Edit: it did test the $89.00 level (and failed), but I'll add at $88.90 . (it did not retest). On Friday add 5% of NAV to SPY shorts if the index rises on the first hour
Edit2: it did go to $89.00 on the yahoo finance chart, but not on google finance. It only happened for about a minute. If I was pretending of running a hedge fund, it would not be possible to build large short position in that time frame.
I also regret putting on the sterling and possibly the copper shorts. (because I was too late) I do love silver though. In short, I think the preference for gold instead of silver as a store of value is irrational. Gold looks pretty, but the ~ 70:1 ratio of gold prices to silver prices is a very high premium for gold. Besides, there are too many gold bugs on seeking alpha and longing it seems to be more of an expression of libertarian political views than a smart investment decision. But I do think gold and silver will do relatively well. I could imagine scenarios for gold to fall though, and I will consider entering short positions in gold if it rises.
Let's say I shorted copper (let's say the contract matures in fall) at $2.05 per pound and that reverted to that today. Also, I screwed up on the timing on the sterling short. Let's say that I shorted it at $1.45 on 4/20 . I only regret the timing of the sterling short, but I think it would fall.
I am also bullish on Treasuries now (which are probably the most reviled financial instrument in Seeking Alpha), but I would not declare a position yet and will add to the German government bond long position if yields rise. I also will consider shorting oil at $58. I rather short USO instead of the actual futures... I love betting against retail investors and the contango of the oil futures stymie USO.
Edit3:
I've switched my view on shorting SPY... I thought it was near a sell-off and was currently supported by inexperienced short-term traders. Yes, that might be correct now, but it is likely this bear market rally would last a little longer. Now I expect good economic news (which will fuel the short-term traders too) and entice bigger money into this market. This would increase liquidity and make it seem to be more safe to be in equities. My long term position is based on discounting and general deflation: there is so much overcapacity (except in medicine and energy [in the long run]) which would lead to competition. The overcapacity and competition (globally) would lead to low returns on equity for many firms. It doesn't matter if consumer confidence is up on a given month, and I do expect those numbers to increase in the short-term. Other people will say that it is all clear and the institutions would start buying. My hypothesis of the short-term "traders" bailing causing a sell-off doesn't seem to be correct now. But, I do love the short position as I speculate those short-term "traders" have net long positions and I am taking the other side of those long positions. Those "traders" as an aggregate have to lose and they will give up when they realize that trading is zero-sum even though they correctly know what buy and hold doesn't work. (I have an elaborate model to explain that, and I might post this later if I have time to write that.) I do not have to bet against a single trade they make, but betting against the aggregate's net long positions seems to be a one-way bet; the difficulty is optimising the timing. In my previous blogs, I noted my motivation for going short was actually fear because the one-way trade seems irresistable and being late means missing it.
Also my discounting model is another fundamental reason for going short. Corporate debt, of course, should increase the discounting rate in equity valuation though because of the possibility of liquidation. Even if a company doesn't have any debt, the equity should be subject to a higher discounting rate because it is equity: unlike debt where one knows the duration and amount of payments as debt is often referred to "fixed-income" while earnings is more turbid. With higher discount rates increasing the equity risk premium and lower earnings due to competition and overcapacity, it seems that equities are still overvalued. I do have a thesis for when it isn't overvalued, and that is when the paradigm shift will change the perception of equities. Equities will be seen as yield instruments, not as growth instruments.
I do plan on adding to the short positions in a slower fashion, because shorting the broad equity market seems to have a good risk/reward. I might have added early, but I will add on Friday. This seems to be one of those trades (and it is so simple to say that broad equities will fall eventually) where one simply has to be pig. I still have my convictions though as the position is a long term one.
I might consider longing the SPDRs of consumer discretionary and consumer staples for a trade. I expect those to rally during the course of the bear market rally, while the "junk" financials (such as Citigroup) will sell-off again. I consider these "trades" as they are not congruent with my macro perspective. Maybe long XLY or XLP (discretionary/staples respectively)/short XLF would be a nice way to institute that view. Or I might go long XLY or XLP to hedge the short SPY trade. Big money is likely to long consumer staples in this environment.
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