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.