Wednesday, February 28, 2007

 

How I Got Poleaxed

Trust me, being down 6.5% in a single day is a humbling experience. It didn't happen by accident. I, intentionally, was over-leveraged (35%) and my asset allocation rules were being violated. In short, I mismanaged risk--if only for one day. That's alright, because I have already taken steps to reduce my equity exposure and will now refocus my efforts to adapt to current market conditions.

Basically, I had been on cruise control, with the exception of the drubbing I took two weeks ago--when BWLD, MVIS and NTRI all imploded at once. With a 27% return in 06', followed by another quick 12% in 07'-- I became complacent and greedy.

Now, the stupid thing to do is sit on my hands and do nothing, thinking "my stocks will come back." Instead, I will expect the worst and hope for the best. In layman's terms, I will trade with the market, not my convictions.

Right now, I hold an 8% cash position. Considering, just yesterday, I was leveraged by 35%; I'd say my equity exposure has been greatly reduced. With the available cash, I will either buy inverse ETF's, short individual equities or add to defensive positions. However, I also reserve the right to buy some high beta names, in the event the market gets too cheap to ignore.

To put it bluntly, one doesn't outperform the market, like I am, without taking on risk. Furthermore, even though I am limiting my upside potential, by selling and hedging, I still own a fucking truckload of speculative stocks, like MVIS, HANS, RIMM, ACLI, VIP, NIHD, GMXR etc.

Finally, I still feel the market will be up, by more than 15% in 2007. However, right now, the bulls are being tested and will likely get their livers eaten for them-- by the fat, greasy bears. Not to worry, we (the bulls) will have our chance at roasting their fucking stomachs on Mother market's grill--sometime soon.

NOTE: Click here to watch the robot fuck the DOW-- live on CNBC.

Comments:
The markets have already been rode hard and put up a wet...but with a fews days of rest the bull will reinstall his cajones to continue his raging for at least the next year. Remember, where can one put his capital for a return worth the risk reward? In this moment, for this year it has to stay in equities and the world knows it, next year who cares I am happy to get through the month...Oh thanx hun gulp........gotta go.
 
I would like to nominate the NYSE computer system (or whatever calculates the DJIA) for Asshat of the week.
 
It doesn't get anymore real than this folks. You would never see Cramer put himself out like this. Nice to see you know how to use the sell button -- FLY. Perhaps next time you're taking a limo ride throwing chicken bones at the minions you should consider putting together a "declare victory/take profits" list.

The good news is that you're a great stock picker and are still up for the year. 10 months to go before this one goes in the books -- plenty of time to get that calculator brain working again.
 
Right now, John Thaine is in the lead for Asshat of the Week.
 
Yeah, Thaine is an Asshat, however, he probably has so much NYX stock that it takes away his asshatiness.
 
going to be interesting this am. up early, suck in the dip buyers, then what?
 
I would guess gap and crap and then when everybody is sick and dizzy a nice rally-too many puts out there. GS stock not doing much pre-open and thats because they know what the computers are going to do at the open.
 
Good post Fly. I'm trying to refrain from buying this a.m. as I feel certain we are do for more downside. I, like you, actually went to margin for the first time this year only a week ago. Glad you are still up for the year.

What's your take on NIHD. I sold yesterday, but the ER was killer.
 
CNBC asshats trying to talk down the market this morning. They are demanding their "corrrection".
 
I look for the oil drawdown to be higher than expected at 10:30 (EST)...and for the subsequent higher oil prices to push gold higher (it's already bounced off yesterday's lows).

Just one asshat's opinion.
 
The winner today will be MVIS.
 
Loved the post, Fly, linked to it but my server is having "issues" this morning. My story's pretty much the same as yours, except the percentages are slightly different – good 2006, good 2007 'til yesterday, margined into yesterday, now barely positive for '07.

Bottom line: shit happens, especially if you're looking for 20%+ returns. This is a bump in a long road, and although it's tough to take, if you can't take it, you need to be putting your money into index and bond funds.
 
Jeremiah was a spammer!

The total, asshatted kind!

I never understood this fucking spamming crap,

And I'd like to kick his fat behind!
 
Do not feel bad that you lost alot yesterday because there is always someone out there that lost more than you. You are still up nicely for the year so that is the bright side of things.
 
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