Love Hurts

My portfolio is down 4% in a month.  It hurts:

Its a 7% drawdown from its all time high at the end of Jan.  Gold fell 16% in the same period.  Even in a gold bull market, it can historically be expected to correct 20-35%, so I expect more pain to come. 

I'm up 10% YTD while gold is up 4%.  So I'm "outperforming": rode the upside, missed most of the downside.

The market is choppy: 3-5 days up, then 3-5 days down.   I hate it, but we trade the market we have not the market we want:

• Started covering some shorts early tonight,
• Sold platinum and silver in the last two days, trailing stop-loss.
• Bought a little more gold (RGLD), bad timing.
• Sold my oil trading positions (XOP and BNO).  Still have Var Energi as a longer term holding. 

I don't know if we get a real correction: VIX > 30 with markets crashing from oversold levels and correlations going to one.  I think we should, as the market prices in inflation and a real (not nominal) recession.  But no sign of it yet.  So I'll probably cover more shorts in the next few days.  The war can last for months or could be over tomorrow.

This is the first time I've been able to short the market successfully over a few months.  And the first time being able to trade the chop.  At least reducing the effect of falling gold on my portfolio.  I should be happy about that.

When would I sell Var Energi?  Even through its a long term fundamental play, oil is cyclical.  Prices can't stay triple digits forever else they'll reduce demand with a recession.  Back-of-the-envelope, from 2025 numbers:

• 5.2bn revenue from crude @ 68.3 USD/bbl.  At 120 Brent it would be 9.1bn, or an extra 3.9bn  At 150 Brent it would be 11.4bn, or an extra 6.2bn.
• 2.4bn revenue from gas @ USD 74.4/boe.  Around 15% of their gas price was fixed in Q4, but I'll ignore this cuz its usually only one or 2 years out.  TTF now is EUR 59/Mwh, or roughly USD 106 per boe.  Selling gas at USD 106 would give 3.4bn revenue, which is an extra 1bn.
• Apply Norway's 78% O&G tax to this: At 120 Brent & 59 TTF, its an extra 1.07bn profit.  Or profit goes up 2.26 times.  At 150 Brent & 59 TTF, its an extra 1.58bn profit.  Or profit up 2.8 times.
• At 10 times earnings, that would be a stock price of USD 7 (NOK 67) for Brent 120 and TTF 59.   Or USD 8.7 (NOK 83) for Brent 150 and TTF 59.

The stock doesn't have to get there or could go further, but these would be unsustainably high stock prices.

Fundamentally, its not yet time to begin value investing.  Some stocks in the UAE ETF might be value buys later, but need to get cheaper.  Stocks in general are still too expensive, there's nothing yet where I'd stick my hand out to catch a falling knife.  Need to see real fear of a recession.  And if this war continues long enough we'll get it.

Gone short again

 Added to my shorts last night and tonight, and cut a few longs.  Almost doubled the shorts:

I expect this bear market bounce to end by next week or Friday.  Possibly tonight if Powell talks tough on rates.  I can still go a bit shorter.

Still moderately bearish due to rising inflation from oil.  No quick off-ramps for Hormuz yet.

Quick Update

Covered some shorts early this morning:

Its a short term move.  Expect to put them back again, with more, in the next few trading days.

Its been a tough week.  Choppy market with the change in daylight savings time mean I have to wake up at 3+ to place trades.  Its been stressful, with the market changing so frequently.  Twice I got caught where I made some moves, the market moved against them the next night, then moved back (and more), validating those moves.

Combined with my day job, barely pulling through.  Need to take this weekend to rest and exercise.

Performance last week is has been drip-drip-dripping down, but still OK YTD at 14%.  It still mostly follows gold (miners?):

I try to remind myself that in this business, a 60% hit rate is good.

I give an 80% chance the war continues next week, with the market beginning to price in sustained inflation and supply disruptions for basic materials.  Anything can happen.  Trump can TACO anytime.  The war can grind on for months.  Or the Iranian regime can be overthrown, bringing a new Golden Age of peace to the Middle East.

There will be opportunities at the end of this, I don't know when.  The war has to be over by the mid-terms.

Meanwhile: reduce high beta exposure, trade short positions, and try not to die.

Grown shorter

I am now 80% invested and 17% short:

Small changes:

• Covered some crypto shorts, bitcoin may be showing strength.
• Sold Copper miners
• Bought more puts and entered more short positions last night.
  
• Bought oil a few days ago, just sold some.

Short term - if the market drops and becomes oversold then I'll cover some shorts.  The war might be over next week...unlikely but anything can happen.

I hate choppy markets, but we trade the market we have, not the one we want.

If this war drags on for another month ands markets start to price it in (we ain't seen nuthin yet), is there anything I'd want to buy?

Cut more exposure

Cut more exposure this afternoon and tonight.  I think the war leads to a slowdown, as oil & food stay high for a few months:

• Reduced my Tin miner (industrial metal)
• Reduced some of my LATAM stocks (they are high beta, and move with the nasdaq).
• Reduced Equinox Mining.  Open pit miner with high diesel costs.  Kept ~ 1/3rd of my original position.  Keep the gold royalty companies.
• Kept silver.
• Sold my trades (XLI and EWW).  Keep EIS for now.
• Added a few puts (0.5% in total).

I am now around 22% in cash (excluding shorts).

A crashing market doesn't give you a nice bounce to sell your holdings and load up on shorts.

Its a pit of a panic, but the question is, is it at the start of the correction or the end of it?

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: