Blogger Capital Management

Buy low Sell high...Citi

2008-03-12T18:45:00.003-04:00

Sold out of the Citigroup long I put on 2 days ago, selling at $22.37 for a profit of $1,422 and a 2-day gain of 11.9%...like I said on a previous trade...annualize that!

Nice timing as well, as the stock promptly dropped to close at $21.21.

Away from that, I've been distracted a little from actively trading lately. I've got 5 stocks in my personal portfolio that have been a DISASTER (all longs)...4 of them I have as I think long (LONG) term the technology they offer will be world-changing, and the stocks could have multiple gains. And one of them I just think is stupid cheap. But literally 3 of them are down 50%, one is down 40% and one is down 70% from my average price. Maybe I should stick to day trading. I may elaborate on some of these in a future post.

And aside from that, this Oil short I have is f*cking frustrating. I can't believe this stuff is trading at $110 today (my short is at around $87). The data that's coming out seems to show that oil use is DOWN in the US, which accounts for around 25% of all oil use I understand, and also the trade deficit would be coming down if it wasn't for the price of oil. Since I think that the markets will eventually do what it takes to save the US from complete meltdown, I think oil will fall and cause the deficit to drop somewhat. But it's certainly a tough ride at the moment.

Who Dares Wins

2008-03-11T19:22:00.006-04:00

Well, that was an interesting day...the biggest up day in the stock market in 5 years...a sure sign of a bear market. I knew yesterday was a day of fear, hence me buying C, FRE and LEH. However I was also slightly fearful, so didn't put as much in as I usually do on a trade. So now I'm taking it on the chin on my shorts (which are thankfully much less than they were a week ago at least), whilst making some back on the the longs I put on.

I took my profits on Freddie Mac (FRE) not long into the open, selling at $19.30 for a profit of $1,218, a one-day percentage gain of 11.75%. Annualize that! If only I wasn't such a chicken, that could have been huge.

Also sold my Lehman long, selling at $46.25 for a profit of $450, a one-day percentage gain of 5.1%.

Citi also looking good ending up 9% today. I think this is the type of stock you buy when the world feels like it's falling apart. If it can get through this credit crunch, it has significant earnings power, a large dividend yield and could be a great long-term investment.

I'd also like to reiterate here how much I like 2 of my shorts...Hormel Foods (HRL) and General Mills (GIS)...these guys sell packaged foods. Think about it. They have to PAY for commodities (wheat, corn, sugar, meat etc) and turn them into cans/packets of stuff to SELL to consumers...I am thinking that there is no way they can pass on the size of price rises they are having to pay for their input costs, so margins must fall. Looks like the stock market doesn't buy my theory though, as these two have crept up marginally since I put them on a month or two ago. We'll see how this plays out, I'm pretty confident.

Fighting the Fear...buying C, FRE, LEH

2008-03-10T13:22:00.003-04:00

Financial stocks are taking a BEATING today, following Bear Stearns liquidity rumours, taking the stock down the most since the 1987 crash, and battering other financial stocks. Lehman also out saying they are laying off 5% of their staff globally.

Well, I like to step in to buy when fear seems high, so today could be the day. I just paid $20.00 (-4%) for Citigroup (C), $17.27 (-12%) for Freddie Mac (FRE) and $44.00 (-5%) for Lehman Brothers (LEH). I was also going to buy some Bear Stearns, but it was 5-6% off the lows of the day so I'll just wait that one out. I bought around $10k worth of each stock.

Whilst the fundamentals are still clearly disgusting for the financial sector, when fear is high you can sometimes get great entry levels, so looking for a good near-term bounce in all of these, purely on technicals. Lehman seems a decent one though, I still think them and Goldman are pretty well run banks, so will probably whether all but a complete financial meltdown (something I am definitely not ruling out).

Portfolio updates

2008-03-10T10:20:00.005-04:00

OK so as I just mentioned in the previous post, I got a little lazy with the blog over the last couple of weeks. Here's what I've been doing (and if you've any doubt I'm making this up, I'll just point out now that if I'd actually waited til today for most of these trades I'd have made a lot more money, so hopefully you'll believe me on this! Anyway this blog is here for me to keep track of my EXACT P+L, so all numbers completely reflect what I make, including all expenses)...most of it was covering existing positions:

March 4th, bought Downey Financial (DSL) at $24.04, having originally sold it on Feb 1st at $33.95, for a profit of $1,982. Was literally just a few hours early to cover this one, as the stock proceeded to plummet even further, and is currently at $19.78. Oh well, can't argue with a 29% return in one month. Still think this company goes bust, but thought I could trade it around a little.

Same day, I covered Vornado Realty Trust (VNO) at $82.34, having sold on Feb 1st at $90.70, giving a profit of $836 and a return of 9.2%. Like some other trades I closed out that I'm about to mention, I felt the size I had on was too small, so taking my profits and if it gets close to my original entry I'll get in in bigger size.

March 5th, I covered my Vodafone (VOD.L) short at 157.7p, for a total profit of $2,921. I'd sold a couple of times, some at 187.5 and some at 171.5.

March 6th, covered Mohawk Industries (MHK) at $69.64, making 11.2% in one month for a profit of $1,758. Again, still hate the company, but am a sucker for a profit and will sell any strong rally.

Same day, covered Hovnanian (HOV) at $8.51, making 15% in just over a week for a profit of exactly $3,000.

Also covered Centex (CTX) at $20.76, making 11% in just over a week for a profit of $2,540.

And covered Lennar (LEN) at $16.20, making 18% in one month for a profit of $1,065.

And FINALLY, covered General Growth Properties (GGP), making 11.9% for a profit of $902. Again, was just too small in this one unfortunately.

Phew! Back up to date with everything...current P+L ~$40,200, damn that Crude Oil short...

Yours,
2and20

Feb P+L recap:

2008-03-10T09:59:00.005-04:00

Have been away travelling plus also a little lazy with the blog. Was also having some problems with the spreadsheet, but I've fixed it now. This Google Docs thing is rubbish, they are kidding if they think they'll ever get people to move from Excel to an online application...

First up...February P+L was $15,463, pushing the total P+L since inception at the start of December to $39,433.

Most of the money was made being short equities and indices, and most of the equities I was successfully short was in sectors pretty close to this credit crisis (financials, reits, homebuilders etc). Also took some money out from selling options on GBP, and a little from being long 10y Treasury futures briefly, a trade that I'd intended to get back in on but I hated the price action as yields went from 3.55% to 3.90% pretty quickly. On the losing front, I got a good kick in the nuts from being short Oil, dropping around $15,000. Very frustrating, like I said I'd been on the road, and literally didn't even see it between ~88 to ~98. I'm mildly nervous on this one, although I think eventually fundamentals will kick in and take it all the way back down. We're already seeing fuel use fall in the US (can't remember where I read it so no link). Demand drop CAN take even oil prices down, and I don't think many people appreciate that.

My next post will follow shortly, detailing trades done over the last couple of weeks.

Closing CHF/JPY long

2008-02-26T04:33:00.008-05:00

Back on December 19th, I bought Swiss Francs versus selling Yen, with the rationale being that Swissie could outperform as it has slightly higher interest rates and some chance of growth, whereas Japan looks set for another recession (I keep my eye on Japan Economy Watch). Both countries should trade similarly on a carry trade basis, so in times of stress, neither should really outperform the other.

Well, I'd left a limit order a point and a half from where I owned it, and it hit today. I'd paid 97.17 for the June contract, and sold it today at 98.77, for a profit of $960.

I don't think much has changed to change my rationale on this trade, so any selloff and I may look to get back in.

Away from that cross, I've now got nothing going on in FX. I'm frustrated that I took off my longs in AUD against JPY and GBP. I'd even written on the GBP one on Jan 9th,

"As always, I'll try and remember and keep an eye on this one, to look for the re-entry. I still think we could have a solid break out of the long-term range as the UK economy comes to a screeching halt."

Well, what a dick I am. I even watched it spike up to 2.28, and just bottled it when I should have pulled the trigger. It's now trading at 2.12! $16k or so that I should have had in my pocket.

I'm still thinking the UK is screwed, but I now don't know what to short it against. I am beginning to think the next down leg in the dollar is coming, as the fundamentals are just terrible in the US, with no solution and no end in sight for the housing problem. I hate the Euro and just refuse to buy it here. I missed the Aussie dollar as I said. I don't like the Yen, as they hit another recession and so near-zero rates look here to stay. Maybe the Swiss Franc is the way forward, but it's had a big move at the end of last year. Might keep an eye on this one though.

Finally, I think Hungary could be the next shit-show in the markets, or at least Eastern Europe in general. Global Economy Matters has some very detailed posts on this, stating

It is unlikely that the Baltics will be the first in line in connection with a potential currency run in the context of Eastern Europe. That dubious honor seems to have landed at the front step of Hungary and Romania.

See this post for plenty details. I'll probably buy USDHUF very soon, the entry point here, around 175, looks fantastic:

In fact I've talked myself into it. Just paid 174.86 in equivalent of $500 per big figure (shorted about $87k worth of HUF).

Cool. Back in the FX game.

Yours,
2and20

I am bearish...really bearish...selling stocks here:

2008-02-25T11:54:00.001-05:00

I am an avid reader of Mish, and lately Reggie Middleton's BoomBustBlog. They are probably the two most informative producers of economic and market related information anywhere, and everything I read here, and elsewhere, points me to a continuing deterioration in economic fundamentals, pretty much led by the US (although exported to Europe/Asia through risk transfer mechanisms such as CDO's).

Homebuilders look screwed, monolines seem finished, as I can't see the plan to split them into two parts, a "good" part and a "bad" part, being anything other than fraudulent conveyance, REITs look like the next crash victim as the CRE crunch hits hard and fast (lots on this posted over at Calculated Risk also), and with the housing crash in full force, bank lending taps turned off and unemployment increasing, retail looks set to get hosed also.

On that note, I've put on some more shorts, selling:

Aeropostale (ARO), a US clothing retailer, at $27.44 in ~$27k
Hovnanian Enterprises (HOV), the builder, at $10.01 in ~$20k
Centex (CTX), the builder, at $23.30 in ~$23k
Boston Properties (BXP), a REIT, at $88.04 in ~$26k
Simon Property Group (SPG), a REIT, at $85.77 in ~$25k

These all look like near-guaranteed to go down over the medium term, with fundamentally flawed businesses in this environment. I'm also looking at shorting Assured Guaranty (AGO), the monoline, and getting long Jones Soda (JSDA)...really struggling to find longs I like, but this one looks like it has potential. More later.

I'll get the spreadsheet updated in a bit, have been on the road for a couple of weeks so not been as active. Time to get back to it, I was hoping February would be a more profitable month, but the Oil short caught me out, and I didn't keep on the long AUD versus both Yen and the Pound which would have really paid out. Oh well, plenty more opportunities out there.

Yours,
2and20

Shorting US Steel again

2008-02-20T15:25:00.003-05:00

Selling ~$18k worth of US Steel (X) at $111.72. This one is the gift that keeps on giving, I've shorted it a couple of times in the last few months, and am getting in again for the same rationale really, in that steel stocks basically get killed in a recession.

Stock up a lot over the last 2 days after a UBS upgrade, but I'm gonna just use that to get this great entry point. UBS may be right in that higher iron ore settlements should cause price rises, but I still contend that lower demand will hit margins.

Portfolio all looking good except my oil short...down something like $13k on it...pretty frustrating, I still don't mind being short, but I even thought that the timing of my entry was poor. Will see how it unfolds over the next few days.

Covering FTSE and S&P 500

2008-02-15T12:26:00.002-05:00

Just bought back the short I put on the FTSE and S&P 500 yesterday. Paid 5785 on the FTSE (having shorted at 5922) for a profit of £1,370 (~$2,700), and paid 1345 on the S&P, having shorted it at 1371.5, for a profit of $1,325.

It's all too easy, just fade the rallies.

This market is gifting you money

2008-02-14T03:32:00.003-05:00

This market is practically giving money away. Trading from the short side, I can barely see how you can go wrong. Adding to shorts here:

Selling ~$69k of S&P 500 June futures at 1371.5

Selling ~£13k (~$25k) of HMV.L at 128.9p. HMV is a large specialist music/DVD retailer in the UK...any slowdown that hits discretionary spending will hit these guys early...combine that with increased music and video piracy (everything is available illegally for free with the simplest of internet searches), and this company should fundamentally struggle.

And finally, selling ~£59k (~$116k) of FTSE June futures at 5922. UK slowdown is coming, but is not being fully recognised in equity prices yet. It's a gift.

[Admin note: new trades will go into the spreadsheet over the next few days, I'm travelling at the moment so unable to keep it fully up to date.]

Profit taking on Goldman

2008-02-13T11:04:00.002-05:00

On the road travelling, but just posting I am buying back my Goldman Sachs (GS) short here. Profit ~$2,300.

Have an eye on shorting some more retailers, maybe ANF next.

Taking my profits on COF, KMX, FED

2008-02-11T11:08:00.000-05:00

Buying back Capital One (COF), FirstFed Financial (FED) and Carmax (KMX) today. Making ~15% on COF and ~10% on the other two. Easy easy money to be made in this market.

I was just thinking about a quote from Reminiscences of a Stock Operator (probably the best book on trading you'll ever read), where (and this is from memory) Livermore says "in a bull market, be long or flat, and in a bear market, be short or flat"...certainly rings true with me, every time the market rallies, I'm just picking out the stocks I fundamentally want to be short and selling them, buying them back when they have dropped a decent amount. Certainly feels easy at the moment.

Details:
Bought back COF at $47.88 that I'd sold at $55.44 on Feb 1st, profit $2,268
Bought back FED at $35.35 that I'd sold at $38.94 on Jan 30th, profit $718

[Something doesn't look right with Carmax, I think I forgot to report my opening of the trade and forgot to put it on the spreadsheet...will investigate...profit was $2,043]

Whilst I still think these stocks can fall from here, by taking profits it leaves me able to reset shorts if/when the market rallies.

Shorting GAP

2008-02-08T13:08:00.000-05:00

Just sold ~$20k of Gap (GPS) at $19.93.

Shorting retail in the US is a GIFT. Every single store is going to see falling revenues this year, falling margins as competitors aggressively price to shift stock, etc etc. With Gap only ~10% off it's 52-week high, today is a great entry point.

Another $3,800 to the good guys

2008-02-08T10:21:00.000-05:00

Well, my GBP/USD 1.95 straddle just rolled off, and I covered the outright short I had on as well.

I'd sold the 1.95 straddle back on January 22nd for 417.1 cents, in £5/cent or £2,085.50 in premium. It just expired for 52 cents, giving me a profit of £1,825 = $3,550.

I'd also took 24 cents out of my outright short, for a profit of £120 = $233.

Sweet. After my 1.98 straddle expired at a great level last week, the market then sells off down to my level for this week's expiry! Doesn't get better than that.

Lots of opportunities in FX. I missed shorting some HUF (Hungarian Forint) since I kept waiting for a better entry, and I didn't put the GBP/AUD short back on, and I didn't put an outright Euro short on or sell some more calls. But once I stop being such a f*cking bottler, I'm going to nail a few more of these. I think the USD is the one to think about. I could see a big rally against the major currencies, but the US really does have some major problems. The biggest issue in the relative housing markets between the US and Europe is that it is SO easy for people to walk away from homes in the US. Ever since that mortgage relief act was signed last year, you can now walk away with no tax liability. So all the banks are going to get royally f*cked. There is just no avoiding it. So if we really think currencies will move based on relative growth differentials and interest rate differentials, it would suggest that the dollar is set to deteriorate further.

Against that, I think the optimism in the UK and Europe over the last year has been unjustified, so these currencies could do with getting a bit of a kick-in.

I'll probably still be a seller of EUR and GBP on rallies, but I'm having a good thing about changing that plan.

Stopped out of the S&P short

2008-02-08T02:06:00.001-05:00

Well, having increased the S&P 500 short yesterday at 1317.5, and moving my stop-loss to the breakeven level of 1334, I got stopped out. Shame. Maybe I should have been less greedy and just chucked some of the profits into the pot whilst it was up.

Oh and just an admin note, I closed out my Johnson & Johnson short back on January 24th, I'd forgotten I even did it at the time, it's in the closed trades section now (profit $689).

And fingers crossed for GBP/USD to expire at 1.95 at 10am NY time today, that's where my straddle is struck.

Closing the Dow straddle and the delta hedges

2008-02-07T09:55:00.000-05:00

Back on January 24th, I bought a Dow 12100 March straddle, and tried some volatility trading. I wasn't exactly delta-hedging, but instead for every 100 points I was selling 10% of the exposure, so if the market had moved 1000 points either way from the straddle, I would have the same notional on for my hedge as I did for my straddle.

So as the market went up from my strike of 12100, I was selling at every 100 points, then each of those trades was bought back when it dropped back 100 points. I realise this is not very clear! But here's what I ended up doing:

Opening	Closing	P+L
12200	12159	$82
12300	12200	$200
12400	12317	$166
12500	12400	$200
12600	12500	$200
12700	12600	$200
12400	12300	$200
12400	12300	$200
12500	12400	$200
12600	12500	$200
12270	12100	$340
12300	12200	$200
12416	12300	$232
12400	12300	$200

Total		$2,820

So I made $2,820 on my hedges. Well, I bought back my straddle for 822 points. I'd sold it for 911 points, in essentially $20/point or $18,220 premium, this lost me $1,780. So net-net, I made a profit of $1,040.

Not bad, and certainly better than a kick in the teeth, but it was a pain in the ass keeping all the orders up to date, and also was tricky to keep track of in real-time in my spreadsheet. So out it goes.

Increasing S&P 500 Short Further

2008-02-07T09:11:00.000-05:00

Increasing my S&P 500 Short, selling another ~$26k worth at 1317.5 on the March future. That gives me a short of nearly $80k now at an average of 1334, so I'm putting my stop loss in at that level.

The US is a mess, the rest of the world is following, I want a big short, and I'm willing to take a risk on timing and getting stopped out to get that short on.

Away from that, my GBP/USD trade is working out well, I have a 1.95 straddle expiring tomorrow, and am also outright short from around the same level. Following the Bank of England cutting 25bps as expected, Sterling has dropped about 1.5 points today to 1.9450. I'm up around $3,000 on this trade, and ideally it will expire bang on 1.95 tomorrow at 10am NY time.

Actually pulled the trigger on Mohawk

2008-02-06T11:44:00.000-05:00

As I mentioned in my previous post, I had my eye on Mohawk (MHK)...well, I just shorted about $16k worth at $78.43.

I'll be honest here...I know jack sh*t about this company...but looking at its profile from Yahoo, I don't see how any company in the carpet/tiling sector can do well in a severe downturn:

Mohawk Industries, Inc., together with its subsidiaries, engages in the production and sale of floor covering products for residential and commercial applications in the United States and Europe. It operates in three segments: Mohawk, Dal-Tile, and Unilin. The Mohawk segment designs, manufactures, and distributes floor covering products, including carpets, rugs, ceramic tiles, hardwood, resilient, and laminates. It markets its products through independent floor covering retailers, home centers, mass merchandisers, department stores, commercial dealers, and commercial end users, as well as through private labeling programs. This segment's products are offered under the Mohawk, Aladdin, Mohawk Home, Bigelow, Durkan, Helios, Horizon, Karastan, Lees, Merit, and Ralph Lauren brand names. The Dal-Tile segment engages in the design, manufacture, and marketing of a line of ceramic and porcelain tiles, and natural stone products. Its ceramic tile products are sold through independent distributors, home center retailers, tile and flooring retailers, and contractors. The Unilin segment produces and sells laminate floorings, as well as insulated roofing and other wood based panels. Mohawk Industries also provides wood flooring products, which include hardwood and laminate flooring. The company was founded in 1988 and is headquartered in Calhoun, Georgia.

Results are February 14, I can't wait. If you need more convincing on this sector, read this recent post by Mish, including the comments section. Lots of negatives on homewares/furniture etc.

Commodities and portfolio update

2008-02-06T10:52:00.000-05:00

Well, my Copper short that I'd entered yesterday hit its stop loss of 324.95, so I'm out of that for flat. Oh well, it was worth a try to try and get the position larger as the market fell. I'll sit out of this one for a few days and re-assess.

My Crude Oil short is finally back to flat following a large increase in inventory's. Perphaps my timing on this trade wasn't ideal, but I think it's inevitable that oil falls substantially from here, so I just plan to leave this trade alone for now.

Away from that, I'm still tempted to enter some new equity shorts. Currently I have my eye on Mohawk Industries (MHK), a carpet and tile supplier. This is exactly the sort of industry that will get hit from the fallout from housing and a slowing economy. They report results on February 14, so I plan to be short by then. As for my current shorts, I love them all. I feel extremely confident sitting short the market just now.

One thing though...if anyone has any ideas of some stocks to get long, please mention them! I've only got 3 on (HLYS, BID, IACI) and I don't particularly like them. IACI is off 3% today after posting a large quarterly loss. If I didn't have so many shorts on, I'd let some of the longs fly.

Increasing the Staples short

2008-02-05T10:43:00.000-05:00

Last Monday, I'd shorted some Staples, about $23k worth. I'm doubling that up today at roughly the same price, selling it at $22.95.

The way I look at it, this stock's 52-week high was $27.66, back before the crunch had started and whilst the economy was chugging along OK. Also, private equity were lurking in every sector, so I suspect a lot of stocks had an LBO premium attached. All those positives are now gone, so the chance of seeing those prices in the near future look slim. So, selling today at $23, with the economy going down the tank and deflation about to rear it's head, looks like a fantastic trade to me. One of my biggest concerns is that I won't be short enough when the meltdown arrives, which was a problem last month.

Trading on a P/E of 15, when Office Depot is trading at 10. Wait for the "E" and the P/E to fall. Let's say earnings drop 20%, and the P/E moves from 15 to 12. That implies a 36% drop in the stock. Looks pretty feasible to me. Book it.

Doubling up the Copper short

2008-02-05T10:23:00.000-05:00

I'd sold some Copper earlier today at 329.35. It's off around 3% or so from there, and I've just sold some more at 320.55 and stuck a stop-loss in the middle. So now I can't lose anything, but I've got a ~$65k short here. I just need it to start heading down without bouncing.

After a horrible ISM number earlier, I think even the MSM will realise that the US is heading into an UGLY recession. Stocks and commodities are going to get crushed, putting on shorts is like shooting fish in a barrel.

Selling Copper again

2008-02-05T03:38:00.000-05:00

Selling around $33k worth of Copper at 329.35.

Same old story really. A US slowdown, soon be hitting Europe and the UK, will reduce demand for industrial commodities. The entry point here looks pretty good, about 15% off the lows of December.

Cable option expiry on Friday

2008-02-03T19:28:00.000-05:00

Back on January 17th, I sold a 1.98 straddle on GBP/USD and at the same time sold some FX outright...I'd sold the straddle for 291.9 cents (ie. 2.919 big figures) in £5/cent, and it expired at 84 cents on Friday at 10am NY time (market was at 1.9714).

That's a profit of £1039.50 = $2,050

At the same time, I'd sold some GBO outright, and I closed it out at the same time for a profit of 90 cents, so making £450 = $887.

Option premiums remain high on this cross, and I think it may do nothing for a while. Whilst the US has taken the brunt of the bad publicity in this credit unwind, the GBP is actually pretty sh*tty as well, actually performing WORSE in 2007 than the dollar on a trade-weighted basis (no link as I can't remember where I read it). So we have two crappy currencies battling it out, and whilst I think on a valuation basis the pound will eventually fall substantially against the dollar, in the near-term I think the newsflow and economic picture coming from the US will remain grim.

So my plan is to stay net short Sterling, but also take some risk selling options. I have another identical trade expiring this Friday coming. My straddle strike here is 1.95, so a small fall would help me here.

Shorting Real Estate

2008-02-01T10:51:00.000-05:00

Just shorted:

~$6k worth of Lennar (LEN) @ $19.75

~$8k worth of Downey Financial (DSL) @ $33.95

~$8k worth of General Growth Properties (GGP) @ $37.92

~$6k worth of Vornado Realty Trust (VNO) @ $90.70

What a rally some of these have had from the lows. Well, homebuilding is still a f*cked sector, and Commercial Real Estate is set to join it. Just read Calculated Risk and Mish to see the CRE disaster coming.

DSL has been posted a few times over at CR, and has an unbelievable growth rate on delinquent loans...GGP and VNO I read about over at Reggie Middleton's BoomBustBlog. Some fantastic analysis on a number of companies, I am pretty bearish already and naturally predisposed to that way of thinking, being generally skeptical, but wow this makes me think some of these companies are on the way to zero.

I've done smaller size than I usually would, as I've just got a LOT of shorts on, but if they start moving my way, I may increase the size and just put some stops in around my average price.

I'm pretty confident on these...literally, if I just leave them 'til Xmas, I don't see any way they can be higher.

Selling some Capital One

2008-02-01T09:53:00.000-05:00

Selling just over $15,000 of Capital One (COF) at $55.44. The stock is up from lows of $37, and the 52 week high is ~$83...last time the stock was at $80 was in the first half of 2007. Now, it's clear that the world has changed, so I don't think we'll be even getting close to those levels again. So selling at ~30% off the highs doesn't seem to bad. Let's target low 40's on this one as a level to consider profit taking, although as always it depends on the newsflow. I think credit card companies will get hit eventually, and that could REALLY mark a change in their stock values.

Taking profits on my Treasuries

2008-02-01T09:18:00.000-05:00

Just sold my 10y Treasury futures position at 117.33, for exactly a 1 point gain and $2,500 profit. I'd bought it 2 days ago with the 10y around 3.69%, today it is in to 3.56% following the weak payrolls number. Whilst I still think we could have a lot lower to go on treasury yields, it won't be in a straight line, so I'll try and capture some volatility in it. Plus I'm just a sucker who can't resist booking profits (I'd call it one of my weaknesses...hey there's worse things to be bad at!).

January P+L recap

2008-02-01T06:43:00.000-05:00

Well...I think all in all, that was a pretty disappointing month. I've taken the P+L from just this morning, before the US open, but a rise overnight in some of the futures I am short means the actual Jan P+L was maybe a little higher, but lets go off this number.

Up $14,000, compared to up $10,000 in December.

I'm really gutted by this. I've been so bearish, and I managed to mostly miss all the equity falls last month. I didn't cover as much as I should of on the morning before the Fed cut rates the first time, although I had planned to as soon as the market open, but the f*cking Fed bailed out the longs by cutting before the open, scuppering my gameplan. I also stupidly shorted som Eurodollar futures, although managed to get out for ~$3,000 instead of the over $10,000 I was down at one point. And I've handed some money back being short oil as well.

I think some of my trades have been too short-term, so I'm going to try and hang on to stuff for longer going forward, so the stuff I am short, I am pretty comfortable being short for several months if necessary. No plans to particularly change the shape of my portfolio, although if we saw the carry currencies sell off (mainly Aussie), I'd maybe look to put some of that on. I also may get involved in some commodities from the long side, looking at livestock and cotton at the moment, and may short copper. Away from that, I'd like to have a larger equity portfolio, although I could do with finding some stuff to get long. I want to short some homebuilders and some REIT's I think.

Away from all that, I think the next shoe to drop in the markets will be the real pain in the European economies. There is no way they avoid the US-style housing-led economic pain, it's just a matter of time. So...I'm watching the UK market in particular with a view to getting short. Maybe I'll sell some June FTSE calls this month if the market rally continues.

That's about it. Like I say, an annoying month, I was up $35,000 at one point, so gave a fair bit back. I'd like to take some swings and try to push the P+L up to $70,000 by the end of February, so that's my mental target. Need some share falls, a rally in Treasuries, and a fall in the oil market to make that happen. Not unrealistic, me'thinks.

Yours,
2and20

Selling FirstFed (FED)

2008-01-30T10:08:00.000-05:00

Just sold around $8,000 worth of FirstFed Financial (FED) at $38.94.

I actually don't know much about this "bank", but any mortgage lender with a focus on California can't be doing well. It was in the high-60's early last year, so doesn't actually seem to have fallen all that much given the huge change in the market. I think we need to see a number of small lenders go bust, and I want to be in on some of them. I plan to short more if it starts to go down, and maybe use a stop-loss around my average short price to limit risk.

I also have my eye on Downey Financial (DSL), with a view to shorting it. It seems to be a regular over at Calculated Risk, as it's delinquent loans are going through the roof! This is from a post on Jan 16th...delinquent loans up from 1.5% in June to 7.8% in December! And I'm not sure, but maybe I see a trend...?

Gonna watch the stock for a little bit before pulling the trigger. I better be careful on getting too bearish...maybe I should find some longs...

Buying 10y Treasuries

2008-01-30T09:53:00.000-05:00

Just paid 116.33 for the 10y Treasury future (March), in $25/cent, which is about
$250 per basis point.

The on-the-run 10 year is trading at 3.68% today. Whilst it has come in from 4.50% just 3 months ago, I think the picture has fundamentally changed from back then. The Fed has shown its willingness to bring rates down a long way, GDP growth is slowing FAST, just 0.6% in the 4th-quarter, and there is plenty scope for deflation talk to begin as profits start to fall, companies start reducing prices, and unemployment begins to drop. All we need to nail it is for commodities to start to come down. I guess that one is a playoff on global demand falling against faith in fiat currencies deteriorating. I've got to think that the demand side wins in the near term.

And when do you see the Fed next hiking rates? The economy is in the process of falling apart, and I can't see the end of the tunnel. Long the 10 year 20bps above Fed Funds with significant cuts still to come, looks good to me.

Increasing the S&P500 short

2008-01-30T09:29:00.000-05:00

Sold another ~$26,000 or so of S&P March futures at 1357, doubling my short (I'd shorted at 1327 last week).

I'm so bearish.

Maybe I read Mish and Roubini too much.

Looking at shorting some homebuilders and REIT's also, I don't know much about the REIT sector, although stumbled across an unbelievably good blog, http://boombustblog.com/, which was discussing the sector (and GGP in particular) in a lot of detail. Very negative.

Cutting out of Intercontinental Hotels for flat

2008-01-29T12:58:00.000-05:00

Back on January 7th, I'd bought some London listed Intercontinental Hotels (IHG.L)

As you can see from the chart, at the time, my 772p entry level looked pretty good. However, within a few days the stock had dropped all the way to 612p!!! Now, to maximise P+L, I think it's important to get good entry levels on trades, so I've cut out for flat, and I'll wait for another huge equity puke to pick some up again. I still think global hotel chains can make good profits, they seem to be growing sensibly and still have plenty spots across the world to get into. For example, IHG are looking at franchising Holiday Inn in China. So...waiting for a better entry.

Back into the Staples short

2008-01-28T19:44:00.000-05:00

I'd successfully shorted Staples (SPLS) earlier this month...in the 13 days since I covered that short, the stock is back up about 14%, so I'm getting involved again. I sold around $23,000 worth at 22.93. If I'd waited closer to the close, I coulda squeezed another 1.5%-2% out of it, as it closed at $23.33.

Anyway, not to worry. There is no way a business supplies retailer is going to do well this year. I'll just try and take 10% out of it as many times as possible.

Selling some S&P500

2008-01-28T10:07:00.000-05:00

Selling ~$27,000 worth of March S&P 500 futures at 1327.

I just feel that the market has some significant downside yet. With the credit markets on their knees, lending siezing up, the housing market looking like it has years of falling still to do, the commercial real estate crash now getting more talk on the MSM, and the fact that equity indices are higher than they were a couple of years ago despite a MUCH worse environment, I think we need to see significantly lower prices.

I also think that in the bigger scheme of things, long-term we will see smaller corporation sizes and smaller profits. The internet revolution is still only a decade old, and barriers to entry in a number of industries, already down massively over the last decade, are continuing to fall as the web techniques develop. From retail, media, real estate, even banking, and many many more industries, it doesn't take much for competition to get started. So long-term this should bring down profit margins, and result in less long-term dominant companies, as innovators improve on existing products and services.

Of course, this could take years to play out. But I'm patient, and I'll add to my short on the way down.

Yours,
2and20

Selling the Dow 12900 call option

2008-01-25T09:25:00.000-05:00

Just sold the balance of my Dow 12900 Feb call at 94, for a profit of $1,500.

Taking advantage of the euphoria of the last few days, whilst their is certainly potential for stocks to continue to creep higher, I don't think it would take much to get fear back into this market. [Note: the chart finishes at last night's close, the market looks set to open around 12465]

Yours,
2and20

Covered my Sep '08 rate trade

2008-01-25T09:16:00.001-05:00

Just paid 97.185 for $125/bp of Sep '08 Eurodollar, to close out my position.

I was in a world of pain just a few days ago when this was up around 97.90, and since the Fed has clearly shown it's hand on its willingness to slash rates as deep, far and fast as necessary, I don't think fundamentally I'm supposed to be short rates. So, I'll take the cut, for a total loss of $3,413 across all my trades on this contract. Better than the $12,000 or so I was down on Tuesday at least...

Oh, and SURELY the Fed doesn't cut next week? They'd be crazy to, but then they seem a little irrational...

Yours,
2and20

Scratched out of AUD/JPY for flat

2008-01-25T07:01:00.000-05:00

Sold my Jun '08 long on AUD/JPY at 92.49, for basically flat P+L. I figure I was down about 3.5 points just the other day, the best part of $10,000, so f*ck it I'll unwind the trade following the monster rally of the last 2 days and look to pick it up lower. Might never happen, but I'm willing to be patient. I don't think we've seen a bottom in equities by a long-shot, so the great unwind and the Yen rally could easily reappear, not that I really agree with the rationale for Yen strength, why would you want to invest in an economy that has had stagnant growth and equity prices for nearly two decades???

Yours,
2and20

Taking off part of my Eurodollar short

2008-01-24T16:04:00.000-05:00

Just paid 97.34 for $25/bp of my Sep '08 Eurodollar. Thought process is that 1) it's booking $500 from my 97.54 sale of the other day, and 2) I'm thinking of taking the whole trade off and just writing off the $5,200 or so loss. The Fed cut rates 75bps and showed its hand, it will CLEARLY be willing to slash rates further when (not if) the economy slows further, bad debts increase, the housing market gets worse, share prices fall and banks lose even more money than they already have.

You can see from the market move over the last couple of weeks that I jumped in too early...ce la vie. Big change in market sentiment in just over a month, moving 165bps or so, was just too tempting to try bottom fishing (longer-term chart here).

Yours,
2and20

Going to try some vol trading...

2008-01-24T12:49:00.000-05:00

Earlier today, I paid 911 for a Dow March 12100 straddle, in $20/point (just over $18,000 premium). My plan here is to do some crude delta hedging, selling $2/point of Dow March futures every 100 points up. At the time I bought the straddle, I sold $2/point of the Dow (about $25,000 worth) at 12270, and set limits to open positions every 100 points away from the strike. So at 12300, I sold another $2/point, at 12400 I'll sell ANOTHER $2/point, etc etc, until if it hits 13100 I'll sell my final delta and I'll be flat on the way up. If the market blew out of the 1000 point range either side of 12100 I'm trying to trade, I'll lose about $9,000. However, I'm hoping I can catch some swings, so in this example, every 100 points it drops, I'll cover that sale. So my first and second sales will be bought back at 12200 and 12100 respectively, then on the way down, I have buy limits set every 100 points down for 1000 points. We'll see how it goes.

Hope that's clear. I'm not going to add it to the spreadsheet at the moment, as I'll be forever updating it as limits get hit. I'll have to think of the best way to do this.

Here's hoping it just keeps flying around for a couple of months between 11000 and 13000...

Yours,
2and20

Sold my Starwood Hotels long

2008-01-24T12:34:00.000-05:00

Sold my Starwood (HOT) stock earlier today at $43.51.

Whilst I still think that some of the global hotel groups can still perform over time, the last few weeks has certainly been a warning shot towards stocks exposed to debt and to the consumer. My Intercontinental Hotels long (UK stock) has performed like a pig since I bought it, down almost 20% or so since I bought it on the 7th of January, but is now almost all of the way back. So my plan is to let Starwood and Intercontinental fly, and maybe pick them up on the days when the market is looking ugly. Another couple of percent on Intercontinental and its gone.

My P+L on the Starwood was $979, as I had some financing costs on it. Although I haven't mentioned it yet, I do have to finance all my longs and shorts, so the P+L isn't just reflective of the spot rates they are trading at when I buy/sell. Just looking at where the stock was trading when I bought sold, it looks like I made $1,220, but because most stocks have dividend yields below the risk-free rate, it's actually negative carry to own stock. For short-term trades, it's not overly noticeable, but longer term it matters. I'll adjust the spot rate of the closed trade to reflect the EXACT P+L that I made.

Yours,
2and20

Portfolio thoughts:

2008-01-23T20:25:00.000-05:00

Some of my thinking on the portfolio so far:

The interest rate trade has been disgusting. I'm not sure if I can take anything away from it, other than maybe I should only trade in the direction I fundamentally believe in. Since I believe that the unwinding of leveraged credit will be deflationary, I need to position for lower rates. Trading the other way just because the price makes it look like a good trade will do me no good, as I can't just sit it out easily, confident in my position.
Taking profits at the right time, and having patience to wait for good entry points, is key. Just look at some of my shorts that I covered, Carmax is up 14% since I covered it just over a week ago, and 21% from the lows, Staples is up 15% since I covered my short last Tuesday, etc etc.
Having said that, I definitely took off my FTSE and DAX Options short, the DAX one alone I booked about $8,000 in profit, but that trade would be up $60,000 if I'm kept it on! So being patient until a trade is at least close to the levels I think it can reach is important.
Sizing my trades; I don't want any particular trade to overly dominate the portfolio, especially if it goes badly, so making sure I am not too big in some trades as well as being large enough in other trades where I believe in the position. I think I've been OK with this so far, although spending the $6,400 on the Dow Call premium was too much given the short term nature of the trade and the P+L so far.

So, although I feel I could have done better so far this week, the P+L is doing OK. I like pretty much all the trades I have on, and am not in a hurry to close out any of these at the moment. I think the next trades I'll be looking at will be once again shorting Staples, Carmax, US Steel, etc. I could really do with finding some longs to put against it, as the single-name equity bit of my book is short about $100,000 notional.

Also I think there is more to do in FX. The Fed has shown its hand, being willing to slash rates as much and as low as necessary. The ECB and BoE look unwilling to bail out the markets to the same extent. Initially this should help the Euro and the Pound, but at some point the markets will focus on relative growth rates, and if the Fed is doing enough to cushion sme of the blow of this credit deleveraging debacle, then maybe the dollar comes into favour. So I still plan to sell strength on the Euro and Pound. I also still have an eye on selling Hungary (HUF) and maybe Czech Krona (CZK), any economy running a large deficit is bound to see its currency get crushed this year.

Finally, commodities seems to be in a playoff between a slowing global economy reducing demand and hence the price, and a lack of faith in fiat currencies driving money into hard assets, taking commodities higher. I think ultimately the demand side wins, taking prices lower, so I plan to be mostly short. Reading any blogs about Peak Oil definitely makes me nervous on my oil short, but I think that long-term trend will still be beaten by demand. Hell, we might even see a supply increase from the oil producers if the price drops enough, so that they can maintain their income...that could really bring an accelation lower.

Yours,
2and20

Cutting my Dow Call Option in Half

2008-01-23T18:36:00.000-05:00

I guess it really is all about timing. I paid 64 for a 12900 Dow Feb Call the other day, only to see the markets puke. I'd paid $6,400 in premium, and was a little concerned I'd gone too large. Following a pretty big rally today, my options is back up to where I bought it, so I'm cutting the position in half for flat, selling $50/point at 64.

I'll consider this a get-out, even if I do lose my premium here. Just this morning, the bid side of my option was 4....maybe more patience is needed for entering and exiting positions...

Yours,
2and20

Couple of trades from earlier

2008-01-22T12:12:00.000-05:00

Sold the S&P futures that I'd bought overnight for a bounce, selling at 1310 (equivalent to 1305.5 on the S&P500). Profit $820.

And covering my Coca-Cola (KO) short...paying $59.12, for a profit of $800.

I'd have liked to cover more of my shorts, but they just didn't seem to go down enough, especially after the 75bps rate cut. I'm almost tempted to increase my shorts on a few things (BBY, GS) and add shorts in SPLS and X. But if the markets go on a little rally, I expect it to lift all stocks, so I'm going to mostly leave my single name equity portfolio unchanged.

Yours,
2and20

Selling more Vodafone, also doing some FX

2008-01-22T04:12:00.000-05:00

Trading looks like it'll be active today, so I'll be keeping everything brief.

Added to my Vodafone short, selling another ~$7,000 worth or so.

Also, with the pound trading around 1.95, I just shorted some (£500/big figure) and sold a Feb 8th Straddle for just over 4 points. Don't mind being short the pound around 2.00, and don't mind taking 4 points profit out the trade if it goes down.

Yours,
2and20

Barclays sold...6.3% in less than an hour

2008-01-22T03:56:00.000-05:00

Big rally on the FTSE, close to unchanged having been down 4-5% at one point.

Selling my Barclays out for a near $1,000 profit. 425.4p, 6.3% in under an hour. Annualize THAT!

Yours,
2and20

Closing my eyes and buying some Barclays

2008-01-22T03:08:00.000-05:00

Just paid 400p for £8,000 worth of Barclays. They say you get paid to take risk on the days no-one else wants it. Well, UK banks are on sale for basically the lowest price in 7 years. Fuck it, lets give it a go. While the UK may be fucked, it's still going to be a long drawn out process before it finally hits recession.

Yours,
2and20

Selling more Crude...love it

2008-01-22T02:41:00.000-05:00

Doubling up my crude short, selling the March NYMEX contract at $86.49 in a bit over $40,000. A few reasons:

1) Oil was the biggest bubble commodity last year, rising even more than gold. It's payback time.
2) Despite everyone saying that it costs $40/$50/$60[insert number here] a barrel to produce, I reckon the Saudi's are still pulling it out the ground for less than 10 bucks a barrel. No evidence at all to back this up, just a hunch.
3) Loved this FT article the other day talking about Israel converting the whole country to electric cars, and requiring ZERO oil within 10 years!!
4) Just saw this BBC article pop up on my computer...'Huge' oil field found off Brazil.

So there's my reasons. I'm short about $95,000 worth now just below $87, I think we should be looking for $70 a barrel to start with.

Yours,
2and20

Selling more Sep '08 Eurodollar

2008-01-22T02:34:00.000-05:00

Well, one of my nightmare positions, being short Sep '08 Eurodollars, is really going crazy this morning...I'm selling another $25/bp at 97.54.

Whilst I definitely see the risk of full blown crisis, and a slashing of Fed rates, I don't think it will be in a straight line, so the market pricing the Fed at 2.25%-2.50% by September seems punchy to me. Since mid-December alone, it's priced in an extra 130bps of easing. Hell, even if it went to ZERO, I'd only be down about $50,000. Bad, but not a total killer by itself.

Yours,
2and20

Buying a little S&P 500 for the bounce

2008-01-21T19:17:00.000-05:00

Well, tomorrow should be interesting. Falls in Europe today of 5-7.5%, and futures way down in the US. From reading through the comments on a few other blogs, it seems like I wasn't the only bear who had taken his shorts off last week.

So I'm expecting the bears to reset shorts tomorrow, the BIG bears who had kept their shorts on to cover, and the longs to panic and dump stuff all over the place. That should set the technicals up for a squeeze higher, although the fundamentals certainly argue for further falls.

Well....that's my thesis, so I'm buying a little bit of S&P500, paying 1269 for the March future (equivalent to 1264.5 in the S&P500 itself), in about $25,000 worth. Keeping it small, I'll see how the day plays out. I think I'll probably look to cover some shorts if it gets hit really badly, and maybe I'll re-short Staples if it's down under 5%.

Stay calm folks, panic never pays.

If you can keep your head when all about you
Are losing theirs and blaming it on you;
If you can trust yourself when all men doubt you,
But make allowance for their doubting too;
If you can wait and not be tired by waiting,
Or, being lied about, don't deal in lies,
Or, being hated, don't give way to hating,
And yet don't look too good, nor talk too wise;

If you can dream - and not make dreams your master;
If you can think - and not make thoughts your aim;
If you can meet with triumph and disaster
And treat those two imposters just the same;
If you can bear to hear the truth you've spoken
Twisted by knaves to make a trap for fools,
Or watch the things you gave your life to broken,
And stoop and build 'em up with wornout tools;

If you can make one heap of all your winnings
And risk it on one turn of pitch-and-toss,
And lose, and start again at your beginnings
And never breath a word about your loss;
If you can force your heart and nerve and sinew
To serve your turn long after they are gone,
And so hold on when there is nothing in you
Except the Will which says to them: "Hold on";

If you can talk with crowds and keep your virtue,
Or walk with kings - nor lose the common touch;
If neither foes nor loving friends can hurt you;
If all men count with you, but none too much;
If you can fill the unforgiving minute
With sixty seconds' worth of distance run -
Yours is the Earth and everything that's in it,
And - which is more - you'll be a Man my son!
- IF by Rudyard Kipling

Yours,
2and20

Covering Copper short, and setting an Oil short

2008-01-21T11:35:00.000-05:00

Covering my Copper short for a $1,135 profit...I'd shorted the March contract at $321.75 on Friday, and am buying it back today at $310.40. Part of the reason is that I'm surprised how well it has held up despite the weakness in today's markets. Maybe something is up.

Setting up a new short in Crude Oil, selling the March NYMEX contract at $88.21. I'm pretty bearish on Oil and don't want to miss it, with a slowing global economy, demand WILL go down, as will speculation in commodities, and so down goes Oil. Sold just under $45,000 worth.

What a day in the markets...not exactly sure how to play this one, am going to do not a lot until I see how the US reacts tomorrow.

Yours,
2and20

Buying some OTM Feb DOW Calls

2008-01-18T12:48:00.000-05:00

Just paid 64 for a Feb DOW 12900 Call. Expiry Feb 15th. In $100/point, so $6400 premium.

Markets are obviously volatile, and I figure I can double my money on a 300 point rally, whilst limiting my exposure to just 64 points. Looks OK to me.

Yours,
2and20

Looking deeper into commodities...Selling Copper

2008-01-18T12:11:00.000-05:00

Just sold some Mar '08 Copper at $321.75, in just over $30,000.

I'm quite surprised how well copper has done lately, given all the recession talk. I guess it's partly to do with the fall of fiat money and the move into hard assets that has been going on ever since the Fed starting cutting rates. Fundamentally, any slowdown is going to affect demand for this industrial metal, so I expect some decent price falls from here. I'll try and add to the position as and when the price falls.

Also, if you've got any nickels in your pocket, you might wanna think about joining me in this trade. Nickel is 75% Copper and 25% nickel, and if you price up the fundamental value in a coin, it's about 6.8 cents at the moment!

The next thing in commodities that I'm having a close look at is meat prices...I see contracts for Feeder Cattle and Live Cattle, and Lean Hogs and Pork Bellies. Now, in all honesty I know jack-sh*t about any of this, but it was put to me somewhere that meat prices could be in a lull as farmers cull their cattle instead of rearing them, due to high grain/feed costs, and once that increased supply is out of the way, there will actually be much LESS supply in the future, so prices could really soar.

Looks like a good entry. The other contracts I mentioned look similar. I'll keep an eye on it for now, although am very close to pulling the trigger.

If anyone has any knowledge about this stuff, please let me know!

Yours,
2and20

Covering US Steel short, 6.1% in 1 week.

2008-01-17T14:30:00.000-05:00

Taking my profit again on US Steel (X), it's down 6.1% since I shorted it a week ago. Just paid $101.25, profit $662, having shorted it at $107.87.

Still think it's going down, but I'll keep chipping in some profits when I can. My big mistake was not selling more when it rallied after my original short, as per what I said my plan was. Shame to have left money on the table, but maybe I'll get another chance since Goldman are still bullish on the sector...for some reason.

Yours,
2and20

Cutting out of CFC for flat

2008-01-17T12:51:00.000-05:00

[sigh]

Just sold my CFC at $5.65. P+L $20. Yes $20.

I can't believe I bought into this in the 2 days before a takeover was announced and I've still managed to make no money. If only I'd been around last Thursday afternoon...I didn't see the news until after the close. Up 51% and $4,000, yeah I'd have taken that! F*ck f*ck f*ck.

Sucks. But I'm not going to lose money on this one.

Whilst there are definitely risks in the merger going through, I still think it's more likely than not that it does, no matter how bad housing, and Countrywide, looks like by the 3rd quarter. Anyway, I'm sick of seeing this stock now, so out it goes.

Yours,
2and20

Selling another consumer "staple"

2008-01-17T12:21:00.000-05:00

Reading this Mish article gave me another stock which looks to be doing far too well, given that it is a food producer getting double-f*cked by higher input prices and lower consumer spending and lower pricing power (I think).

General Mills (GIS) "products include ready-to-eat cereals, refrigerated yogurt, microwave popcorn, frozen pizza and pizza snacks, ice cream and frozen desserts, frozen baked goods, ready-to-serve soup, dessert and baking mix, and refrigerated cookies. The company also offers grain, fruit, and savory snacks; dry dinners, and shelf stable and frozen vegetable products; refrigerated and frozen dough products; and organic products, including soups, granola bars, and cereals."

Yum. Well, how do you reckon that business is doing just now? Paying more for the basic foodstuffs that they use to make it? Yep. Maybe falling sales if we are in a slowdown? Yep. Going to get worse? Undoubtably.

Looks like a good time to get in. Sure, it's not the top, but it's not a whole lot off it. I don't see any reason why it should get back up there either.

Selling almost $55k at $54.64. This is now my biggest single equity position.

Yours,
2and20

No shares to short of CMG...shame.

2008-01-17T12:07:00.000-05:00

Following an excellent post and active comments section from Mish about the restaurant sector, I just tried to short some Chipotle Mexican Grill, but my broker doesn't have any shares to short, damn. This looks like a great one to short TODAY, especially since the shares haven't reacted despite the CFO saying business trends since mid-September have been weak (I'm paraphrasing), and commodity prices are "challenging".

What a no-brainer short. Oh yeah, and the P/E is 62 and the forward P/E is 43. Betcha earnings estimates are brought down this year as well.

Anyone have any other restaurant shorts to look at?

Yours,
2and20

Selling GBP/USD, and selling a Straddle

2008-01-17T11:34:00.000-05:00

Cable (GBP/USD) today is up around 1.5 points, trading at 1.9770 just now. I just sold some Jun '08 at 1.9643, in just under $1,000 per big figure.

At the same time, I just sold a 1.98 Put and Call, expiring Feb 1st, for 1.674 points and 1.245 points respectively, so a total of 2.919 points.

If the pound falls, as I expect it to do over the medium-term, I book a nearly 3 points profit. If the pound rises, I'm comfortable selling more of it...note that on the straddle I lose money above about 2.0050.

Newsflow out of the US is horrible just now, maybe if it quietens down for a while we can get back to focusing on the impending UK crash.

Yours,
2and20

Stopped out of my S&P500 Punt

2008-01-17T08:57:00.000-05:00

Well, I got stopped out on my S&P 500 punt. Down $1,000. My stop was at 1372.5 and you can see it got taken out overnight (I was in the March future).

Oh well. Was maybe a stupid idea.

Yours,
2and20

Taking a punt...going long some S&P 500

2008-01-16T22:14:00.001-05:00

Just paid 1382.5 for equivalent of $100/point of S&P, and put a stop-loss on it at 1372.5...that's a notional amount of long $138,250 fyi.

Market seems oversold, Asian markets back up, and JPMorgan CEO is gonna be on the front-page of the journal tomorrow morning as the WSJ speculates the Dimon may be on the hunt for acquisitions - "In terms of buying assets or buying companies, we are very open-minded," Mr. Dimon said in a conference call with analysts.

We'll see. It's just a punt.

Yours,
2and20

Booking profits on Oil, XOM, EUR, Shorting GS, BBY, adding to Eurodollar short

2008-01-16T12:33:00.001-05:00

Wow. I go to the gym for an hour, and when I come back the Euro has plummeted 2 points, Oil is down and back up a bit, I hear inflation is at the highest rate in 17 years, and while I am reading that, I've got Bloomberg TV in the background telling me that inflation is the lowest in ages!! Who the hell knows what to make of it.

Well...I know what I'm doing. I just bought back my EUR 1.47 Feb 1st Calls that I'd sold a couple of days ago at 2.435 points, for 1.012 points...that's a profit of $1,423. Sweet. I missed the lows unfortunately, but still can't complain with that result after 2 days. Spot was around 1.4660, it's traded in a 2.6 point range today alone!

EUR/USD 5 Day Chart

I also just covered some Exxon (XOM) that I'd shorted on Jan 7th at $91.57, I just bought it back at $86.56, that's 5.4% lower, and a $1,002 profit (yes I was tick-watching to make sure it got into 4 figures!!). As oil prices fell, so did Exxon, plus I think the market is starting to realise that refining margins aren't actually that great. Plus inventory numbers today were higher than expected, causing both oil and oil companies to fall. This inventory stuff seems a little random to me, so I'll take advantage of it.

5 Day Exxon Chart

In line with the Exxon rationale, I just couldn't resist taking my profits on my oil short either...I bought back my Crude short (Feb '08 NYMEX contract) at $90.10, for a profit of $988. I had been even more in the money than that, but I missed the lows of today unfortunately.

Now, that was my profit-taking, I've also added to my horrible Sep '08 Eurodollar position, selling $25/bp at 97.10, figure I might as well average in a bit, especially since I could see an equity bounce, and also rate cuts getting priced out a little bit if/when we see some stability. One of my annoyances with this trade is that I'm purely doing this on a value basis...I fundamentally believe that deflation is coming, so selling Eurodollars just doesn't tie in with that thesis...but hey, we're here to trade, so I better just do that.

I've also put on two more shorts:

Goldman Sachs (GS)...just sold about $20,000 worth at 198.83, I just don't think they will be able to extend the earnings of previous years when M&A is going to decline massively, and ABS (Asset-Backed Securities) issuance is as good as over. Also their financing costs are going to be MUCH bigger than in the past. I think they've had a good run in the markets, but the glory days are gone for a few years now I reckon. Just check out the 2 year chart...trading at $150 or so in the middle of 2006...conditions today are much worse than then, so maybe it should really be trading more like $125 are or so. We'll see.

And finally...I shorted some Best Buy (BBY). Yes, it may be the best electronics retailer in the US, but it's going to get hit as hard as anyone when consumer spending all but dries up. Over the last 2 years, it's basically traded around $50, with a few forays up to the high-$50s and down to the low-$40s. Well, I just shorted it at $45.10, and love the entry level. I shorted just over $20,000 worth.

2y Chart of Best Buy

Well, that's it for now! Relatively pleased with how everything is going, P+L up to $32,000 or so, with about $22,000 of that this month. Here's hoping the market keeps handing out cash!

Yours,
2and20

Taking a punt by covering my DAX puts

2008-01-16T07:34:00.000-05:00

Last Wednesday, I sold a 7500 March call on the DAX and bought a 7000 March put in about 7 times the size, for about zero premium.

Falling a half-decent fall over the last week, I'm covering this position. Whilst I still see significant downside for the German stock market, I want to try and maximise profits by actively trading it around. Plus basically, I'm pretty greedy and find it hard to not book profits!

On the put - I'd paid 76.3 in equivalent of about $135/point, I'm selling it today for 108.7 for a profit of just under $4,400.

On the call - I'd sold at 517.6 in just under $20/point, today I'm buying that back at 305.2, for a profit of about $4,150.

Whilst there is a lot of fear out there, I want to remain level-headed and continue to buy the dips, and set shorts on strength. Nothing goes down in a straight-line, so hopefully this strategy will pay off. Will continue to use these leveraged option trades, where I have a large potential payoff whilst having smaller exposure if it goes against me.

Yours,
2and20

Slightly Increasing AUD/JPY Long

2008-01-16T07:13:00.000-05:00

Yikes looks like I was a little early in the AUD/JPY purchase yesterday...Yen continues to be on a tear, and this has dropped another 2 big figures from yesterday, taking it's drop to about 5 points in a week. Looks a little too far too fast for me, especially since Japan looks like it is heading right into a recession, which Japan Economy Watch details nicely.

Just paid 90.90 for the Jun '08 contract, that's with spot trading 93.18.

Looking on the long-term chart, if you think that trend of a rising Aussie is still intact (and with a slowing Japan and still high Aussie rates, I don't see why it shouldn't be), then the entry point today looks good...but then I thought that yesterday also...

[Admin note: just a reminder, I haven't figured out how to get forwards into the spreadsheet, so I'll just put in the spot rate and adjust when I close the trade, to keep P+L exactly right]

Yours,
2and20

Adding again to Oil short, and reducing the stop

2008-01-16T07:00:00.000-05:00

I'm adding to my Oil short from yesterday...I'd originally sold at $92.95, then $91.61, now I am selling again at $90.68. Putting the stop-loss at $92.41, which would be a ~$400 loss if it bounced back up there.

Feb '08 NYMEX contract

Looks like we are into a trend there, if we can just break through $90 then maybe a few more folk give up on the bull side of this trade. Keeping my risk small by just incrementally adding to the position as it goes my way, but this will hopefully still give me a large payoff if I can ride this trend down.

Yours,
2and20

It's a nice day to take off some shorts

2008-01-15T12:48:00.000-05:00

Buying back a couple of shorts I put on last Tuesday.

Carmax (KMX) I'd sold at $19.02, I just bought it back at $17.25, that's a 9.3% drop in 1 week. Profit $885.

Staples (SPLS) I'd sold at $21.86, I just bought it back at $20.16, that's a 7.8% drop in 1 week. Profit $1,700.

Whilst I'm still negative on both of these stocks (a second-hand car dealer and a business supplies seller are NOT going to perform in a downturn), I might as well take profits when I can. If these things rally back 10% or so I'll look to re-enter.

Yours,
2and20

This is a gift...selling more Hormel Foods

2008-01-15T11:23:00.000-05:00

A month ago I shorted a little bit of Hormel Foods (HRL). Well, I just shorted another $12,000 or so of it at $39.50, and I could barely stop myself from shorting more. Think about it, a food/meat producer in an environment where input prices (grains/meats/other commodities) are going through the roof, where the consumer is tapped out, and we're heading into a recession. How can that stock be trading at all-time highs??? Just makes no sense...I think what's happening is that moron fund managers are piling into consumer staples because "that's what you do" when the economy is going down. Now, this sector probably will outperform in a recession, but perform outright? Nope. It's going down.

I'm going to have a good think about making this into my biggest short. One thing to worry about though...just be aware they are starting a new Spam campaign!

Yours,
2and20

Buying AUD/JPY again

2008-01-15T10:53:00.000-05:00

I bought and sold AUD/JPY last week, between 96.61 and 97.71. Today, the Yen is on FIRE against a number of currencies, and AUD/JPY is down over 2 points to 95.20. I just bought some Jun '08 at 92.81, in an amount that equates to about $2000 per big figure.

As I've said before, Japanese rates are 0.5% and either staying unchanged or going down as the Japanese economy slides back into recession, and Aussie rates are 6.75% and going up apparently. Until the commodity boom cracks, the carry here is worth clipping, and if I can combine that with some active trading, buying dips and taking my profits when they come, I think there is a fortune to be made in this cross.

Away from FX, I'm rueing some big missed opportunities yesterday. Of course, I should have let the FTSE option trade run, but I also had the chance to short some more United States Steel at a great level but didn't (down ~5% today), but didn't despite saying in a previous post how I would sell into any rallies. The strength yesterday just put me off, I guess I'm always a little suspicious that someone out there knows something I don't. Also didn't short Goldman despite it being over 200, which was a level I'd targeted, and also just irritated by Countrywide that just keeps falling!! If it hits the level where my P+L is flat, I'll just dump out of it I guess.

Hindsight makes it look so easy...

Yours,
2and20

Adding to Oil short as it falls

2008-01-15T10:33:00.000-05:00

Oil continues to fall today. I sold some earlier at 92.95, I've just sold some more down at 91.61 in the same size, and I'm putting a stop-loss on at 92.78, so the most I can lose is $200.

I plan to add to this at it falls, I'd love to make this a large winner from initial low risk. With stocks continuing to fall on fears the economy is going to fall into a recession, and Bush pleading with the Saudis to pump more oil, which the Saudis seem willing to do, we could easily see $20 wiped off the price.

Yours,
2and20

Dipping my toes into the Oil short again

2008-01-15T09:14:00.000-05:00

Having caught the Oil move a short while back from 99 to 97, I don't want to miss any larger legs down, so am selling just under $20,000 worth at $92.95 of the Feb '08 contract. Just a small position, if it starts to go my way, I'll add to it and use stop-losses to contain my exposure.

Feb '08 NYMEX Crude Oil Contract, last 10 days or so

I think if you look at what can "save" the US, one of those things is falling oil prices. Today you have Bush talking to the Saudis about increasing production, although I'm sure those guys are already cranking at full with prices where they are. Keep on pumping guys, 'cos you are soon gonna be putting out way more supply than there is demand for the product.

Yours,
2and20

Taking off the FTSE Option trade

2008-01-14T10:59:00.000-05:00

Back on December 21st, with the FTSE trading at 6424, I sold a 6200 Call and bought a 6200 Put, and for zero-cost was able to buy 6 times the size on the Put versus the Call. The FTSE just now is trading ~6230.

I'd sold the Call for 303.7 points, I just bought it back for 87.6 points. Profit $2,115.
I'd bought the Put for 52.7 and just sold it for 47.1, for a loss of $329.

Overall on the trade, I made $1,786.

3 Month FTSE Chart

I'm pretty gutted with this one, as on Friday when the FTSE was well under 6200 it was showing a profit of closer to $6,000...I had an itchy trigger-finger but just never pulled it...too greedy, in hindsight. Now with expiry on Friday coming up, I'm not sure I could stand the time decay of the Put, plus with the markets having taken such a hit in the last couple of weeks, perhaps we see a little short-term stability. So I'll take my meagre profit and move on.

Yours,
2and20

Selling another EUR/USD Call

2008-01-14T09:03:00.000-05:00

The Euro has rallied pretty hard in the last few days, and following my losing option trade which expired on Friday, I'm going to give call selling another go. Luckily for me I didn't dive straight in on Friday as the market is up about a point since then, trading ~1.4890 just now.

Selling a 1.47 Call expiring Feb 1st for 2.435 points, for $2435 premium. My hope is we see bearishness on the US fade a little over the next couple of weeks, which should help the dollar out a little bit. Europe has many problems, and to me this doesn't seem to reflected in the FX markets, where everyone seems to love the Euro. Who knows why.

3 Month Chart of EUR/USD

Yours,
2and20

Summary of last week

2008-01-13T16:24:00.000-05:00

Sold GBP/AUD on Sunday night, and covered it on Wednesday for a 3 point profit, or nearly $3,000. Looks like I was early though, as it moved down a further 3 points. Looks like I may have been right when I said a breakout to the downside was possible.

However, at least I am partly ok with missing the extra part of that move, as on Wednesday I bought some AUD/JPY which I then sold on Friday for a 1 point gain of almost $2,000.

Finally in FX, my EUR/USD options expired for a loss of $680.

In commodities, I tried to increase an oil short that was working for me, but got stopped out for a gain of $1,200.

In indices, I added a short on the DAX (German stock market) through selling a call and buying a more OTM put...I was frustrated as US stocks fell, but I wasn't particularly short, so got involved in the DAX since it seems to be holding up way too well, and I think Europe will eventually start feeling more of the effects of the credit crunch. This trade has marginally moved my way.

Within interest rates, I did a pretty horrible trade, selling some Sep '08 Eurodollar on Thursday, just before Bennie B threatened to slash interest rates. Great...down 24bps, or $2,400.

Individual stocks was where the action really was...some additions to the portfolio were from the UK, where I shorted some Vodafone and bought some Intercontinental Hotels, to compliment my Starwood position. In the US, I sold some United States steel and then covered it just 30 minutes later over 5% lower! An easy $2,000 there. I then re-entered the short on that name on Friday...think this will turn out to be a great trade, steel companies will get hammered in a recession. I also sold some Exxon, which has done nothing yet.

The real action though came with a bunch of trades I put on on Tuesday, while the markets were getting hammered. I bought CFC and MBIA because they were getting smacked down 15% or so, so was playing for a bounce. I also bought some more CFC on Wednesday when it was REALLY cratering. I got my payback when the BoA rumours and then confirmation of the takeover came through. Unfortunately, I wasn't watching the market on Thursday afternoon, so missed the 51% rise and chance to sell that day! CFC fell on Friday, and I still own it, at a profit of about $1,000. Still thinking about this one. MBIA I sold on Friday about a buck higher than I bought it for a profit of just over $1,000...stock had taken off when MBIA cleared a bond deal which gave them enough capital to (probably) keep their AAA rating. RIMM, which I sold on Tuesday, I managed to buy back a crazy 10% lower on Wednesday, which I was obviously delighted with. Finally, Staples and Carmax were both lower, meaning that I'd made money from all 5 of the companies I got involved with on Tuesday. Nice.

Here's hoping this week plays out just as well. I'm hoping my FTSE Put/Call structure really pays off, it's now in-the-money on the 6200 Puts. Expiry is Friday, although if it shows some decent profits and the markets look oversold I may take them off. Also looking at shorting Hungarian currency and the Spanish stock market, and perhaps even Goldman Sachs if it ventures much above $200. The glory days are over for the foreseeable future, but equity investors don't seem to have priced that out of the stock...yet.

Yours,
2and20

EUR/USD expiry from Friday

2008-01-13T16:06:00.000-05:00

Back on January 2nd, I sold a 1.46 call on EUR/USD expiring on Friday (10am NY time). The call expired at 1.85 points (ie EUR/USD was at 1.4785), so I'm down $680 on that, since I'd sold it at 1.51 points in $20/point equivalent.

Bit frustrating, as shortly after the ECB left rates unchanged on Thursday, EUR/USD drifted down close to 1.4650, making my option trade look pretty good. Not to be I guess.

I'll probably sell another call when the markets are open tomorrow. I certainly plan to be generally Euro-bearish this year anyway.

Yours,
2and20

Back into the United States Steel short

2008-01-11T11:32:00.000-05:00

Back on Monday, when I was looking for a good stock to short into a recession, I sold some United States Steel (X), and within 30 minutes or so I was able to buy it back 5.2% lower, a bit of a crazy trade! Now, the stock is back up thanks to an upgrade yesterday by some analyst. Unfortunately, my Yahoo Finance alert which I'd set to trigger if the stock went above $108.50 only JUST NOW sent me the message, despite the fact the stock went above 110 yesterday. Very annoyed at this, so I'm going to go into a small short only. Just sold ~$11,000 at $107.06.

If it goes up, I'll just sell more, if it goes down, I'll sell more and just stick a stop-loss at the average price. Figure I can't really lose either way.

My rational still stands from Monday for this trade...in a recession, steel stocks will get CRUSHED.

Yours,
2and20

Taking profit on the MBIA long

2008-01-11T10:44:00.000-05:00

I'd bought some MBIA (MBI) way back on Tuesday, I'm trading it today just over a buck higher than I paid, selling it out of the portfolio at $16.17, for a profit of $1010 (I'd paid $15.16 on Tuesday).

If only I'd waited an extra day to buy it I could have made WAY more than the 6.6% I ended up with (which I suppose I can't complain about in 3 days), as the stock was getting smashed down on Wednesday. Ah well, can't have it all.

Not entirely sure what's driving the stock up 10% today, but I'll take it, I was mildly worried on Wednesday both with the price action and the very bearish commentary that was around on the company and the sector.

Away from MBIA, I'm still mulling over what to do with Countrywide...I guess there is now a floor under the stock (at least for a while), and some potential of upside if anyone else is stupid enough to come and buy them, or if shareholders gripe about the price enough to make BoA raise it's price.

Finally, some new trades I am considering are:

Firstly, shorting the Spanish stock market (IBEX35), as Spain is clearly going to crumble in this credit crunch...you can read some very bearish stuff here.

Secondly, I'm probably going to sell some Hungary FX, just not sure what to do it against yet. I've read in the past that Eastern Europe is running large deficits, and surely that will be punished in the midst of a credit crunch and a global slowdown...see here for recession talk in Hungary. I don't particularly like the Euro or the Dollar here, so I may go long either Swiss Franc or maybe even Aussie Dollar against it. As always, will keep you posted.

Yours,
2and20

CFC...what to do...

2008-01-11T06:28:00.000-05:00

Following yesterday's 51% rise in Countrywide (CFC), I'm a little unsure how to play this. I'll probably sell near the open, pocketing over $4000 if it opens unchanged. I'm sure the stock can move up further from here if BoA comes in with a firm bid, but I still hate the company so am probably gonna cut out.

One thing I don't get though is how Bank of America think it can buy CFC for just $4bn, or $7 a share (which is what the New York Times is reporting today)...why do they think shareholders will agree to that? Check out the 2 year chart, would you agree to a sale at $7 when you know the buyer wanted to buy above $40 just a year ago, and bought an option through a preferred stock issue at $18 just a few months ago? I think I'd squeeze them way higher. Of course, the idiots in the MSM are saying sh*t like "welcome relief for shareholders to get BoA stock in exchange for CFC stock" but that is just rubbish if you ask me, like these shareholders can't just sell their shares on the open market???

I hear it's trading down $7.40 or so in Europe. I'll be having a good look at the open price and the newsflow, but like I say, I'll probably just let it fly.

Yours,
2and20

Out of AUD/JPY for now

2008-01-11T01:34:00.000-05:00

I'd left an overnight order on my AUD/JPY forward 1 point above where I'd bought it (hey, i can't resist taking profits), so I'm out of the Jun '08 forward at 95.11, for a profit of nearly $2000. Sweet.

5 Day Chart of AUDJPY

The portfolio had a HUGE day yesterday, as Countrywide takeover mumble with Bank of America surfaced, pretty much exactly as I thought. Nothing like having $10,000 of a stock that jumps over 50% in one day lol! I hadn't been watching the markets yesterday afternoon, or I probably would have taken profits on it...we'll see how it opens.

Also the FTSE put options kicked in some P+L, my EUR/USD call option was which expires today was looking good after the ECB left rates unchanged, but is now against me. Was looking good for a while there.

Yours,
2and20

Selling some Sep '08 Eurodollar

2008-01-10T09:06:00.000-05:00

One market I haven't looked at for several months is the Eurodollar market (that is, where 3month Libor resets will be). Check out this chart for the Sep '08 contract:

Sep '08 Eurodollar

You can see that even back in the midst of the crunch in August, the market was only pricing about 4.50% on 3month LIBOR by Sep '08, perhaps believing the crunch would be short-lived. 4.50% would indicate the market thought the FED would be at 4.50% and in cutting mode, or 4.25% and basically done cutting. Or something along those lines.

Today, the market is pricing in 3mLIBOR for Sep '08 at about 3.18%, so for the Fed to be at about 3% by then. Doesn't seem unreasonable, but I think there is some risk the market has got ahead of itself, and if the Fed disappoints at the next meeting and only does 25, and markets can get some sort of a recovery going, I think we could see this react lower by 25-50bps or so. So I just sold $100/basis point (bp) at 96.815.

For those not familiar with these interest rate markets, all I can say is that they are awesome for trading, as the go through such huge swings in sentiment, sometimes very irrationally if you ask me.

Yours,
2and20

Selling Vodafone...£100bn market cap???

2008-01-10T08:31:00.000-05:00

Sold some Vodafone at 187.5 in about £7500. This company (of which I am a former customer) has a market cap of £100bn. This seems way too high for what is now a mature technology, and whilst it is certainly a cash cow, and no wonder given the crazy charges for using your phone abroad, competition should remain fairly tight within the mobile teclo sector. Also, there are new technologies coming through all the time that threaten to harm its business model, such as using Skype with cellphones or WiMax, which I personally believe could be very disruptive when it finally goes mainstream.

5y Chart of Vodafone

At multi-year highs, the entry point looks very attractive.

Yours,
2and20

Buying AUD/JPY

2008-01-09T15:36:00.000-05:00

As mentioned over the last few days, the Aussie Dollar looks like a good place to have money. Interest rates at 6.75% and I hear they are going up, and whilst the commodity boom rolls on, it will do well.

The Yen, although being a favourite of the permabears (of which I have been accused of being in the past but try my best to stay rational), does not appear to me to be somewhere worth investing. 0.5% interest rates and probably going down, a 16 year deflationary economy that even 0% interest rates couldn't fix, 16 or so years of falling property values, and huge levels of government debt. Doesn't sound good to me.

I also think that markets may be oversold a little, so any recovery even in the short-term could see the carry trade pick up. With nearly 5 big figures a year in carry, AUDJPY is the place to be positioning for this sentiment change.

3 Month Chart of AUD/JPY

Spot is trading at 96.61. I just paid 94.11 for Jun '08 contract in the equivalent of about $2000 per big figure (about $189,000 worth of AUD). Lovin' that carry.

Yours,
2and20

Buying back RIMM...1 day, 10%!!

2008-01-09T14:14:00.000-05:00

Just paid $91.84 for RIMM, which I'd shorted yesterday in ~$20,000 at $102.43!! That's 10.3% in 24 hours, happy days. Although I've been smoked on MBIA and CFC which I bought...hmmm I guess I'll ride those out for now.

P+L = $2,118

Yours,
2and20

It's a sin? Adding to CFC losing position

2008-01-09T13:40:00.000-05:00

Buying some CFC at $4.72, just under $5k worth. Having bought some in the $6's yesterday, I'm gonna average in a little. If it goes bust, then I lose $11k or so, which is more than manageable anyway. My bet here is that it survives for now, trades up on a quiet news day and an up day in the markets, and also I bet we get some takeover rumours for it. If BoA were so interested in the 40's in early '07, in the teens in late '07, then surely they'll be interested in single digits now? We'll see.

5 Day Chart of CFC

Yours,
2and20

Downside options on the DAX

2008-01-09T09:48:00.000-05:00

Germany has been holding up way too well, just a shade off its highs.

1 Year Chart of DAX

Europe isn't going to avoid the global slowdown, it's just trading with a delay to the US.

So I've just sold a 7500 March call at 517.6 in £10/point, so £5176 premium.
And bought a 7000 March put at 76.3 in £69/point, so £5265 premium.

Net cost £89. (I had intended it to be ~zero but got my sums wrong!)

At worst, I don't mind setting a short at 7500 anyway on the DAX, but hopefully any near-term falls will allow me to take some very good money out of this trade. Come on the 10% fall!

Yours,
2and20

Taking profits on GBP/AUD

2008-01-09T09:04:00.000-05:00

On Sunday night, I'd sold some GBP/AUD based on the premise that high Australian interest rates (6.75%) were on their way up, and nearly as high rates in the UK (5.50%) were on their way down this year. Well, I just took exactly 3 big figures out of that trade in about 60 hours, so that'll do me for now. Bought the Jun '08 contract back at 224.02, (spot is trading 222.35).

5 Day Chart of GBP/AUD

As always, I'll try and remember and keep an eye on this one, to look for the re-entry. I still think we could have a solid break out of the long-term range as the UK economy comes to a screeching halt.

Profit: £1500 = $2941

Yours,
2and20

New Share Trades...CFC, MBI, SPLS, KMX, RIMM

2008-01-08T13:59:00.000-05:00

Have just done a number of trades...will try to elaborate further later, but just want to post them first here, and say that there are a few things getting smashed in the market today, which is why I just bought CFC at $6.56 (down ~13%) and MBIA at $15.16 (down ~15%), much as I hate both companies, and in particular question CFC's ability to survive, I think a few quite news days and some up days in the stock market generally can take these stocks 10-20% higher from here easily, and since bankruptcy risk is not near-term, especially for MBIA, I think I am ok with a short-term long.

Fundamentally, the slowdown/recession seems to be upon us, so I want to have some good fundamental shorts. Staples will suffer as businesses cut back, so have shorted some at $21.86, Carmax (KMX) will find out that the used car business is not the place to be in a recession, so I've sold some at $19.02, and RIMM i just think is a bit over-hyped so am selling some at $102.43. I just got an iPhone recently, and I think over time it will filter through to investors that there CAN be competitors to the Blackberry.

Yours,
2and20

Stopped out of Oil Short

2008-01-08T10:27:00.000-05:00

Oh well, I'd increased my Oil short yesterday, hoping to get bigger as the market fell and using a stop loss to lock in some profits from the initial trade, but I've been stopped out today on a decent rally in the market, about 1.5 points higher up to almost $97 at one point. My stop of $96.34 on the March future was hit.

3 Day March '08 Crude Oil (NYMEX) Chart

So am once again flat crude, but have pocketed $1200 here which offsets the $1200 I lost last month. Lol!

I'll wait for the next bit of hysteria to short it.

Yours,
2and20

Increasing Oil Short

2008-01-07T20:45:00.000-05:00

My short from last week on Oil has worked nicely. I had shorted about $50,000 worth at $99.42, and just now I am adding to that by selling about $29,000 worth at $95.21 (this is still the Mar '08 NYMEX contract).

I am putting a stop-loss in at $96.34 on the total position, which would still leave me with a profit of $1200 if it got triggered, which is what I lost in December on it. Hey, I'm not planning on being down here!

Oil hysteria is gonna calm down, the commodity stocks are getting hit, think we need to see oil back into the $70's. I'll try and keep increasing my position on the way down, and use stops to limit losses while maximising the profit.

Another thing that has got my thinking is that the US economy NEEDS oil to come down, and since I can't see any other way to avoid a serious slowdown, I think an oil crash could be the thing to do it...let's face it, something ALWAYS comes along to bail out the US economy/markets just at the right time.

Yours,
2and20

Selling Exxon (XOM)

2008-01-07T11:28:00.000-05:00

Selling about $19,000 worth of Exxon (XOM) at $91.57.

I just wanna summarise this very briefly:

- Commodities are a bubble
- $502bn market cap is stupid

'Nuff said.

1 Year Chart of Exxon

Yours,
2and20

Lowering Crude Oil stop loss

2008-01-07T10:57:00.001-05:00

I'd shorted some March '08 Crude Oil contracts on Jan 3rd, and it is moving down nicely, about 4 points lower from my opening level of $99.42. I'm moving my stop-loss down to 97.02, purely because back in December I lost $1200 being short Oil before being stopped out, and this guarantees it back!

10 Day Chart of Light Crude, March '08 Contract

Still like the short, still think traders will get bored with the hysteria in the Oil market, and we'll easily see it drop down below $90.

Yours,
2and20

More Hotels...Buying Intercontinental Hotels

2008-01-07T10:44:00.000-05:00

I bought some Starwood the other day, and was looking into more hotel groups. Intercontinental Hotels (IHG) are the world's largest hotel operator by number of rooms, and are listed in London. I just paid 772.2 pence for about $15,500 of stock (actually bought £7,722 worth).

A good summary of the group is in this Forbes article from a couple of months ago. I like how they have sold off a lot of their property portfolio and are concentrating on managing hotels. The only downside is that the bulk of their revenue comes from the US, but at least the company looks like it is moving its focus to Asia. Here is an article from last April discussing how they are going to franchise Holiday Inn in China, and here is another one from today talking about a Holiday Inn that has just opened in South Africa.

2 Year Chart of IHG

This is one that I suspect will take time to perform, but given the stock has sold off over 50% in about 6 months and is at lifetime lows today (not sure if they just floated 2 years ago, but stock chart has less than 2 years of data), I like the entry point.

Yours,
2and20

Selling United States Steel (X)...and buying it back!!

2008-01-07T10:13:00.000-05:00

Just sold about $43,000 worth of United States Steel (X), at $105.04

I don't have much rationale on this one, other than a steel company is going to get CRUSHED in a recession. I read a couple of bullish articles on Seeking Alpha here and here, although don't see why it's different this time. Just look how any steel company did back in 2001-2003, including US Steel which was down in single digits.

2y Chart of US Steel

I'm pretty excited about this one. In fact, from selling it 30 minutes ago to finishing writing this, I'm up $2,000 already???

Just looking at Google News...don't see anything other than this recommendation by Deutsche Bank rating the stock as a high conviction buy.

In fact...I'm buying the short back. Just paid $99.53, to make a profit of $2,242. Sweet!! Had planned for that to be a long-term trade, but no way I'm turning that down for 30 minutes of work!!

Anyway folks...still seems a decent long-term short to me, I'll keep it on my radar.

Yours,
2and20

Selling UK Sterling to buy Aussie Dollar

2008-01-06T19:27:00.000-05:00

I remain bearish on the UK economy, and the pound. See this Times article for a good summary of the challenges facing the UK, including a record current account deficit of 5.7%.

So if I'm shorting the pound, what do I get long? Still like the US Dollar on a RELATIVE basis to the pound, but just now I am going for some Australian Dollars, as interest rates there are 6.75% and apparently on their way to 7%. Nice carry trade. It just requires commodities to hold up...whilst I'm generally long-term bearish on commodities, partly as I think prices are high on speculation, and partly because a global slowdown/recession will reduce demand and hence prices, I will express my bearish views in that sector separately (currently I am short Oil).

5 Year Chart of GBP/AUD

In terms of the past price action, the pound has not moved very much for a few years against the Aussie, I guess partly as both have been used as carry trades. With the Bank of England set to reduce rates further, I think the pound's role as a carry currency will fade, so we could see a nice breakout to the downside here.

I've sold about £110,000 worth of pounds for Aussie...I actually sold the June '08 contract at 2.2702 in equivalent of £500 per big figure, although I'll have to record the spot price in the spreadsheet as I can't get forward prices from Yahoo Finance. Spot was trading at 2.2558 at the time.

In terms of carry, it's worth about 3 points a year to me (eg. If spot is ~ 2.26, 1 year forward is approximately 2.29).

Yours,
2and20

Lowering the stop loss on Oil to the entry point

2008-01-04T13:03:00.000-05:00

Moving my stop loss on yesterday's Oil trade down to my entry point (99.42 on the March futures contract).

Currently trading down at 97.65 and further to go I reckon.

Yours,
2and20

GBP Option (2.00 Straddle) Expires

2008-01-04T12:45:00.000-05:00

Back on December 17, I sold a 2.00 straddle on cable (GBP/USD) for 3.826 points, pocketing £3,820 in premium. It expired today at 2.47, netting a profit of $2,679 (£1,356).

Pretty pleased with the trade as my rationale seemed to work, although some last minute selling in the market pushed it down from ~1.98 to 1.975 area, so unfortunately cutting my profit by $1,000, dammit.

Today's Chart (Friday Jan 4th) of GBP/USD - note the fall just before option expiry (London time)

Still plan to play Sterling from the short side this year, this is one to keep an eye on.

Yours,
2and20

Buying some Starwood Hotels

2008-01-03T15:48:00.000-05:00

Buying ~$21,000 worth of Starwood Hotels at $41.07

2 Year Chart of Starwood

Whilst I'm sure in a global slowdown hotel stocks can take a beating, I think that for now the big hotel chains have significant earnings power, particularly whilst we have generally rising prices across the globe. I do a fair amount of travelling, and the major hotels always seem very busy/full, from London to New York to Asia to South America. I would have thought that pricing in the US may have taken a hit by now, but just have a flick around Expedia.com to see what pricing is like...good luck finding anything for under $400 a night in NY.

I'd also recommend a quick flick through Google news for Starwood, it's the first time I'd done this, and as I'd thought from other things I read previously, they seem to be expanding across the emerging markets. Some headlines:

- "Starwood Hotels & Resorts Worldwide Inc, in co-operation with TCC Capital Land, will open a new hotel in Chiang Mai (Thailand)in the second quarter of 2008..."
- "Indian real estate company Parsvnath reported near pacts with Marriott, Starwood"
- "Starwood Hotels and Resorts will debut its aloft brand in the Middle East"
- "The US-based hospitality chain Starwood Hotels and Resorts Worldwide will open more hotels — under the Westin and Aloft brands — in India"

To me, this all sounds like a company growing strongly, and so buying today at the same price the stock was at in early 2004 looks positively a bargain. I haven't done too much research into their finances, so when I get a chance I'll look into their debt levels and funding profile. Yahoo has their total debt at $3.16bn. Also, Yahoo has their P/E at ~15 and the forward P/E at about 16, although I've read some analyst articles including this one by Zacks
which states "Starwood...which currently trades at 8.9x our 2008 EBITDA estimate", so not entirely sure what to believe!

Anyway...f*ck it, it looks cheap. I may keep an eye on buying some other hotel operators also. As I mentioned above, although I'm sure during a global slowdown, hotel earnings could suffer, I think 1) they have significant earnings and growth potential at the moment, plus 2) stocks like these will hopefully act as some sort of hedge to a generally bearish book that I plan to set up.

Yours,
2and20

Will give shorting Oil another go

2008-01-03T11:33:00.000-05:00

Sold some Oil at $99.42 (the Mar '08 NYMEX Crude Future) in about $50,000.

6 Month Crude Chart

I don't see the rationale for oil being up here. An economic slowdown in the US will reduce demand for oil. A strengthening dollar against Euro/Sterling will mean a falling oil price will be needed just to keep the price the same in those currencies. Persistent high prices over the last few years has brought on (some) advances in other fuels (see solar stocks or the price of grain due to ethanol demand if you don't believe this). Yes we may be at peak oil, but shouldn't that have been priced into the market? Anyway that is a long-term effect, whereas we are seeing large short-term price moves.

So. We'll see how it goes. I've put a stop loss on 2 points above where I bought it ($101.42), so if it rips higher, I'll force myself to re-evaluate again.

Yours,
2and20

Selling FTSE versus Buying CAC, for the long haul

2008-01-02T07:05:00.000-05:00

Looking for some long-term trades, I am shorting the FTSE versus going long the CAC, the idea being to keep it on for the whole year, although I may get opportunistic if it goes my way far and quickly.

2y Relative Chart of FTSE versus CAC

The UK is sitting on top of a perilous and bursting debt-induced bubble, with the property market having topped out and now slipping fairly quickly. Depending on which survey you look at, property has been going down for 2-4 months, including 0.5% in December, and mortgage approvals in November were over 40% lower than the previous year. Also worth noting is a complete collapse in first-time buyers. Keep an eye on the UK Housing Bubble blog for great info on the UK economy. As an aside, I also plan to be short Sterling most of the year (my 2.00 straddle rolls off on Friday).

Now, the rest of Europe (possibly excluding Germany) has also had a huge increase in property values/speculation/consumer debt, but one country I'm interested in from the political side is France, where Nicolas Sarkozy become prime minister last year, and with a solid right-wing profile, looks set to make a good effort of modernising France. Just a couple of months ago it was taking on some of the unions, and he didn't seem to waiver particularly.

From another BBC summary:
"After a bitter battle against his Socialist rival Segolene Royal, Nicolas Sarkozy was elected President of France in May after a record turnout of 85 per cent. His platform was to effect a "moral renaissance" for France by cutting down on welfare and restoring the work ethic. By the end of the year he had unveiled nearly 100 measures to streamline France's cumbersome public administration. He has also developed a playboy image after divorcing his wife, Cecilia."

So, as the UK goes into property freefall, contracting lending, and an increasingly socialist tax-and-spend government that has taken the Current Account deficit to record levels, it should underperform neighbour economies that are willing to make painful changes to their social structure.

I had a similar trade on the DAX a couple of years ago, and that subsequently went on to SERIOUSLY outperform the FTSE as Germany reformed to make itself more competitive. My bet here is that France can do the same.

I sold the FTSE whilst it was at 6491.
I bought the CAC whilst it was at 5645.

I put on the equivalent of £20 per index point they are apart, so short about £130,000 ($257,500) of the FTSE and long about $224,000 worth of the CAC. Looking for these to get much closer together, not sure they quite get flat this year, but we'll see.

Yours,
2and20

Selling some short-term EUR/USD Calls

2008-01-02T06:43:00.001-05:00

One of my strategies this year, unless my mind is changed, is to play EUR/USD from the short side. Dollar weakness has clearly been on display in this cross last year, and I think unreasonably so, as the Euro is a fundamentally flawed currency, in that 18 (I think, I'm losing count now that Malta and Cyprus just joined yesterday) different nations can NOT share the same currency/interest-rate/monetary policy. OK, this might take 30 years to collapse, but still, a flawed currency long-term is supposed to be shorted. And yes, I know many will argue the dollar is flawed, but at least it's one nation with one monetary policy.

3 Month Chart of EURUSD

So, taking advantage of Xmas strength which has pushed it up to 1.4688 just now, I'm selling a 1.4600 call expiring Jan 11th. I'll see if I can keep pocketing premium through short call selling on the EUR whenever the opportunity looks good, and if it rockets upward, I am comfortable being outright short for the long-term.

Sold the call at 151, with my exposure being $20/point, so $3020 in premium. Of course, it's slightly in-the-money so I need about a 1 point fall over the next week and a half.

Yours,
2and20

First month P+L - Up $10,000

2008-01-01T13:30:00.001-05:00

So, the first month of Blogger Capital Management's existence, and I'm up a shade under $10,000.

Highlight's:
Up £1,200 on owning Heely's, as it moved up 13%
Up $3,500 on selling a 2.00 straddle on Cable over the Xmas period
Up $5,500 on 2 leveraged shorts on the FTSE and the Dow
Up $1,000 on a short on Apple, where I sold at pretty much all-time highs.
Down $1,200 on shorting Crude Oil...a stop loss saved me from further losses

Fairly pleased with this, I expect going forward I'll be trading a little more actively, with more open positions. I'll also try and clean up the spreadsheet to make it more readable.

Looking forward to 2008, I think the trades I'll put on this week will be shorting US stocks and going long either 10y or 30y treasury futures, playing on the deflation theme that I believe in at the moment (see Mish if you still believe in inflation...), and I'm looking at shorting the FTSE versus getting long the CAC, as I believe France's efforts towards increased capitalism under their new(ish) president Sarkozy will benefit equity markets, unlike the increasing socialism going on in the UK under the Labour Party...plus I think the UK will be the next economy to hit major stress due to falling property values.

As always, I'll be posting every trade. Good luck to all in 2008. Lots of opportunities out there, and it should be easy to make money if you can see the big picture correctly.

Yours,
2and20

Stopped out of my Oil Short

2007-12-21T15:29:00.000-05:00

I'd shorted some Feb '08 Light Crude futures a few days ago here, well I had put a stop on it 2 points higher, which just got triggered today ($93.31).

So am out for now, taking a $1200 hit.

3 day Oil Chart

Will keep an eye on it, may look to fade a strong rally to get involved again. Xmas markets probably too thin and can squeeze pretty far in either direction, so OK to be out for the moment and wait for a better entry.

Yours,
2and20

Back into the FTSE leveraged downside trade

2007-12-21T08:13:00.000-05:00

Just did the following:
Sold FTSE Jan 6200 Call at 303.7 in £5/point, so £1518.50 premium.
Bought FTSE Jan 6200 Put at 52.7 in £30/point, so £1581 premium.

Net cost £62.50 which is about $124. For ref, the FTSE was at 6424.

Similar to my trades from earlier this month that I've already exited (see FTSE here and DOW here), I'm pretty bearish on equities but appreciate the squeeze factor that seems to be in them, so I think the strategy is to trade from the short side through fading any strength and buying the dips.

3 Month FTSE Chart

Going into options expiration today, global equity markets have moved up, so taking advantage of that to sell the FTSE. I'm doing this rather than the US markets as I think the US has been hit with a barrage of bad news lately, such as MBIA/monolines, Investment Banking writedowns and continuing disgusting housing data, and is impressive in how it hasn't cracked under that pressure. So I'm waiting for higher US prices before I fade that move.

Contrary to that, I think the UK still has bad news to come out. Housing is only just beginning to crack, and has a considerable way to go. I think we'll have increasing talk of a UK housing "crash" going forward, and the realisation has yet to sink in that UK equities were levitating in the first half of 2007 on potential private equity buyouts, and now that hope has gone.

Finally, for you technicians, I see that 1) the market has just moved up to both the 50 and 200-day moving average, which may provide resistance, and 2) the 50-day is just falling under the 200-day, the so called death cross!

So the ideal outcome here is that as soon as options expiry is over today, the market can get back to fundamentals and push back down to the 6100 level it was recently at. If it can do that in the next week or so, that would be around a £3500 profit ($7000) or so.

You like it?

Yours,
2and20

Selling Yen, Buying Swiss Franc

2007-12-19T10:13:00.000-05:00

Why? Well, today Japan cut its growth forecast for the current fiscal year (April '07 - March '08) from 2.1% to 1.3%, and there seems to be talk of a recession happening also. Today's Lex column in the FT is pretty pessimistic.

Now I'm no expert on Japan, but over a decade and a half of failing to kickstart its economy, continued deflation, interest rates at 0.5% yet no stimulation happening, equity prices down over 60% from their peak in 1990, and land prices falling for 16 years in a row, does not inspire one to invest in that economy. I think this downgrade of is GDP forecast is a green light to get back into the carry trade.

Now, what to position it against though? Whilst I do think the US Dollar is due a rally, the economy is still a mess and looks set to worsen. The UK looks like it's set to follow, and the Euro is definitely over-valued after far too big a rally this year, and the Aussie/Kiwi I have no view on (although just glancing at it for this post, the entry levels look attractive and the carry is pretty huge...I'll come back to this later).

So given the options, I think the Swiss Franc is fundamentally the right currency to be long. We are in a period of great uncertainty, the Swiss Central Bank are apparently considering raising rates again from their current target level of (I think) 2.25 - 3.25%. With Euro rates at 4%, and fundamentally they should be higher as the ECB needs to slow down money supply, I think this could also drag Swiss rates up. So with rising rates, it should be used less as a carry currency going forward.

Also, Switzerland is the 4th largest holder of gold, which is good news for those who aren't fans of fiat currencies. (See here for a nice overview).

1y Chart of CHFJPY

In terms of carry, it's worth about 50 cents per 3 months.

Spot is trading ~98.00, I am buying a Jun '08 contract at 97.17, with an exposure of $600 per big figure.

And I am going to have a good think about putting the same trade on against AUDJPY and NZDJPY.

(Admin note: I'm going to put just the spot price in the spreadsheet, so will put the equivalent spot level of 98.07 in. Will correctly account for P+L/Carry etc when trade unwound)

Yours,
2and20