Summary:
I found no shelter from the volatility induced by the subprime mess and credit worries. Yet when all was said and done I was able to pick up some bargains and have a good feeling going forward.
I awoke Monday to find myself down about 1.5% with my tanker stocks sinking. After a brief moment of panic, I decided to add as little had changed with the fundamentals (tanker rates remained high) and dividend yields had become more attractive. I added ONAV in the 18-19 range and also added some ERF and MMG and picked up some HTE. I also closed my BSC short after seeing it go from way down to even. I finished with a small loss for the day and all my trades ended positive, making me feel like a genius.
Tuesday’s pattern was similar, with a large drop followed by a recovery to near near. When things recoverd on Wednesday, I thought I was in the clear and added NM, CHNG, a Chinese natural gas company in growth mode (and recommended) and ANH, with holds a portfolio of mainly agency (FNMA, etc.) mortgage-backed securities. It has been beaten down because of problems at one of its subsidiaries, Belvedere Trust, but was selling below book value, and was being recommended by some posters (though other heavyweights were recommending the preferred, but staying clear of the common).
My optimism on Wednesday was rewarded by the 2.3% drop in the markets on Thursday. I did much worse, ending down over 4%. Before the rout I added some QADMF, QMAR and NRF, and re-shorted BSC. A limit order to sell some XSI got hit, which was pretty much the only redeeming feature of the day. Later I noticed they had already reported earnings, which showed a large jump in sales though not profitability. I’m done selling this one for now and will see how things play out.
I woke Friday to find myself down another 3%. Luckily I had to go biking with a friend, which prevented me from doing anything silly and by the time I returned things were mending. I added more QADMF, ANH and was able to snag some of the ANH-A. This on further troubles at Belvedere. I also closed the BSC short. By the end of the day I was up 1.5% though down 3% on the week.
Its hard not to feel optimistic when you look a market squall in the face and emerge unshaken. I bought in the face of adversity and the trades I made are heavily positive. I am now at my lowest cash levels in a long time and ready to chug forward. I must remind myself however that markets don’t work according to scripts. I’m feeling pretty good about things right now, but the subprime mess has not gone away and could spread. Though most of my positions aren’t directly exposed, when panic sets in nothing is immune. Careful.
Positions:
Long: JEQ NXG HBMFF ALSWF FFHL XSI NTLRF EXDUF GREXF MLKKF QADMF SHERF OKOFF ESEA MVO BWLRF SEA DRYS DSX ONAV ERF HTE ANH ANH-A CHNG NM QMAR
Short: GCI HLS MNI YHOO LEN TOL.
Options:
Cash: 6.6%
Short Pct: 11.1%
Read:
Stocks Researched:
Positions most worried about: XSI, can’t get in touch w/ management.
Positions most sanguine about:
Biggest market worries: rate rise induced meltdown
Thinking about:
Outlook ( up-flat-down surety rating: 1-5 reasoning):
US: down, 2.0; rates are rising, Bear Stearn and subprime getting worse.
Tech: ??
Japan: flat-down, 1.0; political wobbles and subprime resonance.
China: flat-down, 1.0; bubbly and subprime spread.
Silver: flat s/t, 2.0, price action; l/t up, 1.0, industrial demand.
Gold: flat s/t, 2.0, price action; l/t up, 1.0, industrial demand, GFMS study.
Copper: flat-up, 1.0. Strikes on the horizon.
Zinc: up, 2.0. Declining stocks.
Real life: Working on summer schedule, but busy w/ a special project.
Weekly sleep and exercise: soccer, biking, swimming, etc. Sleeping somewhat irregular but sufficient
Mood: calm.
