Tuesday, December 2, 2008


First off, I have been remiss in posting to this journal. The point is to document my thoughts and strategies so that they are clear and to ensure that I do not decieve myself. Doesn't work very well if I don't use it.

Second, performance stats for November.

I think the charts speak for themselves. It was a great month. Despite being a bull at the start of the month, I managed to be fairly agile and catch some of the big moves from both sides. I even nailed the bottom of SPX within a few points.
One major problem -- I closed out last Friday with a massive long equities position, then was very busy with the real job yesterday, and my portfolio got whacked by 14%. Uggh. What a day! My own fault, really. I knew the market was overextended and due for a drop (not like that, mind you), but I held on looking for a bit more. Poor risk management. My achilles heal.
So where to from here? As I mentioned, I am long equities (still), with a smallish cash position. My conviction level here is a bit weak, but I am still bullish. Yesterday's action smacked of panic. People went long last week (or did not sell) now clamouring to get out. The PMI and news of the official recession date provided good excuses to sell. We needed a correction to restore some doubt to the market. The optimists came out pretty strongly last week. Good bear market rallies should be choppy, volatile. Keeps everyone afraid and on the sidelines. Then they pile in when the market is higher.
So after yesterday's break I think that the optimists will hunker down some more. The media this morning is certainly really bad -- lots of stories about how long and deep the recession will be, how monetary policy is moving to quantitative easing, etc.
That is not to say that the news is not bad -- it certainly is. There is growing evidence that the credit crunch is not easing, and the longer it persists, the worse will be the impact on the economy. But the most likely assumption is that this is already priced into the market. The most likely path would seem to be up.
Now that the correction is out of the way, we should be clear for a rise into the mid 900s on SPX. But the market needs to rally hard today. If it does not, all bets are off -- a new low may be in the offing. For now, I am holding tight.
MARKET POSITION: EQUITIES - Long SPX, CDN equities, EAFE, golds, emerging markets; CURRENCIES: CDN/USD - long; Cash

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