Monday, December 04, 2006

Portfolio November 2006

November was another good month for my portfolio. The actively managed (AM) accounts gained 6.19%, mainly on the back of strength in the PM sector. The rebound in oil didn’t hurt either. The cumulative gain since Jan. 11 now stands at 20.15%. The asset allocation accounts managed 3.05 % to bring the cumulative gain from Jan. 11 to 11.44%.

I exited some weaker PM names on 11/13-16 before the PMs took off. I managed to replenish partially via UNWPX. Even then, my current PM position at 48% of the AM accounts is about the maximum I can stomach. You can also see that I have been making stabs at shorting home builders and mortgage lenders with mixed results. As long as I honor my tight stops, I don’t feel too bad about taking small losses when there is a realistic chance at large gains.

Long positions
11/13 Sold MGN 500 sh @ $5.95, NXG 1000 sh @ $3.06
11/16 Sold GRS 400 sh @13.15, TRE 1600 sh @6.63, GG 400 sh @ 26.50
11/16 Closed BEARX ~$20k
11/27 Sold Company stock
11/22 Bought UNWPX ~$9k

Short positions
10/27 Short BZH 200 sh @$43.79, covered 11/13 @ $43.44
10/27 Short CTX 200 sh @ $52.55, covered 11/13 @ $51.08
10/30 Short NEW 200 sh @$38.95, covered 11/9 @ $36.80
11/13 Short WM 300 sh @$42.85, covered 11/16 @ $43.51
11/27 Short LEND 300 sh @ $29.66, covered 11/29 @ $30.49
11/27 Short WM 200 sh @ $42.54, covered 11/29 @ $43.24
11/29 Short QQQQ 200 sh @ $43.67, covered same day @ $43.86

Mechanical trading model
From the monthly summary, you can see that I withdrew $30k from my AM accounts. This was the amount transferred to a new Zecco account to try my hand at a mechanical trading model.

As I’ve said before, the disconnect between the market technicals and the economic fundamentals is nothing short of glaring. My bets in the AM accounts are largely driven by my understanding of macroeconomic conditions which has lead to emphatic long positions on PM/commodities and persistent bearish bets on housing, mortgage lending and the general indices. I’m more than happy with my PM positions. The shorts have been profitable overall this year thanks to a couple timely puts bought in May and an early position in Beazer Homes, but they were also responsible for the 8% loss in September. I believe this is where a more rule based approach will help.

I spent the last month working on a swing trading model using Excel and Visual Basic. It’s based on a run-of-the-mill trend following methodology. Obviously, I’m hoping it will generate plenty of profits, but more importantly, it should teach me to take my emotion out of trading and listen more to what the market is trying to tell me. Hopefully, I’ll have more to write about this endeavor in a couple of months.