Monday, October 02, 2006

Portfolio September 2006

I did not have a good month. For September, the actively managed portfolio declined 7.95%, bring the cumulative gain from Jan. 11 to 8.71%. The loss was primarily due to the precipitous drop in the PM sector as well as the bearish bets on a stock market that went on a tear. The red ink from PMs and commodities spilled over to the asset allocated accounts as well, although the loss was mostly offset by gains in the other sectors to a minus 0.16%, bringing the cumulative gain from Jan. 11 to 4.89%. Considering that my portfolios experienced gains of 3-4% in the first 11 days of this year, my year-to-date results are still respectable.

I have been upset at myself for not so much as the poor results last month, as the manner in which I did it. For example in the PM sector, I pointed out in several posts that the 353.5 level on the HUI was a critical level; however, when that level was breached in a classic “throw back” move, I did nothing to limit the downside risk from a very big PM exposure. Once the market ran away from me, it was extremely difficult to liquidate at the fire sale prices since the longer time bullish trend was still intact. My positions may ultimately be vindicated, but the plan of trading a portion of my PM positions to limit the volatility was dealt a blow.


  • 9/7 and 9/12 Closed IWM Jan 75 puts, broke even
  • 9/11 Bought SSRI 300 sh @ $22.30, AEM 200 sh @ $33.65
  • 9/26 Sold QID, 200 sh @ $60.36, -10.2%
  • 9/26 Covered PHM short, 300 sh @ $29.39, -12.7%
  • 9/28 Shorted LEND, 200 sh @ $34.49

You can see that my trades did not turn out well, with a couple losses in the 10-12% range. My bearishness on the general equities has not diminished an iota after all this, as I’m sure you can tell from my last post.

My most recent short, LEND (Accredited home lenders), is a mortgage lender specializing in subprime, interest only/option ARM loans. The general idea was consistent with the housing implosion that I have talked about ad nauseum. I was trying to catch the top of the bounce before it starts a new leg down. Because things have not gone my way lately, I’m taking on smaller positions and setting tighter stops. Let’s hope October is a kinder, gentler month.