Tuesday, June 28, 2022

Getting shorter

Shorted another 4% on Monday night's opening rally and 4% on last night's.  Now 45% short vs 96% long.  Aim to short one more time, if I get a chance.

Everyone's expecting the market to rally into the end of the month, before falling again.  Dunno what it will do: it can go up, down or sideways.

Friday, June 24, 2022

Sold Petrobras and Getting Shorter

Sold by Petrobras 1% position at a 20% loss, too much political risk.  We've had Biden question why Exxon is making 'more money than God', the UK apply a North Sea tax, and Queensland apply a coal tax.  There's a risk of a diesel shortage in Brazil in the coming weeks/months, and energy companies are a good scapegoat.  Sell it while its worth something.

Now 96% invested.  Most of the new cash is from dividends and salary.

Increased my short position like a broken record, now 37% short.

I think the market bounces here into the start of July.  The same as its done every other month:

Chart from: The Market Dog.  Its actually Q's not SPY, but close enough.

A 'normal' bear market rally can be 20% - we haven't had one yet.  'SPY is almost up 5% from previous lows last night, I'll add 4% to my shorts next week if it reaches that (3817).  Then another 4% again if it goes up 5% more (3999).  And again (4181).  Then stop.  If it follows the past pattern, the market rallies into Independence Day, before selling off again. Its as good a guess as any.


Thursday, June 16, 2022

Getting shorter

I missed the 9% rally from mid-May to early-June.  Because I was expecting it to go higher, and was taking a break from the market every night.  Trading while holding a job is hard.


Was hoping to short on last nights weak rally, but it already dead.  Shorting more now on market open.  Another 1% Q's, 1% Russell, 1% EWP, 1% EWI.  Now 37% short (based on selling price - its ~33% on current market price).

Its a bad time to short, everything is a little oversold.  But I need to get shorter to balance my portfolio.

No way to tell when we get a 20% bear market rally.  Just have to take my chances.  The important thing is to be short in a bear market.

Friday, June 3, 2022

Bought Woodside Energy

Bought half my position (2.5%) in Woodside Energy yesterday.  Long term dividend play.

Why?

  • I can't see how Europe manages to replace their gas from Gazprom.  Only the US can grow supply now, but they are constrained by pipeline and export capacity.  We need to wait till 2025-2028 to see substantial increase: "global capacity looks set to soar from around 450 mtpa today to 550 mtpa by 2028".  But even that extra 100 mtpa only equals ~13 bcf/day, less that the ~18 bcf Europe imports from Russia.
  • After Woodside completed the merger on June 1st, their shares jumped on massive volume.  I don't know why, I was expecting the grind down to continue  Maybe index funds were buying the enlarged energy company.

  • From 2021 earnings they paid a 5% dividend (after WHT).  Thats 80% of NPAT, with an LNG ASP of USD 58.1/boe (slide 6) - roughly USD 10.5/btu.  2022 prices are a lot higher than 2021's.  The chart below shows US prices - European and Asian prices follow the same pattern (at a much higher price level).


Why did I only buy half?

We are in a bear market. Right now we're in a bear market rally.  But it will stop, and we'll later move back to where the VIX is in the 30's and the market drops weeks or months at a time.  By then, Fundamental Analysis, Valuations, or Technical Analysis won't matter: stocks will just drop like rocks.  Most likely, energy stocks eventually get pulled into the vortex.

The fundamental risks to this play are recession, Putin dying, or China invading Taiwan.

Tuesday, May 31, 2022

Quick Updates on shorts

A violent bear market rally started 3 days ago, just after I built a comfortable short position.  The S&P 500 is now up 11% from its lows.  Although my shorts are getting hammered, my longs are doing OK, so I don't feel much pain.

I still think its a bear market.  It is going to take more than a quarter to work off the stimulus excesses of 2021.  The rally's job now is to convince as many people as possible that its a bull market.

Bear market rallies of 20% are historically common.  I'm currently 33% short.  Aim to go up to 37% if we get a 20% rally in the S&P 500 (to 4572), and 40% if we get a 40% rally (very unlikely).  I don't think the duration or height of the rally can be predicted, so just guess based on history.

Saturday, May 21, 2022

Quick Updates: shorts and gold

Sold all my gold at a small loss.

Overall, now I am 29.5% short vs 98% long.  The shorts are: 

  • Low beta stuff, HYG and JNK.  Easy to hold, they usually just drip down.  
  • Some higher beta stuff: Q's and IWM.  I've been lucky.
  • Some Europe ETFs bought recently.  This position is currently at a loss.
  • Plus small positions in Korea and copper miner ETFs.

Comfortable with these short positions, they partially offsets declines on down days.  I could increase it a bit, but no longer feel pressure to.  My portfolio should be OK, no matter which way the winds blow.

Saturday, May 14, 2022

Quick update: shorts and gold

I've increased my shorts, buying on the small 1-3 day bounces.  Now I'm 24% short.  Most likely we get a crash into the next month.  Lower prices beget selling, as hedge fund redemptions start, till finally everything gets sold.

So I'm still looking to short more on bounces.  We are so oversold, we could get a rally first.

I've cut my gold position, from 10% to 4%, taking a small loss.  Gold has not been doing well, even in a falling market.  Maybe its because interest rates are rising.  Maybe fear from the Ukraine war has died down (sell the news).  I don't know.   Sell first, ask questions later. 

Sometime, it will be time to buy stocks.  Don't know when.