TRADING UPDATE
Woo-hoo! That was a wild one. If you have kids, you might be able to relate to this. In the animated movie “Ice Age” Manfred the mammoth, Sid the sloth, and Diego the sabre tooth tiger break through the ice in a cavern complex and go hurtling down a series of tunnels until they come flying out of a chute at the bottom. After the momentary shock wears off, Diego loses his normal calm and starts jumping around all excited and exhilarated from the adrenaline rush. Well that was what today felt like – major brush with danger, miraculously emerging (relatively) unscathed.
And a rollicking ride it was. Previous record for REAP trades in one day – 5. Today we hit 7. Group #6 traded twice. There was one whole month where I only did six trades total. This is some kind of volatility, and it suggests capitulating, if not yet capitulation, and getting close to an interim bottom – the financial system melting down notwithstanding. Watching the movie “The Perfect Storm” last night was also quite topical in retrospect.
In the midst of all of this I continued to make adjustments to the portfolio content. On the news that Eli Lilly (LLY) was buying ImClone for $6.5B, I opted to give it the pink slip. These days I’m in the hunt for top notch balance sheets and/or franchises. Lilly looked liked good value with a reasonable debt/equity ratio and cash coverage of the debt when I bought it. But going on a $6.5B spending spree and paying top dollar in a bear market is not exactly my idea of keeping one’s powder dry.
The other move was to buy into the art world (sniff) with Sotheby’s (BID), the famous 250 year-old British (now American) auction house – paying 4% with a PE of 5.5 or so. (It was either that or Chuck-E-Cheese.)The company does appear to have recently taken on some long term debt, but the cash is still in the coffers, and in fact that cash currently represents 45% of the stock price. In having read the history of Sotheby’s, it does seem to stumble during recessions, so let’s trust that the “gone” part isn’t going to be the company.
Here’s the record of today’s day-trading frenzy. (Did I mention this was a long-term trading system?)
| REAP TRADES | ||||||||
| # | Trade | Qty | Stock | Symbol | Price | Grp | ||
| 110 | Sold | 59% | HBP TSX60 Bear+ ETF | HXD | @ | $28.90 | 2 | |
| 110 | Bought | 143% | HBP Cr Oil Bull+ ETF | HOU | @ | $17.28 | 2 | |
| 111 | Sold | 37% | HBP NASD Bear+ ETF | HQD | @ | $28.90 | 6 | |
| 111 | Bought | 36% | Arc Energy Inc Trust | AET.UN | @ | $17.31 | 6 | |
| 112 | Sold | 100% | HBP N Gas Bear+ ETF | HND | @ | $22.42 | 1 | |
| 112 | Bought | 39% | HBP DJIA Ag Bull+ ETF | HAU | @ | $6.90 | 1 | |
| 113 | Sold | 24% | ProSh UlSht Dow ETF | DXD | @ | $73.48 | 3 | |
| 113 | Bought | 68% | Potash Corp of Sask | POT | @ | $92.02 | 3 | |
| 114 | Sold | 40% | HBP DJIA Ag Bear+ ETF | HAD | @ | $42.28 | 4 | |
| 114 | Bought | 31% | HBP N Gas Bear+ ETF | HNU | @ | $10.08 | 4 | |
| 115 | Sold | 47% | HBP SP500 Bear+ ETF | HSD | @ | $30.13 | 5 | |
| 115 | Bought | 31% | Trina Solar | TSL | @ | $17.16 | 5 | |
| 116 | Sold | 30% | HBP Gld Shs Bear+ ETF | HGD | @ | $15.52 | 6 | |
| 116 | Bought | 85% | Nvidia | NVDA | @ | $7.40 | 6 | |
| Sold | 100% | Eli Lilly | LLY | @ | $39.58 | 2 | ||
| Bought | 100% | Sotheby’s | BID | @ | $14.02 | 3 | ||
| Replaces | Buffalo Wild Wings | BWLD | 3 | |||||
| REAP methodology detailed in the blogroll under “My Portfolio” | ||||||||
| Qty % are amount by which shares counts are decreased/increased | ||||||||
Every REAP sell was a short equity or short commodity ETF. And every buy except for NVDA was energy or agriculture related. So energy and ag markets, if you’re not too busy imploding and otherwise collapsing, any time now would be good for at least a modest rally – you know, just a little something for the common folk.
I dodged a bit of a bullet today as well. I was looking at a bid/ask on HAD at around $42.82-$43-something. It trades very thinly, but because the spread was fairly narrow I figured OK there’s a bid, no problem, here’s my market order. I absolutely could not believe it when I got filled at $33.01. When I called to ask about it, my brokerage firm kept on insisting no, it was a bona-fide trade – despite the fact that the low continued to show as $42.28 throughout the day. I had to call them three times to bitch about it before finally at the end of the day I noticed somebody had changed the fill. They gave me the posted low of the day $42.28. I’m pretty sure they just ate the trade rather than bust it. (Busting a trade is where the exchange cancels a trade if they agree there’s been a violation of the trading rules.) The problem with electronic trading platforms is that in thin markets you could very well get nailed like this if you are not careful. In a fast market (quotes and spreads are lagging the trading) or on a thin (illiquid) stock/ETF, it’s much safer to enter a limit order at the bid price if you are selling or the ask price if you are buying. This way you can’t do worse than the limit if someone yanks the visible bid or offer away.
The second trade in Group 6 was interesting. Fairly late in the afternoon but before the rally, much like Wile-E-Coyote walking off a cliff and falling only when he realizes where he is, gold stocks suddenly decided to plunge en masse. HGD shot up, traded out at $15.52, then promptly dropped to close at $14.00. It’s one of those “what was that all about?” situations.
For all the frenetic activity, I still didn’t gain all that much on the S&P500. The “commodities are now toxic” theme has been hammering the Canadian dollar. My benchmark for REAP is the total return S&P500, which is denominated in US dollars. The portfolio right now is about 62% in Canadian dollars, so I’m only getting 38% of the currency gain benefit that the S&P is getting. This will change when commodities rally, (if they don’t, then you’ll be fully within your rights to demand your gasoline for free when you next fill up) but for now, it’s a stiff headwind from the loonie.
Here’s the box score …
| PORTFOLIO SUMMARY | 6-Oct-08 | ||||
| (in $C, adjusted for $US exchange rates) | |||||
| PORTFOLIO | S&P500 | S&P500 | SP500 $C | REAP | vs S&P |
| Tot Retrn | |||||
| Reference Date | Start | Last | % | % | Var. |
| Inception MAR 07 | 1406.2 | 1,056.9 | -27.8% | -25.2% | 2.7% |
| Re-start OCT 07 | 1526.7 | 1,056.9 | -19.0% | -12.9% | 6.1% |
| 2008 Year to Date | 1468.4 | 1,056.9 | -16.2% | -3.4% | 12.8% |
| Discretionary Trading P&L (included in above results) | -5.4% | ||||
| Canadian dollar | Last | Inceptn | Var. | Restart | Var. |
| 0.9069 | 0.8547 | -6.1% | 1.0069 | 9.9% | |
| Dividend Yield (current) | 1.91% | ||||
| Intrinsic leverage (from 2x ETFs) | x | 1.39 | |||
| Currency Mix | |||||
| Canadian Investments/Cash | 62.0% | ||||
| US Investments | 34.6% | ||||
| Other (country ETFs) | 3.4% | ||||
| Market Bias | Net Long | 39.2% | |||
| Cash | 21.6% | ||||
| Short | 19.6% | ||||
| Long | 58.8% | ||||
| Theme Mix | |||||
| Commodity ETFs | 14.9% | ||||
| Short Commodity ETFs | 8.0% | ||||
| Short Equity ETFs | 11.6% | ||||
| Energy | 8.5% | ||||
| Agriculture | 2.9% | ||||
| Alt Energy/Infrastructure | 5.8% | ||||
| Financials | 6.6% | ||||
| Health Care | 3.3% | ||||
| Technology | 10.4% | ||||
| Transportation | 1.1% | ||||
| Auctions | 2.0% | ||||
| Country ETF | 3.4% | ||||
| Cash | 21.6% | ||||
| Portfolio Notes | |||||
| Inception date is when I started tracking portfolio performance in | |||||
| this blog. I track it to reflect total performance after initial mistakes | |||||
| and discretionary trading losses. A more accurate representation | |||||
| of REAP’s “pure” performance is as of 10 Oct 07, when I | |||||
| re-established it after selling out the portfolio twice due to | |||||
| sub-prime systemic concerns. | |||||
| *** S&P Comparison is total return to reflect dividend re-investment | |||||
| REAP GROUPS | |||||
| Stock | Sym | Last | Gain % | Weight | Yld |
| Group #1 | |||||
| HBP DJIA Ag Bull+ ETF | HAU | $6.80 | -30.16% | 3.9% | 0.00% |
| HBP NGas Bear+ ETF | HND | $22.94 | 0.00% | 0.0% | 0.00% |
| Husky Energy | HSE | $35.61 | -15.47% | 1.8% | 4.74% |
| Apple Inc | AAPL | $98.14 | -4.20% | 2.0% | 0.00% |
| PrSh S&P Sh ETF | SDS | $85.10 | 34.54% | 3.2% | 0.92% |
| PrSh Ultra Financ’l | UYG | $14.40 | -30.31% | 4.0% | 1.90% |
| Group #2 | |||||
| HBP CrOil Bull+ ETF | HOU | $16.20 | -24.75% | 1.8% | 0.00% |
| HBP TSX60 Bear+ ETF | HXD | $28.85 | 38.63% | 0.8% | 5.96% |
| CME Group | CME | $403.85 | 6.50% | 2.6% | 5.27% |
| Formfactor | FORM | $16.11 | -21.15% | 2.9% | 0.00% |
| Gen & Wyom | GWR | $33.23 | -9.53% | 1.1% | 0.00% |
| Eli Lilly | LLY | $38.42 | 0.00% | 0.0% | 0.00% |
| Group #3 | |||||
| HBP Gold Bull+ ETF | HBU | $16.45 | 5.89% | 2.0% | 0.00% |
| HBP CrOil Bear+ ETF | HOD | $14.66 | 19.19% | 3.4% | 0.00% |
| Potash Corp Sask | POT | $95.25 | -8.08% | 2.9% | 0.39% |
| Sotheby’s | BID | $14.64 | 6.53% | 2.0% | 4.37% |
| Cree Inc | CREE | $20.42 | -8.13% | 1.1% | 0.00% |
| PrSh Dow Sh ETF | DXD | $72.28 | 28.86% | 3.5% | 1.58% |
| Group #4 | |||||
| HBP DJIA Ag Bear+ ETF | HAD | $43.43 | 97.57% | 1.7% | 0.00% |
| HBP NGas Bull+ ETF | HNU | $10.00 | -37.77% | 4.6% | 0.00% |
| IGM Financ’l | IGM | $36.28 | 0.00% | 0.0% | 0.21% |
| FTSE/Xinhua China ETF | FXI | $30.10 | -21.60% | 3.4% | 2.90% |
| Nokia | NOK | $16.70 | -13.82% | 2.4% | 4.02% |
| PrSh NASD Sht ETF | QID | $68.83 | 55.13% | 1.4% | 0.83% |
| Group #5 | |||||
| HBP GoldSh Bull+ ETF | HGU | $9.74 | -28.14% | 2.6% | 0.00% |
| HBP S&P500 Bear+ ETF | HSD | $29.14 | 18.58% | 0.8% | 0.00% |
| Precsn Drilling | PD.UN | $14.00 | -21.95% | 2.3% | 8.69% |
| PrSh Ultra Health ETF | RXL | $45.30 | 0.00% | 0.0% | 0.06% |
| Sun Hydraulics | SNHY | $21.90 | -2.53% | 1.0% | 1.60% |
| Trina Solar | TSL | $17.96 | -22.49% | 3.7% | 0.00% |
| Group #6 | |||||
| Arc Energy Inc Tr | AET.UN | $18.05 | -17.41% | 4.4% | 13.17% |
| HBP GoldSh Bear+ ETF | HGD | $14.00 | 30.97% | 2.8% | 0.00% |
| HBP NASDAQ Bear+ ETF | HQD | $34.56 | 28.82% | 1.9% | 0.00% |
| ISh Australia ETF | EWA | $17.11 | 0.00% | 0.0% | 0.14% |
| Forest Labs | FRX | $23.94 | -24.73% | 3.3% | 0.00% |
| Nvidia | NVDA | $7.85 | -29.50% | 3.1% | 0.00% |
So that’s it then. Another 7 tomorrow?
Now, we’ll start the bidding. Who’ll give me $1 per share for this fine, slightly mismanaged but otherwise charming Hatteras-style Wachovia bank? Anyone? Ah, the haggard-looking gentleman with the red umbrella. Two dollars? Two dollars for this biggish Eastern bank requiring nothing more than some tender loving care and a $10 billion cash infusion? No? Going once … going twice … SEVEN dollars a share from the gentleman in the stetson with the stagecoach reins. Once, twice, SOLD! …. Mr. red umbrella, please stop shouting and do sit down, or I’m afraid we’ll have to call security … I’m sorry, Mr “Wells” was it, will that be cash or cheque? …
Cheers,
Allocator
a.k.a George Parkanyi
gparkanyi@hotmail.com
Copyright 2008 – all rights reserved
