The rally continues, wow!

I wondered about the rally’s ability to roll on. At the moment, its rolling on. Like the Alabama Crimson Tide. Most of my large positions are up strongly. At the close Australia time, the portfolio was up $280k, plus realized gains of $20k, bringing the total to $300k. Mind you it can all go pear shaped rapidly. A month ago things were down about $250k. I held firm in my views and its paid off with a $550k turn around. VaR is comfortably within the $500k limit. The long S&P position is strong, the long 7 to 10 year treasuries as also done well. Both these were put on back on 15 Jan 2010. TOL was up strongly in Aus to $7.29, reasonable gain after buying in at $6.90, opening the position right after it fell 17% back on 25 Feb. But TOL has high volatility so I had to reduce to position to stay within my VaR limit. GOOG, APPL were added on 26 Feb and have done well, price gains have offset the FX impact of the slight strengthening of the AUD. Still thinking about Berkshire Hathaway. And maybe AWB.

Happy trading!

Rally is helping, but will it continue

Google and Apple have gone very well in USD and AUD terms since 26 Feb 2010.   Slightly lower yields on 7 – 10 year treasuries have also paid off – very well in USD and pretty good in AUD.  The biggest loser has been the long emerging markets equities position (EEM).  TOL has come back a bit.  The long S&P March futures put on on 15 Jan is up  in AUD and slightly in USD.  These gains can evaporate very quickly if the markets turn south, something I am keenly ware of.  Time permitting, I am going to review my positions and rationale and probably take some of the realized gains while they are on offer and I workout my updated forward view.  VaR is about $350k, well below the $500k limit. 

Happy trading!

Back in black!

Lost a little of the gains today on TOL but overnight GOOG and APPL fared ok.  Overall up $132k now, inclusive of $10k of realized gains (mostly currency driven plus partial realization of TOL). Positive position are still TOL, USD, GOOG, US 7 to 10 Treasuries.  The pound and my long emerging markets position (EEM) are the bigger drags.   

Might look into a small position in Berkshire Hathaway, just to learn more about it. 

I had a VaR breach of my $500k limit (touched $515k), so the game fined me $20k.  You can’t breach your risk limits, that’s the rule in trading.

Have a great weekend!

Winning, finally

Portfolio is up $108k since starting the game 15 Jan 2010. Realized $17k profit on part of the investment in Toll put on 26 Feb. Too the opportunity to close out my China wireless plays that didn’t work out, down $5k. Also sold part of my long S&P futures position for a small $4k gain (due to currency gains!). Also sold out of Electricitie de France at a $6k loss, 50% due to Euro weakening vs. AUD. My long emerging markets position is down $63k, the long 7 to 10 year treasuries is up about $57k in AUD terms. The remaining S&P futures position is up $9k due to FX gains offsetting declines in the USD price. Despite increases in the their prices in GBP, my Barclays and BP positions are in the red $2k due to the weakening of the pound vs. Aussie. Small positions put on 26 Feb 2010 in GOOG and APPL are up $11k due to a combination of price gains and further aided by FX gains. Overall I am happy to be back up a net $108k given my trading was down $350k at one stage! I am comfortable with the unhedged FX positions in USD and GBP resulting from my current trades.

The rumour is Friday’s US jobs data is going to be disappointing. Probably, but I will have look at markets tonight and see how the trends and news are looking.

Happy trading!

down & out

Market very nervous. I mentioned concerns about things like Eastern Europe, PIIGS, etc. in prior blogs. Sovereign debt issues are really weighing on the market. We also had China tightening a few weeks ago. And Obama and other leaders threatening severe regulation of the financial sector. Taken together, we’ve had CDS spreads spike up, risk appetite wane, volatility up and equity markets down.

Nervous markets should not be completely unexpected. Its surprising the severity of the market reaction given each of those things was largely a known issue, not really a surprise.

China needs to be careful of a bubble so it has acted on that issue. PIIGS and Eastern Europe issues were widely forecasted. Stiff financial sector regulation was foreshadowed long ago.

The effects of this could linger awhile and if compounded by more confirmation of expected or new unexpected bad news, the correction could head down another big leg.

Still, monetary policy around most of the world is highly stimulatory.

Happy trading
Tom

Co-Author, Enterprise & Venture Capital, 5th Edition, Allen & Unwin, 2009

Coming back

My notional portfolio took some heavy unrealized losses in the recent correction.  Was down about $350k I think.  Now the markets have recovered a little and my positions are making up some ground, just down $150k or a little less.  That may sound bad but its less than my traded risk mates.  Those guys were hammered in the correction.   I am long S&P 500, short long treasuries, long emerging markets stocks, unhedged on the USD.  Also a couple positions in Electricitie de France and Barclays.

To that I added 3 new small positions today, I think they will be short holding periods.  I went with Hooray and another NASDAQ listed China tech firm plus added British Petroleum.  All three were really a punt, believe it or not, put on because I noticed that despite they were still falling despite the very recent uptick from the correction.  I didn’t do any fundamental analysis.  I did check the news on them and didn’t see a reason for a serious correction for those 3 stocks so I took a punt on them. Fingers crossed.

In my real money, things are still long equities with a decent focus on ethical companies.  Its sagged a bit during the correction but not as severely as my notional holdings in the competition with my mates.

Wipe out!

The past week was pretty rough on my portfolio.  Being long stocks and short treasuries resulted in a loss of about $200k after being up at one stage $80k.  Speaking with my colleagues, they have quite a number of relative value trades on that are losing at the moment too, down $300k plus.  Brad was correct to short the Nikkei but was still down $250k overall. Interestingly, we are all holding to our views for the first half of 2010 and no one’s changing their positions / views yet.   Same for me but I have read some compelling views that US fed funds rate is not going up this year as deflation is still the big worry in the US.   Yet on Bloomberg data, the odds according to the market are in favour of rate rises in 2010.

For now, I am staying long equities and short treasuries in the competition with my mates.  For my retirement money, I am staying long equities, have a good focus on ethical investments and have been reducing bonds in favour of cash (as still expect yields to rise). 

I saw an interview with the CIO of Calpers last week, just before the hiccups.  He also favoured equities, esp. emerging markets, he like corporate bonds but not treasuries and they planned to put more money into infrastructure and private equity.  Most of his views mirrored the positions I had taken.  We will see if it works out.  Calpers can afford to lose more than me and wait longer too!

Happy trading and investing (and Australia Day!)

Tom

Co-author, Enterprise & Venture Capital, 5th Edition, Allen & Unwin, 2009

Panic stations?

Since my colleagues and I started the investment competition a few days ago, the market has had some ups and downs.  The first couple days things were gloomy for all of us. 

In the 24 hours things turned around a bit and most of my positions are winning.  It looks like I am up $70k to $80k on my $2.4m exposure since we started last week.    It changes minute to minute and I expect plenty of volatility.

Treasury yields rose, so that short position made money. Emerging markets and the S&P 500 were up a bit, so those positions moved into the black too.

My VaR limit is $500k and my VaR usage increased about $15k to $400k, still comfortably within my risk limit.

I read a lot and one of  my favourites is John Mauldin.  I strongly recommend his writings.  We do not always agree but his comments offer the clear, sober thinking that helps me make better decisions (or at least better informed, eyes wide-open decisions).   At the moment he’s a pessimistic optimist. 

I have no doubt the economic issues he rates as threats are indeed serious.  2010 is probably going to be choppy but for the moment I still like being long S&P500, EM stocks and short treasuries.  Rationale is EM growth, earnings recovering, interest rates rising.  My view might change but for the moment I am willing to accept the risks and returns that such positions offer.   My real retirement money is pretty much invested along similar thinking to the notional money in the game with my work mates.

Happy investing and trading!

Tom

Co-author, Enterprise &  Venture Capital, 5th Edition, Allen & Unwin 2009

Long S&P500, short US10 Year Treasuries

Yesterday I joined some work mates in a competition to put our trading and investment ideas to the test.  This bit is with play money.  Even with just 4 of us playing, there are a variety of views about relative value, direction, currencies, etc.  And we all work for the same employer.   We are all working within a $500,000 value at risk limit.  We’ve loaded the portfolios into Bloomberg so its calculating the market values and the VaR for us.

Most of myopening  positions are designed similarly to my personal retirement fund asset allocation at the moment.  I put a small amount in Barclays shares.  In two of my larger positions I went long the S&P500 (used a March futures contract) and I shorted 10yr US Treasuries, a sort of relative value trade on the basis of rising yields and decent corporate earnings supporting the share market and the assumption that in the near term we won’t have any extreme bad news of an unexpected nature. 

Will keep you posted as I have a couple more relative value trades ideas I aim to put on next week.

Cheers

Tomthemoneyman

Co-Author, Enterprise & Venture Capital, 5th Edition, Allen & Unwin, 2009

Don’t be enslaved by debt

Beware of too much personal consumption funded by debt. Many will already have learned this lesson the hard way but here in Australia, debt levels are still on the rise.   Use debt wisely to buy things of long term value and income generation, don’t over gear.  Its a real trap. 

 If you want freedom, to pick the job you want, to move where and when you want, then don’t be enslaved by useless debt.  Make sure your borrowings have a real future value for you and don’t over do it. 

Cheers

Tom

Co-Author, Enterprise & Venture Capital, 5th Edition, 2009, Allen & Unwin – Recommended by the Australian Private Equity and Venture Capital Association