I am not posting this for your pity or to teach you any lessons, but to document my mistakes during this collapse.
Just two weeks ago, I was sitting on 16% year to date gains in an 80% cash position. I felt the market was a sell until September or until Bernanke announced another form of quantitative easing. I intended to put 25% of my cash into TLT, due to the seasonal trends in the month of August for bonds, which are flawless. So, what happened?
First, I got distracted by the Congressional debt ceiling debate. They pulled an old Kaiser Soze on me, a regular sleight of hand if I might be so bold as to say so. The reason why I was in cash was because of the European debt crisis. I felt, and still do, Italy and Spain are too big to save. However, the Congressional clown show made me forget the answers to the questions that plagued me. I bought into the market on the premise I would sell into a debt ceiling deal. It was all a ruse, a ploy that helped some get out while schmucks like me bought in.
I fell for it.
The deal was announced and futures were ripping in pre-market trade. Shortly after the market opened, everything was sold and with great vigor.
I held my ground, believing the sell off was reactionary and without merit.
Then, I overweighted in WNR, due to my belief that the company would smash earnings because of industry wide fundamentals. On the day they reported an eps shortfall, the market dropped 500+, exacerbating the selling in WNR, sending shares down more than 20% in a day. At the time, I was 20% cash and looking for longs. Remember, I just finished booking sick profits on a number of stocks, like DECK.
The very day before the 500 point decline, seeing the market weak, I put 30% of my cash to work in a number of names. At this point, the Italian and Spanish news flow was beginning to thicken and tensions were high. However, like a jackass who had the answer key but didn’t bother to look at it, I chased stocks down the rabbit hole.
The market cratered and I lost 10% in one day, all but wiping out my year to date gains. Then on Friday, stocks continued to sell off, following a very good opening. I didn’t like the patterns, so I sold most of my positions, raising cash levels to 70% again. While doing this, I booked millions in losses. However, shortly after I sold, a news story broke that the ECB was going to buy Spanish and Italian debt. To me, that meant QE1 for Europe. What I failed to acknowledge is how retarded the Europeans are when it comes to taking action. I got hooked, allocating cash to the markets, leaving my reserves at a respectable 30%.
Then came today. I didn’t buy anything or sell; but my positions plunged lower, sending me down more than 5% for the day. The only reason I wasn’t down more is because of my 30% cash position, which is now 35% all on its own.
Where does that leave me?
65% long, 35% cash, down 8% for the year aka “new lows.” Aside from the losses, my psyche is badly damaged. It’s one thing to miss a trade, it’s a whole different story ignoring my own advice and getting blown up as a result. The game plan going forward entails lots of finger crossing. I am fairly scared to death that this market can plunge 10%+ in a day. I am putting all of my emotional capital in The Fed, which is a future mistake yet to be revealed. I can see myself making mistakes in real time and it shocks me.
We’re all waiting for respite, some semblance of normalcy in order to reduce risk. However, when markets are this oversold and sentiment is at the point of panic, markets crash. Granted, we’ve crashed over the past 12 days, down more than 17%. But if confidence isn’t buoyed ASAP, we’re gonna crash some more.
Sadly, this time around, I don’t see our leaders doing anything. I mean, these fuckers aren’t even trying. In the midst of a global meltdown, our fucking President is hosting $15,000 per plate fundraisers. Something is wrong. It’s as if they’ve resigned themselves to let this thing just play out. The consequences of their inaction will be devastating for this country, and more specifically me.[youtube:http://www.youtube.com/watch?v=m9SmhC-Sm6Q 616 500] If you enjoy the content at iBankCoin, please follow us on Twitter