MarketBook 4/11/08

I have been remiss on a new MarketBook post, for a number of reasons.  First, the past two weeks were so busy with 1) finishing a major paper for my masters (which I had to start over as a result of a computer issue after I was almost completely finished); and, 2) I had to travel to London for a business trip.

About three weeks ago, I changed my portfolio around to a point where I am pretty much long on everything.  I offloaded my positions that just weren’t turning out, and I have embraced a commodity-driven strategy that right now is heavy on oil.  I also have a couple of high yield long equity positions and one merger arbitrage play with the XM-Sirius merger (I’m long XM and have a put for SIRI).  Nothing has panned out on that yet, but next week’s options expiration date should be interesting.  I am fairly certain XMSR will not recover, but this is my play and I am sticking to it at least through the options expiration.

This is another thing that I am working on:  developing a strategy for every single trade and position in my portfolio and sticking to it.  I realize there will be times when volatility and changes in the marketplace will change a strategy; however, I had a bad habit of making changes to quick and sometimes my moves were outright rash.  No more of that.  Discipline is the name of the game from here on out. 

Another thing that I am developing, as I am learning more, is how to really develop a strategy.  I hear all the time how traders make moves on technical analysis or following analysts’ recommendations.  There will be no more of that for me.  If I want to be a serious investor/trader, then I must learn how to form my own quality analysis and develop a strategy around that.  So, now I am focusing on quality, rather than quantity.  When I have my own fund sometime down the road and a number of analysts looking through a great deal of data to find a higher volume of opportunities, then I will look more to quantity.  For now, however, it’s all about finding the best plays to fit my strategy amongst a smaller pool of good ones. 

The market is a weird place right now for a young investor like myself.  I have seen fluctuations, but it is safe to assume that some of the things happening right now are new to a far majority of investors, traders and portfolio managers out there.  That means it’s time to get back to basics.  Fundamentals, research, technical analysis and discipline is key now. 

On another note, I am managing a second portfolio now.  Without going into details, this has allowed me to increase the amount of money I am managing, in efforts to acheive higher returns, and hopefully build this as a business at some point in the future.  More on that later …

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