MarketBook 3/11/08

Here is the bottom line:  I am either extremely stupid or extremely smart (or just crazy, in which case both could apply).  I have managed to restructure my portfolio significantly.

First, let me explain why.  I didn’t do it for the heck of it.  I had found that I was not benefitting off of volatility, nor was I even tracking the S&P 500 as closely as I originally had.  So, when the market was down, I was down.  Likewise, when the market was up with a great day (like today), I didn’t go up much, and actually still ended down.  Now, granted, some of that red was do to an option play that I have on my account right now, but I will get to that in a minute.  So, I restructured my account to play volatility more closely, because I think we’re going to be dealing with that more in the next few months than the ups. 

Here’s what I have done.  I sold off most of the Powershares ETF’s that I was tracking.  They were non-movers and just weighting me down.  I took some losses, but nothing earth shattering.  Then, I boosted my fixed income allocation by purchasing Lloyds (LYG), AT&T (T) and France Telecom (FTE).  I purchased these, based on fundamentals, technical analysis, ratings and yield.  Now, on to the questionable moves …

I made one option move.  The Spider tracking energy (XLE) was showing interesting charting analysis, so I took an option position with it (I wasn’t brave enough to short it).  Let me pause here to point out that I am one of two people in the world (Boone Pickens is the other) who is shorting oil right now.  Yes, I see that its over $108/barrel, but I am sticking by this call.  On that note, I am shorting it because I think it will drop in the next two months (i.e., bursting bubble), but then I think it will be up into the $120’s by the end of the summer/early fall.  The only bad thing here is that this option will be up on 3/22, so I don’t know how XLE will fare with a $74 strike price.  Unless this fund comes back down in the next week (which it very well may), I might have to let this one ride.

This was not my only oil short play I made, though.  I purchased 50 shares of DUG, which is ProShares’ ultra short energy play.  Needless to say, it was down today, but I am confident in this one, and I will hold it at least until the energy bubble starts to leak. 

Continuing on, I did make one short play.  North American Palladium (PAL) closed yesterday at the $6.57 range and I shorted at $6.56.  Today, it is trading at $7.46.  Yeah, you do the math.  Perhaps I’m adopting the gravity strategy (“what goes up, must come down”), but at this point it isn’t looking like the best move.  Not to worry, there’s plenty of time on this one, because there isn’t a great deal of money involved. 

In other moves, I also made some small plays for IOM, WRLS and KDKN (maybe I’m not completely shorting energy after all).  I don’t expect tons of movement out of these right away, but I do think there’s potential.  Again, not huge plays, but we’ll see. 

Next, I’ll be shorting the dollar against the euro, but that’s a different story for a different day. 


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