PORTFOLIO CHANGES FOR SEPTEMBER 29TH
I announced on Twitter the initiation of a position in FCX at 32.20 today. It's a small position and will remain that way. Not because I feel the position has excessive amounts of risk or lacks potential. But rather due to the fact that it's an individual stock. I'm not comfortable with individual stocks at this juncture of the market. I wanted to a way to play a coming move up in copper, I think FCX is an aggressive way of doing so, which is why I made the exception. I also took profits on the remaining portion of my DZZ long (short gold) position at 5.32. The position was initiated on August 31st at 4.33. Total profit on the trade was roughly 20% in a one month time period. I remain bearish on gold but am of the belief that it will rally with the market over the coming weeks. I should be able to put on the position at higher prices in November. I continue to believe gold is headed towards 1300 and is now broken over the intermediate term. Current holdings in order from largest position to smallest: TMV, FAS, FCX and 40%...
ANYBODY INTO WINDOW UNDRESSING?
It's not window dressing, it's window undressing. That's what has the potential to do the greatest damage to the markets as we move into the weekend. It's the end of the quarter. Very simply, this means that fund managers holdings suddenly become fully transparent, as they are required to report them via 13F filings every quarter. Since a majority of fund managers are eating bear scrotum this quarter, you can imagine that the anxiety is high going into the last couple days before the end of the quarter. As a fund manager, there is absolutely nothing more humiliating than releasing your 13F to the watchful eyes of investors and having a bunch of names on there that are down 20, 30 or 40 percent from their highs a few months ago. In order to perform damage control to an already skeptical and frightened audience of investors, fund managers are being forced to reduce their worst performing positions into the end of the quarter. This very simply means that the big losers turn into even bigger losers. It also means that there is opportunity as the markets have the potential to become artificially compressed over the next couple of days. I mentioned last night that there was a good chance that we would sell-off following the disappointing last hour of trading on Tuesday. The momentum to the downside may continue right into Friday, irrespective of a positive vote out of Germany, which I think will be the case. I am eagerly looking forward to buying this dip if it does occur. I have a 25% allocation of cash I would like to put to work in order to be fully invested. If we don't get the dip, I will be happy with the 75% allocation in TMV, DZZ and FAS. This isn't a market to even think about chasing up. The bottomline is this: You don't want to try to get too cute here. Catching the bottom tick or waiting for a specific price point in the S&P just isn't smart. We're very close to an important intermediate term turning point in the markets that could yield significant upside results over the next 4-6 weeks. It's not something that is worth missing because you wanted to time the market to the day, hour and minute of the last tick down. Two things I am sure of are 1) The structure of the range is one that suggests an upside reversal NOT a continuation to the downside 2) The sentiment confirms that only under the most grievous of economic scenarios will we breakdown significantly from here. In other words, an anomalous...
WE’RE IN THAT WINDOW…..BUT
There's always a but. Especially when you have a newly formed group of buddies in the EU who are genetically predispositioned to dislike their neighbor to the north, south and west. Suddenly the once brilliant idea of bringing everyone together to compete with the United States and allow the European economies to flourish without borders has become the equivalent of making Los Angeles the capitol of Texas. Everyone hates the idea and each other as a result. The rally today should not have fizzled in the manner in which it did. The shorts and under-allocated longs were in the perfect position to be taken advantage of, but the market couldn't capitalize. That is a short-term negative. On the other hand, we are in a time period when the buying window has opened. The next several weeks have a very high percentage probability of being quite bullish. You saw an example of the pent up demand for risk today. There is a disease of under-allocation to equities taking place that is based on fearful expectations of another autumn disaster. Earnings season in October is going to be far above expectations. The economic reports will show that fears of the European contagion hitting US shores have been exaggerated. The lack of risk in portfolio managers portfolios will become quite apparent right as time to bring in those gains is running off the clock into year end. This should result in a mad dash into riskier assets. All intermediate-term positives. There is a better than coin-flips chance that the markets will fall into the end of the week. Volume will be light due to the Jewish holiday. And let's not forget about the constant flow of news coming out of Europe as they attempt to put together a rescue plan for what ails them. I have a 25% cash allocation that I will be looking to put to work should the S&P 500 fall below 1120. I have no interest in shorting the market hoping to catch the next few days of downside. I'm in accumulation mode here, as the intermediate term opportunity is on the bullish side of the trade. Should we manage to finish Thursday's trading above 1180 on the S&P, then the lows may have been set earlier in the week. However, a momentum driven decline either today or tomorrow may move all the way down to the recent lows, as it will indicate further worries about Europe right before they face enough pressure to finally agree to a deal, despite their differences. If this all sounds confusing, look at a chart for the S&P over the past two...
PORTFOLIO CHANGES FOR SEPTEMBER 26TH
Took profits on another 25% of gold short DZZ at roughly 5.30. The DZZ trade was initiated on 8-31. The remaining 50% of the trade will remain in the portfolio for the intermediate term as I believe gold is headed towards 1300. Bought more FAS at the close at roughly 11.65. FAS is now a mid-sized position. Initiated this position on Friday. Reasoning is here. The portfolio currently consists of a long 20-30 treasury yield position (TMV), a short gold position (DZZ) and a long financials position...
GOLD HEADING TO 1300
This article also featured on Forbes A simple answer to a question that I have received with increasing frequency over the weekend. On August 21st, I wrote an article entitled, "A Note To Gold and Silver Bulls: Your Gig Is Up". In the article I outlined the reasons I believed gold and silver had no catalysts, other than developed economy and governmental Armageddon, to drive the prices forward. Looking at gold following Friday's historic plunge, it is now apparent that gold is technically broken. Rallies from this point forward will be sold with increasing frequency. A historic move down in an asset class that has received an abundant amount of publicity - whether on the radio, through newsletters or at the corner "Cash 4 Gold" stores that are popping up everywhere - does not simply end with a one week spike down, followed by a move to new highs. What Friday marked was a beginning in the trend down rather than an end. The mission of gold has now switched from rinsing the pessimists to ruining the optimists. It's a process that will take months, not weeks. It's a process that will have gold heading to 1300 before sentiment shifts to a point where the calibration between buyers and sellers becomes fine tuned sufficiently to support a multi-month attempt at another run to the upside. From a fundamental standpoint gold continues to lack catalysts to put together a sustained move to the upside: - The inflation trade: Finished. It has now become a deflation trade. Emerging markets are underperforming. The US Dollar is in full bull mode. The commodity sector in general is being reshaped as a result. Gold is a commodity with rabid groupies that have nude posters of the metal posing in a safe deposit box. Because of this fact, gold is seen as being immune from the rest of the lowly commodity sector. Once emotions and obsession are allowed to separate themselves from reality, it will become clear that gold is not immune and is in fact more vulnerable due to the emotion surrounding the commodity. - The fear trade: One of the primary reasons gold was a screaming short above 1800 per ounce was due to the fact that it wasn't responding to the consistent anticipation of Europe dissolving into a sub-continent of China. We're at a point currently where the anticipation of the dissolution of developed economies and governments is at a peak. Yet gold just had a historic week to the downside. Short of Europe and the United States plunging into the dark ages in the coming weeks, there is little that can...
8 CHARTS THAT WILL MAKE THE GERMAN CHANCELLOR FRENCH KISS THE GREEK FINANCE MINISTER
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BLOOMBERGS SELECTION OF VIDEOS TODAY
A picture speaks a thousand words. The blind leading the...
FOR THE FIRST TIME IN OVER 2 MONTHS…..
I've taken on long side exposure relating the US equity markets. I initiated a position in FAS on Friday at roughly 10.50. It's the smallest position in the portfolio for the time being. I may add in the near future. Depends on what I see, hear and smell in the coming days and weeks. In my article from 9-22 entitled "Black Clouds and Traumatic Memories", I briefly discussed a discounting mechanism that I believe is apparent in the marketplace currently and is receiving very little mention. The traumatic events of 2008 undoubtedly left lasting mental scars amongst the majority of professional investors that currently dominate Wall Street. The relatively short amount of time between the 2008 crisis and the current crisis - not to mention the similarities - are causing investors to face the same fears as they did in 2008. Given the flashbacks and propensity for survival amongst those who are making vast sums of money, you can be assured that fund managers are taking every step necessary to make sure that they don't lose a source of income that will be impossible to replicate should the market repeat the events of a few years ago. In other words, risk has been taken off completely and totally in the name of job security. Given this set of circumstances how much of a repeat of 2008 fear discount is being factored into the markets currently? Even more importantly, how much of a repeat of 2008 fear discount is being factored into the financial sector currently? After all, the financial sector is what was behind the events of 2008. The financial sector caused massive wealth destruction amongst those who thought that Lehman and Bear going down was an impossibility. The financial sector became the poster child for over-leveraging and lack of oversight or perhaps lack of understanding with respect to fundamental truths about markets. There is no sector that is as negatively influenced by this discount as the financials. With that said, the greatest potential for mispricing and therefore, most significant upside is in the financial sector. You can study the balance sheets of JP Morgan (good luck with that if you try, by the way), Goldman, Bank of America and Citi until your eyes falls out and bounce around your desk. It's not going to take into account the core reasoning behind all price movement: Emotionally driven aspects of human psychology that depend on monetary fulfillment in order to derive a sense of security to further cultivate the fundamental motivation behind all living things - procreation. A subject for another article. Once fear gives way to rationality, it will...
PORTFOLIO CHANGES FOR SEPTEMBER 23RD
I posted on Twitter this afternoon regarding a trade I initiated in FAS. I am looking to gain some equity exposure. I think exposure to the financials will provide a good vehicle once the market bounces next week. I will go into more detail over the weekend. FAS was initiated at roughly 10.50. I took profits on 25% of my short gold position in DZZ at roughly 5.20. The DZZ trade was initiated on 8-31. I am holding a majority of the position as I believe we are closer to an intermediate term beginning of a downtrend than anything resembling an end. Short-term there could be a bounce as the move down today was historic in proportions. Lots more this weekend, including the weekend chart review on...
PORTFOLIO CHANGES FOR SEPTEMBER 22ND
- I took profits on my short Euro/long Dollar position EUO at around 19.10. I initiated EUO on 8-29-11 at a price of 16.55. - I added to my position in TMV around 15 I currently hold DZZ, TMV and good ol' American cash.