Fundamental Trading Diary

Fundamental analysis of the capital markets

My Marketocracy Fund Performance

My Markeocracy fund has had a fantastic run so far this year.  My last 6 months of performance puts me in the 97th percentile of funds managed there.
My Fund's Performance

My Fund's Performance

I’ve taken the past two weeks to do some reorganisation of the portfolio in anticipation of some downward movement in the market.  It’s still a rough time to be a bear.
Here are my holdings:
  • AEA (Advance America) is a national payday loan company.  This is one of the few outright longs I like in this economy.
  • SKF vs HDB, MTU and KB — American financials vs Asian financials spread trade.  This is for the long term.
  • OIL (GSCI Crude Oil Total Return) – the underlying commodity can go to $25, but it also can go to $100.  It is impossible to argue that it will closer to the former in the next 5 years.
  • TBT (UltraShort 20-year Treasuries) is another long term bet.  Despite the Fed printing 1/3rd of this year’s projected deficit, the yield is still pushing 3%.  Perhaps the Fed is allowing it to rise so that it may attract some foreign capital before pushing the yields down again.  I jumped into this far too early in November by underestimating how many long dated bonds the Fed was going to buy.  I am reducing my exposure to this position in the coming days.
  • QID (Nasdaq 2x Inverse) is one of the few short term trades I’m taking.  I think there is 6 or 7%  on the downside, much like Marc Faber predicts.
  • GS (Goldman Sachs) knows exactly what it’s doing.
  • DV (DeVry) does vocational education, and this is where people go when they are unemployed.  Their enrollment continues to rise, and it’s just going to continue.  I’m going to be increasing my small position in this company.
  • WAB (Wabtec) – geez, did I recommed this?
For the future, I’m looking to acquire gold and silver at better prices.  If the 10y yield drops back down around 2.5%, I’ll increase my bond short exposure again.
It is tough to say what the direction of the US stock market is.  Financial services make up the majority of our economy, and the government has currently shown a willingness to out-right subsidise it.  This is not something that continue without other parts of the economy cracking.  They are playing a gigantic game of chicken.
While the fundamentals deteriorate, the government is simply giving money to corporations.  That will make their stock price go up.  To profit, you have to make more direct and specific bets.  Find the guys holding the bag on risky consumer debt who won’t get bailed out – think high yield bond funds like HYP.  I’ve yet to determine the best target there.  The crux of it is that it’s not good to go short someone who the government will hand money.
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April 30, 2009 - Posted by | Uncategorized

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