February 9, 2010

Sucks to be senile

I was at work today and only noticed after coming back from lunch that I was in my jeans.  In the rush to get out the door, I had put on my jeans instead of my business slacks, which is bad enough.  But it’s the not noticing till noon part …   When I mentioned this to some colleagues, they pretty-much all responded the same way, “Well at least you have pants on.”  There’s always a silver lining.  :)

Did OK in the market today.  No trades, but good participation in the 14-point S&P500 rally now that my net-long bias is up to 40%.  The portfolio equity just keeps jiggling around in a very tight range, as it has since the beginning of the year.  Gold stocks came back with a vengeance, I was on the right side of a limit-up market (cotton by way of BAL), oil popped right after I bought some more yesterday, and XPP (China ETF) bounced after yesterday’s buy as well.  Fun for a day, but it could all be down 30 points again tomorrow.  It’s been that kind of a market recently.

Now I think I’ll just chill.

Cheers,
Allocator
a.k.a. George Parkanyi

February 9, 2010

TU#266 – the brakes are starting to fade

Today I was in there covering some more short ETFs and switching to the long side.  I started the day net-long about 31% and ended it net-long over 38%.  The market (S&P500) was down about 10 points, and the brakes did start to smoke a little bit.  I lost on the day a small amount along with the market, which is the expectation once you step out from under the cover of the short side.  The Canadian dollar is now also mitigating declines.  As commodities have weakened of late, this has also weakened the CAD, kicking in a currency gain from the 75% of the portfolio that is denominated in USD.

USD Trades   Trading Update # 266          
# Trade Qty Stock Symbol   Price   Acct
  Sold 34% ProSh UlSht Rus2000 ETF SKK @ $21.93   1
PRS Bought 33% ProSh Ult China ETF XPP @ $55.20   1
                 
CAD Trades              
# Trade Qty Stock Symbol   Price   Acct
PRS Sold 100% HBP CrOil Bear+ ETF HOD @ $10.96   3
PRS Bought 36% HBP CrOil Bull+ ETF HOU @ $7.31   3
                 
Qty % are amount by which shares counts are decreased/increased    
                 

XPP is the double-long version of FXI, the popular ETF that tracks the FTSE Xinghua 25 index – basically the index of the top 25 Chinese “blue-chip” stocks.  Go China.  It’s a little scary averaging emerging markets, but I do have EDZ (triple-short emerging markets) hedging it, and now even net-profitable.

With the signaled trade to go long more oil, I sold completely out of HOD, the crude double-short ETF and went as much more long the double-long ETF HOU.   I still think oil could go back to $35-$50, so I’m a little leery getting too crazy-long the oil market.  HOU is on death row anyway – if and when I starting building up HGU (gold shares) and HNU (natural gas) to larger positions in Account 3, HOU and HAU (ag index double long ETF) will be sacrificed.  I already have an ag position with DAG in Account 1, and the triple-long energy shares ETF ERX in Account 2.

*************************************************************************
PORTFOLIO STATUS Currency Weight Month YTD
Feb-10        
         
ACCOUNT 1 USD 48.2% -1.7% -4.8%
ACCOUNT 2 USD 28.5% -0.1% 3.5%
ACCOUNT 3 CAD 23.3% 4.0% -2.5%
Canadian Dollar 0.9291   0.6% 2.2%
         
PORTFOLIO EQUITY CAD   0.5% -0.4%
         
PORTFOLIO EQUITY USD   -0.1% -2.5%
S&P500 USD 1,056.7 -1.6% -5.2%
Portfolio vs S&P500 USD   1.5% 2.7%
*************************************************************************
         
MARKET BIAS     LONG 38.3%
Cash       1.2%
Short       30.2%
Long       68.5%
         

I surprised myself yesterday when I went back and reviewed all my trades since 2007.  Despite riding a bunch of them down during the March 2008 rally, most short equity ETFs were still net-profitable overall.  My biggest losses were actually averaging down natural gas, crude oil, and ags in the REAP program through the commodities collapse of 2008.  Started buying back in way too soon.  Can I avoid doing that mistake again?  Let’s hope so.

The biggest impact of this review, helped by the positive results from EDZ, is that I’ve decided to include an equity short ETF in Account 1 as well, and maybe Account 3 – primarily for the opposite correlation (making the overall account equity less volatile).  Stock indices also have more of a useful choppiness to them than I had originally thought, and as long as I am trading short ETFs in and out on a regular basis, the buy-and-hold erosion effect is attenuated.  (Leveraged short ETFs erode more quickly because of the way they are re-balanced, the upside-down math of % declines vs % increases – $10 to $5 is a 50% decline, whereas $5 to $10 is a 100% gain).

Played soccer tonight.  Badly need a shower.  Time to take care of that.

Cheers,
Allocator,
a,k,a. George Parkanyi

February 5, 2010

TU#265 – yo-yo ride turns out well enough

Today the S&P500 carried through on yesterday’s 35 point drop, being down as much as 22 points at around 2:30PM.  But then it rallied 25 points to close 3 points up.   Because I did some short covering and buying yesterday, and because the Canadian dollar was fairly strong on Canadian jobs news, the portfolio finally gave up ground and looked like it was going to get in line with the market to go down.  Natural gas had been up nicely in the early going with oil holding on, but quickly sagged mid-session.  With commodities weak, and fewer short ETFs now to offset, the equity soon hit the lowest point it has seen this week.  But that all changed in the last 90 minutes. 

In the morning I had taken  profits on EDZ (short emerging markets), sold some DXD (short Dow Jones), and bought 2 lots each of ERX (energy shares) and TSX:HGU (gold shares).

USD Trades   Trading Update # 265          
# Trade Qty Stock Symbol   Price   Acct
PRS Sold 28% Drx EMkt Bear 3X ETF EDZ @ $6.55   2
  Sold 23% ProSh UlSht Dow ETF DXD @ $31.61   2
PRS Bought 75% Drxn Energy Bull 3X ETF ERX @ $32.64   2
                 
CAD Trades              
# Trade Qty Stock Symbol   Price   Acct
PRS Bought 46% HBP GoldSh Bull+ ETF HGU @ $9.58   3
                 
Qty % are amount by which shares counts are decreased/increased    
                 

In the late rally, for some reason HGU really caught fire.  Bought at $9.58, it later closed 11% up from there at $10.63.  And HNU (natural gas) followed suit, not with that kind of gain, but a nice recovery from the hole it fell into.  These two together now make up 16.5% of the portfolio, so these moves juiced things.  With the help of a  few friends, they drove the portfolio ahead 1.3% this week and the month, and positive again on the year at .5%.  This after a pretty nasty week for longs.

1.3% doesn’t sound like much, but a lot of things happened getting there, most notably the shift in directional weighting to 32.8% net long.  Until very recently (mid-Jan) the portfolio had little directional exposure either way.  It is now more sensitive, and will participate better in rises and not do as well in declines.  I don’t know if this is a sweet-spot at S&P 1066, exactly 400 points above last year’s low; but at least now the results are going to start to move around more, and I’m getting the short-ETF monkey off my back, having closed out on acceptable terms a number of them in the past few weeks.  It was certainly worth waiting out the last couple of months and not tossing them when I was feeling the pain.   (Thank you again, Rocky Humbert).

EDZ (triple-short emerging markets) has actually done not too badly, and I attribute that to trading it far more actively than the others that have just sat there and eroded.  I’m seriously toying with the idea of consolidating the rest of the equity short ETFs in Account 1 and trading the new position on PRS signals.  I wouldn’t expect it to be as profitable as the long side long term, but it would provide opposite correlation, produce cash when the others are buying, and build up when the others are selling making the use of the cash position more efficient.  In  theory.

Gold stocks have really jumped around, and I think will continue to do so.  HGU tested as one of the best when I back-tested PRS.  It, and its short counter-part HGD are performing as expected and are the most profitable PRS traders so far,  both  nicely in the black acccounting for all trades and open positions.  Because gold is influenced by multiple factors – inflation, deflation, US dollar, geo-politics, gold bugs – it should remain volatile because of all the uncertainty going forward, while having a reasonable floor under it.  I expect a 100% return within the year from this position, played from the long side.  You heard it here first.  :)

Here’s how things are after the first (exciting) week of February:

*************************************************************************
PORTFOLIO STATUS Currency Weight Month YTD
Feb-10        
         
ACCOUNT 1 USD 47.9% -1.0% -4.1%
ACCOUNT 2 USD 28.0% -0.3% 3.3%
ACCOUNT 3 CAD 24.0% 7.9% 1.1%
Canadian Dollar     0.2% 1.8%
         
PORTFOLIO EQUITY CAD 100.0% 1.3% 0.5%
         
PORTFOLIO EQUITY USD   1.1% -1.3%
S&P500 USD   -0.7% -4.4%
Portfolio vs S&P500 USD   1.8% 3.1%
*************************************************************************
         
MARKET BIAS     LONG 32.7%
Cash       1.2%
Short       33.1%
Long       65.8%
         
THEME MIX       100.0%
Agriculture       15.6%
Energy       13.0%
Metals       14.0%
Other Commodity       0.0%
Short Commodity       1.2%
Country ETF       7.1%
Financial       7.7%
Health Care       1.3%
Infrastructure       0.0%
Real Estate       2.3%
Retail       0.0%
Technology       3.7%
Transportation       1.1%
Short Equity       23.5%
Short Bond       8.4%
Currency       0.0%
Cash       1.2%
         

Not bad, considering.

Cheers,
Allocator
a.k.a. George Parkanyi

February 4, 2010

TU#264 – buying the dump

Yesterday I managed to sell off a few things and get short again with a re-purchase lot of EDZ.  Well, I’ll be selling that EDZ tomorrow, as the S&P500 took a huge 35 point dump today, and the Asian markets are probably going to follow suit overnight, and then some.  Today came the outlier that I could feel in my bones lurking out there.  It seems the US labour department miscalculated job losses, under-reporting by 800,000.  That’s an 800,000 miss on the original 7 million estimate.  Ouch. 

I got a bit of a bye today, with the account going down, but not all that much compared to the rest of the market.  The short ETFs still in place did their thing, and natural gas, though down heavily as well in the early going, suddenly rallied to gain on the day – that despite gold, silver and crude oil getting crushed.  Gold was down almost $50.  And those are the things I’ll be buying tomorrow morning – gold and energy shares by way of the ETFs.

My signals area in the spreadsheet lit up like a Christmas tree with signals, and I took some of them before the close, and set the rest up for tomorrow’s opening.  Here are the trades I did complete.

USD Trades   Trading Update # 264          
# Trade Qty Stock Symbol   Price   Acct
PRS Sold 12% Drxn TBond Bear 3X ETF TMV @ $64.22   1
  Sold 14% ProSh UlSht Rus2000 ETF SKK @ $22.06   1
PRS Bought 109% Drxn R Est Bull 3X ETF DRN @ $110.43   1
PRS Bought 82% ProSh Ultra Silver ETF AGQ @ $45.63   1
                 
CAD Trades              
# Trade Qty Stock Symbol   Price   Acct
  No Trades              
                 
Qty % are amount by which shares counts are decreased/increased    
                 

What had been dragging on the market before was more like a cumulative malaise of many smaller things.  Today’s jobs revision was a hit.  A direct hit.  I think this will change the psychology of the market for a while, and things are going to get a lot more complicated.  If the recovery is now (more) in doubt, then commodities are going to get hit pretty hard, mostly metals and oil.  Precious metals will go along with that for a while, but I think they’ll bounce before the others because of increasing uncertainty about the major currencies themselves.  Many will want to hedge against uncertainty, not just inflation, and they’ll go bargain-hunting soon for gold and silver.  Copper and the base metals are probably screwed.  Ags will hold up better than most despite the current surplus in wheat.  Non-defensive stocks are likely in for a rough ride, and U.S. treasuries will do well for a while, but probably turn when gold and silver do, which, by the way I think would be triggered by some new stimulus announcement.  I can’t see the administration standing by and allowing the stock market to collapse when that’s the only ATM left (by way of retirement savings) for people with mortgages under water or with no home equity, and some who have no jobs.  They’ve probably had that standing by as a contingency already.

If gold and silver don’t bounce, and treasuries get bid back up and hold, then we’re staring deflation squarely in the eye.  If you thought things were bad now …

But besides all that, have a nice day.  :)

Cheers,
Allocator
a.k.a. George Parkanyi

February 3, 2010

TU#263 – selling the bounce

I’ve got to stop not trading at the market right away on the opening just because it has gone against me.    I could have sold DRN at $128.50 vs my $130.67 signal price, but now its at $124 and change.  It’s not a big deal %-wise, and I only have 1 lot of it, but the principle is wrong.  The one trade where I was burned doing this was in silver, that I could have got out of around $64, to see the position still sitting there at $54.  That was 2 lots.  (For me a lot is a certain fixed % of the portfolio, a little different for each account.  It is 2.5% of Account 1, and 5% each of accounts 2 and 3.  For the overall portfolio a lot is approximately 1.25% of the portfolio.)  Be it resolved, that going forward I will take all opening signals, warts and all.

So tommorrow I cover 1 lot of short bonds, and hopefully complete the sale of the lot of DRN I should be out of.  But today, the 3 trades that did go through were as follows:

USD Trades   Trading Update # 263          
# Trade Qty Stock Symbol   Price   Acct
PRS Sold 14% PwrSh DB Ag 2X ETF DAG @ $9.92   1
PRS Bought 47% Drx EMkt Bear 3X ETF EDZ @ $5.53   2
                 
CAD Trades              
# Trade Qty Stock Symbol   Price   Acct
PRS Sold 35% HBP DJIA Ag Bull+ ETF HAU @ $18.95   3
                 
Qty % are amount by which shares counts are decreased/increased    
                 

These are all single lots because they are all the first trades after an interim trend reversal (down to up).  If the rebound carries higher, the sell-side lot sizes increase as the profitability increases.  I do this to buy larger quantities nearer the lows, and hold back larger sales till nearer the highs.  I still trade relatively small amount on the first reversal signals to take advantage of prolonged sideways but narrow movements for a market that’s taking a breather.

The S&P500 gave up 6 points today but the portfolio still managed to eke out a fractional nuisance gain on the day.  With the cashing out of the two ag ETFs and going short a lot of EDZ, the portfolio long bias drifted back down to 22.8% net-long.

TMV (short T-Bonds) was interesting.   It was creeping up slowly, not by all that much.  It wasn’t until late in the sessions that bonds moved sharply lower.  T-Bonds can move down swiftly when they move, and it will be interesting to see if this carries through.  The overall position, almost 10% of the whole portfolio, today went fractionally positive, and would be good to maybe get some more upside out of the ETF and take another profit or two.

Cheers,
Allocator
a.k.a. George Parkanyi

February 2, 2010

TU#262 – climbing the wall

This past six month’s trading has been like climbing a rock face.  Grasping and probing for the next toe-hold or crevice, pulling higher, then back-sliding, re-positioning, resting, and struggling higher again.  Today I inched to the highest point so far, then slid back slightly at the close.  Painstaking, but progress.

Today the only trade was to create enough top-up cash to fit in a PRS lot at tomorrow’s opening. 

 

USD Trades   Trading Update # 262          
# Trade Qty Stock Symbol   Price   Acct
  Sold 17% Claym Gl Solar ETF TAN @ $9.17   2
                 
CAD Trades              
# Trade Qty Stock Symbol   Price   Acct
  No Trades              
                 
Qty % are amount by which shares counts are decreased/increased    
                 

 

The signals for tomorrow are to buy a single lot of EDZ (the emerging markets short ETF), and sell single lots of DRN (real-estate ETF) and one each of ags TSX:HAU and DAG.  The single sales are not particularly profitable at this level, but do modify the risk profile by raising some cash without overly diminishing the impact of the much larger overall positions if they were to rise.  If the downtrend continues, then they act as defacto short-sales and provide a bit more cash for purchases at lower levels.

This is quite the change from two sessions ago …

*************************************************************************
PORTFOLIO STATUS Currency Weight Month YTD
Feb-10        
         
ACCOUNT 1 USD 48.5% 1.9% -1.3%
ACCOUNT 2 USD 27.5% -0.7% 2.9%
ACCOUNT 3 CAD 24.0% 8.2% 1.5%
Canadian Dollar     -1.2% 0.4%
         
PORTFOLIO EQUITY CAD 100.0% 1.7% 0.8%
         
PORTFOLIO EQUITY USD   2.9% 0.4%
S&P500 USD   2.7% -1.1%
Portfolio vs S&P500 USD   0.1% 1.4%
*************************************************************************
         
MARKET BIAS     LONG 27.9%
Cash       3.3%
Short       34.4%
Long       62.3%
         

Tonight I was chatting with my friend Brian.  When he went to use a Canadian Tire Mastercard cheque (the ones they send you in the mail that are drawn on the credit card) to pay for his car repair, the Canadian Tire store wouldn’t accept it.  It was actually the increasingly uncomfortable store manager who was explaining this to him while he was at the cash with a big line-up behind him.  I do like Brian’s response to this though - “You know, if you’re going to send these things out to people, but they can’t actually use them, they might just want to know that.”   Mastercard cheques – feel free to leave home without them.

Cheers,
Allocator
a.k.a. George Parkanyi

February 1, 2010

TU#261 – the dollar trade is back; winter camp

This time I was better prepared for the first-day-of-the-month blowing-out of the starting gate.  The S&P500 rallied 15.3 points – almost as much as the first day of January – but the inflation-hedge commodities really caught fire.  So much so that the 6.2% deficit in Account 3 (all commodity ETFs and virtually all long) was wiped out in one day.  Now the portfolio is once again .6% ahead on the year and still 2.1% ahead of the S&P500.

The general market bullishness was ostensibly due to the better-than-expected manufacturing report, and the energy and precious metals response to the dollar blanching in the face of President Obama’s $3.8 trillion tax-and-spend budget.   It’s all relative of course, but the huge funding requirements are bearish for the U.S. dollar and for bonds, while the increased taxation makes the U.S. a somewhat less desirable place to invest.  The U.S. administration is probably counting heavily on the fact that there is no really viable large-scale alternative to the U.S. dollar as  a reserve currency, and that these measures will not in fact create a stampede from same.  This is probably true in the short run, but the continuation of the dollar rally is certainly called into question.  The dollar will probably sit on a balance-point trading range here, to be eventually pushed around by other factors. 

The markets also likely responded positively to the fact that some uncertainty has been lifted for now.  There is actually some kind of plan.  There doesn’t seem to be a great deal of austerity involved given the size of the budget, and there is definitely a conduit of wealth transference from higher income to lower income through the taxation shifting.  Whether or not this is positive for job creation remains to be seen, especially if there are “buy-America” strings attached to the incentives side of things, increasing global protectionist tensions.

Today I had a couple of signals from Friday to execute.  Unfortunately (for these trades) gold and energy shares gapped higher at the open, and I didn’t get very good fills for HGD (2x short gold shares ETF) and ERX (3x energy shares ETF).

 

 

USD Trades   Trading Update # 261          
# Trade Qty Stock Symbol   Price   Acct
PRS Bought 251% Drxn Energy Bull 3X ETF ERX @ $37.19   2
                 
CAD Trades              
# Trade Qty Stock Symbol   Price   Acct
  Sold 100% HBP GoldSh Bear+ ETF HGD @ $5.23   3
                 
Qty % are amount by which shares counts are decreased/increased    
                 

I haven’t decided if I’ll retire HGD outright, but I won’t use it concurrently with HGU (its mirror image).  I may put it on again if I feel the gold market is at a rally extreme (and I’m sold out of HGU), but for now, another short ETF shut down.

This past weekend I was at winter camp with the Scouts, at Camp Awacamenj Mino in Quebec about 90 minutes drive north of Ottawa.  It was pretty cold (-23C or so) on Friday night, but we all slept in the lodge and didn’t have to deal with it that night.  On Saturday it was also pretty cold, but we kept warm snowshoeing, building a snow shelter (often referred to as a quinzee), doing permit work with the mountain stove and axe and saw (Scouts need to earn permits to use the more potentially dangerous camp equipment), and felling a tree into the parking lot.  (Don’t ask.)  The quinzee was a lot of work, and I had to mine blocks of snow out of the snowbank along side the road, out of which the kids built the walls of the structure.  We then used two-by-fours and one-by-fours covered with more snow blocks to build the roof, and then finally covered that with a tarpaulin, and more snow.  The kids who slept in it that night were quite toasty, though that was more from the temperature rising overnight rather than any precision-engineered thermal properties of the quinzee itself.  Today I hobbled around like a 90-year old.  Snow is water, and water is heavy, and I cut and carried a crap-load of it on Saturday.

The camp was all-sections – Beavers (5-7 year olds), Cubs (8-10), and our Scouts (11-14).  The Beavers pretty-much terrorized the Scouts in the lodge with systematic attacks on the Scouts’ sleeping area in the basement, so much so that Scouter Steve put it down to a successful “psy-ops” campaign by the Beavers for which the Scouts were wretchedly unprepared.  Steve uses words like “psy-ops” because he’s ex-military – engineering corps.  The parent that was with us, Randy, was also ex-military – infantry.  Them finding this out about each other led to some entertaining and colorful military banter, generally revolving around the relative intellect of “sappers” and “grunts”.

We had a campfire that crisp night in silvery surroundings under the full moon.  A Scouts campfire is more ceremonial than just hanging out and cooking marshmallows (although we do that too).  There is a formality, and it is MC’d by one of the leaders who picks different groups and sections to do either a song or a skit, which is then usually followed by a cheer, of which there are also many.  For example our skit went as follows:  One of the Scouts (commandant) marches the troop (legionnaires) into the campfire circle.  As they stand and face the commandant, he announces, “Legionnaires, you’ve been marching in the desert for 40 days and 40 nights. I have some good news, and I have some bad news.  The good news is, today you get a change of underwear!”  Great cheering erupts from the legionnaires.  “Now the bad news.  You change with him, you change with him, you change with him …”   Scouter Steve was responsible for the actual fire as well, and everyone was in awe when it instantly lit into a roaring blaze (just like the gas ones at home) with one toss of a match.  Steve had actually juiced it with some highly flammable substance, but we explained it as “correct campfire building technique”.

Most of the kids also slept outside, though I managed not to, by selflessly giving up my winter sleeping bag to one of the Scouts.  When I explained this act of altruism to the other leaders, I detected a hint of skepticism.  But when, with great humility, I explained  ”What can I say, that’s just the kind of guy I am”,  they seemed to understand - ”Of course you are.”  And with that I sauntered off to my nice, warm, comfortable bunk for a snooze.  Although ultimately there was a down-side to sleeping indoors.  At about 7AM one of the leaders started cooking breakfast, and forgot to turn on the stove hood fan.  Never in my life have I heard such a loud fire alarm, let alone woken up to one.  I dragged myself out of the bunk, had the presence of mind to put on pants, and went to check on the 3 Scouts downstairs.  Well, they had long bolted and were standing outside.  I commended them on their quick and correct response, but did point out that next time they might consider grabbing their boots when evacuating into sub-zero temperatures.

On Sunday we played some broomball, demolished the quinzee (which I had to then mostly rebuild because this upset one of the kids), did a Scouts own (where we talk about the pros and cons of the camp), packed up, and finally made our way home, but not before Steve drove into a snowbank as we were leaving the parking lot. I sent him an email today commending him on his exemplary enthusiasm for camp by somehow managing to even squeeze in a little snow-plowing on the way out.

And finally,  the best line at camp? … a six-year old Beaver to Scouter Steve:  “Why are you teaching us poker?”

Now I have to go plan our skiing and tubing activity.

Cheers,
Allocator
a.k.a. George Parkanyi

January 31, 2010

Portfolio results for January 2010 – down .8%

This was market’s response to all the new year enthusiasm of the first two weeks of January – “Oh you liked my little rally, did you?  Here, have this turd.  As a matter of fact, have several.  Enjoy.”

It looked like a good start to the year with the S&P500 still partying effortlessly from 1115 to 1150.  But there it tapped on 1150 twice more and then walked off a cliff.  Now we’re at 1074 and the bungee cord is still uncoiling.   It wasn’t really any one thing that set off this sharp downturn, but a number of things adding up to more of a malaise.  It’s more like chugging along happily and then suddenly getting queezy and not feeling so good.  Europe is facing down debt trouble in Greece and some of the other weaker Euro-zone nations, Japan’s debt has been downgraded, China has been pulling in the reins on credit and raising interest rates to pour cold water on “speculation”, and foreclosures and unemployment persistenly gnaw at the US economy.   Then there are other lesser things  that are piling on – airlines struggling again because of the new ratchet-tightening of airport security, Toyota’s big recall, the U.S. Administration’s negative rhetoric and awkward moves toward regulatory reform, and it’s loss of the Senate seat in Massachusetts leading to the stalling of the proposed healthcare bill.  Even the Haiti earthquake disaster, though not affecting the markets and world economy directly, just adds to the pall of gloom with its enormity.

So to finish the party analogy, we had a couple more drinks and then threw up.

At a loss of .8%, the portfolio held up OK because the losses on the long side were mitigated by short ETFs, and the Canadian dollar weakened by 1.6%.  But there was quite a shift in the net-long/short weighting from about flat (equally balanced) to 20% net-long.  So the risk of loss on further market declines has increased going into February.  I have to be careful here because this has only been two weeks and market downlegs can last for months, and this hasn’t exactly been a bull market underpinned by a robust economy. 

I’m heavily weighted in commodities, and that weighting had a significant effect, as the Canadian account (all commodity ETFs) quickly dropped about 10% after rallying 4%, for a net monthly loss of 6.2%.  Natural gas in particular took a big hit.  So did gold and oil, but they were offset by short ETFs, mostly now sold.  Commodity declines can be brutal for their swiftness and ferocity, and not to be underestimated.  Agricultural commodities now make up 18.4% of the portfolio, and this mix should not be as volatile as energy and metals, mostly because of relative valuation and the diversity of the ags.

I basically missed the 2009 rally entirely because of too much hedging with leveraged short ETFs.  These instruments are just so mathematically unsound that they get crushed on one good rally and never really have the wherewithal to bounce back.  They do bounce now and then, but always from a lower point.  I’m slowly getting rid of them, and managed to close off QID and ZSL this month.

Here is the data on this month’s trading results and positions.

*************************************************************************
PORTFOLIO STATUS Currency Weight Month YTD
Jan-10        
         
ACCOUNT 1 USD 49.0% -3.1% -3.1%
ACCOUNT 2 USD 28.4% 3.6% 3.6%
ACCOUNT 3 CAD 22.6% -6.2% -6.2%
Canadian Dollar     1.6% 1.6%
         
PORTFOLIO EQUITY CAD 100.0% -0.8% -0.8%
         
PORTFOLIO EQUITY USD   -2.4% -2.4%
S&P500 USD   -3.7% -3.7%
Portfolio vs S&P500 USD   1.3% 1.3%
*************************************************************************
         
MARKET BIAS     LONG 19.3%
Cash       5.1%
Short       37.8%
Long       57.1%
         
THEME MIX       100.0%
Agriculture       18.4%
Energy       12.4%
Metals       9.2%
Other Commodity       0.0%
Short Commodity       2.4%
Country ETF       7.5%
Financial       2.3%
Health Care       1.4%
Infrastructure       0.0%
Real Estate       1.1%
Retail       0.0%
Technology       3.8%
Transportation       1.1%
Short Equity       25.8%
Short Bond       9.6%
Currency       0.0%
Cash       5.1%
         
CURRENCY MIX (REAP)       100.0%
US Cash       5.1%
US Investments       46.6%
Commodity (USD Neutral)       40.9%
Other (Currency & Country ETFs)     7.5%
         
STOCK SYM LAST GAIN % WGT
PRS Engine        
ProSh Ultra Silver ETF AGQ $51.32 -11.31% 3.3%
ProSh Ult China ETF XPP $58.32 -13.34% 7.5%
PwrSh DB Ag 2X ETF DAG $9.37 -5.45% 8.3%
Drxn R Est Bull 3X ETF DRN $118.90 -10.54% 1.1%
Drxn TBond Bear 3X ETF TMV $62.23 -5.23% 9.6%
         
REAP        
ProSh Ult Oil & Gas ETF DIG $31.43 0.00% 0.0%
Buff Wld Wings BWLD $46.81 0.00% 0.0%
ProSh UlSht QQQ ETF QID $21.54 0.00% 0.0%
Garmin GRMN $32.31 0.00% 0.0%
iPth Coffee ETN JO $37.52 0.00% 0.0%
Genesee & Wyoming GWR $29.47 -11.67% 1.1%
Nvidia NVDA $15.39 0.00% 0.0%
UBS Ag Platinum ETF PTM $17.98 0.00% 0.0%
ProSh UlSht SP500 ETF SDS $37.54 -21.95% 7.5%
ProSh Ult Cr Oil ETF UCO $10.41 0.00% 0.0%
MktVc Brazil SmCap ETF BRF $41.83 0.00% 0.0%
ProSh UlSht Rus2000 ETF SKK $21.35 -5.08% 7.9%
Myriad Genetics MYGN $23.50 -9.62% 1.4%
Sun Hydraulics SNHY $22.38 0.00% 0.0%
First Solar FSLR $113.30 -8.44% 1.2%
ProSh Ultra Gold ETF UGL $43.37 0.00% 0.0%
ProSh UlSht Silver ETF ZSL $5.05 0.00% 0.0%
Cash       0.0%
         
PRS Engine        
Drx Energy Bull 3X ETF ERX $34.14 -20.71% 1.1%
Drx EMkt Bear 3X ETF EDZ $6.17 19.98% 3.3%
         
REAP        
Formfactor FORM $15.47 -9.39% 2.6%
iPth Cotton ETF BAL $33.76 2.27% 2.6%
CME Group CME $286.82 0.00% 0.0%
ProSh UlSht Dow ETF DXD $31.39 -17.47% 7.1%
Green Mtn Coffee GMCR $84.82 0.00% 0.0%
Claym Gl Solar ETF TAN $8.77 -1.23% 1.5%
MkVec Gold Mng ETF GDX $40.72 -10.21% 0.7%
iPth Sugar ETF SGG $83.11 50.63% 1.5%
iPth Livestock ETF COW $27.92 0.38% 2.6%
ProSh Ult Financl ETF UYG $5.43 43.65% 1.2%
Cash       4.2%
         
PRS Engine        
HBP DJIA Ag Bull+ ETF HAU $17.96 -6.0% 3.3%
HBP GoldSh Bear+ ETF HGD $5.57 35.0% 1.2%
HBP GoldSh Bull+ ETF HGU $9.77 -15.5% 5.2%
HBP GoldSh Bear+ ETF HND $5.62 0.0% 0.0%
HBP NGas Bull+ ETF HNU $9.69 -11.0% 7.4%
HBP CrOil Bear+ ETF HOD $10.75 12.9% 1.2%
HBP CrOil Bull+ ETF HOU $7.68 -16.1% 3.6%
Cash       0.8%
         

So it was yet another losing month, but I did beat the S&P500 by 1.3% after being behind by about 3.5% at one point.  I’ll be like a mutual fund manager and take that as a victory.  :)

February is shaping up to be another exciting month.  Trade long and prosper.

Cheers,
Allocator
a.k.a. George Parkanyi

January 28, 2010

TU#260 – frosty reception

On two counts – (1) we’re having a winter scout camp this weekend and the weather is going to be the coldest so far this winter, and (2) the S&P500 was down 12 points in the face of Ben Bernanke’s imminent and highly likely re-appointment.

The weather thing sucks, as we plan to sleep in tents on Saturday night.  I’ve done this a number of times before, and, despite using winter sleeping bags, I couldn’t really characterize any of  it as “fun”.  But, must build character.

The markets seem to have adopted “down” as the path of least resistance of late, and it’s looking pretty unlikely that January will end positive.  Today I did a little more short covering and buying to increase the portfolio net long bias to 20%.  Like yesterday, I dialed down the size of the trades to not get too aggressively long at a this relatively early stage of a major downdraft (if it is to be a major downdraft).  I was to both cover short oil and go more long.  I only did the short covering, and will wait for the next signal lower before doing the buy.

USD Trades   Trading Update # 260            
# Trade Qty Stock Symbol   Price   Acct  
  No Trades                
                   
CAD Trades                
# Trade Qty Stock Symbol   Price   Acct  
  Bought 72% HBP GoldSh Bull+ ETF HGU @ $10.70   3  
  Sold 67% HBP CrOil Bear+ ETF HOD @ $10.40   3  
  Bought 200% HBP DJIA Ag Bull+ ETF HAU @ $18.65   3  
                   
Qty % are amount by which shares counts are decreased/increased      
                   

Interestingly, despite being net-long 20% or so in the morning right after I did the trades, and despite the market being down 17 points during the middle of the day, I actually recovered a good portion of yesterday’s losses.  Ags held up, the Canadian dollar was friendly, the Chines ETF responded to Asia’s overnight rally, and the short ETFs did enough to make it all a plus.  The account is still only down .1% this year after all this sudden, expected market tobogganing.

Although I took it easy on the aggressive scale-down buying, I’ve still bought plenty, and a rally – pretty likely after the first drop from the top – would probably ratchet up the account another notch or two.  So I feel comfortable enough at the moment.  (Ask me again on Saturday night).

Cheers,
Allocator
a.k.a. George Parkanyi

January 27, 2010

TU#259 – extrication

Yesterday’s PRS signals were consummated this morning at the opening – although I chickened out a little by reducing a number of trades from 3 lots to 2 lots.  I’m not too crazy about averaging down aggressively from these heights while at the same time rapidly reducing my short equity ETF positions, and decided to slow things down a little by reducing the trade a sizes, although I did take all the signals.

 

 

USD Trades   Trading Update # 259          
# Trade Qty Stock Symbol   Price   Acct
ETF Bought 51% ProSh Ultra Silver ETF AGQ @ $54.30   1
ETF Bought 36% PwrSh DB Ag 2X ETF DAG @ $9.56   1
ETF Bought 44% ProSh Ult China ETF XPP @ $57.80   1
ETF Sold 48% Drx EMkt Bear 3X ETF EDZ @ $5.93   2
                 
CAD Trades              
# Trade Qty Stock Symbol   Price   Acct
  Bought 41% HBP NGas Bull+ ETF HNU @ $10.52   3
                 
Qty % are amount by which shares counts are decreased/increased    
                 

This now leaves the portfolio with a 14.5% net-long bias, but with still-significant downside protection and resources to take advantage of even lower prices without significantly impairing the overall account equity.  And I’ve been able to extricate myself reasonably gracefully from two of the short ETF positions I’ve been wanting to get out of for some time now.

Having said that, I still lost a significant amount of money on the day, putting the account back under water by .6% on the year.  The long positions, mostly dominated by commodity ETFs, did not really recover much with the intra-day equities rally while the short ETFs gave up some ground.  However, there are significant PRS system ETF long positions now and even a modest rally should provide the opportunity to kick in some short-term profits.  If the market continues lower then I can build the positions further at more favourable prices and further reduce the short ETFs positions.

Feeling a little tired and groggy at the moment.  Got back not that long ago from a couple of beers and a few games od NTN trivia at the nearby New Edinburgh Pub with my friend and co-scout leader Steve.  We kicked butt as SPARTN (though it would have been more satisfying had the other players been playing and not just sitting there with their machines idling). However, our plan is to take down the GRYFON, who racks up scores in the order of 9500 out of 10000 (and clearly has no life).  Steve is planning to bring in a trivia ringer friend of his to accomplish this objective, probably a wise move, as between us, we were able to muster only 6000 points.  We have work to do.  :)

Cheers,
Allocator
a.k.a. George Parkanyi