MarketBook 4/21/08

When I see that my accounts are up 10 and 20 percent, I quickly became concerned about losing good gains, especially when I have no real clue as to where the market is going in this world of high volatility.  As a result, I put stop/limit orders on pretty much everything that I didn’t decide to unload. 

First, the things I decided to drop:  I have abandoned my high yield strategy … for the time being.  If I were investing in 2004’s market, then my portfolios would likely be made up only of high yield long positions that generate just as much income from dividends as they do growth, thus creating the value power-play, so to speak.  However, this is not 2004, 2005 or 2006 – this is post-credit crisis (although I wouldn’t say the crisis is past), mid-recession, 2008, earnings season no less.  Thus, I am adopting a temporary “risky conservatism” strategy whereby I am looking for short term plays, even if they fall under the day trading category.  I would feel much better about going to bed at night with the boards wiped clean, so to speak, rather than wondering without a clue what will happen in essentially all of my positions the following day as a result of at least a dozen different pieces of news that could affect everything.  As I have said before, if I had an entire research department or a trading floor of portfolio managers that could monitor these things, perhaps this wouldn’t be the case.  However, I am a one man show, for the time being, and as such, I can only do so much work and still keep those green numbers on the boards.

One of the key sources of uncertainty for me now is financials.  In this manner, I don’t think I am any different from anyone on or off Wall Street.  If someone tells you they know what is happening with financials, don’t walk, run the other way, if you can manage to run due to all the laughing you should be doing at them.  As a result of financials being the current black plague of uncertainty, I sold Lloyds (LYG) today, after it served as a high performer for a while now.  Why?  Because I have no business holding a financial as a part of a high yield strategy when that thing could be virtually any direction without notice, even when it is a UK-based ADR (I don’t consider the UK’s financials to be the essence of stability right now either).

I also sold my short term hold in GOOG today, not because I think it is a bad position, but because last week when I made that move, I did not have a chance to do adequate research, even though as you will recall, I spent a good while on this move.  So, in that situation, I will always put a stop/limit order on such a position so as to preserve my profit.  I admit that if I were a portfolio manager, this would not have been the best move.  But, if I were a portfolio manager, I probably wouldn’t need to be learning as a “young buck” and writing on my blog about my trading experience.  Instead, I would be spending my time walking my daughter through Green Park or buying toys at Harrods.  So, that is where I am with Google right now.  I can honestly say that I am torn as to where this stock is going.  My general feeling is to say that it will continue to rise; however, there is a part of me that says there is enough volatility out there, which wasn’t expressed in last week’s earnings, but is present enough to deliver significant declines.  Remember, just last week, before I made all of those gains from buying into the earnings injected increase, I was considering whether or not to short Google.  I’m glad I made the right decision then, but I am not necessarily convinced I have adequate information to make it again.  More on that to come …

Another stop/limit induced trade was EZA, which I still think is strong, because I still think emerging markets are a good play, based on macro-indicators.  I’m moving on from that ETF for now, but I’m not moving on from emerging markets.  I’m just looking for a better way to play that volatility right now.

OIL also got offloaded today, not because I’m going bearish on energy, but because this was another fund that ran its course with me.  For the record, I’m bullish on oil until $125 a barrel.  You can criticize me all you want, saying I’m a Jim Cramer/Goldman Sachs hack, but that’s a line that I’ve held for a couple of weeks now, even though I am just now coming out with my feelings on a specific number.  You may not have heard it from me first, but I will claim fame, if even just to myself, for being on this bandwagon. 

I’m getting back on the France Telecom (FTE) train, as I sold part of my position there last week after the acquisition news come out.  I am long FTE and depending on what happens with AT&T (T) tomorrow, I will hopefully have some better indication as to where telecom is going through the remainder of earnings season.  I may get back in or might hold back on what I currently have.  How’s that for a definitative strategy?!?

Just as a reminder, I am still long IEO and FRO.  Also, I sold my assets from the SIRI puts and DT calls that just expired over the weekend, both of which turned out to be very fruitful for me; however, I had no desire to hold them any longer.  While Deutsch Telecom was one of those that I’m shying away from holding long until I get a better feel for telecoms, I have had great fun making money off of the volatility that has surrounded the XM-Sirius merger.  While politically and economically, the hold-up of this merger is the most ridiculous thing that the Democrats have done since who knows when, the riskarb opportunities that have come up as a result has been enough to keep my entire portfolio busy if I would let it.  I’m out of that completely now, though, and I am not sure if I will risk getting near again until there is more definition on what will happen with the merger.  As Democrats are coming out everyday against the merger and what seems to be good news comes out of the government, I have resolved to the fact that an inefficient entity like the government poking its head in market efficiencies is a “recipe for red” and I don’t want any part of that Democrat-led socialism. 

Sidebar:  I like Jim Cramer.  I am one of those guys that genuinely like what I see and read about him.  He’s a goof yes, and many people on (and off) Wall Street think he’s a fraud, but I can’t help it; I like the guy.  However, his interview with Gene Green (D-TX) was a little lackluster.  I have agreed from the start with Cramer’s argument on the topic of the merger, because we’re both making the case for the market, and at first, I complemented Cramer’s interview.  However, looking back on it, he was way too accepting of Green’s party line, caucus generated arguments.  CNBC, especially Cramer, should have pushed him and everyone else much harder on this issue, yet for some reason, I think Cramer let him slip through by giving the Democrats’ argument on the issue, challenging him a little and then letting him off the hook.  Press harder! 

And finally, as a new entry, I played Texas Instruments’ (TXN) earnings call today, buying a few call options at the $27.50 strike price.  I wouldn’t call this the most informed play I’ve made, but certainly better than a lot of them, as it closed today at $30.59, even after what I think were inconclusive earnings reports.  I think this would have done even better if it weren’t for BofA’s bad earnings, along with a number of other bearish reports that kep the markets at more or less even keel today. 

Today’s report was longer, but I have gotten behind somewhat, as a result of being busy with the whole day job thing, but I wanted to catch up.  Also, I am getting more active, attempting to jump on more opportunities to make gains while keeping those good gains that I’ve somehow managed to acheive so far.  More on that later, but I will say one thing that I’ve been thinking about.  Lately, I’ve felt guilty for changing my trading strategy (not my method, mind you) so much lately.  However, after reading, researching and listening, I have resolved to the point that I would be an idiot if I didn’t adjust my strategy.  Now, there’s no reason to change something just for the sake of changing it.  But, I firmly believe that those who become complacent in the markets have a clock posted on their face that is ticking down quicker and quicker.  Further, I whole-heartedly admit that I am still learning.  I may have started pursuing my passion for investing/trading years ago while in college, but I am still a neophyte and I take the opportunity to learn every day.  If I don’t learn something new, I will consider the day unsuccessful, especially with the access to information that we all have now. 

I believe that one doesn’t have to come from Goldman or another bulge bracket to understand investing and trading; however, in order to succeed, you gotta chase it like a pitbull, and that’s what I’m working to do.  So, if you don’t like my adjustments, I’m sorry, but if you want get on my case about something, make sure it’s from not making moves. 

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2 Trackbacks

  1. By MarketBook 4/21/08 | Try New Shit on April 22, 2008 at 3:31 am

    […] Go to the author’s original blog: MarketBook 4/21/08 […]

  2. By MarketBook 4/23/08 « Reiboldt.com on April 24, 2008 at 2:49 am

    […] per my previous entry, I chose to almost completely eliminate my positions that I have been in with both of my primary […]

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