Tuesday, July 17, 2012
VIX to 15 or Below a Good Bet
Sunday, July 15, 2012
BACK!
I AM BACK!
Thank you everyone who visited my blog during the last several years and apologies for the long absence. The primary reason for my absence was my work and personal life. During the financial crisis which was beginning around the time I last posted, my job situation wasn't easy. At times, I was very busy with work. At other times, I was anxiously worried that I didn't have any work and wasn't in a mood to really post. I wish I could say that I hit a jackpot during the financial crisis with my investments. The truth is that I more or less broke even. That's actually still not bad, considering the losses that some people took.
My best trade during that period was the time that I stalked and anticipated almost to the minute, the top in oil at around $147 per barrel, and went long some airlines for huge gains in the next 2 or 3 days. I didn't invest enough (a mistake I've made too often) and exited the trade too early, but still made a hefty sum, maybe $50,000.
Not too long thereafter, as the shi* started to hit the fan, in one account, I get out of gold mining stocks shortly after they started to tank, taking a stinging loss, but definitely avoiding the worst of it. Thereafter, I made some short term trades in financial ETFs, sometimes shorting, sometimes going long, which together probably netted out to around break even. I remember one episode when I left several thousand dollars on the table because there was a technical problem with Fidelity not executing my trade for a good hour or so. Frustrating to say the least.
In a second main account, I took losses in Asian funds as the crisis began to take hold. I remember taking particularly bad losses in Chinese and Japanese funds, though the amounts at stake weren't overly huge in relative speaking. I also took steep paper losses in this account in my gold mining shares, investing in the Black Rock managed World Gold Fund. In this account, I decided to ride out the crisis with my gold mining positions intact. It was a disaster at the beginning, but eventually, the position went back to positive, and then soared into profit, as gold miners rose sharply after all the stimulus injected by governments and central banks. One mistake I may have made was not selling the investment earlier because I actually had a currency gain (with the fund being denominated in USDs) relative to my home base currency which actually outstripped my gain in the miners themselves. I remember at one point I had a gain of over 50% considering capital appreciation and currency gains. Eventually, I sold the position for something like a 30% net gain. Still not bad, but again left some money on the table.
As the economy started to bottom out, one of my better ideas was to close my fidelity account and repatriate most of my funds from an account in the U.S. back to my base country. Overall, I only had a very modest gain overall from this account, but I felt it was decent enough. Unfortunately, it took me well over a month to succeed in doing it because Citibank, where I had my funds, was very uncooperative and imposed hurdle after hurdle. If I had been able to do it on the day of my decision, I would have benefited from a cross exchange rate of 1250 per USD. Instead, by the time I was actually able to overcome all the red tape and hurdles, I could only get 1185 to 1190. That was around USD 435,000 repatriated. I rode my base currency all the way down to 1050 or so, at which point I bought some USD for a nifty swing trade, selling them at around 1120--if only I had bought more! The currency currently sits at 1146.
My mistake during the recovery was being initially too tentative in getting back into the market. I remember going to the bank to buy some Korea funds at the height of the crisis (i.e., near the bottom) and the bank teller literally scaring me into taking a smaller position than I had initially wanted ("don't invest too much.. who knows what could still happen to GM!"). Then of course, I sold too early and watched from the side as world stock markets continued to advance for months.
After the last major pullback last September or so, I started to buy back in. I was a little bit too early again, but I was convinced by certain analysis by Adam Hamilton of http://www.zealllc.com/ that the September highs were not a market top. It wasn't easy being long with all this bad news in the press, with Europe being of course the most prominent. But it turned out that Mr. Hamilton was correct and, by extension, so was I.
But several factors limited the gains that I made. First, misallocation among markets. I should have been investing in the U.S., the indices of which had the most bullish postures. Instead, I concentrated in Asia. The Korea funds generally did ok and I sold them at various times for approximately between 5% and 20% gains. Japan also rallied sharply after lagging for a while following the earthquake/tsunami (in which I had the misfortune to participate as an investor in a Japanese fund). I sold my Japanese positions for around 10% gains. But China continued to underpeform and in the end, although I sold at a relative high, I had to take a 8% loss on a position of around $200,000, which definitely put a damper on my gains. Another reason was fund underperformance. Some of the funds definitely underperformed, including one Korean fund in which I had doubled down right after the death of Kim Il Sung which I knew to be, and was proven correct, to be a significant buying opportunity. I think I sold that one at under 5% gain, which was a shame because my decision to invest right after the death of Dear Leader was one that would have been probably considered to have been rather risky at the time. I wish the risk could have been appropriately rewarded, but instead the incompetent fund manager screwed me.
Overall, doubling down on Japan right after the tsunami, and adding more to my Korean holdings following the death of Dear Leader, were good decisions on my part, but investing straight up in the U.S. (possibly with currency hedge) would have been even better, so my gains lagged those of the S&P.
And now, I come to the current situation. One of my mistakes was getting back into gold miners too early after gold topped out last year at over $1900. I've been since adding to a position that has come under water and remained under water for quite some time. I still continue to think it's a sound bet, and that gold miners are particularly undervalued relative to the price of gold. Further, I think that sentiment among gold investors is very bad, which is a good contrarian signal. Still, I'm pretty sure there will be at least one more scary shakeout before the miners can start on an uptrend, though the bottoming process may have started already. I'm looking to add slightly to my position later in July if gold takes another hit. I'll be carefully watching the support between $1550 and $1530 or so.
I like the recent quote from Mark Hulbert of MarketWatch: "Gold-market contrarians these days must be feeling like the card counter in blackjack who knows that the odds are in his favor—provided he continues to play rationally. But beads of sweat are definitely visible on his brow."
Other than that, I have a small leveraged position in Korea stock funds and have been slowly accumulating USD while selling my base currency. I believe that world markets are getting close to topping (in fact, they most likely already topped out when the S&P reached over 1400, but one more push to around that level might not be out of the question), though VIX will still again fall to or below 15 and might stay there for a little bit before we get a significant downdraft. In summary, I see both my long Korea stocks position and my USD hedging position working out fairly soon. Selling off my Korea funds in the coming days for a small profit and adding to my USD hedge seems like a sound idea while keeping my fingers crossed on gold in the coming days/weeks.
What will happen once the markets top? It's hard to say. I don't see another major bear market that takes the S&P below 1000 just yet, though a significant and painful downdraft could definitely be in the cards before the coming election in November--such sell off, which I see as likely in the coming few months, would definitely strongly undermine Obama's reelection chances. After I think the markets will try to muddle through. Hopefully the Fed will step up to the plate and add some support soon, which will help to keep the bottom from completely falling out, while giving a major boost to gold stocks.
My goal remains the same: to soon retire and concentrate on my interests, including my investments.
Thank you everyone who visited my blog and apologies for the long absence. The primary reason for my absence was my work and personal life. During the financial crisis which was beginning around the time I last posted, my job situation wasn't easy. At times, I was very busy with work. At other times, I was anxiously worried that I didn't have any work and wasn't in a mood to really post. I wish I could say that I hit a jackpot during the financial crisis with my investments. The truth is that I more or less broke even. That's actually still not bad, considering the losses that some people took.
My best trade during that period was the time that I stalked and anticipated almost to the minute, the top in oil at around $147 per barrel, and went long some airlines for huge gains in the next 2 or 3 days. I didn't invest enough and exited the trade too early, but still made a hefy sum.
Not too long thereafter, as the shi* started to hit the fan, in one account, I get out of gold mining stocks shortly after they started to tank, taking a stinging loss, but definitely avoiding the worst of it. Thereafter, I made some short term trades in financial ETFs, sometimes shorting, sometimes going long, which together probably netted out to around break even. I remember one episode when I left several thousand dollars on the table because there was a technical problem with Fidelity not executing my trade for a good hour or so. Frustrating to say the least.
In a second main account, I took losses in Asian funds as the crisis began to take hold. I remember taking particularly bad losses in Chinese and Japanese funds, though the amounts at stake weren't overly huge in relative speaking. I also took steep paper losses in this account in my gold mining shares, investing in the Black Rock managed World Gorld Fund. In this account, I decided to ride out the crisis with my gold mining positions intact. It was a disaster at the beginning, but eventually, the position went back to positive, and then soared into profit, as gold miners rose sharply after all the stimulus injected by governments and central banks. One mistake I may have made was not selling the investment earlier because I actually had a currency gain (with the fund being denominated in USDs) relative to my home base currency which actually outstripped my gain in the miners themselves. I remember at one point I had a gain of over 50% considering capital appreciation and currency gains. Eventually, I sold the position for something like a 30% net gain. Still not bad, but again left some money on the table.
As the economy started to bottom out, one of my better ideas was to close my fidelity account and repatriate most of my funds from an account in the U.S. back to my base country. Overall, I only had a very modest gain overall from this account, but I felt it was decent enough. Unfortunately, it took me well over a month to succeed in doing it because Citibank, where I had my funds, was very uncooperative and imposed hurdle after hurdle. If I had been able to do it on the day of my decision, I would have benefited from a cross exchange rate of 1250 per USD. Instead, by the time I was actually able to overcome all the red tape and hurdles, I could only get 1185 to 1190. That was around USD 435,000 repatriated. I rode my base currency all the way down to 1050 or so, at which point I bought some USD for a nifty swing trade, selling them at around 1120--if only I had bought more! The currency currently sits at 1146.
My mistake during the recovery was being initially too tentative in getting back into the market. I remember going to the bank to buy some Korea funds at the height of the crisis (i.e., near the bottom) and the bank teller literally scaring me into taking a smaller position than I had initially wanted ("don't invest too much.. who knows what could still happen to GM!"). Then of course, I sold too early and watched from the side as world stock markets continued to advance for months.
After the last major pullback last September or so, I started to buy back in. I was a little bit too early again, but I was convinced by certain analysis by Adam Hamilton of www.zealllc.com that the September highs were not a market top. It wasn't easy being long with all this bad news in the press, with Europe being of course the most prominent. But it turned out that Mr. Hamilton was correct and, by extension, so was I.
But several factors limited the gains that I made. First, misallocation among markets. I should have been investing in the U.S., the indices of which had the most bullish postures. Instead, I concentrated in Asia. The Korea funds generally did ok and I sold them at various times for approximately between 5% and 20% gains. Japan also rallied sharply after lagging for a while following the erarthquake/tsunami (in which I had the misfortune to participate as an investor in a Japanese fund). I sold my Japanese positions for around 10% gains. But China continued to underpeform and in the end, although I sold at a relative high, I had to take a 8% loss on a position of around $200,000, which definitely put a damper on my gains. Another reason was fund underperformance. Some of the funds definitely underperformed, incluidng one Korean fund in whcih I had doubled down right after the death of Kim Il Sung which I knew to be, and was proven correct, to be a significant buying opportunity. I think I sold that one at under 5% gain, which was a shame because my decision to invest right after the death of Dear Leader was one that would have been probably considered to have been rather risky at the time.
Overall, doubling down on Japan right after the tsunami, and adding more to my Korean holdings following the death of Dear Leader, were good decisions on my part, but investing straight up in the U.S. (wpossibly with currency hedge) would have been even better, so my gains lagged those of the S&P.
And now, I come to the current situation. One of my mistakes was getting back into gold miners too early after gold topped out last year at over $1900. I've been since adding to a position that has come under water and remained under water for quite some time. I still continue to think it's a sound bet, and that gold miners are particularly undervalued relative to the price of gold. Further, I think that sentiment among gold investors is very bad, which is a good contrarian signal. Still, I'm pretty sure there will be at least one more scary shakeout before the miners can start on an uptrend, though the bottoming process may have started already. I'm looking to add slightly to my position later in July if gold takes another hit. I'll be carefully watching the support between $1550 and $1530 or so.
I like the recent quote from Mark Hulbert of MarketWatch: "Gold-market contrarians these days must be feeling like the card counter in blackjack who knows that the odds are in his favor—provided he continues to play rationally. But beads of sweat are definitely visible on his brow."
Other than that, I have a small leveraged position in Korea stock funds and have been slowly accumulating USD while selling my base currency. I believe that world markets are getting close to topping (in fact, they most likely already topped out when the S&P reached over 1400, but one more push to around that level might not be out of the question), though VIX will still again fall to or below 15 and might stay there for a little bit before we get a significant downdraft. In summary, I see both my long Korea stocks position and my USD hedging position working out fairly soon. Selling off my Korea funds in the coming days for a small profit and adding to my USD hedge seems like a sound idea.
My best trade during that period was the time that I stalked and anticipated almost to the minute, the top in oil at around $147 per barrel, and went long some airlines for huge gains in the next 2 or 3 days. I didn't invest enough and exited the trade too early, but still made a hefy sum.
Not too long thereafter, as the shi* started to hit the fan, in one account, I get out of gold mining stocks shortly after they started to tank, taking a stinging loss, but definitely avoiding the worst of it. Thereafter, I made some short term trades in financial ETFs, sometimes shorting, sometimes going long, which together probably netted out to around break even. I remember one episode when I left several thousand dollars on the table because there was a technical problem with Fidelity not executing my trade for a good hour or so. Frustrating to say the least.
In a second main account, I took losses in Asian funds as the crisis began to take hold. I remember taking particularly bad losses in Chinese and Japanese funds, though the amounts at stake weren't overly huge in relative speaking. I also took steep paper losses in this account in my gold mining shares, investing in the Black Rock managed World Gorld Fund. In this account, I decided to ride out the crisis with my gold mining positions intact. It was a disaster at the beginning, but eventually, the position went back to positive, and then soared into profit, as gold miners rose sharply after all the stimulus injected by governments and central banks. One mistake I may have made was not selling the investment earlier because I actually had a currency gain (with the fund being denominated in USDs) relative to my home base currency which actually outstripped my gain in the miners themselves. I remember at one point I had a gain of over 50% considering capital appreciation and currency gains. Eventually, I sold the position for something like a 30% net gain. Still not bad, but again left some money on the table.
As the economy started to bottom out, one of my better ideas was to close my fidelity account and repatriate most of my funds from an account in the U.S. back to my base country. Overall, I only had a very modest gain overall from this account, but I felt it was decent enough. Unfortunately, it took me well over a month to succeed in doing it because Citibank, where I had my funds, was very uncooperative and imposed hurdle after hurdle. If I had been able to do it on the day of my decision, I would have benefited from a cross exchange rate of 1250 per USD. Instead, by the time I was actually able to overcome all the red tape and hurdles, I could only get 1185 to 1190. That was around USD 435,000 repatriated. I rode my base currency all the way down to 1050 or so, at which point I bought some USD for a nifty swing trade, selling them at around 1120--if only I had bought more! The currency currently sits at 1146.
My mistake during the recovery was being initially too tentative in getting back into the market. I remember going to the bank to buy some Korea funds at the height of the crisis (i.e., near the bottom) and the bank teller literally scaring me into taking a smaller position than I had initially wanted ("don't invest too much.. who knows what could still happen to GM!"). Then of course, I sold too early and watched from the side as world stock markets continued to advance for months.
After the last major pullback last September or so, I started to buy back in. I was a little bit too early again, but I was convinced by certain analysis by Adam Hamilton of www.zealllc.com that the September highs were not a market top. It wasn't easy being long with all this bad news in the press, with Europe being of course the most prominent. But it turned out that Mr. Hamilton was correct and, by extension, so was I.
But several factors limited the gains that I made. First, misallocation among markets. I should have been investing in the U.S., the indices of which had the most bullish postures. Instead, I concentrated in Asia. The Korea funds generally did ok and I sold them at various times for approximately between 5% and 20% gains. Japan also rallied sharply after lagging for a while following the erarthquake/tsunami (in which I had the misfortune to participate as an investor in a Japanese fund). I sold my Japanese positions for around 10% gains. But China continued to underpeform and in the end, although I sold at a relative high, I had to take a 8% loss on a position of around $200,000, which definitely put a damper on my gains. Another reason was fund underperformance. Some of the funds definitely underperformed, incluidng one Korean fund in whcih I had doubled down right after the death of Kim Il Sung which I knew to be, and was proven correct, to be a significant buying opportunity. I think I sold that one at under 5% gain, which was a shame because my decision to invest right after the death of Dear Leader was one that would have been probably considered to have been rather risky at the time.
Overall, doubling down on Japan right after the tsunami, and adding more to my Korean holdings following the death of Dear Leader, were good decisions on my part, but investing straight up in the U.S. (wpossibly with currency hedge) would have been even better, so my gains lagged those of the S&P.
And now, I come to the current situation. One of my mistakes was getting back into gold miners too early after gold topped out last year at over $1900. I've been since adding to a position that has come under water and remained under water for quite some time. I still continue to think it's a sound bet, and that gold miners are particularly undervalued relative to the price of gold. Further, I think that sentiment among gold investors is very bad, which is a good contrarian signal. Still, I'm pretty sure there will be at least one more scary shakeout before the miners can start on an uptrend, though the bottoming process may have started already. I'm looking to add slightly to my position later in July if gold takes another hit. I'll be carefully watching the support between $1550 and $1530 or so.
I like the recent quote from Mark Hulbert of MarketWatch: "Gold-market contrarians these days must be feeling like the card counter in blackjack who knows that the odds are in his favor—provided he continues to play rationally. But beads of sweat are definitely visible on his brow."
Other than that, I have a small leveraged position in Korea stock funds and have been slowly accumulating USD while selling my base currency. I believe that world markets are getting close to topping (in fact, they most likely already topped out when the S&P reached over 1400, but one more push to around that level might not be out of the question), though VIX will still again fall to or below 15 and might stay there for a little bit before we get a significant downdraft. In summary, I see both my long Korea stocks position and my USD hedging position working out fairly soon. Selling off my Korea funds in the coming days for a small profit and adding to my USD hedge seems like a sound idea.
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