Monday, September 22, 2008

All cashed out

I'm 100% in cash now, waiting for the market to give me a sign. I might be waiting for a while.

My three sales of SDS on Thursday (81.63), Friday (64.05) and this morning (66.96) occurred at an average price of 70.88. Since I bought in at 66.72 last month, that's a 6.2% gain, or 3.1% for my entire account including the cash position.

Yes, it occurs to me that I would have done much better without the announcement Thursday afternoon that the government would absorb bad debt, and the short-selling stoppage on Friday morning. However, those events were simply unforeseeable, so I'm content to get out with any kind of gain.

7 comments:

John from CO said...

Jody;
Opportunity or collapse? This morning the market was down 200 points and the financials index was down 3%. I was watching SKF (ultra-short financials) and UYG (ultra-long financials). SKF was down ~2% and UYG was down ~6%. But wait, shouldn't SKF be up ~6%? The ban on short selling and the stress in the derivatives market is playing havoc with SKF. What an incredible finacial time we are observing!
John from Colorado

Jody said...

Yes, this may be one of those unique times we tell our grandkids about.

I'm waiting for the other shoe to drop: a complete ban on all short selling, followed by a predictable crash which I'm not allowed to participate in. That would make me very, very unhappy.

Anonymous said...

I wonder how GM and Ford managed to get an invite to the the short ban party? They are not a part of the financial crisis. What's next? Government proposes a package to buy a "toxic" oversupply of Hummers that nobody wants?

You are right. A complete short sell ban seems more and more likely.

Oleg

Jody said...

I'm tempted to buy in to GRZZX before the total ban arrives, but then that would be based purely on fear and not on any quantitative forecast. I've come to terms with the growing possibility that I'll be in cash rather than a bear fund for the remainder of the bear market.

Anonymous said...

Absolutely bizarre. This morning (09/24) S&P 500 has barely advanced (0.20%), but at the same time SDS is down almost 6%.

Oleg

Dan said...

Jody,
I don't understand:

"I've come to terms with the growing possibility that I'll be in cash rather than a bear fund for the remainder of the bear market."

So you're saying that you will ride the market down from the current level DOW ~ 10,8xx to 8500 in cash? Can you explain this?

Jody said...

Dan,

I'm facing two problems:

1) Current trends at the SEC suggest they may eventually ban short selling of most or all of the stocks in the S&P 500. That would stop GRZZX in its tracks and put too much strain on derivative ETFs like SDS.

2) Even without the short ban, government bailouts and takeovers have created so much turmoil in the market that my regular market indicators are of little or no use right now. That may change, but until it does I'll be flying blind.