Thursday, September 18, 2008

Ca-Ching!

My market indicators are finally starting to choose sides, and one of them is pegged at maximum panic, so I've just cashed out of 1/3 of my SDS position, locking in a 21% gain for part of my investment. That means I'm left with about 1/3 in SDS and 2/3 in cash. Depending on what the indicators do, I anticipate selling off the remainder in equal pieces tomorrow and Monday.


Update: Sometimes it pays to be lucky. I sold my partial SDS position at exactly 1:00 PM today, very close to the market low (SDS high) of the day. Market bottoms, whether short-term or long-term, are impossible to time perfectly, and that's why I prefer spreading out my transactions over more than one day.

12 comments:

Dan said...

Jody,

I recently sold off my SDS position also.

Thank you!

So would it be a good idea to go long after you cash out completely from SDS or stay out since you say we are still in a bear market and wait to short again? I guess you will have to decide based on what your market indicators say? I'll stay tuned.

Jody said...

... would it be a good idea to go long ...

If don't already know the answer to that question, then you haven't been reading the blog.

Dan said...

Jody,

Ok thanks again, you definitely answered my question. I'll sit tight until the next opportunity.

BTW, did you see what Brinker put out in his latest bulletin a few days ago? Keep dollar cost averaging in and stay the course along with all his buy ins on the way down including the one at S&P 1450.

Jody said...

You've got to admire Brinker's tenacity in the face of repeated failure!

Anonymous said...

Way to go Jody!

Btw, If you have no good way(and/or time) to anticipate the market, isn't buy'n'hold(/rebalance) a good way of achieving good returns in the long run(10+ years) ?

Also, would this ever hit the US:
http://www.ft.com/cms/s/0/16102460-85a0-11dd-a1ac-0000779fd18c.html?nclick_check=1
(FSA to ban short-selling of financial stocks)

Jody said...

Fortunately the indicators are starting to show signs of life only 24 hours after my "flying blind" post, so I've got more information to work with today.

But putting short-term indicators aside, buy-and-hold only works during bull markets. The longest-term position I would recommend in a bear market is to go 100% short (SDS or GRZZX) when it's obvious that a bear market has begun (Jan '08), and then only switch to long again when it's obvious that the bear market is over.

The SEC already put a temporary ban on short selling of financial institutions here in the U.S. back in July.

John from Colorado said...

Jody;
One of the best pieces of advice I have ever received is "make your money in the middle". I sold my TWM position two days ago between $74 and $77 ($ cost averaged buy ~$66). Today it closed at ~$68. I thought I was a bit early and may still be but I "made my money in the middle". Thanks for the updates the past few days.
Any thoughts on the govts "RTC-like" plan. RTC took assets and liquidated them. This would look much different in that the govt would have to buy the assets at some discount (tax payer beware) and then hold and sell them later. Japan tried that years ago but financial institutions didn't like the "discount" and the system failed. Thoughts on the potential medium term impact on the market?
John from Colorado

Jody said...

Hi John,

I'm just not smart enough to know what effect all of this government intervention will have in the short term. In the long run, though, I have no doubt in my mind that government control/ ownership/ regulation has an exclusively negative effect. Take, for instance, a certain government regulation that forces banks to give mortgages to people who can't afford homes! Brilliant!

linc campbell said...

After our biggest one day gain since 2002, what does this mean? It's somewhat rhetorical based on history, but in light of all of the nationalization talk I wonder if upward movement might actually occur.

I happen to be listening to a teleconference right now with the fund manager of a $65 Billion dollar fund, and I must say it's quite insightful. I have a feeling we're drifting sideways until May-ish of next year.

Jody said...

Hi Linc,

Yeah, you know what I think of big up days! Right now it's just part of the general high volatility. Every day this week has seen the market swing 4% or more during each trading session.

As far as nationalization sparking a rally goes, I just don't know. There have to be some investors who are turned off by the idea, and the only question is how many of them there are. Here in the U.S. our taxes are eventually going to be higher as a result of this, and that will make it harder for us to buy or hold stocks - which does not bode well for prices in the long run.

Dan said...

All of these bailouts which the taxpayer will eventually have to bear will not cultivate a healthy economy either, nor a heathly stock market espcially if consumer spending is diverted to covering the cost of higher taxes.

linc campbell said...

Jody and Dan -

I wholeheartedly agree. It is the old adage of we want all the upside with none of the downside. We forget that the cause of our current mess was also the cause of 2003, 2004, 2005, 2006 and 2007 (up until October 9th) being a runaway train of appreciating value in the secular stock and bond markets.

Many of the talking heads du jour acknowledge that but also say, "But something has to be done." I suppose the point of disagreement is what that "something" is. Tack all this to our $9 Trillion debt and it equals the biggest taxation without representation ever since it's not the three of us that will pay this debt off, it is our unborn children, grand-children and great-grand children.

But the horse is out of the barn and here we are. No more naked shorts as it was 10 years ago although we still have no uptick rule; National Conservatorships for some large banks which may or may not equate to nationalization; A "comprehensive plan" to shore up financial markets. It all sounds nifty I suppose.

It will be interesting to see how long this rally goes. My gut tells me there are still a couple of shoes left to drop. Time shall tell.