The End of Active Management

A three year period (May 3 2004 - June 1 2007) of active management has come to an end as I am no longer permitted to trade. The total return after all fees, costs etc. is +530.05%. During this time every trade has been reported on this blog in near real-time in some 203 posts. Highlights included pyramiding the silver market during the big rally and then going short hours before the biggest fall in decades. I have been less active in the forex market even though I have had a very favorable record on the few trades I have made. On the equity side of things I have typically always been going against the prevailing grain like for example selling puts into panic. Psychologically it has been hard to sell just to see a stock continue (like Mastercard did last fall) or to place a limit order just to miss an incredible opportunity. Performance has been lacking from time to time when regular job have been taking too much of my time.

Final Allocations

Bought back LUMI as well as increased marginally in PARE. The latter literally exploded today as Carnegie upgraded the stock. This is despite lower oil prices.

I also bought back the short ES hedge. This position has clearly highlighted the problem with betting against the stock market drift.

Placing a Bet on Macau

Bought some MPEL today close to all time low for the stock which coincidence with the much awaited opening of Crown Macau. Macau experienced some 46% revenue growth year over year for the first quarter of this year. Melco is the only Macau pure play available and I think long term investors will be well awarded. TheStreet.com has some more in-depth coverage of the stock for the interested.

In other news; WFR will be added to the S&P 500. For the broad market I think it is very healthy to see some selling, I can't remember when I last saw a 17 point drop in the S&P futures. Google is a under-performer that is showing some strength.

Two Trades

Sold off LUPE and Vostok today as I am reassessing my holdings for the long term. Needless to say LUPE's performance has been lackluster.

One New Name

Participated in the Interactive Brokers Dutch auction IPO. I really like this stock as much as I like the company. Technology driven all the way from the top will keep the competitors behind. In fact in a sense Google-sque. Plus 4% for the first day must be regarded as modest.

I scale in to MEMC during the slaughter, it is now paying off. In this case JP Morgan represents the smart money adding the stock to the focus list during the panic.

Also notable today was Goldman Sachs run-up, approaching $230...

A Trade

Picked up some WFR today as the stock was down heavily after earnings that was slightly better than expected at least on the bottom line. As readers know I have had my eyes on this stock for a while. Q1 earnings was up about 100%, the stock is trading at an expected 2007 PE of 18.50 and has exposure to the hot solar power market. With a PEG under 1, this opportunity was to good to pass. The very smart James Altucher has done some interesting work on gap-down trades which further adds to the case.

A Hedge

Just sold the Jun S&P future at 1491.50 as going against the prevailing market sentiment has proven profitable in the past.

Oil is spiking on Nigeria, I am well positioned.

Google

The earnings once again blew past the expectations and propelled the whole market higher. My April puts expired OTM, which of course is the best that can happen if you are short.

I would be careful with the market at this level and I am considering to put on a hedge.

Quite Amazing...

... how quick the sell-off after February 26 has been reversed. Today financials has been leading, needless to say I am very comfortable with my Goldman Sachs position. The media is much focused on the weak dollar.

WYNN and the other US gaming stocks were on fire today as the gaming revenue in Macau increased some 45% first quarter. Of course I have been writing here about the Macau pure play MPEL. Not surprisingly the stock is up 9.5% today.

In the news you can read how Intel will support WiMax rather than 3G in new laptop chips. Nokia will release handsets in 2008 with WiMax technology. I find it remarkable how Ericsson is shunning the technology. IP is clearly the future in communication, voice and data.

Yahoo is down heavily in today's trading, it is clear where the market share is growing. Google is reporting tomorrow...

A somewhat Google-sque company is IB. The auction is open...

Portfolio and Market Update

GS is flying today, up some 3.9% after Citigroup's earnings. Some news out of Google and the stock is trading above $475. I find it interesting to note that their search market share continues to rise and is standing at an ATH.

With a leap in production numbers going forward I don't think 'sell on strength' is the right strategy for Pare.

Commodities in general are showing strength in the light of the weak dollar and the tight inventories. Silver is currently trading above the $14 mark.

I wouldn't chase the market at these levels, but rather be opportunistic in the face of any volatility as the earnings season unfolds.

Lundin Mining

LMC exploded to the upside today after it announced takeover plans. Needless to say I am very happy with today's price action in the stock. Since Cramer has been a supporter of the stock, I suspected he might say something on CNBC's 'Stop Trading!' segment that is aired just before 3pm EST every weekday. The stock gained another 6-7 percentage points after the show and I sold everything above the $13 mark. With that said I would like to add that I believe Cramer to be somewhat underestimated among more 'intellectual' groups. I might very well be back on the long side in this stock rather soon. I still have metal exposure in Boliden, even though the company is not as dynamic. As for PARE the market is clearly waiting for numbers until we'll see a fair value, the time to buy is now.

Noting that the Brent to WTI spread is at a record level both in relative and absolute terms above $4.00/barrel. This is worth some thoughts.

Also worth noting is that Google is again trading above the $370 mark.

Good News

I am of course very pleased with the news out of PARE today. The fact that it is not yet reflected in stock price presents an opportunity for those of you without exposure. PARE continuous to be a core position.

Some Quick Notes

Bought some GS common at in the last minutes of trading yesterday. I intend to average into the position.

It is not hard to understand the explosion in Crude prices as geopolitical events unfold. I am well positioned.

It is encouraging to see USD/JPY holding up relative well.

Less Than One Week

GS from under $200 to $210. WFR from under $50 during the sell-off to over $60. MPEL from under $15 to briefly over $17. I am sure the combination of expiration pinning and the market sell-off made many capitulate at the worst possible time. This is exactly how the market machine rakes in. With S&P trading at 1434 and change all this is a lesson in the fallacy of the wait-and-see-until-it-stabilizes-attitude that is so common not least in the media. Over and over the big moves tends to come at the bottom and the big risk is to be on the sidelines at those very moments. All this this should quantified.

On the Crude side of things, the expiration was quite dramatic. With contango we are now trading above $61 again! As written here recently, when Silver was trading below $13, the trade is on the long side. I would also like to point out the ongoing inventory situation in Copper.

On the portfolio side one notes the huge move in Lupe today.

The good thing is: There is always another trade.

Options Expiry

Sold the remaining GS calls today as they go to into expiry tomorrow. It is my experience that trends tends to reverse after expiry (this must be tested) and if you get caught on the wrong side of the trade this will hurt you, even tough as with the case of Goldman they beat the estimates with some 36% or so. In this particular case the market decided that all financials were bad. Seems like the stock will be pinned at $200. When reality sets in I believe the stock will go much higher and I want to get long soon.

Other stocks on my watch list are:

- WFR
- MPEL

The Good and the Bad

Goldman's quarter was fantastic as they beat the expectations by some 34% and surpassed the most optimistic forecast. The stock was up over 2% this morning as I put in orders to sell some of the calls on the offer side at $7.90 and at $8.00. Unfortunately those trades were not done and as per usual the as the market sells off, the correlation increases and even the good names get hit. I don't like to sell into a panic, but with calls the erosion of time value has to be considered.

Market Update

Finally we got somewhat of a bounce yesterday. Goldman Sachs was up $7.37, the biggest one day gain I have ever seen in that stock percentage wise or in absolute terms. Google is back over $450. Today the stock got an upgrade from UBS. Crude briefly traded below $60 where it should have been bought. The problem with this trade is that my exposure to the oil markets is already substantial and risk I believe should be measured by bet size.

I feel very comfortable with being short the Google puts, it is a somewhat optimal trade as we see volatility decrease and prices drift upwards. The more aggressive strategy used for GS is not bearing fruit just yet. Goldman should not be trading down with the housing market as the exposure is minimal. This is still an opportunity.

I don't think I ever have referenced chart patterns on this blog. However, looking at the price action for Silver it does look very bullish to me. Looking at LME inventory stats for Copper and Zinc I feel very confident with the positions in Boliden and Lundin Mining.

On the sideline I have been eyeing a Solar energy play, the stock was up over 7% yesterday and another 1% today in an otherwise rather weak market.

Another Weak Day

Looks like we ended near the lows of the day. In the media as well as for technicians this is seen as bad news for the bulls. This however needs to be tested as the media seems to be focused on the last move at every point in time and that it turns tends you to lean at the wrong direction in every turn. In addition to this the media has a history of repeating market myths and nothing stops you from taking advantage from this if you are an independent thinker. Even though I know that the day the turn-around comes I will regret that I am not even more exposed it always has to be put in relation to the amount of pain you can handle. I am historically a seasoned pain-taker and that has paid off very well over the years.

Some More Buying

Further increased the position in the GS calls. Also sold the Google APR 440 put. These trades were done when GS traded under $200 and Google just above $445. GS is trading under PE 10 on forward earnings and could rebound fast once this is over. The Google puts represents a break-even of about 424 on the stock which in turn would mean a forward PE of 28.

Markets are in large playing out as expected. The question is if the washout this morning was enough to flush out the weak hands.

Some Thoughts and a Trade

Some stocks just got a lot cheaper. I believe we saw the wipeout of some momentum traders with their stop-loss orders. I increased the GS call position yesterday during the carnage. As per usual in these situations the implied volatility spiked and it is arguable a better strategy to sell puts. I was somewhat disappointed by today's action as we didn't get a follow-through today from yesterday. Disappointed because I was eyeing some more opportunities. That said we might very well see more weakness ahead.

Notable is that commodities are holding so well through all this. Crude was up for most of yesterday and finished today close to $62.

Another encouraging sign is that the USDJPY remained relatively strong, particularly today. It is much talk about the so called Yen carry trade in the media. It is probably a good thing that everyone is aware of the risks of this trade.

Performance

This graph represents the performance data on a NAV basis. I am happy with a 90.4% annualized return compared with 9.7% for the S&P 500 since May 2004. I have also added the NAV numbers in a new section on the right side of this blog.

All trades since September 29, 2005 have been documented on this blog in near real-time.

Market and Portfolio Update

Commodities show remarkable strength here with WTI crude above $60, silver at new highs above $14 and and gold up some $20 the other day getting closer to $700. I don't believe in chasing crude here, the contract should be bought on weakness under the $60 level.

Boliden ended the day up more than 4%. The company released earnings for full year 2006 earlier this month. The earnings came in over SEK 21 per share. With a share buy-back program of up to 10% of the float and increased dividends the management seems more shareholder friendly. Something I have called for. At the same time we know that the company has locked-in higher copper prices in the years to come, this is good news as it seems the metal is more or less in balance. The exposure still remains in zinc, where we still see very small inventory numbers. The stock is fundamentally very cheap at current levels.

Pare is a very volatile stock. I firmly believe that once the company reports a full quarter with 20,000 bpd in production the stock will be much higher than today.

Google proves once again that the stock should be bought aggressively every time PEG dips below 1 on forward earnings. The company just announced a premier edition of Apps which will compete head to head with Windows Office. We know Gdrive is still in the pipeline and could be launched at any time. There have recently been a lot of news surrounding Viacom and YouTube. I would like to point out that Joost is not a competitor to YouTube, still Google needs to be present in the new TV platforms, either with a GoogleTV solution or directly with Joost as I have suggested here before.

The equity markets continues to trade with a historical very low volatility, which have dampened my trading activity somewhat. I have been successful with S&P shorts recently and right here I find myself once again closer to a short hedge than an increased market exposure.

The GS call option strategy is working extremely well as the stock remains undervalued. Calls should be accumulated on weakness which could be triggered by a market sell-off.

There are two interesting IPOs one should keep an eye out for; Interactive Brokers and Clearwire. Maybe the first one more than the latter but of course all given pricing. Clearwire is a pure play in Wimax in the US. I strongly believe that the Wimax adoption for phones will be considerably faster than 3G due to cheaper technology and packet based (IP) data. Wimax is what 3G shold have been.

Taking Profit

Covering the S&P short at 1438.75 for a 12.5 point profit.

The Right FIG Trade

The way to play the Fortress IPO craze is GS. This could be the trigger for GS multiple expansion. Hence, the GS calls should be bought aggressively on any dips, currently they have a $20 bid.

On another note, WTI Crude is once again above the $60 mark.

Two Trades

Exiting oil at $58.850 after a huge recovery. The contract gained $4.275 in one week, which is quite remarkable.

Shorting ES as a hedge here at 1451.25, as we might very well be in for a pull-back.

Digging for Gold

Buying the GS Mar 200 call for $13.70 as the stock is selling off from record levels at around $220. The stock is cheap, and I will average down if the stock comes down further.

Crude is up over 4% right here as what looks like short covering. My firm believe is that the contract should be accumulated under $55.

Buying on Dip

Staying true to the strategy and buying the March Crude future at $54.575.

Quite a Day

Sentiment has definitely shifted in the oil patch. It is getting much colder in the northeast US very soon as the winter already arrived in Europe. Fundamentally it is questionable how much it should affect the prices, but on a psychological level it does matter. The strategy of buying at dips is working. The time to buy today was right after the numbers were release when WTI was down some 1.5%. We ended the day up, well above $55.

GS is really breaking up here, posting a new ATH today. Fundamentally this stock has to be bought on dips. A strategy would be to get long Deep-In-the-Money calls.

Google crossing $500 after hours, getting the last push from eBay's report.

As for the major equity indices, I would not get long at current levels.

We are finally seeing some weakness in USD, something I have been looking for lately for a contrarian trade.

Market Strategy

The theme for crude has quickly shifted to sell on strength to buy on weakness. As the March contract is up at the $55 level, the time to buy was at the expiry of the Feb contract. Cold weather and doubling of US reserves created a short squeeze in today's trading. The tell that the shorts was building positions was that the open interest was increasing during the steep sell off (as noted in earlier posts). Once again the turn-around seems to happen right around the expiry. Of course the media is always backward looking and outlets such as CNBC was speculating about oil in the 30ish when crude was at the bottom. Thus it seems that Goldman and Deutsche were right on their 'doubling down' thesis. Looking at commodities at large one might be surprised to see such strength in silver, gold, natural gas, as well as many softs.

Lunding mining was up close to 5% in today's US session. I am anticipating similar follow thru across the board in Stockholm tomorrow.

Yahoo just reported, the stock is up in after-hours trading. The results should be analysed for tells about Google. On another note; as video is the next frontier of the Intenet and online ads, Google should buy Joost as soon as possible. The business logic behind eBay's buyout of Skype is very questionable. However a Joost takeover makes a lot of sense and would make Google more valuable (as well as Joost).

On the sideline, I am eying a FX trade.

Closing a Position

Crude is up here and I am closing out the position as I am not convinced we have seen the bottom.

The Good and the Bad

Google at $500 and above in after hours. The stock getting fueled not only by the tech rally but also by Goldman's bullish comments. Also the Swedish holdings having a good rebound, up between 5 to 10% across the line.

Apple is really taking off on the iPhone news. The time to buy was clearly before Macworld which also was considered at the time, but the question is as always what is price in and not and the probability of this or that happen. A priori not a given trade to make. The valuation seems rich, the strategy should be to let the stock come in. Especially since there is quite a bit of time before the release. Apple TV is somewhat overlooked by the media, the only disappointment there is the lack of Google integration.

Goldman Sachs has left the $200 level where it has been at for some time. This is a name to keep an eye on in a market sell-off.

The bad is the energy sell-off where I put in a sell order as the market was up about 10 seconds too late, just to see the future down some $2 in short time. I haven't been following the open interest, but have heard there has been an increase which suggest speculative shorts at play.

Taking Profit

Covered my short Mar S&P futures at 1417. It is not easy to make money on the short side in this market...

Market Update

A tech rally is underway. Google is one stock that became way too cheap in the 450:s, where it should have been bought heavily. Gdrive and iTV will likely be the big announcements of Q1.

Otherwise the big news is Crude which is tough to be long during a record warm winter in the northern hemisphere. The weather should be priced in already. I think it would be wrong to sell during this shake-out.

Pare has had a fantastic rally up to over SEK 70 before this pull-back. I am waiting for a release from the company before I trim my position.

GS seems to be pinned at $200. Could be a good case for put writing as I don't see much downside trading at P/E 10.

I have been eyeing EURJPY that was trading at record levels and should have been shorted in a contrarian move, I was however more focused on other markets.