Bookkeeping: Weekly Changes to Fund Positions Year 3, Week 7

Year 3, Week 7 Major Position Changes

To see historic weekly fund changes click here OR the label at the bottom of this entry entitled 'fund positions'.

Cash: 73.9% (v 68.4% last week)
23 long bias: 16.5% (v 16.7% last week)
7 short bias: 9.6% (v 14.9% last week) *includes long term puts

30 positions (vs 33 last week)

Weekly thoughts
Groundhog week - the markets almost performed identical to the week before, albeit it in a 5 day week rather than 4 days. All positive days except for 1 "correction" day, which is marked in red below - as you will see the corrections are nothing but a 1-3 point dip in the S&P 500.

At this point the action strikes me even more bullish than NASDAQ 1999... we had a similar type of rally in terms of "up" but even within the constant waves of rallies we experienced some very volatile down days where you could drop 2% in a session just as easy as go up 3%. (of course you bought all those dips because the market could only go up) Now? A month ago we were talking about a string of 18 out of 20 sessions where the S&P was either up or down less than 0.5%. Currently, we have a new string of 10 out of 10 with the same conditions. The charts remain bullish and the only negative is that everything is so bullish ...

It's a relatively quiet week for economic reports, but whatever we do have = we'll use as the 29th consecutive week in which we will buy the news and be "surprised" by it. So play along. Leading indicators will push us up Monday. Tuesday is quiet - generally we'll sit on our hands awaiting the results of the 2 day Fed meeting which will be announced Wednesday afternoon. But don't let that stop you from buying the market at 3:30 PM for the now traditional 30 minute rally into the close. Thursday is the weekly unemployment claims which are to be ignored ("backwards looking") if they are bad, and embraced if they are good. Either way buy on the news. Existing home sales also come Thursday which should be a barn burner as Americans mistakenly think this 1st time home credit will be ending November 1st. Sorry folks - this party is just getting started - more handouts to go, but most likely we'll see an unnatural rush as people think "Cash for Clunker Homes" will sunset and it's time to buy now to take advantage of fellow citizen largess. All the same thought processes for new home sales on Friday.. and we'll also get durable goods order which will surge on Cash for (Car) Clunkers fallout. All in all, the same old story - where the government is flushing the economy with cash (i.e. everywhere) be surprised by economic reports, and buy stock. The only place the government cannot fix by generational debt arbitrage (take from the future to give to the now) is unemployment and with that, you ignore it and say the economy does not need jobs to prosper. Which is technically correct, when government handouts are the driving force for an economy.

Let me reiterate a statistic I posted last week, if the next 6 months are like the last 6.5 months we'll pass through all time highs in the market by mid winter (mid 1500s on the S&P 500), and get over S&P 1700 by March 1st. I ask every week when valuations begin to matter again - it appears "not yet" is the constant answer. As I watch companies "beat their numbers" I can't help to note many are seeing profits at 50%+ below year ago levels, but their stocks no longer are 50% down - which can only mean one thing: "P/E multiple expansion". Which is a fancy word for "there is too much paper money in the world chasing too few opportunities, and hence into speculative assets they will go."

For the fund, I look like I am positioned "bullishly" but really it's been forced to some degree. We finally cried some uncle the past 6 sessions and started covering some short positions in full. After closing out a short on PPG Industries (PPG) the Friday before last, we were forced out of Caterpillar (CAT) and Riverbed Technology (RVBD) Monday. Should of listened to myself on RVBD Monday when I said technically with that break over resistance the chart went into bullish condition and it was a chance to go long.

So on the short side, when the day comes the market actually falls in any material fashion we'll simply be using a large cash position to benefit, or try to throw some puts on in the very short term. On the long side, we closed out long GeoEye (GEOY) for complete and utter boredom reasons. We took some profits in RF Micro Devices (RFMD) - up by a third in just a few weeks, and Blackstone Group (BX) - up by a fifth in as many weeks, and otherwise just held course. I have a host of limit buy orders sitting outstanding for either new positions or to buy back some portion of current positions at lower prices, but for those to execute would require the market to go down more than 0.3%.

Last point on the portfolio, as I look at it - each and every long position is in the green except for an index long I put on late Friday. It is hard for me to believe I am so sharp that no matter what I buy, it goes up. I mean that is Goldman Sachs good... approaching 100% success on long positions. But that's the situation right now - throw a dart, make yourself a winner. I had an interesting email exchange today with a reader who wrote (to paraphrase) "the real test for you will be when the market goes sideways or down." To which I replied... no, that is actually the type of market I would thrive in. This type of market is a real test for me, because the "buy and hold, cash is trash" mutual fund crowd loves this market that only goes in 1 direction (up) and every dip is bought frantically and 94% of all stocks are a winner. *That* environment is actually very hard to keep up with running any sort of hedged portfolio. Inversely, when the market falters or at least is range bound, those type of "all in" investors generally struggle to outperform. But I found it an interesting comment.

So in summary, everything I buy long makes us money - everything I short loses money. Clearly this is (ahem) "a stock pickers market" as they like to say on financial infotainment TeeVee. So as I survey new purchases this week I'll take my trusty dart board, and slew of darts and get to throwing, while swigging a mug of "Complacency". Everyone's drinkin' it... it's good for you.

Off tangent though of the week: What happened to hurricane season this year? Did the constant carpet bombings of paper money by B52 bomber create a tsunami of air flow outward from the continental US, pushing all tropical storm patterns away from the U.S.? Bernanke is like a deity with his powers. The only reason I mention this is natural gas flew off the handle last week, up 26%. Now up 50% since early September. For no good particular reason. Storage facilities of natgas are about to go "full" in the coming months yet prices fly up. Uhh, supply and demand anyone?

Well there is 1 reason for a convenient rally - a lot of people buy natural gas in August to sell in September or October when hurricanes threaten. That's just the "playbook" by institutions. But now, you can make tons of dough on these things even when the hurricane doesn't show up. There doesn't even need to be a catalyst to bail these folks out of their positions. It is almost like a certain group of very high powered investors, who (allegedly) bought up a ton of natgas positions (due to historic precedent) can make the commodity go up (allegedly) even without a catalyst so they could get out of their positions for nice profits (allegedly). Almost as if pre ordained to get a 97% winning percentage. Or maybe it was Hurricanes Void & Nil I just missed....