or entire hands trying to catch falling knives.

I continue to see no reason to make any aggressive moves on the long side... and continue to view this market from the prism of the short side. A close below recent intraday lows (1071.50) should point to a new leg down and a test of the 200 day moving average below S&P 1050. Notice the 20 day moving average now crossing below the 50 day moving average which we noted would happen this week.

Despite that 2 day respite the advantage appears with the bears at this time.  This morning's weekly jobless claims was a horror - almost back to 500K.  I don't take too much stock in any 1 week's report but that was very disappointing.  Of course tomorrow morning's monthly report will have a ton of focus on it.

I've added some short index exposure this morning and continue to like the dollar here.  I have little interest in long positions.  I remain interested in protecting capital at this juncture - little else.  Cash levels are the highest in a long time.