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:

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.