July 2ndí 12 15:39
One of the best trades I have done seems to be purchasing some hard-beaten stocks for the Distressed Opportunities Fund. The Fund is up close to 60%, as compared what would have been only 15% if I had just hold on to the bond trade. Buy low Ė sell high is alive no matter what investors say about not trying to catch a falling knife. The Spanish market (EWP) was way undervalued when I initiated the position, and indeed it has performed very well. It even pays a good dividend, how about that!!!
June 29th' 12 13:45
I have swapped my position in AAPL to an aggressive position in GMCR as it is a very good value and there seems to be a rally forming to correct that mispricing. As to why I chose to close the AAPL position you can check out I have posted on SeekingAlpha about AAPLís expected stagnation.
June 28th' 12 15:46
Tesla has lost its momentum after The actual launch of Model-S. That is intriguing because it was largely a very successful launch. There might be a buying opportunity here but the consensus seems to be that with the launch not generating gigantic euphoria the trading opportunity has gone away and speculators seem to be backing away from the stock. Any buying opportunity here has to be evaluated against the backdrop of Eurozone problems. I am tempted to buy but will probably wait until Eurozone problems are truly solved.
June 18th' 12 14:43
I have finally started trading the Luxury Mega-Caps Fund with a wonderful pair trade. I am also back to trading the Tech Opportunities Fund to makeup the losses incurred from shorting the cloud stocks in early 2012. My trading argument is that cloud stocks are about to go through the latest stage of a typical bubble which usually brings exponential increases. I will try to take advantage of those gains in July 2012 to make up the losses in that Fund. You check out the Fund pages for more detailed information about my trading analysis and links to Seeking Alpha articles about the trading opportunities that I have undertaken for these two Funds.
June 15thí 12 15:52
As expected early June 2012 was some sort of a short-term bottom for the markets. The Funds have improved considerably as markets normalized, bond yields increased and also of note A123 Systems which I have a large position in the Electric Cars Fund has almost doubled. However, the volatility in the Funds caused by the market sell-off has largely increased the risk measures of the Funds which I am not fond of. Although the Funds have made up most of their losses the increases in volatility of the Funds is harder to reduce. One of my aims will be to reduce the correlation to markets. However it is a difficult task as correlations across asset classes remains extremely high and it is hard to generate alpha without taking additional risks and leverage.
June 4thí 12 12:47
As a good trader would do, I have initiated some large bullish positions in the Funds, as the decline in the markets is way overdone and it wouldnít be prudent to take advantage of the buying opportunities at these levels. Of note is I have largely increased my bearish Treasury positions in the passive Funds to more leveraged levels. Also I have increased the USO exposure in the Energy EP&D Fund to almost a 3X leverage. As I have reduced the cost of my USO position quite considerably and snap back rally in oil should largely make-up the losses incurred so far from USO.
May 29thí 12 11:54
Both the decline in the market and oil has reached extreme levels. I was definitely not prepared for this and the decline has hit the Mega-Caps and Energy EP&D Fund very hard. The decline in oil is also capping gains in some of my other Funds. My anticipation was that some sort of a Eurozone hype about further intervention by the ECB would boost up the markets. However the situation seems to have jumped to Spain and lack of good news keeps the market trending lower.
May 18thí 12 15:54
The market has declined very aggressively. As the decline is much more than I can justify I have used this decline to initiate many long positions in various Funds. I have also initiated bearish Treasury bond positions for the passive Funds which I have not had the chance to trade actively yet. The 10 year will not go below 1,70% in my opinion and is likely to go back above 2%. †I have also made a very smart silver (SLV) trade which has brought a 600% profit in the Global Macro & FX Fund. It has made up for the massive losses on the FX positions in that Fund and once the FX positions normalize the Fund should be up close to 65%. Check out that Fundís page for more details.
May 4thí 12 15:28
I have made some great trades. The one that I am most hopeful for is the pair trade of short US Airways and long Western Refining. Check out the Travel & Leisure Fund for more details on that one. I also expect a short relief rally that will bring in a new 3 year high in the stock market, before the actual summer swoon in late May and June of 2012. To take advantage of that I have initiated very large short-term option positions on Morgan Stanley and Deutsche Bank for the Mega-Caps Fund. I have also initiated a very leveraged long EUR.USD position in the Global Macro & FX Fund. These are rather fickle trades to try to take advantage of just before a very large expected crash but ECB might end-up giving the market one final boost before summer 2012, in my opinion.
Apr 17thí 12 15:17
I made a major move for the Funds. The Treasury yields have moved down very sharply from the 2,30 level so I closed down all the long Treasury positions in the Funds. The positions were closed with a gain of 6,1% in most of the Funds. This is a very short-term trade. I will initiate the long Treasury positions as soon as the yields go back to 2,10 level. I also initiated some long stock positions in the Mega-Caps Fund to take advantage of a quick market bounce, especially a bounce in Apple. Check the Mega-Caps Fund page for details.
Apr 16thí 12 15:14
The pull back in Apple has brought down the whole market with it. It just shows how much the market has become dependent on a single stock. This is a very dangerous situation in my opinion. But the market should rid itself of this problem quite soon. As a side note cloud stocks, especially CRM still hold their ground. This makes turning around the losses in the Tech Opportunities Fund very difficult. I should admit I donít understand how the cloud stocks can withstand even a selloff generated by Apple, especially given their lofty valuations. These stocks donít have very high growth rates to justify the valuations either. When the correction comes it will probably be very severe. The trick is to keep the Fund somewhat stable until then so there is money to take advantage of the selloff when it happens.††
Apr 5thí 12 12:28
I have made back all the losses in the Mega-Caps Fund with a smart options play. Basically the move up in MS was unjustified and the correction was very sharp as a result. I have identified the correct options play to take advantage of the volatility on the shares of MS and GS smartly and it has paid off well. I will seek to make more money on the fluctuations in these stocks as the EU situation unfolds. You can check the Fund page for details.
Mar 26thí 12 15:33
Pivotal day for some of the Funds. I have started trading the Electric Cars Fund with a long position in AONE and USO. Oil seems to me the safest way to play the Bernanke boost and I might initiate positions in USO in other Funds too. Unfortunately my large MS position in Mega-Caps turned out as a huge loser. Donít get me wrong there is still great money in shorting MS as Spain seems to flare up European problems. However, for short term I have closed out the MS position and I will try to short it from a higher level probably early May 2012. I have also closed out the short EUR.USD position in Global Macro & FX Fund as the Bernanke comments should boost the EUR short term. However I will also try to initiate that short from a higher level around 1,37. On the plus side, Bernanke comments will probably pressure Treasury yields and I will make up the losses in those two Funds from other Funds.
Mar 26thí 12 9:43
Bernanke comes out and says stimulus is here to stay. My long Treasury positions should turn very profitable in the next 10 days or so.
Mar 21stí 12 10:32
Treasury yields are still elevated. In my opinion this is a great opportunity to cost average on my long Treasury positions in the Funds. I have therefore increased the long IEF and TLH positions in the Funds up to 3X leverage. 10 year yield around 2,20% is more like the new breakeven for the Funds compared to 2,08% before I started increasing the positions. Market is still underestimating Bernanke.
Mar 14thí 12 13:21
Investors selling Treasuries to buy AAPL. Dare I say the top?
Mar 14thí 12 11:52
Market is out of whack. Iíll hold my discipline and hold true to my predictions. I have increased the Treasury exposure on most of the Funds to take advantage of the jump in Treasury yields. If Bernanke says rates low until 2014, Iíll be on his side.
Mar 13thí 12 15:57
Horrendous day for the Funds. The market just exploded higher mainly because there isnít much to stop it. Bond yields also reached the 2,1% level which I predicted would be a top. The good news is I donít have any margin calls coming in even in another 10% increase in my short positions. Therefore I can wait this momentum rally. I still hold that the rally is not based on earnings growth but just multiple expansion so there will be a correction. However that correction might not come until late May 2012. So far I have two Funds up 30% and my EUR prediction is playing out accurately so I am happy.
Mar 7thí 12 15:37
You can check out my article on SeekingAlpha about why I believe the 10 year Treasury yields will struggle to climb above 2,1% even in an improving macro environment. I do hold a good deal of long term Treasury ETFs in the Funds so this should explain my reasoning in more detail.
Mar 5thí 12 13:18
The Dow has bounced off the same 12885 level for the third time in the last month. What is interesting is the bounce is very precise, it does not bounce from around 12900 for example, it bounces from exactly 12885 each time. Also the bounce comes with a very strong unwarranted push on the EUR.USD and an increase in bond yields. Some major macro trade is going on obviously. However, the index canít continue upwards either so if we can break to the downside it might be very good for the Funds, as many of my short positions like MS and AAPL are already rolling over even without a major correction in the market. One exception is IBM, as it has stood up very well but all I need is a 5-6% correction in IBM to make great money on my puts. I hope a general market correction before the Greek swap deal gets resolved will pull down IBM with it.†
Feb 23rdí 12 15:56
Enough with the suspense!!! I will close out the short position in US Airways before market close, as the Travel and Leisure Fund is up about 30% mostly on that trade. There might be some more downside, especially if the market cracks but letís not get greedy. Also I am actually quite bullish on US Airways. This trade was just a smart way to take advantage of the little bubble that formed in the shares, which was likely to pop short-term. The high oil prices were a big culprit in this trade too.
Feb 23rdí 12 12:14
IBM is on the move for some reason. Actually it is not farfetched to say it is the sole reason the market has recovered from its losses. The move made me notice, that the implied volatility on IBM options is ridiculous cheap. Therefore I have initiated small positions for the Mega-Caps and Tech Opportunities Fund in IBM puts. I could have taken a position in in the opposite direction but given the large upside move today and there probably is some resistance at $200 puts were a better opportunity. This might turn out to be a very successful trade actually.
Feb 13thí 12 9:58
Abundant headlines about how Apple crossed the $500 and how it could be the first to cross the trillion mark. In my opinion, even more important is the fact that Tech as a sector just keeps widening its lead relative to even other high-beta stocks in other sectors. We might be at the initial stage of a medium-term tech bubble fueled by the investment banks to get the social media IPOs out the door at the unjustifiable levels needed to cash out the private investors without a loss.
Feb 6thí 12 15:42
I had previously suggested that the Fedís move to keep the rates low until 2014 might be an indirect intervention into the European situation. The reasoning is Fed cannot intervene directly, but intervenes by lowering the value of the dollar so the European Bonds gets a little boost at least in dollar terms. There have been unexplained sudden intraday boosts to the EUR.USD cross in the last couple of trading sessions especially in US trading session. In my opinion Fed is very secretly intervening in the FX market too, for the same reason. They are trying to hold off a run on the EUR until ECBís second LTRO. If they succeed that would really crush the EUR shorts.†
Feb 6thí 12 9:43
The absence of any good news from Greece is starting to push the markets from their upward trajectory which is good. There still does not seem to be any panic at least for the US markets. However given some major indexes are up more than 10% in just a month, the sentiment can change very quickly and profit taking can come up quite suddenly.
Feb 3rdí 12 15:18
My last comment is about what I assume will happen with the European situation. My opinion is that we will get some sort of a downside shock in February. But that wonít last since we also have the second part of ECBís LTRO at the end of February. The markets will move sharply in February on some possible bad Greek news but they will bounce back up by the suggestion that Greece is out of the system then, possible by way of a default, and that we donít have to worry about Europe anymore. There will be another strong rally into May when we will get a default by a large European country or a combination of a few small ones such as Portugal and Hungary. That will bring about the main pullback of about 20% in late May. So as for the Funds, I hope the pullback in February will come before we get to ECBís LTRO and I will close out the short positions, go long till May and then take another big short position going into late May. If the markets can successfully hold on until the second LTRO by ECB that will be very problematic for some of the Funds.†
Feb 3rdí 12 14:58
Also lets get into some more detail about what has gone wrong with the Funds and how things might play out going forward. My usual strategy is never to short a steady market when itís on the way up otherwise known as ďnever sell a dull market shortĒ. However, the reason I was caught off guard is the probability of an imminent Greek default. The payoff from being short in such a shock was too much to give up. Also if you look closely youíll realize the Funds have taken the majority of their losses on the last few days where returns on some high-beta stocks such as MS and LCC have moved into a parabolic shape. I have taken advantage of the rally in some of these stocks to go short some more raising profit potential on a pull back. However, that has raised the leverage on some of the Funds and has somewhat magnified the losses. In such an environment the strategy that works is usually to cost average, but to not take so much leverage that margin calls come and forces you to close positions before prices return to reasonable levels. Some of the Funds are a little close to getting margin calls, but taking in to consideration that the rally has started to go parabolic we are at the last part, and the pullback will come before any of the Funds get any margin calls. If I can pull that off the cost averaging will pay back very nicely. Also consider that the Funds have taken a hit because some stocks have almost risen by 30% or more in just a month. That shows that a move on the opposite direction is also very much possible. Such a move would put some of the Funds up more than 20% YTD while the markets would be down 3% - 5%.† In that case the only damage on the Funds will be the increased volatility but the opportunity to correct that is way past.
Feb 3rdí 12 14:03
Let me comment on my perception of the market and how it will affect the Funds going forward. Needless to say the markets are in a very solid uptrend for the last month and a half and the Funds being positioned bearishly has taken some serious damage especially in the last few days where the returns have rather taken a parabolic step. I should mention though the markets seem to be going up on a rather absence of news. What I mean is the market fully ignores the bad earnings news and the European situation, but it also does not. react fully to positive economic news either. For example such an unexpected positive surprise on the NFP data such should have caused a more violent uptick however the gains seem to be capped at 1,2%. Also the upside earnings surprises are at their lowest level since two decades and the market have so far completely ignored that fact. The huge outperformance of the high-beta stocks over more established ones also suggests the rally is not based on the fundamentals.
Jan 25th, 12 15:39
As for the effect of the Fed decision on the Funds: Obviously on a short term basis this is reflationary and since the Funds are positioned with a bearish bias this does not bode well. However, many Funds have long Treasury bonds in them and the Fedís move will definitely push up bond prices so the Funds will benefit. I am also very happy with the fact that the extent of the marketís rise is quite limited so far. The only significant hit has been to the Silver Puts in the Global Macro & FX Fund which was only 2,8% of the Fund.
Jan 25th, 12 14:37
My comments on the Fed decision: I have to say this was uncalled for. Why would you guarantee a near zero interest rate 3 whole years into the future when all the economic data is improving rapidly. In my opinion this had more to do with Europe than the US domestic economy. Since the Fed cannot intervene in the European bond markets, but it wants to, it has devalued the dollar, so the bonds denominated in Euros are attractive to at least the dollar based investors. While the Fed and eventually the ECB will succeed in thwarting a crisis, short term the Fed might be anticipating a high likelihood of a Greek and then Portuguese default. As for how this will affect the equity markets it is more complicated than it seems. The initial reaction is that this is just QEIII and the equity markets will rocket higher. However, it might turn out that traders conclude investing in longer Treasuries is a surer trade and pile into fixed income. That would mean Fedís plan would backfire, as money flows from equities to fixed income and the Fed might have to do an actual QEIII. Which is a more likely scenario will probably reveal itself in a few days.
Jan 25thí 12 9:08
AAPL earnings were a big surprise. AAPLís valuation with these new earnings makes me reconsider my range bound trading strategy. Check the Tech Opportunities Fund page for details.
Jan 24thí 12 9:53
AAPL earnings is coming up. I am still contemplating whether to put a trade on. My expectation is absent a general market decline AAPL will trade flat after earnings. I was expecting to put a trade to take advantage of a possible downside move as AAPL is trading at the upper limit of its trading range but I couldnít formulate a low risk trade to use that. To sell some calls might be a better strategy as a huge upside move is very unlikely, unless there is a very large surprise above the already lofty expectations. Check the Tech Opportunities Fund for updates.
Jan 23rdí 12 14:52
I am having difficulty finding trading opportunities. The market is at very lofty levels so opening up any long positions is risky. One opportunity that I am following recently is UNG (US Natural Gas). In the last few days it has set up itself for capitulation as the move to the downside has accelerated. I am still waiting for a daily decline which should make traders say ďI did not expect that could happen at allĒ which in my opinion should be in the 12% - 15% range. However I might have missed that opportunity as UNG is up about 8% currently. If I have missed the capitulation so be it, I will still wait for that decline that will truly shock traders before I get in.
Jan 23rdí 12 10:46
The relentless rally in equities has spread to the EUR and the Bond Yields also which is really squeezing the Funds. The lack of a deal with Greece should have shaken the markets but it seems some big players believe that unless a deal is a definite failure then the risk is still to the upside. If the Greek deal does not get done, the correction should come and the Funds should get some respite. Still it is nice that the Global Macro Fund and the Solar Fund is up almost 15%.
Jan 12th' 12 10:05
Another example for the thesis that markets are moving on purely technical terms, this version is from the perspective of the bulls. The Italian and Spanish bond auctions were huge successes and the Italian 10 year yield has dropped close to half a percent. 2 months ago this kind of action would have shot up the markets 3% (not that I want that. It would be terrible for the Funds). Yet the markets are down because without eventual clarity on Europe no big player is getting in the market. Itís just about small technical plays and the markets can't move up substantially. Back to my main thesis. We should get another serious correction, the ECB should admit it needs to do QE, we should get our capitulation and move on. Before that itís all theatrics.
Jan 12th' 12 9:28
The markets have come down back to reality as Draghi speaks and US data hits. Still the thin trading and the purely technical updrift is frustrating. As an example it is worth noting that the ECB announcement and the US Data has very minimal effects on the markets and most of the move upwards in the European markets was before the economic events. Translation: Nobody wants to make a serious move before there is definitive clarity on the European situation. Therefore the markets are moving up slowly only on the technicals.
Jan 11th' 12 15:13
One thing that should be mentioned is how thin the trading is. The lack of depth is what is holding the markets up in my opinion. As no big player wants to make a move before the Euro situation clears up the market is moving up on the soft technical trend upwards.
Jan 11th' 12 14:37
A spectacular day for most of the funds. The EUR is down, bonds yields are down (Bond prices up), and the solar stocks are rocketing higher, some around 30%. The Solar Energy Fund has made almost all of its losses even though the hedges cap the upside somewhat. Check the Solar Fund page for details. Only Fund that is still struggling is the Model Moment Fund due to the model still being suppressed and its bearish exposure. If only this market corrects itself that should straighten itself out also.
†For older comments check out the General Comments Archive