Market Outlook - Sept 11

Well this week has definetly not gone as planned. I have kept most of my shorts and still believe we are due for a pullback; however, it may not happen. I am down on the month about 5% - so needless to say I am pretty pissed off. I have been cleaning out some longs but honestly may regret it. I sold STAR the other day, not based on the story, but based on a belief that I will buy the stock cheaper. I do that very often actually – sometimes I sell out of a position for a particular reason but majority of the time I try to play a channel. For example, if I buy stock XYZ for $5 and it goes to $5.50 and I have a bad feeling of market, I will sell all for quick 10% gain and buy it back at $5. Needless to say, that does not always work; however, occasionally it does.

As for my portfolios, 1 portfolio is great and the other is not great. In portfolio 2, my long only portfolio (inception May) I have a 100% win rate - - out of 84 trades I have made profit on all. The other long/short portfolio I have about 80% win rate, which is down from about 92%. I have lost thousands shorting as a hedges, but from a YTD% gain and am up about still 252% on it – so I am just flat over months. If I would have not shorted I would be up monsterous – oh well. My point is that shorting is risky and acts as a “hedge”. Anotherwards, you get paid on a “rainy day”. The biggest error is I was forecasting a “typhoon”, we got a “thunderstorm” and I didn’t cover any of my shorts. Sometimes, it’s smart to be a long only investor; however, last year we say that all long only portfolios were red, while shorts were rich. I recommend not shorting unless you can read sentiment, techincals, equity valuations, etc…and even at that, it’s extremely difficult. Many equities are fully priced or are overvalued but that doesn’t mean we can’t go higher. In a long-only model portfolio, I think 50-60% cash is very wise in these conditions because if we do “tank” you have tons of cash to buy things cheap. If we don’t dip, you still have decent exposure. My favorite sector is the most unloved which is consumer staples. Stocks like Proctor & Gamble (PG) still have a lot of value but are considered “slow money”. So when I see stocks that are cheap, however, are “slow money” I just make it a small % of my portfolio. I think PG could get to $60 low end - $70 high end; however, since it’s slow money and I like quick gains, I make it a small % of the portfolio, so all of my capital is not tied up and I can trade actively.

Lastly, today I will count my blessings, as it marks 7 years since 9/11....may God bless the families of those who lost loved ones.