I don’t quite know what’s going to happen after tomorrow. What concerns me is the bipolar nature of the two main outcomes I see.
We need to deleverage this beast. But how we do it makes a world of difference.
If we devalue the currency, everything goes much higher. If we let mother market sort things out through failures, we could go much lower. Or maybe we let the consumer sort it out and we just float along as the working man deleverages us all.
Ideally, I would have more cash right now, but as I’ve opted to position myself in assets I feel will be able to continue making money and grow despite the second option of deleverage-by-failure, I don’t want to sell out of anything.
And even though I’d rather not be short something like oil with the chance that the Fed announce they intend to eat the dollar’s value – well because I’m so long my other positions I can’t really afford to not have a hedge on, in case the world should burn, if you catch my drift?
So I’ve decided to just hold strong with what I have. I still hold AEC, CLP, AWK, BG, CCJ and physical silver, with a now scant <10% cash position (after associated short funds) and an ample UCO short stake.
Depending on how we go up or down, that may not be enough. If we absolutely collapse, I will take it to the teeth along with everyone else; but God willing so will oil, so maybe I increase my cash level as a percentage of my portfolio anyhow.
And if we should go way up well, I can only pray oil doesn’t graze $200 before BG does.
Going into this summer I had one basic set of mind. I thought the Fed was done easing and I figured commodities were overbought, the dollar was oversold, and we needed a good pullback before the economy could strengthen up, with us recovering into Christmas.
That was before Europe. That was before China. That was before the manufacturing slowdown in the U.S. Is this all part of people overreacting to the selloff in commodities and such? Maybe that’s all it is.
The real point here is that I don’t know enough to negate my initial judgment, so I have no reason not to assume that I’ll still end up right. As information comes along, I might see that I was wrong, but that alone isn’t enough to switch up.
I’ve lost plenty of money before now second guessing myself.
Personally, I am a much stronger investor when I find situations where I recognize things are against a wall. My back to the wall, I tend to march into the room guns blazing. But once in the center of the room, like we are now, well, I need to find my corner again.
My next adjustments will be reactionary. I will extend the duration of my oil short into next week.
Let’s see what Jackson Hole has to offer.
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Tomorrow, at Jackson Hole, I predict Uncle Ben will unveil the Fed’s newest policy.
“Cash Fo Bling”
A program designed to get gold out of the rap crowd’s hands and into Fort Knox. Christ, at today’s spot Mr T is worth about the same as the GDP of Canada. The Bernank is well aware of the sheer wealth accumulated by the rap scene and this program will send the gold back to it’s rightful owners.
Fly says hedging is for pussies. But you do it pretty well.
When I reach Boss status, I will be using SPY options.
If the risk off trade is uh, off (money flows out of gold and bonds), the cash has to go into equities right?
Oil looks weak, consolidating under resistance, as does the SPX failing at the 20 day. Most currencies are stuck in limbo waiting for some direction.
The good news is the Yen selling off which is good for a market rally.
Depends; sometimes the cash doesn’t flow anywhere.
The “finances-are-like-plumbing” models that you sometimes see only work when the sale of an asset occurs near the original asking price.
The funny thing is, over the last few weeks, there have probably been lots of instances where a seller needs to lower his price without making a sale, judging by the free falling stock prices.
In those cases, the cash wasn’t “flowing” anywhere. It just sort of got bid away.
We could easily see the PM’s and treasuries sell off without a rally in equities. All depends on who has cash and what they plan on doing with it.