Reducing Exposure

Reduced exposure last week, both on the long and short side.  Not as part of a strategy, just a bunch of individual trades:

• Reduced my crypto shorts.  Less bearish on this due to price action.
• Reduced one of my LATAM banks.  Its holding up OK from rising oil, but this decreases the chance of a political change in the next election, needed to really boost the price.
• Cut a lot of country specific trades, as they broke trend.  They were mostly profitable, but it doesn't matter.
• Cut my oil trades as they shot upwards.  Oil now to volatile to trade.  Still holding my fundamental oil pick (Var Energi).

Now I am almost 15% cash:

I think the market may be beginning to price in a slowdown/recession from the war.  The Straits of Hormuz is (fully or partially) blocked, oil cannot flow out, fertiliser and chemicals can't flow in.  This is existential for both Trump and the Iranian regime, and I see no off-ramp.  The war will escalate from here, and it could be a few months.  Enough to spike energy prices now and food prices later.  After the market does price all this in, it might be time to turn bullish.  A revolution in Iran would lead to a golden age of peace for the Middle East.  I don't know what will happen.

Short term, I want to:

• Sell my Trades if they break down (failure) or if they spike up (success).  XLI and EWW are looking weak, I've already reduced the former.
• Maybe reduce my LATAM companies, as they are high beta and will not do well in a correction.
• Sell Var Energi if oil goes unsustainably high ($100 to %150).
• And I would sell a bit more Silver if it goes above $100.

Long term, everything depends on wether the Iranian govt collapses (probably) and if there is a stable, interim replacement (maybe).  Iran is a black box now with no internet, so we have no idea.

Less Bullish. Sector Rotation.

I've been balls-to-the-wall bullish since April 2025.  Averaging 120 to 130% invested.  Now I've cut my exposure and added some shorts.  Now I'm 98% (gross) invested, plus 14% short.

Sold or reduced:

• Copper, palladium following Hedgeye Trade and Trend
• A Latam bank
• Shorted tech and crypto, again following Hedgeye Trade and Trend
• Sold 1/4 of my Malaysia Smelting Corp shares.  Tin made all time highs in Jan, with MSC up around 40% from where I bought it.  I think tin continues up this year, but probably falls next year with slowing economic growth.  So I still have a while to sell, but sell a little now in case I am wrong.
• Sold Hartalega (Malaysian rubber glove company) at a 66% loss.  I'm not sure if I timed the cycle wrongly, or there is something wrong with the company, or China is destroying the glove market.  There was no clear signal to say that I was wrong and to cut loss, just a slow drip, drip, drip of bad news.

Still golding a large chunk of gold and precious metals.  Gut feeling that we are not at the end of the gold cycle, but no numbers to back it up.

The US market is rotating away from tech and into Industrials and some cyclicals.

I am still bullish for 2026, but think 2027 has slower growth.  The bear may start end of this year.

My positions.  Short term trades are purple.  Cyclical commodities to sell as they go higher are Green:

The portfolio is doing OK, beating SPY but tracking gold.  With all the volatility that entails:

Another loss; Sector rotation; becoming less bullish

Another big loss last night, around 50K.

Caused by gold dumping for a 3rd time.

I still think gold is in a correction in a bull market.  Gold is making higher lows, while gold vol is dropping:

Still a bull market till proven otherwise.

The loss isn't really that big actually, at 2.6%.  I'm up 12% YTD.  The only way to handle volatility is to get used to it.  There is no course, training or job that can teach you this. When you ride the bubble up, you get smacked with vicious corrections along the way.  

This time tech and crypto sold off along with gold.  The market is rotating.  Tech (mag7, new AI and old SAAS companies) are out of favour.   Industrials, some cyclicals, and energy are in favour.  I have some short crypto positions, and added some short tech positions on the open last night.  Quite pleased with myself.

Since June last year I've been wildly bullish.  Was often 130% invested.  Now I'm down to 108% (gross) long and 10% short.  Want to continue in this direction.  With so many sectors selling off on the same day - and these are usually unrelated sectors like tech & gold - we may get a correction.  Where VIX goes over the 30s and correlations go to one.

2nd Biggest Daily Loss; Buying Japan

 Last Night:

Losses from gold (39K), Silver (12K), Cooper (9K), Platinum & Palladium (7K),.

What happened?

• Silver got hammered by some guy in China building a massive short position.  If his short position is not hedged, he'll have to cover in a few weeks.
• Gold fell in sympathy
• Crypto and Tech fell.  For tech, both Mag 7 (cause they are spending too much on AI), and traditional SAAS companies (cause they're going to get disrupted by AI).

I don't know if all these falls are the start of a new selldown, as volatility begets volatility, and correlations go to one.  I'm posting this to remind myself what 30-40 one-month forward IV feels like.  Really hope my next blog post has a different title.

My best guess is that gold will recover in a few months.  GVZ has peaked and is now falling, but needs to hit the low 20s:

Retail interest is still strong.  For now, I'll hold it and wait for the bull to continue.

Silver I think will also bounce, but is still too volatile.  For now, I'll hold it and look to sell above $100.

I don't know if tech and crypto will recover.  I'd like to put some tech shorts on during a bounce.  And reload my crypto shorts (MSTR and BMNR).

In the meltdown this morning, I bought 2 Japanese companies (paid link).  They are a growing SAAS duopoly, with a 20% market share together and 20-30% growth rates, and EV/Sales in the low single digits.

This is a fundamental bet, not macro.  Betting they won;t be disrupted by AI, and they can keep growing as the majority of additional revenue adds to their profits.

The meltdown can always continue next week.

Biggest loss in a day

Down over 100K last night.  Its the largest dollar (not percentage) loss I've ever had.

Mostly from metals: 34K from gold, 22K from silver, 15K from Platinum/Palladium, 8K from copper.

Silver down 28% looks like forced liquidation due to margin changes.

Part of this game is learning to deal with the volatility.

I'm still up over 200K this month.

Short term, I think theres a 40% chance that the metals and stock markets go down on Monday (more margin calls), and a 60% chance they bounce.  VIX is still below 20.

Long term, I am still bullish for 2027:

• Will hold my gold, as I'm expecting the bull market to continue.  Maybe after a few months of consolidation.  GVZ dropped a little yesterday but is still in the 40s, it needs to go into the 20s.
• Still buying copper.
• Look to sell my silver in the $100-$200 range.

Started to sell some gold

Gold is up 10% in the past week and 33% in the past month.

Crazy, but not a record.  I'm selling 1/3rd of Equinox.  Its the highest beta gold stock I own, and some of its upside has been removed by recent divestments.

Honestly, I have no idea when to sell.  Today could be gold's top, or it can go to 6000, 7000, or 10000.

There is no quantitive way to measure that gold is "too expensive" or "over owned".

Gold has no fundamentals. There is no "high price" where demand gets substituted or destroyed.

It is going up despite low inflation.

It has gone parabolic, and can go more parabolic. In the last month of the 70-80's bull market, it rose 66% in a month.

COT data tells you that its over owned, and has been over owned forever. GVZ has surpassing its previous peak before the correction in Oct - a mere 10% two-month correction. Even if you sold beforehand, you probably didn't get back in.

‌What can make it keep going up?

• Increased liquidity - especially China and Japan. People buy gold when their currencies are shit.
• CBs holding currencies down to offset their trade surplus wit the US by buying a neutral reserve currency instead of USTs.
• War or threat of war.

What can make it go down?

• Japan stops spraying liquidity (think its from BOJ issuing shorter term bonds)
• USD drops enough so no more trade defecit. Asian CBs no longer need to intervene in their currency markets.
• US successfully delevers, so USTs look more attractive.
• World peace. Old-Man-Xi dies (will happen) and his successor says he won't invade Taiwan (dunno). Iran regime overthrown (likely). Putin leave Ukraine (no sign yet).

Best I can do is look for signs of technical weakness or over-exuberance.  Like:

• Gold bugs telling people to "Have Fun Staying Poor".
• Gold doesn't rise on good news (good news for gold, ie: bad news).
• The price rise gets stupidly parabolic (like in the 70s). Or GVZ makes all time highs.

‌My gut feeling is that we still have some way to go. This is not yet like Crypto in 2021. But in a bull market, your gut feelings are probably wrong.

‌At some point, I have to say that "this is getting ridiculous", slowly sell my gold holdings, and maybe keep a small position just to trade. The trouble is, there are no numbers to tell you where that point is.

Start Selling My Silver

I bought Silver (SLV) eight months ago as a trade from Hedgeye.  Its up 3 times since then.  It was 2% of my portfolio, now its 5%.

When something goes parabolic theres no way to know when it ends.  You'll always miss the top.  Even a local top.  Hedgeye risk manages by frequent trading, but I don't like trading so I need another way.  Don't want to overstay my welcome and become like the sad crypto bros of 2025.

Fundamentally, for commodities, high prices cure high prices.  Demand destruction for silver in solar panels begins around  $100 to $135.  But supply incentives are harder to guess, as silver is a by-product of other metal mining:

Gold (10-15% of silver supply) has hit its incentive price.  Zinc (30-40%) is hitting it now.  Copper is nowhere near.  And of course silver mines (25-28% of silver supply) are incentivised.  So we have 65-83% of silver supply being incentivised.  The supply is not immediate - probably takes 9-15 years for a new mine to open.  But existing mines can increase output.

At $109 silver (tonight), we are at-or-near prices where demand replacement occurs, and at current silver/gold/zinc prices the majority of the worlds silver production is incentivised to produce more.   Neither will happen overnight, but it will happen.  I'm comfortable slowly trimming my silver position.  Sold a quarter of my holdings (pre-market), and will sell more if if rises.  It can still keep going higher.

Trader Ferg wrote a excellent piece about handling parabolic price rises.  Don't get too greedy.  Inner peace.

When would I sell my gold companies?  I don't know.  Gold is a currency, not a commodity, so has no fundamental price targets.