Time to get extremely aggressive

On Friday I will close XLP and XLY and go short SPY (30% of NAV). Also adding to the 10 year German Government Bond long position would be good too. If have more conviction short the more volatile XLY, XLF, and IWM (Russell 2000). Closed gold shorts at as small loss... (I am wrong on the assumption of a short-term sell off.) I am moderately bullish on it in the longer term, although more bullish on silver. The equity longs are too risky, although I love PBR. As seen today, the market is extremely frangible as it opened up higher and then there was a large sell-off. I'll attribute it to profit taking since the reported stress test results aren't that bad.

These last months have been frustrating. I will not use the dollar anymore. That is a bad idea. I'll use FX crosses to bet against GBP, EUR, and NZD by focusing the longs on the yen. That printing press is a potential guillotine for speculators. Bernanke is the main reason the real-time experiment's portfolio is slightly negative since the start of this experiment. I lost 6% in one day (March 18) about 3.5% on currencies (long dollar) and 2.5% on bonds (short 10 year) because of Bernanke's announcement. Fortunately, it was mitigated since I correctly called the bear market rally, and my longs on CAD/SEK/AUD vs EUR made up for that. Bernanke's announcement ruined my psychology, forcing me to be more timid, and it made it harder to dig out of losses.

Now, one has to be aggressive by going short regardless of the short term losses. Is he going to print money to buy equities now? (Is he going to create the "Taxpayer Assurance Equities Facility") Fuck you Ben. There has to be a time to go massively short and then shutting the fuck up instead of being concerned with short-term market moves. The bear market rally is about to end.

I did not anticipate the equity market rally fast enough. When I did put on the positions (and by attempting to cover the SPY short), the market already open up high, just when I anticipated it. This frustrated my as my speculative equity longs (I most certainly do not believe XLY is worth buying; I bought it solely on the proposition because I expected others to bid it up too.) Those positions were badly timed (although correct) given that the portfolio is holding risky long positions and it did not receive gains because I was too slow in closing the SPY short to profit from a short term trade.

So add to German government bond long by 20%: (3.38%)

The 10 year German bond bet did miserably today as its yield went up by 13 bp (which corresponds to a 1.2% loss (.5 x 1.2= .6%)). I still have conviction with that position and I am not tempted to close, but I currently did not know what caused the sell-off except that there was a sell-off in US Treasuries. There was no corresponding sell-off in Japanese bonds though even though the Nikkei 225 is doing well, so the loss wasn't off set with the Japanese government bond short.

http://www.bloomberg.com/apps/news?pid=20601009&sid=aEUEP4YoLxbU&refer=bond

I am still treading water. I am down 2.3% since initiation.



Total profit/losses:
-.9% + USD/GBP (closed May 4)
-.7% - Copper (closed on May 1 [0.035 x .2])
-.65% - Gold (closed .25 x 0.025)
-.6% + German government bond 10 year (open 1.2 x .5)
+1.5% + Silver (open .2 x 0.075)

-1.3%

Equities and other currencies were a wash. Losses on SPY short offset gains from longs.

Remember, the question is the timing. I am more confident about the direction.

Approxiate portfolio:

Portfolio (10 positions/ 1.9:1 leverage) (approximate)

Equities (20%):
+ XLP 10
+ XLY 5
+ PBR 5
(XLP and XLY will be removed tommorrow: it is imperative that I build up large short positions before the real sell-off)


Currencies (40%):
- USD/SEK 10
- EUR/SEK 25
- EUR/AUD 5
- EUR/CAD 5
(consider building larger currency positions [short GBP and NZD against yen especially pound] first)

Fixed income (110%):
+ German government bond 10 year 70
- Japanese government bond 10 year 40
(consider a small long position in 10 year Treasuries)

Commodities (20%)
+ Silver 20
(prepared to short oil and copper)