FLASHBACKS OF A BATTLE FOUGHT IN 2004
Having a lot of visions of January of 2004. It's a period of time that I think about probably more often than any other time in my trading career. And January of 2011 is reminding me a lot of that period of time.
Why are memories of that period a chronic condition within my mind? It marked the performance peak for my hedge fund. Right around this time in January of 2004, my fund was up some 45% for the month of January...not for the year...just for the first few weeks of the month. This was after being up over 100% the previous 18 months.
From the middle of January 2004 until the beginning of 2006...trading the markets became a hellish nightmare. The boogie man was chasing me everyday and I couldn't get away from him. Needless to say, I gave back the 45% and then some in 2004.
I'm reminded of January of 2004 due to the fact that the market action and my results are very much alike. I had a triple digit percentage gain in 2010, just as I did in 2003. I haven't had any gains so far in 2011...portfolio is more or less flat...so that's a bit different. However, the market action is very similar.
We are coming off of a strong year in 2010, similar to 2003 being a strong year. The markets have continued their strength into the first half of January, just as they in 2004 and are now weakening during the second half of January...again, just as they did in 2004.
I don't think that 2004 is a bad roadmap to use for what can transpire in 2011. I don't think that we'll see the many months of weakness following January that we did in 2004. However, the general path and intentions of the market may be similar.
I also don't think...actually I know that my trading results won't be similar. My trading style and focus is so much different now than it was then. The ability to produce large gains still exists. However, the risk has been lessened through different methods of allocation and an increased focus on a very specialized niche within the market...that being reorganizations, shareholder activism, spinoffs within the micro-cap market. In 2004, I was trading anything and everything within my macro fund.
I will be posting a chart of 2004 for further study tonight, as it may give us important clues as to where we go and what to expect.
