Quick Update

Last 2 nights:

• Added some Big Tech longs.  Then took some profit.
• Cut some of the Crypto trades that weren't working last night.

Day-to-day many individual trades I'ver taken are too choppy.  I may consider:

• Take profit on individual trades sooner.  On extreme overbought/oversold.  Sell/cover half, leave the other half to run.
• Only trade the more liquid ETF.  Ignore ETFs and stocks with a high spread - only experienced traders should touch them.
• Position size by volatility.  Or simply only trade the lower beta ETFs.  eg: If I was trading gold, pick GLD instead of GDXJ.  Less likely to be shaken out.

Reframe what I am trying to do:

• Even through the market as a whole is unclear, there are clear trends.  Look at three month charts of bitcoin/ETH (up), Apple/MSFT/NVDA (up), XLU (down) or the Russell (down).
• I'm trying to jump on board the trends, at a safer place where I don't lose too much when the trend changes, and in a way that I won't get shaken out by noise.

Under current conditions - near the end of the economic cycle, with rising rates, fighting an oil-war in the mid-East - take smaller and safer trades.  Don't swing for the fences.

Portfolio down; Sold LATAM

Portfolio was down 1% last night: mostly from LATAM and gold.

I sold 2 of my LATAM positions.   These were longer term trades, or shorter term investments.  Bought several quarters ago as South America had upcoming elections expected to swing to the right.  Now thats behind us, the macro outlook for the next few quarters is bad, and the price action starting to reflect this.  They were cyclicals (banks), not buy-and-hold-forever stocks.  Took profits of 20% and 35%.

I need to think about the remaining LATAM position.  It fell due to stock specific factors, and the factors above are more balanced.

My new crypto position from last week is down a bit, I could buy more or cut loss.  If it does work out, I must remind myself to take some profits when overbought.  Crypto is really volatile.

Only consolation is that my short term trades, both long and short, are mostly working.  I may take some profit in oil if it keeps going up next few days.  Now 34% net cash.

This year has been tough for my account.  Up 9% YTD, but been through a grinding 9% drawdown in the past 7 months.  I remind myself that I've been through worse, a learning experience.  My trading style does not do well in non-trending markets.  Eventually the market will start trending again, probably to the downside - if it hasn't started already.  Need to be ready for that.

Bought some crypto

After falling one-and-a-half years, crypto broke out last month, I managed to buy a tiny bit.  It broke out again 2 weeks ago and corrected over the past few days, letting me buy bigly, up to a 6% position.  Lets see if it keeps going up.

Other than that, just made a few small trades:

• Managed to add to some shorts, and Europe, Russel, some rate sensitive.
• And to some longs: software, consumer, and refiners (long oil/refiners is that same as shorting the market).

No change over the weekend.  I had thought that Xi and Trump might come to some sort of deal.  For example, the US could allow Iranian oil to be sold to China, if Xi lifted the export ban on refined products.  Instead, the opposite may have happened.

And there was never any chance the Iran/US sides could reach a deal.

Expect the same as before.  Iran gets slowly strangled, as oil/product grinds higher, pulling most stocks down, even as mag7 and the indices rise.  Eventually the IRGC loses effectiveness and Hormuz gets fully restored.

Longer term, expecting a bear market next year.  Here is a good interview:

  

Neither here nor there

Added some shorts plus long oil at market last nite.

Its a mixed market.  Some sectors are going up, many down.  Short some stuff, long others.  It changes, with no overriding themes.

Probably looking to buy some crypto soon and cover some shorts.  Before flipping back to do the opposite a week or two later.

In the short term, rising oil/diesel is grinding almost everything else down through higher rate expectations.  In the long term, I think we are near the end of a multi-year boom.  Stay small, nimble, and don't get attached to anything.  Float like a butterfly.

Wait and See

We don't know how the market will go, so wait and see.

Everything depends on oil and Iran and Houthi news.  We could get a new war or a TACO tomorrow.  My base case is that the US continues to strangle Iran while the Houthis allow non-Saudi oil out.  Crude in the 90s. Inflation grinds up while the market grinds down.

I added some shorts (High Tech Beta) and some trades.   Not much change.

Waiting to add some gold, copper and rate-sensitive shorts.  We'll see if it haoppens.

Some Links

• US negotiates with Houthis.  Not a big deal, but theres scope for a quick deal.  The Houthis said they do not want to attack US interests, and will not attack Israeli vessels, or any commercial vessels apart from Saudi's.  Back-of-the-envelope its 3.5m bbl/day crude, with 1-1.5m of that re-routed through Suez - based on ships docking at Saudi terminals, not just Saudi flagged.  If this is true, we could see a quick deal between the US and Houthis, leaving the Saudis out in the cold.  

Options from here (not mutually exclusive): 

• Saudis rally the Sunni world against the Houthis after an alleged(?) drone attack on Mecca. 

• Saudi signs Abraham accords after their 'Mecca pact' proves useless. 

• US peace deal with Houthis.

Bab Al-Mandab closure is now being priced in, but may not be as bad as expected.  Geopol changes faster than macro.

• China passes mass mobilisation law.  For Great Reunification.  A day after they imposed travel bans on their citizens.

• Hedgeye talk with Mike Taylor: The AI bubble numbers are too big to make sense.

• Michael Every.  Economically, the US must become more like China, while China is not becoming more like the US - in a zero sum world.  Economic statecraft, US grand macro strategy and Brazil.

Sold stuff

It was a mistake buying gold (miners) on Fri, I have sold these down to a minimum position.  Kept only some Royal Gold.

Sold some trades.  Losers that I got stopped out of and winners that are overbought.

Separately I sold one of my speculative miners.  They sold their best producing asset a month ago, and the stock price went up but this removes the asymmetric upside.  Small profit.

Now 36% cash.

Rising oil/diesel kills everything.  Probably continues until Trump taps out or the IRGC is strangled and Iran breaks up.

Waiting for signs to buy.  Either golds or stocks.  Or maybe to short stocks/bonds on the next bounce.

Bought Gold

Bought Gold on Friday night.  But I may have been too early as oil went up and the market dropped on news of the Houthis capturing Bab El Mandeb.

Hard to know how this plays out for gold.  Its a risk-on asset, any hot war in the ME means they sell gold.  Rising oil/diesel increases the chance of rate hikes on Wed.  I don't think the Fed should increase rates - we've reached the stage where US govt debt cannot be paid off unless the dollar devalues, and increasing interest rates doesn't help cost-push inflation.  But they might do a token rate hike just for credibility.

Looks like higher inflation for a few months.  This is the IRGC's play to unseat Trump in the mid-terms.  Maybe the market picks up if Trump does a helicopter-dump of money on voters, but I haven't see any signs of it in the market yet.  And if it happens, gold goes up further :)

Still haven't found anything to buy, for the rest of my trades:

Sold more

Sold more gold after Wednesday night's bounce (before market open US Wed morning).  Next we have US CPI numbers (Sept 11th pre-market) and Warsh's decision to raise or hold (16th).  May buy some back after the CPI release.

Also finished selling Delfi, and some trades that didn't work out (Silver) later in the week.

Am now 20% cash.  Its not intentional, I don't like having so much cash in a bull market.  But I'm also expecting a bear market next year, so only want to enter short term trading positions.

Look for stuff to buy in the current dip.

Sold a little on the bounce

Gold and my portfolio corrected for 4 days before recovering last night.  Sold a little after the bounce because:

• I had too big a position.  It was 17%, excluding 2% silver.  And this is high-beta gold (miners and royalties), not low-beta pussy gold (GLD).  Now its around 14%.  Sometimes you think you can weather a drawdown till it slaps you in the face.
• A medium risk for the gold trade is the rising price of oil/diesel.  Rising inflation increases rate expectations.
• The US is trying to strangle Iran, who has an incentive to increase oil prices, possibly by kinetic action.  Gold trades as a risk-on asset, it fell throughout the war.
• A short term risk is Warsh's decision on the 16th.  I think the market is starting to price in a hike.  Gold either pops or drops that day.

Still think theres a 3/4th chance that gold continues trending upwards, from here and now.  I am bullish long term on gold as a neutral reserve currency, and as a hedge against governments inflating away their debts.  But I was sized too big.

Also got kicked out of some market broadening trades.  Small loss.

Separate from my trading, I sold half of Delfi, Indonesian chocolate manufacturer today.  Will probably sell the rest later:

• I've held it too long.  Over 5 years.  Its a cyclical that trades inversely to cocoa prices, not a compounder.  Its a perpetual value stock.
• Risk of cocoa prices continuing to rise next year from El Nino.
• Increasing Indonesian political risk.  Not the economic cycle, but degrading rule of law and institutions.  For example, they have stopped companies exporting commodities, offered immunity to money laundering charges to people buying government bonds, and replaced the central bank governor.  If things get worse, you could imagine them restricting dividend payouts by companies listed on foreign stock exchanges, for example.
• If we do get an El-Nino cocoa spike into next year, it might be worth buying back again then.

I'm now around 10% in cash.  Can buy a bit more, but I need to remind myself to relax and just take trades when I can.

I expect a bull market till the mid terms.  Bear in Dec or 1H27.  Looking forward to it.