This is very simple. I will lay out three scenarios that many of you find yourselves in, with possible courses of action:
1. Fully invested, long. This is a HORRENDOUS idea, no matter how cheap things look they can always get cheaper. I know many of you learned that lesson in 2008. If I were you, thank God I am not, I’d sell 25-50% of my longs immediately, putting 10% of the proceeds in one of the following: [[FXP]] , [[TZA]] , [[VXX]] or [[SKF]] .
2. More than 50% cash, 20% short, 30% equities. You are in a sweet spot, in my opinion. If anything, keep your positions monitored on a spreadsheet and cover shorts when the weighting gets out of whack. The weighting of the shorts will become oversized when they go your way. So, do yourself a favor and “reverse nibble,” by taking profits in increments.
3. 100% short. This is a very dangerous position to be in, especially since the government is explicit in its desire to see higher stock prices. If this is you, it’s important to remember 2009 and how gay you were for the past 18 months. Book the trade, get to cash and hedge your shorts with some longs.
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