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.

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.

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.

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.